AS FILED WITH THE SEC ON ____________________. REGISTRATION NO. 2-81243
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-6
POST-EFFECTIVE AMENDMENT NO. 26
FOR REGISTRATION UNDER THE SECURITIES ACT OF 1933
OF SECURITIES OF UNIT INVESTMENT TRUSTS REGISTERED
ON FORM N-8B-2
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PRUCO LIFE OF NEW JERSEY
VARIABLE INSURANCE ACCOUNT
--------------------------
(Exact Name of Trust)
PRUCO LIFE INSURANCE COMPANY OF NEW JERSEY
------------------------------------------
(Name of Depositor)
213 WASHINGTON STREET
NEWARK, NEW JERSEY 07102-2992
(800) 778-2255
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(Address and telephone number of principal executive offices)
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THOMAS C. CASTANO
ASSISTANT SECRETARY
PRUCO LIFE INSURANCE COMPANY OF NEW JERSEY
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
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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, 1999 pursuant to paragraph (b) of Rule 485
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[ ] 60 days after filing pursuant to paragraph (a) of Rule 485
[ ] on pursuant to paragraph (a) of Rule 485
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<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 of New Jersey Variable Insurance Account
6. Pruco Life of New Jersey Variable Insurance Account
7. Not Applicable
8. Not Applicable
9. Litigation
10. Brief Description of 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 of New Jersey
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 of New Jersey Variable Insurance Account
19. Reports to Contract Owners
<PAGE>
N-8B-2 ITEM NUMBER LOCATION
- ------------------ --------
20. Not Applicable
21. Contract Loans
22. Not Applicable
23. Not Applicable
24. Other General Contract Provisions
25. Pruco Life Insurance Company of New Jersey
26. Brief Description of the Contract; The Prudential Series
Fund, Inc.; Charges and Expenses
27. Pruco Life Insurance Company of New
Jersey; The Prudential Series Fund,
Inc.
28. Pruco Life Insurance Company of New Jersey; Directors
and Officers
29. Pruco Life Insurance Company of New Jersey
30. Not Applicable
31. Not Applicable
32. Not Applicable
33. Not Applicable
34. Not Applicable
35. Pruco Life Insurance Company of New Jersey
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
<PAGE>
N-8B-2 ITEM NUMBER LOCATION
- ------------------- --------
46. Brief Description of the Contract; Pruco Life of New Jersey
Variable Insurance Account; The Prudential Series Fund,
Inc.
47. Pruco Life of New Jersey 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
59. Financial Statements: Financial Statements of Pruco Life of
New Jersey Variable Insurance Account; Financial
Statements of Pruco Life Insurance Company of New
Jersey
<PAGE>
PART I
INFORMATION REQUIRED IN PROSPECTUS
<PAGE>
VARIABLE LIFE INSURANCE
PROSPECTUS
The Pruco Life of New Jersey
Variable Insurance Account
May 1, 1999
PRUCO LIFE INSURANCE COMPANY OF NEW JERSEY
<PAGE>
PROSPECTUS
MAY 1, 1999
PRUCO LIFE INSURANCE COMPANY
OF NEW JERSEY
VARIABLE INSURANCE ACCOUNT
VARIABLE
LIFE INSURANCE
CONTRACTS
This prospectus describes a variable life insurance contract (the "Contract")
offered by Pruco Life Insurance Company of New Jersey ("Pruco Life of New
Jersey", "us" or "we") under the name Variable Life Insurance. Pruco Life of New
Jersey, a stock life insurance company, is an indirect wholly-owned subsidiary
of The Prudential Insurance Company of America ("Prudential"). This form of
Contract provides a death benefit that varies monthly with the investment
performance of the subaccounts of the Pruco Life of New Jersey Variable
Insurance Account (the "Account"). However, investment performance cannot cause
the death benefit to be less than a guaranteed minimum amount (generally the
face amount specified in the Contract). The Contract also provides a cash value
which generally increases with the payment of each premium and varies daily with
investment performance. There is no guaranteed minimum cash value.
AS OF JANUARY 1, 1992, THESE CONTRACTS WERE NO LONGER AVAILABLE FOR SALE.
You, as the Contract owner, may choose to invest your Contract's premiums and
their earnings in one or more of the following ways:
o Invest in one or more of 13 available subaccounts of the Pruco Life of New
Jersey Variable Insurance Account, each of which invests in a corresponding
portfolio of The Prudential Series Fund, Inc.:
MONEY MARKET HIGH YIELD BOND PRUDENTIAL JENNISON
DIVERSIFIED BOND STOCK INDEX SMALL CAPITALIZATION STOCK
GOVERNMENT INCOME EQUITY INCOME GLOBAL
CONSERVATIVE BALANCED EQUITY NATURAL RESOURCES
FLEXIBLE MANAGED
o Invest in the Pruco Life of New Jersey Variable Contract Real Property
Account (the "REAL PROPERTY ACCOUNT"), described in a prospectus attached to
this one.
This prospectus describes the Contract generally and the Pruco Life of New
Jersey Variable Insurance Account. The attached prospectus for the Series Fund,
and the Series Fund's statement of additional information describe the
investment objectives and the risks of investing in the portfolios. Pruco Life
of New Jersey may add additional investment options in the future.
You should retain this prospectus, together with the Contract for future
reference.
The Securities and Exchange Commission ("SEC") maintains a Web site
(http://www.sec.gov) that contains material incorporated by reference and other
information regarding registrants that file electronically with the SEC.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED IF THIS
PROSPECTUS IS ACCURATE OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
PRUCO LIFE INSURANCE COMPANY OF NEW JERSEY
213 Washington Street
Newark, New Jersey 07102-2992
Telephone: (800) 778-2255
<PAGE>
PROSPECTUS CONTENTS
<TABLE>
PAGE
<S> <C>
INTRODUCTION AND SUMMARY..............................................................1
BRIEF DESCRIPTION OF THE CONTRACT...................................................1
INVESTMENT OPTIONS: THE PRUDENTIAL SERIES FUND, INC. PORTFOLIOS.....................1
ADDITIONAL INVESTMENT OPTION........................................................2
EFFECT OF INVESTMENT PERFORMANCE ON THE CONTRACT'S CASH VALUE.......................2
CHARGES.............................................................................2
GENERAL INFORMATION ABOUT PRUCO LIFE INSURANCE COMPANY OF NEW JERSEY, PRUCO LIFE OF
NEW JERSEY VARIABLE INSURANCE ACCOUNT, AND THE VARIABLE INVESTMENT OPTIONS AVAILABLE
UNDER THE CONTRACT....................................................................4
PRUCO LIFE INSURANCE COMPANY OF NEW JERSEY..........................................4
PRUCO LIFE OF NEW JERSEY VARIABLE INSURANCE ACCOUNT.................................4
THE PRUDENTIAL SERIES FUND, INC.....................................................5
THE PRUCO LIFE OF NEW JERSEY VARIABLE CONTRACT REAL PROPERTY ACCOUNT................5
WHICH INVESTMENT OPTION SHOULD BE SELECTED?.........................................6
DETAILED INFORMATION FOR CONTRACT OWNERS..............................................6
REQUIREMENTS FOR ISSUANCE OF A CONTRACT.............................................6
SHORT-TERM CANCELLATION RIGHT OR "FREE LOOK"........................................6
PREMIUMS............................................................................6
PREMIUM ADJUSTMENT..................................................................7
ALLOCATION OF PREMIUMS..............................................................8
CHARGES AND EXPENSES................................................................8
TRANSFERS..........................................................................10
HOW A CONTRACT'S DEATH BENEFIT WILL VARY...........................................10
HOW A CONTRACT'S CASH VALUE WILL VARY..............................................12
SURRENDER OF A CONTRACT............................................................14
WITHDRAWAL OF A PORTION OF A CONTRACT'S NET CASH VALUE.............................14
WHEN PROCEEDS ARE PAID.............................................................15
LIVING NEEDS BENEFIT...............................................................15
ILLUSTRATIONS OF CASH VALUES, DEATH BENEFITS, AND ACCUMULATED PREMIUMS.............16
CONTRACT LOANS.....................................................................17
RIGHT TO EXCHANGE A CONTRACT FOR A FIXED-BENEFIT WHOLE-LIFE POLICY.................18
SALE OF THE CONTRACT AND SALES COMMISSIONS.........................................18
TAX TREATMENT OF CONTRACT BENEFITS.................................................18
LAPSE AND REINSTATEMENT............................................................20
OPTIONS ON LAPSE...................................................................20
LEGAL CONSIDERATIONS RELATING TO SEX-DISTINCT PREMIUMS AND BENEFITS................22
OTHER GENERAL CONTRACT PROVISIONS..................................................22
RIDERS.............................................................................22
VOTING RIGHTS......................................................................22
SUBSTITUTION OF SERIES FUND SHARES.................................................23
REPORTS TO CONTRACT OWNERS.........................................................23
STATE REGULATION...................................................................23
EXPERTS............................................................................24
LITIGATION.........................................................................24
YEAR 2000 COMPLIANCE...............................................................24
ADDITIONAL INFORMATION.............................................................25
FINANCIAL STATEMENTS...............................................................25
DIRECTORS AND OFFICERS...............................................................26
FINANCIAL STATEMENTS OF PRUCO LIFE OF NEW JERSEY VARIABLE INSURANCE ACCOUNT..........A1
FINANCIAL STATEMENTS OF PRUCO LIFE INSURANCE COMPANY OF NEW JERSEY...................B1
</TABLE>
<PAGE>
INTRODUCTION AND SUMMARY
THIS SUMMARY PROVIDES A BRIEF OVERVIEW OF THE MORE SIGNIFICANT ASPECTS OF THE
CONTRACT. WE PROVIDE FURTHER DETAIL IN THE SUBSEQUENT SECTIONS OF THIS
PROSPECTUS AND IN THE CONTRACT. THE CONTRACT, INCLUDING THE APPLICATION ATTACHED
TO IT, CONSTITUTES THE ENTIRE AGREEMENT BETWEEN YOU AND PRUCO LIFE OF NEW JERSEY
AND YOU SHOULD RETAIN THESE DOCUMENTS.
BRIEF DESCRIPTION OF THE CONTRACT
AS OF JANUARY 1, 1992, PRUCO LIFE OF NEW JERSEY NO LONGER OFFERS THESE CONTRACTS
FOR SALE.
As you read this prospectus you should keep in mind that this is a variable life
insurance contract. Variable life insurance has significant investment aspects
and requires you to make investment decisions, and therefore, it is also a
"security". Securities that are offered to the public must be registered with
the Securities and Exchange Commission. Because the Contract provides whole-life
permanent insurance, it also serves a second important objective. It may provide
an increasing cash value that can be used during your lifetime.
The Contract is first and foremost life insurance. It provides insurance
protection for the entire lifetime of the insured. But the Contract also has
significant and useful investment features. The Contract owner decides in which
investment option[s] premium payments, less applicable charges, will be
invested. The death benefit of the Contract will increase with favorable
investment experience and decrease with unfavorable investment experience;
however, it will never be less than the guaranteed minimum death benefit. The
Contract owner will be able, from time to time, to reallocate and transfer
invested amounts among the various subaccounts and the Real Property Account.
You may invest premiums in one or more of the 13 available subaccounts, or the
Pruco Life of New Jersey Variable Contract Real Property Account. Your
Contract's death benefit changes monthly, but your Contract's cash value will
change every day depending upon the change in value of the particular investment
options that you have selected.
INVESTMENT OPTIONS: THE PRUDENTIAL SERIES FUND, INC. PORTFOLIOS
You may invest in one or more of the 13 available subaccounts of Pruco Life of
New Jersey's Variable Insurance Account (the "Account"). Each is currently
invested in a corresponding portfolio of The Prudential Series Fund, Inc. (the
"Series Fund"). The Prudential Insurance Company of America ("Prudential") acts
as investment adviser to the Series Fund.
o MONEY MARKET PORTFOLIO - The investment objective is maximum current income
consistent with the stability of capital and the maintenance of liquidity.
The Portfolio invests in high quality short-term debt obligations that mature
in 13 months or less.
o DIVERSIFIED BOND PORTFOLIO - The investment objective is a high level of
income over a longer term while providing reasonable safety of capital. The
Portfolio invests primarily in higher grade debt obligations and high quality
money market investments.
o GOVERNMENT INCOME PORTFOLIO - The investment objective is a high level of
income over the longer term consistent with the preservation of capital. The
Portfolio invests primarily in U.S. Government securities, including
intermediate and long-term U.S. Treasury securities and debt obligations
issued by agencies or instrumentalities established by the U.S. Government.
o CONSERVATIVE BALANCED PORTFOLIO - The investment objective is a total
investment return consistent with a conservatively managed diversified
portfolio. The Portfolio invests in a mix of money market instruments, debt
obligations and common stocks.
o FLEXIBLE MANAGED PORTFOLIO - The investment objective is a total investment
return consistent with an aggressively managed diversified portfolio. The
Portfolio invests in a mix of money market instruments, debt obligations and
common stocks.
o HIGH YIELD BOND PORTFOLIO - The investment objective is a high total return.
The Portfolio invests primarily in high yield/high risk debt securities.
1
<PAGE>
o STOCK INDEX PORTFOLIO - The investment objective is investment results that
generally correspond to the performance of publicly-traded common stocks
generally. The Portfolio attempts to duplicate the price and yield
performance of Standard & Poor's 500 Composite Stock Price Index (the "S&P
500 Index").
o EQUITY INCOME PORTFOLIO - The investment objective is both current income and
capital appreciation. The Portfolio invests primarily in common stocks and
convertible securities that provide good prospects for returns above those of
the S&P 500 Index or the NYSE Composite Index.
o EQUITY PORTFOLIO - The investment objective is capital appreciation. The
Portfolio invests primarily in common stocks of major established
corporations as well as smaller companies that offer attractive prospects of
appreciation.
o PRUDENTIAL JENNISON PORTFOLIO - The investment objective is to achieve
long-term growth of capital. The Portfolio invests primarily in equity
securities of major established corporations that offer above average growth
prospects.
o SMALL CAPITALIZATION STOCK PORTFOLIO - The investment objective is long-term
growth of capital. The Portfolio invests primarily in equity securities of
publicly-traded companies with small market capitalization.
o GLOBAL PORTFOLIO - The investment objective is long-term growth of capital.
The Portfolio invests primarily in common stocks (and their equivalents) of
foreign and U.S. companies.
o NATURAL RESOURCES PORTFOLIO - The investment objective is long-term growth of
capital. The Portfolio invests primarily in common stocks and convertible
securities of natural resource companies and securities that are related to
the market value of some natural resource.
Further information about the Series Fund portfolios can be found under THE
PRUDENTIAL SERIES FUND, INC. on page 5.
ADDITIONAL INVESTMENT OPTION
The REAL PROPERTY OPTION is regulated differently from the other 13 because it
is not an investment company registered under the Investment Company Act of
1940. It invests primarily in income-producing real property and it is described
in a separate prospectus attached to this one.
EFFECT OF INVESTMENT PERFORMANCE ON THE CONTRACT'S CASH VALUE
Your Contract's cash value changes every day depending upon the change in the
value of the particular portfolios and the additional investment option that you
have selected for the investment of your Contract's premium payments.
Although the Contract's cash value will increase if there is favorable
investment performance, there is a risk that investment performance will be
unfavorable and that your Contract's cash value will decrease. The risk will be
different, depending upon which investment options you choose. See WHICH
INVESTMENT OPTION SHOULD BE SELECTED?, page 6.
CHARGES
We deduct 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 8. In brief, Pruco Life
of New Jersey may make the following charges:
2
<PAGE>
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PREMIUM PAYMENT
---------------------------------------------------------------------------
o less a 2% charge for taxes attributable to premiums
o an annual administrative charge of up to $48
o We charge a sales charge of up to 9% of the sum of the basic premiums
to be paid in the first 20 years.
o We charge a guaranteed minimum death benefit risk charge of not more
than 1.2% of each basic premium.
o If the Contract includes riders, we deduct rider charges from the
Contract's premiums.
o If the rating class of the insured results in an extra charge, we will
deduct that charge from the Contract's premiums.
---------------------------------------------------------------------------
---------------------------------------------------------------------------
NET PREMIUM AMOUNT
o To be invested in one or a combination of:
o The investment portfolios of the Series Fund
o The Real Property Account
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DAILY CHARGES
o We deduct management fees and expenses from the assets of the Series
Fund and, if applicable, from the Real Property Account assets. See
THE PRUDENTIAL SERIES FUND, INC., page 5, and THE PRUCO LIFE OF NEW
JERSEY VARIABLE CONTRACT REAL PROPERTY ACCOUNT, page 4.
o We charge a mortality and expense risk charge, equivalent to an annual
rate of 0.35%, from the variable investment options assets.
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MONTHLY CHARGES
o We charge a charge for anticipated mortality, with the maximum charge
based on the 1980 CSO Tables.
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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 on 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 10 and HOW A CONTRACT'S CASH
VALUE WILL VARY, page 12.
You should retain a copy of your Contract. That document, together with the
attached application, constitutes the entire agreement between you and Pruco
Life of New Jersey.
THE REPLACEMENT OF LIFE INSURANCE IS GENERALLY NOT IN YOUR BEST INTEREST. IN
MOST CASES, IF YOU REQUIRE ADDITIONAL COVERAGE, THE BENEFITS OF YOUR EXISTING
CONTRACT CAN BE PROTECTED BY PURCHASING ADDITIONAL INSURANCE OR A SUPPLEMENTAL
CONTRACT. IF YOU ARE CONSIDERING REPLACING A CONTRACT, YOU SHOULD COMPARE THE
BENEFITS AND COSTS OF SUPPLEMENTING YOUR EXISTING CONTRACT WITH THE BENEFITS AND
COSTS OF PURCHASING ANOTHER CONTRACT AND YOU SHOULD CONSULT A QUALIFIED TAX
ADVISER.
THIS PROSPECTUS WAS ONLY OFFERED IN JURISDICTIONS IN WHICH THE OFFERING WAS
LAWFUL. NO PERSON IS AUTHORIZED TO MAKE ANY REPRESENTATIONS IN CONNECTION WITH
THIS OFFERING OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, THE PRUDENTIAL
SERIES FUND PROSPECTUS AND STATEMENT OF ADDITIONAL INFORMATION, AND THE
PROSPECTUS FOR THE REAL PROPERTY ACCOUNT.
3
<PAGE>
GENERAL INFORMATION ABOUT PRUCO LIFE
INSURANCE COMPANY OF NEW JERSEY, PRUCO LIFE
OF NEW JERSEY VARIABLE INSURANCE ACCOUNT,
AND THE VARIABLE INVESTMENT OPTIONS
AVAILABLE UNDER THE CONTRACT
PRUCO LIFE INSURANCE COMPANY OF NEW JERSEY
Pruco Life Insurance Company of New Jersey ("Pruco Life of New Jersey", "us", or
"we") is a stock life insurance company, organized in 1982 under the laws of the
State of New Jersey. It is licensed to sell life insurance and annuities only in
the States of New Jersey and New York. Pruco Life of New Jersey is a
wholly-owned subsidiary of Pruco Life Insurance Company, which in turn is a
wholly-owned subsidiary of Prudential, a mutual insurance company founded in
1875 under the laws of the State of New Jersey. Prudential is currently
considering reorganizing itself into a publicly traded stock company through a
process known as "demutualization." On February 10, 1998, the Company's Board of
Directors authorized management to take the preliminary steps necessary to allow
the Company to demutualize. On July 1, 1998, legislation was enacted in New
Jersey that would permit this conversion to occur and that specified the process
for conversion. Demutualization is a complex process involving development of a
plan of reorganization, adoption of a plan by the Company's Board of Directors,
a public hearing, voting by qualified policyholders and regulatory approval, all
of which could take two or more years to complete. Prudential's management and
Board of Directors have not yet determined to demutualize and it is possible
that, after careful review, Prudential could decide not to go public.
The plan of reorganization, which hasn't been developed and approved, would
provide the criteria for determining eligibility and the methodology for
allocating shares or other consideration to those who would be eligible.
Generally, the amount of shares or other consideration eligible customers would
receive would be based on a number of factors, including the types, amounts and
issue years of their policies. As a general rule, owners of Prudential-issued
insurance policies and annuity contracts would be eligible, while mutual fund
customers and customers of the Company's subsidiaries, such as the Pruco Life
insurance companies, would not be. It has not yet been determined whether any
exceptions to that general rule will be made with respect to policyholders and
contract owners of Prudential's subsidiaries.
As of December 31, 1998, Prudential has invested $127 million in Pruco Life of
New Jersey through its subsidiary Pruco Life Insurance Company in connection
with Pruco Life of New Jersey's organization and operation. Prudential may make
additional capital contributions to Pruco Life of New Jersey as needed to enable
it to meet its reserve requirements and expenses. Prudential is under no
obligation to make such contributions and its assets do not back the benefits
payable under the Contract. Pruco Life of New Jersey's financial statements
begin on page B1 and should be considered only as bearing upon Pruco Life of New
Jersey's ability to meet its obligations under the Contracts.
PRUCO LIFE OF NEW JERSEY VARIABLE INSURANCE ACCOUNT
Pruco Life of New Jersey Variable Insurance Account (the "Account") was
established on December 29, 1982 under New Jersey 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 of New Jersey's other assets.
The obligations to Contract owners and beneficiaries arising under the Contract
are general corporate obligations of Pruco Life of New Jersey. Pruco Life of New
Jersey is also the legal owner of the assets in the Account. Pruco Life of New
Jersey will maintain assets in the Account with a total market value at least
equal to the reserve and other liabilities relating to the variable benefits
attributable to the Account. These assets may not be charged with liabilities
which arise from any other business Pruco Life of New Jersey conducts. In
addition to these assets, the Account's assets may include funds contributed by
Pruco Life of New Jersey to commence operation of the Account and may include
accumulations of the charges Pruco Life of New Jersey makes against the Account.
From time to time these additional assets will be transferred to Pruco Life of
New Jersey's general account. Before making any such transfer, Pruco Life of New
Jersey will consider any possible adverse impact the transfer might have on the
Account.
The Account is a unit investment trust, which is a type of investment company.
It is registered with the Securities and Exchange Commission ("SEC") under the
Investment Company Act of 1940 ("1940 Act"). This does not involve any
supervision by the SEC of the management, investment policies, or practices of
the Account. For state law purposes,
4
<PAGE>
the Account is treated as a part or division of Pruco Life of New Jersey.
Currently, you may invest in one or a combination of 13 subaccounts within the
Account, each of which invests in a single corresponding portfolio of the Series
Fund. Pruco Life of New Jersey may add additional subaccounts 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 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-ended, diversified
management investment company which sold its shares only to separate accounts of
Pruco Life of New Jersey and Pruco Life Insurance Company, 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 of New Jersey 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.
Prudential is the investment adviser for the assets of each of the portfolios of
the Series Fund. Prudential's principal business address is 751 Broad Street ,
Newark, New Jersey 07102-3777. Prudential has a Service Agreement with its
wholly-owned subsidiary The Prudential Investment Corporation ("PIC"). The
Service Agreement provides that, subject to Prudential's supervision, PIC will
furnish investment advisory services in connection with the management of the
Series Fund. In addition, Prudential has entered into a Subadvisory Agreement
with its wholly-owned subsidiary, Jennison Associates LLC ("Jennison"). Jennison
furnishes investment advisory services for the Prudential Jennison Portfolio.
Further detail is provided in the prospectus and statement of additional
information for the Series Fund. Prudential , PIC, and Jennison are registered
as investment advisers under the 1940 Act.
As an investment adviser, Prudential charges the Series Fund a daily investment
management fee as compensation for its services. In addition to the investment
management fee, each portfolio incurs certain expenses, such as accounting and
custodian fees. See CHARGES AND EXPENSES, page 8.
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. Neither the companies that 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. 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, RESTRICTIONS, EXPENSES, INVESTMENT RISKS, 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 OF THE
SERIES FUND WILL BE MET.
THE PRUCO LIFE OF NEW JERSEY VARIABLE CONTRACT REAL PROPERTY ACCOUNT
The Pruco Life of New Jersey Variable Contract Real Property Account (the "Real
Property Account") is a separate account of Pruco Life of New Jersey. This
account, through a general partnership formed by 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 asset value.
The Partnership has entered into an investment management agreement with
Prudential. Prudential selects the properties and other investments held by the
Partnership. 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.
5
<PAGE>
A FULL DESCRIPTION OF THE REAL PROPERTY ACCOUNT, ITS MANAGEMENT, POLICIES,
RESTRICTIONS, CHARGES AND EXPENSES, INVESTMENT RISKS, 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. IT 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 OF THE REAL PROPERTY ACCOUNT WILL BE MET.
WHICH INVESTMENT OPTION SHOULD BE SELECTED?
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, Prudential Jennison, Small Capitalization Stock,
Equity, 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 different investment risks,
policies, and programs.
You 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. Or, you may want even greater safety of principal
and may prefer the Money Market Portfolio, recognizing that the level of
short-term rates may change rather rapidly. If you are willing to take risks and
possibly achieve a higher total return, you may prefer the High Yield Bond
Portfolio, recognizing that the risks are greater for lower quality bonds with
normally higher yields. You may wish to divide your invested premium among two
or more of the portfolios. You may wish to obtain diversification by relying on
Prudential's judgment for an appropriate asset mix by choosing one of the
Balanced Portfolios. The Real Property Account permits diversification to your
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.
Your choice should take into account how willing you are to accept investment
risks, how your other assets are invested, and what investment results you may
experience in the future. You should consult your Pruco Life of New Jersey
representative from time to time about choices available to you under the
Contract. Pruco Life of New Jersey recommends against frequent transfers among
the several options. Experience generally indicates that "market timing"
investing, particularly by non-professional investors, is likely to prove
unsuccessful.
DETAILED INFORMATION FOR CONTRACT OWNERS
REQUIREMENTS FOR ISSUANCE OF A CONTRACT
As of January 1, 1992, these Contracts were no longer available for sale. The
minimum initial guaranteed death benefit was $25,000. The Contract generally was
issued on insureds below the age of 76. Before issuing any Contract, Pruco Life
of New Jersey required evidence of insurability which may have included a
medical examination. Non-smokers who met preferred underwriting requirements
were offered the most favorable premium rate. Pruco Life of New Jersey charges a
higher premium if an extra mortality risk is involved. These are the current
underwriting requirements. We reserve 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 of New Jersey 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 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. 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 you
pay premiums more often than annually, the aggregate annual premium will be
higher to compensate Pruco Life of New Jersey for the additional processing
costs (see CHARGES AND
6
<PAGE>
EXPENSES, page 8) 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
initial death benefit and the insured's age at issue, sex (except where unisex
rates apply), and risk classification. If you pay premiums other than monthly,
we will notify you about three weeks before each due date, that a premium is
due. If you pay premiums monthly, we will send to you each year a book with 12
coupons that will serve as a reminder. You may change the frequency of premium
payments with Pruco Life of New Jersey's consent.
You may elect to have monthly premiums paid automatically under the "Pru-Matic
Premium Plan" by pre-authorized transfers from a bank checking account. You 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 $333.75 $342.75 $1,245.00 $1,281.00
35 at issue
- -------------------------------------------------------------------
Male, age 40 $449.00 $484.50 $1,706.00 $1,848.00
at issue
- -------------------------------------------------------------------
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 $31.00 $342.75 $112.00 $1,281.00
35 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. 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, you will have several
options. You may continue the amount of insurance coverage in effect on the due
date of the unpaid premium, less any Contract debt, for a fixed period or you
may continue a lesser amount of insurance for the lifetime of the insured, or
you may surrender the Contract for its net cash value. See OPTIONS ON LAPSE,
page 20.
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, we will increase the death benefit by the portion of
the last premium that covers the period subsequent to the date of death.
7
<PAGE>
ALLOCATION OF PREMIUMS
The initial premium, after we deduct applicable charges, is allocated among the
subaccounts and/or the Real Property Account, according to the desired
allocation specified on the application. The invested portion of all subsequent
premiums are placed in the selected investment option[s] as of the end of the
valuation period when due (not when received) in accordance with the allocation
you previously designated. 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. Eastern time
on each day during which the New York Stock Exchange is open. Any premium
payments received prior to the due date will be held in Pruco Life of New
Jersey's general account, and the net premium will not be credited to your
selected investment option until the due date. Provided the Contract is not in
default, you may change the way in which subsequent premiums are allocated by
giving written notice to a Home Office, or by telephoning a Home Office,
provided you are enrolled to use the Telephone Transfer System. There is no
charge for reallocating future net premiums among the investment options. If any
portion of a net premium is allocated to a particular subaccount or to the Real
Property Account, 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% cannot. Of course, the total allocation of all
selected investment options must equal 100%.
CHARGES AND EXPENSES
This section provides a more detailed description of each charge that is
described briefly in the chart on page 3.
All of the charges made by Pruco Life of New Jersey, whether deducted from
premiums or from the Contract's assets, are set forth below.
1. If premiums are paid annually, we charge an annual administrative charge of
$30 for administrative expenses, billing, collecting premiums, processing
claims, paying cash values, making Contract changes, keeping records, and
communicating with Contract owners. If premiums are paid more frequently,
we will charge a higher charge 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 1998, 1997, and 1996, Pruco Life
of New Jersey received a total of approximately $1,329,587, $1,413,936, and
$1,499,381, respectively, in annual administrative charges.
2. We charge for sales expenses. This charge, often called a "sales load",
compensates us for the costs of selling the Contracts, including sales
commissions, advertising, and the printing and distribution of prospectuses
and sales literature. It is 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 1998, 1997, and 1996, Pruco Life of New
Jersey received a total of approximately $1,265,145, $1,319,547, and
$1,430,362, respectively, in sales load charges.
3. We charge 2% of each basic premium for state and local premium-based taxes.
The amount charged may be more than Pruco Life of New Jersey actually pays
for premium-based taxes. During 1998, 1997, and 1996, Pruco Life of New
Jersey received a total of approximately $253,029, $264,046, and $286,525,
respectively, in charges for payment of such taxes.
4. We charge up to 1.2% of each basic premium for assuming a guaranteed
minimum death benefit risk. This charge compensates Pruco Life of New
Jersey 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 1998, 1997, and 1996, Pruco Life of New Jersey
received a total of approximately $151,817, $158,428, and $171,915,
respectively, for this risk charge. When premiums are paid more frequently
than annually, we will deduct this charge 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.
5. Each month, we reduce the amounts held in the Account and/or the Real
Property Account for anticipated mortality charges attributable to each
Contract. This charge compensates Pruco Life of New Jersey 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 1980 Commissioner's Standard Ordinary Mortality Table (the "1980 CSO
Table").
8
<PAGE>
6. We reduce the Account and/or the Real Property Account for the mortality
and expense risks that Pruco Life of New Jersey assumes. This charge is
made daily at an effective annual rate of 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 of New Jersey estimated. During 1998, 1997, and 1996, Pruco Life
of New Jersey received a total of approximately $589,402, $539,708, and
$470,315, respectively, in mortality and expense risk charges.
7. If the Contract includes riders, we make a deduction from each premium
payment for charges applicable to those riders. A deduction will also be
made if the rating class of the insured results in an extra fee.
8. Pruco Life of New Jersey deducts an investment advisory fee daily from each
portfolio at a rate, on an annualized basis, from 0.35% for the Stock Index
Portfolio to 0.75% for the Global Portfolio. The expenses incurred in
conducting the investment operations of the portfolios (such as custodian
fees and preparation and distribution of annual reports) are paid out of
the portfolio's income. These expenses also vary from portfolio to
portfolio.
The total expenses of each portfolio for the year 1998, expressed as a
percentage of the average assets during the year, are shown below:
---------------------------------------------------------------------------
INVESTMENT OTHER EXPENSES TOTAL EXPENSES
PORTFOLIO ADVISORY FEE (after expense (after expense
reimbursement)* reimbursement)*
---------------------------------------------------------------------------
MONEY MARKET 0.40% 0.00%* 0.40%*
DIVERSIFIED BOND 0.40% 0.00%* 0.40%*
GOVERNMENT INCOME 0.40% 0.03% 0.43%
CONSERVATIVE BALANCED 0.55% 0.00%* 0.40%*
FLEXIBLE MANAGED 0.60% 0.00%* 0.40%*
HIGH YIELD BOND 0.55% 0.03% 0.58%
STOCK INDEX 0.35% 0.02% 0.37%
EQUITY INCOME 0.40% 0.02% 0.42%
EQUITY 0.45% 0.00%* 0.40%*
PRUDENTIAL JENNISON 0.60% 0.03% 0.63%
SMALL CAPITALIZATION STOCK 0.40% 0.07% 0.47%
GLOBAL 0.75% 0.11% 0.86%
NATURAL RESOURCES 0.45% 0.04% 0.49%
---------------------------------------------------------------------------
* 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. Pruco
Life of New Jersey currently makes payments to the following five
subaccounts so that the portfolio expenses indirectly borne by a Contract
owner investing in the Money Market, Diversified Bond, Conservative
Balanced, Flexible Managed, and Equity Portfolios will not exceed 0.4%. No
such offset will be made with respect to the remaining portfolios, which
had no counterparts in the Pruco Life Series Fund, Inc. Without such
adjustments the portfolio expenses indirectly borne by a Contract owner,
expressed as a percentage of the average daily net assets by portfolio,
would have been:
(1) 0.41% for the Money Market Portfolio;
(2) 0.42% for the Diversified Bond Portfolio;
(3) 0.57% for the Conservative Balanced Portfolio;
(4) 0.61% for the Flexible Managed Portfolio; and
(5) 0.47% for the Equity Portfolio.
The earnings of the Account are taxed as part of the operations of Pruco Life of
New Jersey. No charge is being made currently to the Account for Company federal
income taxes. Pruco Life of New Jersey reviews 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 of New Jersey 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 of New Jersey that are attributable to the
Account may result in a corresponding charge against the Account.
9
<PAGE>
The investment management fee and other expenses charged against the Real
Property Account are described in the attached prospectus for that investment
option.
TRANSFERS
You may, up to four times in each Contract year, transfer amounts from one
subaccount to another subaccount or to the Real Property Account. You may make
such transfers provided the Contract is not in default or is inforce as variable
reduced paid-up insurance (see OPTIONS ON LAPSE, page 20). Currently, you may
make additional transfers, with our consent, without charge. 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 will take effect as of the end of the valuation
period in which a proper transfer request is received at a Home Office. 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. You may transfer amounts by proper written notice to a
Home Office or by telephone, provided you are enrolled to use the Telephone
Transfer System. You will automatically be enrolled to use the Telephone
Transfer System unless the Contract is jointly owned or you elect not to have
this privilege. Telephone transfers may not be available on Contracts that are
assigned, see ASSIGNMENT, page 22, depending on the terms of the assignment.
We will use reasonable procedures, such as asking you to provide certain
personal information provided on your application for insurance, to confirm that
instructions given by telephone are genuine. We will not be held liable for
following telephone instructions that we reasonably believe to be genuine. Pruco
Life of New Jersey cannot guarantee that you will be able to get through to
complete a telephone transfer during peak periods such as periods of drastic
economic or market change.
The Contract was not designed for professional market timing organizations,
other organizations, or individuals using programmed, large, or frequent
transfers. A pattern of exchanges that coincides with a "market timing" strategy
may be disruptive to the subaccounts and will be discouraged. If such a pattern
were to be found, we may be required to modify the transfer procedures,
including but not limited to refusing transfer requests of an agent under a
power of attorney on behalf of more than one Contract owner.
HOW A CONTRACT'S DEATH BENEFIT WILL VARY
Your Contract's death benefit will change on the first day of each Contract
month by an amount that depends on the investment performance of your chosen
subaccounts and/or the Real Property Account. However, your Contract's death
benefit can never be less than the Contract's guaranteed minimum amount
(assuming there is no outstanding Contract debt or premium in default).
Generally, if the first premium was paid with the application, the Contract Date
is the later of the date of the application or the date of a medical
examination. If the first premium was not paid with the application, the
Contract Date is ordinarily two or three days after the application is approved
by Pruco Life of New Jersey so that it either coincides with or is prior to the
date on which the first premium was 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."
In the following discussion, we assume that all of the net premiums under a
Contract are 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). In determining the premiums for the Contract, we assume that
the value of the assets increase due to investment performance at a rate of 4% a
year. Therefore, the assets of the subaccount relating to a Contract must
increase at an annual rate greater than 4% in order for the death benefit to
increase.
The exact amount of death benefit changes is determined by an actuarial
computation. The computation is based upon: (1) the age and sex (except where
unisex rates apply) of the insured; (2) the size of the Contract; (3) the number
of years it has been in effect; and (4) the investment results of the subaccount
in which the Contract participates. Generally, 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.
10
<PAGE>
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 inforce for a long time than for one that has been inforce 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 through T4 of this prospectus. The examples
set forth below illustrate death benefits. These examples also assume a total
Series Fund expense ratio of 0.48% (taking into account the offsets described
under CHARGES AND EXPENSES on page 8).
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 7.17%
per year. In the 19th year the value of the assets increase at a uniform rate of
8.17%. (These percentages correspond to gross annual investment returns in the
corresponding Series Fund portfolio of 8% and 9% per year, respectively.)
- ----------------------------------------
DEATH DEATH
INSURED BENEFIT BENEFIT
END OF END OF
YEAR 18 YEAR 19
- ----------------------------------------
Male, age 25 $59,512 $60,999
at issue
- ----------------------------------------
Male, age 40 $60,653 $62,285
at issue
- ----------------------------------------
EXAMPLE NO. 2. Same assumptions as in Example No. 1 except that the value of the
assets increases by 1.17% in the 19th year. (This percentage corresponds to a
gross annual investment return in the corresponding Series Fund portfolio of
2%.)
- ----------------------------------------
DEATH DEATH
INSURED BENEFIT BENEFIT
END OF END OF
YEAR 18 YEAR 19
- ----------------------------------------
Male, age 25 $59,512 $58,504
at issue
- ----------------------------------------
Male, age 40 $60,653 $59,545
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 7.17% 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 7.17% per year. In the 19th year the value of the assets
increases at a uniform rate of 8.17%. (These percentages correspond to gross
annual investment returns in the corresponding Series Fund portfolio of 8% and
9% per year, respectively.)
11
<PAGE>
- -------------------------------------------------------
GUARANTEED DEATH DEATH
INSURED DEATH BENEFIT BENEFIT
BENEFIT END OF END OF YEAR
YEAR 18 19
- -------------------------------------------------------
Male, age 25 $76,012 $90,474 $92,733
at issue
- -------------------------------------------------------
Male, age 40 $42,354 $51,378 $52,761
at issue
- -------------------------------------------------------
EXAMPLE NO. 4. Same assumptions as Example No. 3 except that the value of the
assets increases by 1.17% in the 19th year. (This percentage corresponds to a
gross annual investment return in the corresponding Series Fund portfolio of
2%.)
- -------------------------------------------------------
GUARANTEED DEATH DEATH
INSURED DEATH BENEFIT BENEFIT
BENEFIT END OF END OF YEAR
YEAR 18 19
- -------------------------------------------------------
Male, age 25 $76,012 $90,474 $88,940
at issue
- -------------------------------------------------------
Male, age 40 $42,354 $51,378 $50,440
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 applicable subaccount have earned less than 4%, and the
death benefit accordingly equals the guaranteed minimum amount, we will keep a
record of what the death benefit would have been had there not been a guaranteed
minimum. If investment results become favorable and the value of the assets in
the subaccount increase at a rate greater than 4% a year, the death benefit will
not be more than the guaranteed minimum amount until the earlier unfavorable
investment results have been offset. For example, suppose for the first three
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 remain at the
guaranteed minimum amount. If the value of the assets increases at a rate of 8%
in the fourth year, it 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 T3 and T4 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%.
HOW A CONTRACT'S CASH VALUE WILL VARY
Your Contract has a cash value which may be obtained while the insured is living
by surrender of the Contract. However, your 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 your chosen subaccount[s] and/or
the Real Property Account.
A Contract's value upon surrender is its "net cash value." The net cash value
equals the cash value less any outstanding Contract debt. See CONTRACT LOANS,
page 16. 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.
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 we need 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.
12
<PAGE>
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. If the net premium
is not paid before the end of the grace period, or if the Contract is
surrendered before then, we will lower the cash value to take into account the
failure to pay the premium on the due date.
The tables on pages T1 through T4 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. The examples set forth below assume a total
Series Fund expense ratio of 0.48% (taking into account the offsets described
under CHARGES AND EXPENSES on page 8).
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 7.17%
per year. In the 19th year the value of the assets increases at a uniform rate
of 8.17%. (These percentages correspond to gross annual investment returns in
the corresponding Series Fund portfolio of 8% and 9% per year, respectively.)
- ----------------------------------------
CASH VALUE CASH VALUE
INSURED END OF END OF
YEAR 18 YEAR 19
- ----------------------------------------
Male, age 25 $11,871 $13,131
at issue
- ----------------------------------------
Male, age 40 $20,131 $22,118
at issue
- ----------------------------------------
EXAMPLE NO. 2. Same assumptions as in Example No. 1 except that the value of the
assets increases by 1.17% in the 19th year. (This percentage corresponds to a
gross annual investment return in the corresponding Series Fund portfolio of
2%.)
- ----------------------------------------
CASH VALUE CASH VALUE
INSURED END OF END OF
YEAR 18 YEAR 19
- ----------------------------------------
Male, age 25 $11,871 $12,277
at issue
- ----------------------------------------
Male, age 40 $20,131 $20,675
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.
Therefore, the same rate of increase 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 7.17% per year. In the 19th year the value of
the assets increases at a uniform rate of 8.17%. (These percentages correspond
to gross annual investment returns in the corresponding Series Fund portfolio of
8% and 9% per year, respectively.)
13
<PAGE>
- -----------------------------------------
CASH VALUE CASH VALUE
INSURED END OF END OF
YEAR 18 YEAR 19
- -----------------------------------------
Male, age 25 $18,048 $19,962
at issue
- -----------------------------------------
Male, age 40 $17,053 $18,736
at issue
- -----------------------------------------
EXAMPLE NO. 4. Same assumptions as in Example No. 3 except that the value of the
assets increases by 1.17% in the 19th year. (This percentage corresponds to a
gross annual investment return in the corresponding Series Fund portfolio of
2%.)
- -----------------------------------------
CASH VALUE CASH VALUE
INSURED END OF END OF
YEAR 18 YEAR 19
- -----------------------------------------
Male, age 25 $18,048 $18,664
at issue
- -----------------------------------------
Male, age 40 $17,053 $17,513
at issue
- -----------------------------------------
The last two examples might be compared with Examples No. 3 and 4 on pages 11
and 12. 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 1.17% 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
You may surrender your Contract, in whole or in part, for its net cash value
while the insured is living. A partial surrender essentially involves splitting
an existing Contract into two Contracts. One is surrendered for its net cash
value; the other is continued inforce on the same terms as the original
Contract, except that 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 Premium will be payable. The face amount immediately
after the partial surrender must be at least equal to the minimum face amount
applicable to the insured's Contract.
To surrender a Contract, in whole or in part, you must deliver or mail the
Contract with a written request in a form that meets Pruco Life of New Jersey's
needs, to a Home Office. The net cash value of a surrendered or partially
surrendered Contract will be determined as of the date such request is received
in a Home Office. Surrender of all or part of a Contract may have tax
consequences. See TAX TREATMENT OF CONTRACT BENEFITS, page 18.
WITHDRAWAL OF A PORTION OF A CONTRACT'S NET CASH VALUE
An alternative to surrender or partial surrender of a Contract is a partial
withdrawal of net cash value. You are permitted to withdraw a portion of your
Contract's net cash value generally, the portion resulting from investment
performance exceeding 4% a year without surrendering the Contract. This avoids
splitting the Contract into two Contracts. We will reduce the death benefit by
the amount of paid-up whole life insurance that the cash value withdrawn would
have purchased for that Contract owner. We will reduce the guaranteed minimum
death benefit so that the difference between the death benefit and the
guaranteed minimum death benefit will be the same percentage of cash value as
before the withdrawal. The right to withdraw such excess net cash value may be
usefully compared with a partial surrender. If you elect to withdraw excess cash
value, the Premium is not reduced. The cash value is 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 if the face amount is
decreased, the Contract might be classified as a Modified Endowment Contract.
14
<PAGE>
For a brief discussion of the potential tax consequences of the withdrawal of
your excess cash value, see TAX TREATMENT OF CONTRACT BENEFITS, page 18.
Upon request, we will tell you the amount of the net cash value that you may
withdraw 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. You may withdraw a portion of the Contract's cash value to pay
premiums on the Contract. This can be done once, occasionally, or automatically
every year, to the extent investment performance warrants it. To exercise this
right, you must deliver or mail a written request in a form that meets our needs
to a Home Office.
WHEN PROCEEDS ARE PAID
We generally pay any death benefit, cash value or loan proceeds within seven
days after receipt at a 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 is determined as of the end of the valuation period in which
the necessary documents are received at a Home Office. However, we 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: (1) the New York Stock Exchange is
closed for other than a regular holiday or weekend; (2) trading is restricted by
the SEC; or (3) the SEC declares that an emergency exists.
With respect to a Contract inforce as extended term or fixed reduced paid-up
insurance, we expect to pay any cash value promptly upon request. However, we
have the right to delay payment of such cash value for up to six months (or a
shorter period if required by applicable law). We will pay interest of at least
3% a year if we delay such a payment for 30 days or more (or a shorter period if
required by applicable law).
LIVING NEEDS BENEFIT
The LIVING NEEDS BENEFIT(SM) is available under the Contract. It may be added
to Contracts at issue and 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.
The LIVING NEEDS BENEFIT allows you 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. One or both of the following options may be
available. You should consult with a Pruco Life of New Jersey representative 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 six months or less. When satisfactory
evidence is provided, Pruco Life of New Jersey 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 six 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.
NURSING HOME OPTION. This option is available after the insured has been
confined to an eligible nursing home for six 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 of New
Jersey 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 a specified number of years (not more than 10 nor less than two),
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 of New Jersey
reserves the right to determine the minimum amount that may be accelerated.
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 of New Jersey 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.
15
<PAGE>
You should consider whether adding this settlement option is appropriate in your
given situation. Adding the LIVING NEEDS BENEFIT to the Contract has no adverse
consequences; however, electing to use it could. With the exception of certain
business-related policies, the LIVING NEEDS BENEFIT is excluded from income if
the insured is terminally ill or chronically ill as defined by the tax law
(although the exclusion in the latter case may be limited). You should consult a
qualified tax adviser before electing to receive this benefit. Receipt of a
LIVING NEEDS BENEFIT payment may also affect your eligibility for certain
government benefits or entitlements.
ILLUSTRATIONS OF CASH VALUES, DEATH BENEFITS, AND ACCUMULATED PREMIUMS
The following four tables show how a Contract's death benefit and cash surrender
values change with the investment performance of the Account. They are
"hypothetical" because they are based, in part, upon several assumptions which
are described below.
All four tables assume the following:
o a Contract with a face amount of $50,000 bought by a male of a given age,
with no extra risks or substandard ratings, and no extra benefit riders added
to the Contract.
o the premium is paid on each Contract anniversary and no loans are taken.
o the Contract fund has been invested in equal amounts in each of the 13
available portfolios of the Series Fund and no portion of the Contract Fund
has been allocated to the Real Property Account.
The first and third tables (pages T1 and T3) assume a Contract purchased by a 25
year old male and the second and fourth tables (pages T2 and T4) assume a
Contract purchased by a 40 year old male. All four tables assume the current
charges will continue for the indefinite future.
Finally, there are five assumptions, shown separately, about the average
investment performance of the portfolios. The first is that there will be a
uniform 0% gross rate of return with the average value of the Contract Fund
uniformly adversely affected by very unfavorable investment performance. The
other four assumptions are that investment performance will be at a uniform
gross annual rate of 4%, 6%, 8% and 12%. Actual returns will fluctuate from year
to year. In addition, death benefits and cash surrender values would be
different from those shown if investment returns averaged 0%, 4%, 6%, 8% and 12%
but fluctuated from those averages throughout the years. Nevertheless, these
assumptions help show how the Contract values change with investment experience.
The first two tables (pages T1 and T2) assume uniform gross annual rates of 0%,
4%, and 8%. The third and fourth tables (pages T3 and T4) assume uniform gross
annual rates of 0%, 6% and 12%.
The first column in the following four tables (pages T1 through T4) shows the
Contract year. The second column, to provide context, shows what the aggregate
amount would be if the premiums had been invested to earn interest, after taxes,
at 4% compounded annually. The next three columns show the death benefit payable
in each of the years shown for the three different assumed investment returns.
The last three columns show the cash surrender value payable in each of the
years shown for the three different assumed investment returns.
A gross return (as well as the net return) is shown at the top of each column.
The gross return represents the combined effect of investment income and capital
gains and losses, realized or unrealized, of the portfolios before any reduction
is made for investment advisory fees or other Series Fund expenses. The net
return reflects average total annual expenses of the 13 portfolios of 0.48%, and
the daily deduction from the Contract Fund of 0.35% per year. Thus, based on the
above assumptions, gross investment returns of 0%, 4%, 6%, 8% and 12% are the
equivalent of net investment returns of -0.83%, 3.17%, 5.17%, 7.17% and 11.17%,
respectively. The actual fees and expenses of the portfolios associated with a
particular Contract may be more or less than 0.48% and will depend on which
subaccounts are selected. The death benefits and cash surrender values shown
reflect the deduction of all expenses and charges both from the Series Fund and
under the Contract.
Your Pruco Life of New Jersey representative can provide you with a hypothetical
illustration for your own age, sex and rating class.
16
<PAGE>
ILLUSTRATIONS
-------------
VARIABLE LIFE INSURANCE CONTRACT
MALE ISSUE AGE 25
$50,000 GUARANTEED DEATH BENEFIT
$536.50 ANNUAL PREMIUM FOR STANDARD UNDERWRITING RISK (1)
<TABLE>
<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 (-0.83% Net) (3.17% Net) (7.17% Net) (-0.83% Net) (3.17% Net) (7.17% Net)
---------- -------------- -------------- -------------- -------------- -------------- -------------- --------------
<S> <C> <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 $ 50,081 $ 376 $ 396 $ 416
3 $ 1,742 $50,000 $50,000 $ 50,209 $ 730 $ 781 $ 834
4 $ 2,369 $50,000 $50,000 $ 50,396 $1,080 $ 1,178 $ 1,283
5 $ 3,022 $50,000 $50,000 $ 50,643 $1,438 $ 1,598 $ 1,772
6 $ 3,701 $50,000 $50,000 $ 50,951 $1,792 $ 2,030 $ 2,296
7 $ 4,407 $50,000 $50,000 $ 51,320 $2,142 $ 2,474 $ 2,855
8 $ 5,141 $50,000 $50,000 $ 51,751 $2,487 $ 2,930 $ 3,451
9 $ 5,905 $50,000 $50,000 $ 52,244 $2,828 $ 3,397 $ 4,085
10 $ 6,699 $50,000 $50,000 $ 52,799 $3,163 $ 3,876 $ 4,761
15 $11,172 $50,000 $50,000 $ 56,516 $4,737 $ 6,424 $ 8,818
20 $16,615 $50,000 $50,000 $ 61,838 $6,100 $ 9,183 $14,211
25 $23,237 $50,000 $50,000 $ 68,847 $7,240 $12,129 $21,322
30 $31,293 $50,000 $50,000 $ 77,669 $8,133 $15,204 $30,584
40 (Age 65) $53,020 $50,000 $50,000 $101,469 $9,057 $21,298 $57,292
</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 of New Jersey 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>
VARIABLE LIFE INSURANCE CONTRACT
MALE ISSUE AGE 40
$50,000 GUARANTEED DEATH BENEFIT
$939 ANNUAL PREMIUM FOR STANDARD UNDERWRITING RISK (1)
<TABLE>
<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 (-0.83% Net) (3.17% Net) (7.17% Net) (-0.83% Net) (3.17% Net) (7.17% Net)
---------- -------------- -------------- -------------- -------------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1 $ 977 $50,000 $50,000 $50,029 $ 197 $ 208 $ 220
2 $ 1,992 $50,000 $50,000 $50,121 $ 815 $ 863 $ 912
3 $ 3,048 $50,000 $50,000 $50,276 $ 1,417 $ 1,528 $ 1,643
4 $ 4,147 $50,000 $50,000 $50,493 $ 2,003 $ 2,200 $ 2,411
5 $ 5,289 $50,000 $50,000 $50,778 $ 2,643 $ 2,956 $ 3,299
6 $ 6,477 $50,000 $50,000 $51,131 $ 3,266 $ 3,722 $ 4,235
7 $ 7,713 $50,000 $50,000 $51,551 $ 3,873 $ 4,499 $ 5,223
8 $ 8,998 $50,000 $50,000 $52,039 $ 4,461 $ 5,286 $ 6,265
9 $10,335 $50,000 $50,000 $52,595 $ 5,033 $ 6,084 $ 7,363
10 $11,725 $50,000 $50,000 $53,218 $ 5,587 $ 6,892 $ 8,521
15 $19,554 $50,000 $50,000 $57,350 $ 8,057 $11,021 $15,260
20 $29,080 $50,000 $50,000 $63,205 $ 9,979 $15,194 $23,776
25 (Age 65) $40,670 $50,000 $50,000 $70,860 $11,344 $19,294 $34,399
</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 of New Jersey 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>
VARIABLE LIFE INSURANCE CONTRACT
MALE ISSUE AGE 25
$50,000 GUARANTEED DEATH BENEFIT
$536.50 ANNUAL PREMIUM FOR STANDARD UNDERWRITING RISK (1)
<TABLE>
<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 (-0.83% Net) (5.17% Net) (11.17% Net) (-0.83% Net) (5.17% Net) (11.17% Net)
---------- -------------- -------------- -------------- -------------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1 $ 558 $50,000 $50,004 $ 50,026 $ 22 $ 26 $ 31
2 $ 1,138 $50,000 $50,030 $ 50,185 $ 376 $ 406 $ 437
3 $ 1,742 $50,000 $50,076 $ 50,481 $ 730 $ 808 $ 890
4 $ 2,369 $50,000 $50,144 $ 50,922 $1,080 $ 1,230 $ 1,393
5 $ 3,022 $50,000 $50,232 $ 51,518 $1,438 $ 1,683 $ 1,962
6 $ 3,701 $50,000 $50,341 $ 52,276 $1,792 $ 2,159 $ 2,593
7 $ 4,407 $50,000 $50,471 $ 53,203 $2,142 $ 2,658 $ 3,291
8 $ 5,141 $50,000 $50,620 $ 54,307 $2,487 $ 3,180 $ 4,063
9 $ 5,905 $50,000 $50,789 $ 55,599 $2,828 $ 3,725 $ 4,916
10 $ 6,699 $50,000 $50,978 $ 57,085 $3,163 $ 4,295 $ 5,858
15 $11,172 $50,000 $52,196 $ 67,821 $4,737 $ 7,515 $ 12,225
20 $16,615 $50,000 $53,840 $ 85,266 $6,100 $11,388 $ 22,479
25 $23,237 $50,000 $55,871 $111,637 $7,240 $15,996 $ 38,886
30 $31,293 $50,000 $58,258 $150,112 $8,133 $21,392 $ 64,887
40 (Age 65) $53,020 $50,000 $64,011 $283,153 $9,057 $34,448 $168,094
</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 of New Jersey or the Series Fund
that these hypothetical rates of return can be achieved for any one year or
sustained over any period of time.
T3
<PAGE>
VARIABLE LIFE INSURANCE CONTRACT
MALE ISSUE AGE 40
$50,000 GUARANTEED DEATH BENEFIT
$939 ANNUAL PREMIUM FOR STANDARD UNDERWRITING RISK (1)
<TABLE>
<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 (-0.83% Net) (5.17% Net) (11.17% Net) (-0.83% Net) (5.17% Net) (11.17% Net)
---------- -------------- -------------- -------------- -------------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1 $ 977 $50,000 $50,011 $ 50,066 $ 197 $ 214 $ 231
2 $ 1,992 $50,000 $50,045 $ 50,277 $ 815 $ 888 $ 962
3 $ 3,048 $50,000 $50,101 $ 50,638 $ 1,417 $ 1,584 $ 1,763
4 $ 4,147 $50,000 $50,179 $ 51,154 $ 2,003 $ 2,304 $ 2,637
5 $ 5,289 $50,000 $50,281 $ 51,844 $ 2,643 $ 3,124 $ 3,675
6 $ 6,477 $50,000 $50,405 $ 52,716 $ 3,266 $ 3,971 $ 4,812
7 $ 7,713 $50,000 $50,552 $ 53,776 $ 3,873 $ 4,848 $ 6,058
8 $ 8,998 $50,000 $50,721 $ 55,034 $ 4,461 $ 5,755 $ 7,422
9 $10,335 $50,000 $50,911 $ 56,497 $ 5,033 $ 6,693 $ 8,918
10 $11,725 $50,000 $51,122 $ 58,175 $ 5,587 $ 7,661 $10,556
15 $19,554 $50,000 $52,472 $ 70,192 $ 8,057 $12,950 $21,341
20 $29,080 $50,000 $54,273 $ 89,547 $ 9,979 $18,949 $38,013
25 (Age 65) $40,670 $50,000 $56,479 $118,657 $11,344 $25,629 $63,548
</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 of New Jersey or the Series Fund
that these hypothetical rates of return can be achieved for any one year or
sustained over any period of time.
T4
<PAGE>
CONTRACT LOANS
You may borrow from Pruco Life of New Jersey an amount up to the current loan
value of your Contract using the Contract as the only security for the loan.
Generally, the loan value of a Contract is 75% of its cash value. The minimum
amount that may be borrowed at any one time is $500, unless the loan is used to
pay premiums on the Contract. If you pay premiums other than monthly, you may
elect in advance to have Pruco Life of New Jersey 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.
If you request a loan, you may choose one of two interest rate options. You may
elect to have interest charges accrue daily at a fixed effective annual rate of
5.5%. Alternatively, you may elect a variable interest rate that changes from
time to time. You may switch from the fixed to the variable interest loan
provision, or vice-versa, with Pruco Life of New Jersey's consent.
If you elect the variable loan interest rate provision, you may borrow up to 90%
of the Contract's cash value and interest on any loan will accrue daily at an
annual rate Pruco Life of New Jersey determines at the start of each Contract
year (instead of at the fixed 5.5% rate). The interest rate will not exceed the
greatest of: (1) the "Published Monthly Average" for the calendar month ending
two months before the calendar month of the Contract anniversary; (2) 5%; or (3)
the rate permitted 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 1998 ranged from 6.72% to 7.00%.
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. The
Contract debt is the amount of all outstanding loans plus any interest accrued
but not yet due. If at any time the Contract debt exceeds what the net cash
value would be if there were no Contract debt, Pruco Life of New Jersey will
notify you of its intent to terminate the Contract in 31 days, within which time
you may repay all or enough of the loan to keep the Contract inforce. If you
fail to keep the Contract inforce, 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 19, and LAPSE AND REINSTATEMENT, page
20.
When a loan is made, an amount equal to the loan proceeds is transferred out of
the applicable investment options. The reduction is generally made in the same
proportions as the value that each investment option bears to the total value of
the Contract. While a fixed-rate loan is outstanding, the amount that was so
transferred will continue to be treated as part of the Contract's assets, but
will be credited with the assumed rate of return of 4% rather than with the
actual rate of return of the applicable investment option[s]. While a loan made
pursuant to the variable loan interest rate provision is outstanding, the amount
that was transferred is credited with a rate which is 1% less than the loan
interest rate for the Contract year, rather than with the actual rate of return
of the subaccount[s] and/or the Real Property Account. Currently, we credit such
amounts at a rate that is 1% less than the loan interest rate for the Contract
year. If a loan remains outstanding at a time when Pruco Life of New Jersey
fixes a new rate, the new interest rate applies.
If the death benefit becomes payable while a loan is outstanding, or if the
Contract is surrendered, any Contract debt is deducted from the proceeds
otherwise payable.
A loan will have a permanent effect on a Contract's death benefit and cash value
because the investment results of the selected investment options will apply
only to the amount remaining in those investment options. 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 greater than the rate being
credited upon the amount of the loan 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 below that rate, the death benefit
and the cash value will not be as adversely affected as they would have been had
no loan been made. Loan repayments are allocated to the investment options
proportionately based on their balances at the time of the loan repayment.
Loans from Modified Endowment Contracts may be treated for tax purposes as
distributions of income. See TAX TREATMENT OF CONTRACT BENEFITS, page 18.
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 eight and repaid at the end of
Contract year nine. Upon repayment, the death benefit would be $51,930.76 and
the cash value $4,007.59. These amounts are lower than the death benefit and
cash value shown on that page for the end of Contract year nine
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because the loan amount was credited with the 4% assumed investment return
rather than the 8% gross rate of return for the selected investment options.
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 Prudential and will be a participating (potentially dividend
paying) policy. Premiums for the new policy will be based on 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 of New Jersey 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.
You may 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 of New Jersey, in conjunction with the New Jersey Insurance
Commissioner, will determine if a change in investment policy is material. You
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
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 751 Broad
Street, Newark, New Jersey 07102-3777. The Contract was sold by registered
representatives of Prusec who were also authorized by state insurance
departments to do so. The Contract may also have been 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. Representatives with less than
three years of service may be paid on a different basis. Representatives who met
certain productivity, profitability, and persistency standards with regard to
the sale of the Contract may be eligible for additional compensation.
Sales expenses in any year are not equal to the deduction for sales load in that
year. Pruco Life of New Jersey 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 of New Jersey'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 8.
TAX TREATMENT OF CONTRACT BENEFITS
This summary provides general information on the federal income tax treatment of
the Contract. It is not a complete statement of what the federal income taxes
will be in all circumstances. It is based on current law and interpretations,
which may change. It does not cover state taxes or other taxes. It is not
intended as tax advice. You should consult your own qualified tax adviser for
complete information and advice.
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TREATMENT AS LIFE INSURANCE. The Contract must meet certain requirements to
qualify as life insurance for tax purposes. These requirements include certain
definitional tests and rules for diversification of the Contract's investments.
For further information on the diversification requirements, see DIVIDENDS,
DISTRIBUTIONS AND Taxes in the prospectus for the Series Fund.
We believe we have taken adequate steps to ensure that the Contract qualifies as
life insurance for tax purposes. Generally speaking, this means that:
o you will not be taxed on the growth of the funds in the Contract,
unless you receive a distribution from the Contract,
o the Contract's death benefit will be tax free to your beneficiary.
Although we believe that the Contract should qualify as life insurance for tax
purposes, there are some uncertainties, particularly because the Secretary of
Treasury has not yet issued permanent regulations that bear on this question.
Accordingly, we reserve the right to make changes -- which will be applied
uniformly to all Contract owners after advance written notice -- that we deem
necessary to ensure that the Contract will qualify as life insurance.
PRE-DEATH DISTRIBUTIONS. The tax treatment of any distribution you receive
before the insured's death depends on whether the Contract is classified as a
Modified Endowment Contract.
CONTRACTS NOT CLASSIFIED AS MODIFIED ENDOWMENT CONTRACTS.
o If you surrender the Contract or allow it to lapse, you will be taxed
on the amount you receive in excess of the premiums you paid less the
untaxed portion of any prior withdrawals. For this purpose, you will
be treated as receiving any portion of the cash surrender value used
to repay Contract debt. The tax consequences of a surrender may differ
if you take the proceeds under an income payment settlement option.
o Generally, you will be taxed on a withdrawal to the extent the amount
you receive exceeds the premiums you paid for the Contract less the
untaxed portion of any prior withdrawals. However, under some limited
circumstances, in the first 15 Contract years, all or a portion of a
withdrawal may be taxed if the Contract Fund exceeds the total
premiums paid less the untaxed portions of any prior withdrawals, even
if total withdrawals do not exceed total premiums paid.
o Extra premiums for optional benefits and riders generally do not count
in computing the premiums paid for the Contract for the purposes of
determining whether a withdrawal is taxable.
o Loans you take against the Contract are ordinarily treated as debt and
are not considered distributions subject to tax.
MODIFIED ENDOWMENT CONTRACTS.
o The rules change if the Contract is classified as a Modified Endowment
Contract. The Contract could be classified as a Modified Endowment
Contract if a decrease in the face amount of insurance is made (or a
rider removed). The addition of a rider may also cause the Contract to
be classified as a Modified Endowment Contract. You should first
consult a qualified tax adviser and your Pruco Life of New Jersey
representative if you are contemplating any of these steps.
o If the Contract is classified as a Modified Endowment Contract, then
amounts you receive under the Contract before the insured's death,
including loans and withdrawals, are included in income to the extent
that the cash value exceeds the premiums paid for the Contract
increased by the amount of any loans previously included in income and
reduced by any untaxed amounts previously received other than the
amount of any loans excludible from income. An assignment of a
Modified Endowment Contract is taxable in the same way. These rules
also apply to pre-death distributions, including loans, made during
the two-year period before the time that the Contract became a
Modified Endowment Contract.
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o Any taxable income on pre-death distributions (including full
surrenders) is subject to a penalty of 10% unless the amount is
received on or after age 59 1/2, on account of your becoming disabled
or as a life annuity. It is presently unclear how the penalty tax
provisions apply to Contracts owned by businesses.
o All Modified Endowment Contracts issued by us to you during the same
calendar year are treated as a single Contract for purposes of
applying these rules.
WITHHOLDING. You must affirmatively elect that no taxes be withheld from a
pre-death distribution. Otherwise, the taxable portion of any amounts you
receive will be subject to withholding. You are not permitted to elect out of
withholding if you do not provide a social security number or other taxpayer
identification number. You may be subject to penalties under the estimated tax
payment rules if your withholding and estimated tax payments are insufficient to
cover the tax due.
OTHER TAX CONSIDERATIONS. If you transfer or assign the Contract to someone
else, there may be gift, estate and/or income tax consequences. If you transfer
the Contract to a person two or more generations younger than you (or designate
such a younger person as a beneficiary), there may be Generation Skipping
Transfer tax consequences. 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. Your individual situation or that of your beneficiary
will determine the federal estate taxes and the state and local estate,
inheritance and other taxes due if you or the insured dies.
BUSINESS-OWNED LIFE INSURANCE. If a business, rather than an individual, is the
owner of the Contract, there are some additional rules. Business Contract owners
generally cannot deduct premium payments. Business Contract owners generally
cannot take tax deductions for interest on Contract debt paid or accrued after
October 13, 1995. An exception permits the deduction of interest on policy loans
on Contracts for up to 20 key persons. The interest deduction for Contract debt
on these loans is limited to a prescribed interest rate and a maximum aggregate
loan amount of $50,000 per key insured person. The corporate alternative minimum
tax also applies to business-owned life insurance. This is an indirect tax on
additions to the Contract Fund or death benefits received under business-owned
life insurance policies.
LAPSE AND REINSTATEMENT
This Contract ensures that insurance protection remains in effect as long as
premiums are paid. However, if a premium is not paid on or before each due date
or within the 31 day grace period after each due date, 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 18.
A Contract that lapses may be reinstated within three years after the date of
default unless the Contract has been surrendered for its cash value. We require
renewed evidence of insurability and submission of certain payments due under
the Contract to reinstate a lapsed 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 your Contract does lapse, it will still provide some benefits. You can
receive the cash surrender value by making a request of Pruco Life of New Jersey
prior to the end of the 31 day grace period. You may also choose one of the
three forms of insurance described below for which no further premiums are
payable.
1. EXTENDED TERM INSURANCE. With one exception explained below, if you do not
communicate at all with Pruco Life of New Jersey, life insurance coverage will
continue for a length of time that depends on: (1) the net cash value on the due
date of the first unpaid premium; (2) the amount of insurance; and (3) 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 inforce. This benefit is known as extended term insurance.
We will tell you in writing how long the insurance will be in effect. Extended
term insurance has a cash value but no loan value.
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.
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2. FIXED REDUCED PAID-UP INSURANCE. You 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. We will tell you 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 Contract owner
who wants fixed reduced paid-up insurance must ask for it in writing, in a form
that meets Pruco Life of New Jersey's needs, within three months of the due date
of the first unpaid premium. Fixed reduced paid-up insurance has a cash value
and a loan value. It is possible for this Contract to be classified as a
Modified Endowment Contract if this option is exercised. See TAX TREATMENT OF
CONTRACT BENEFITS, page 18.
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 inforce on a premium
paying basis (see HOW A CONTRACT'S DEATH BENEFIT WILL VARY, page 10 and HOW A
CONTRACT'S CASH VALUE WILL VARY, page 12). Variable reduced paid-up insurance
has a loan privilege identical to that available on premium paying Contracts
(see CONTRACT LOANS, page 16). It is possible for this Contract to be classified
as a Modified Endowment Contract if this option is exercised. See TAX TREATMENT
OF CONTRACT BENEFITS, page 18.
Variable reduced paid-up insurance is the automatic benefit on lapse for
Contracts issued on certain insureds. Owners of other Contracts who want
variable reduced paid-up insurance must ask for it in writing, in a form that
meets our needs, within three months of the date of default; it will be
available to such Contract 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. You can receive the net cash value by surrendering
the Contract and making a written request in a form that meets our needs. If we
receive the request within the grace period 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 grace period, plus or minus an
amount that depends upon the investment performance between the due date and the
date we receive 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 we receive the request after the grace
period expires, the net cash value will be the net value of any extended term
insurance then inforce, or the net value of any reduced paid-up insurance then
inforce (either fixed or variable), less any Contract debt. Surrender of the
Contract may have tax consequences. See TAX TREATMENT OF CONTRACT BENEFITS, page
18.
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 eight
years after a uniform gross annual investment return of 8%. The tables assume a
total Series Fund expense ratio of 0.48% (taking into account the offsets
described under CHARGES AND EXPENSES on page 8).
- --------------------------------------------------------------
EXTENDED REDUCED
INSURED CASH VALUE TERM PAID-UP
INSURANCE INSURANCE
- --------------------------------------------------------------
Male, age 25 $3,451 $51,751 $14,405
at issue for 19.84 for life
years
- --------------------------------------------------------------
Male, age 40 $6,265 $52,039 $16,201
at issue for 12.73 for life
years
- --------------------------------------------------------------
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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 differ under Contracts issued on males
and females of the same age. 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 who purchased
a Contract should consult their legal advisers to determine whether a Contract
based on sex-distinct actuarial tables is consistent with Title VII of the Civil
Rights Act of 1964 or other applicable law.
OTHER GENERAL CONTRACT PROVISIONS
ASSIGNMENT. This Contract may not be assigned if the assignment would violate
any federal, state or local law or regulation. Generally, the Contract may not
be assigned to another insurance company or to an employee benefit plan without
Pruco Life of New Jersey's consent. Pruco Life of New Jersey assumes no
responsibility for the validity or sufficiency of any assignment. We will not be
obligated to comply with any assignment unless we receive a copy at a Home
Office.
BENEFICIARY. You designate and name your beneficiary in the application.
Thereafter, you 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. We will not contest the Contract after it has been inforce
during the insured's lifetime for two years from the issue date except when any
change is made in the Contract that requires Pruco Life of New Jersey's approval
and would increase our liability. We will not contest such change after it has
been in effect for two years during the lifetime of the insured.
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 of New
Jersey will adjust the death benefits payable, as required by law, to reflect
the correct age and sex. Any such benefit will be based on what the premium
would have provided at the correct age and sex.
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 of New Jersey representative authorized to sell this
Contract can explain these options upon request.
RIDERS
Contract owners may be able to obtain extra fixed benefits, which may require an
additional premium. These optional insurance benefits will be described in what
is known as a "rider" to the Contract. Charges applicable to the riders will be
deducted from the premiums.
One rider pays additional death benefit 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 certain premiums into the Contract if the insured dies
within a stated number of years after issue; similar term insurance riders may
be available for the insured's spouse or child. The amounts of these benefits
are fully guaranteed at issue and do not depend on the performance of the
Account. Certain restrictions may apply; they are clearly described in the
applicable rider. Any Pruco Life of New Jersey representative authorized to sell
the Contract can explain these extra benefits further. Samples of the provisions
are available from Pruco Life of New Jersey upon written request.
VOTING RIGHTS
As described earlier, all of the assets held in the subaccounts will be invested
in shares of the corresponding portfolios of the Series Fund. Pruco Life of New
Jersey is the legal owner of those shares and has the right to vote on any
matter voted on at Series Fund shareholders meetings. However, Pruco Life of New
Jersey will, as required by law, vote the shares of the Series Fund in
accordance with voting instructions received from Contract owners at any regular
and special shareholders meetings. The Series Fund may not hold annual
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 of New Jersey will be voted in the
same proportion as shares in the respective portfolios for which instructions
are received. If the applicable federal securities laws or regulations, or their
current interpretation, change so as to permit
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Pruco Life of New Jersey 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.
Contract owners participating in a portfolio will vote separately on the
investment advisory agreement or any change in the portfolio's fundamental
investment policy, pursuant to the requirements of Rule 18f-2 under the
Investment Company Act of 1940.
The number of Series Fund shares for which a Contract owner may give
instructions 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 of New Jersey instructions will be determined
as of the record date chosen by the Board of Directors of the Series Fund. Pruco
Life of New Jersey will furnish Contract owners with proper forms and proxies to
enable them to give these instructions. Pruco Life of New Jersey 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 of New Jersey may, if required by state insurance regulations,
disregard voting instructions if they 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 of New Jersey
itself may disregard voting instructions that would require changes in the
investment policy or investment adviser of one or more of the Series Fund's
portfolios, provided that Pruco Life of New Jersey reasonably disapproves such
changes in accordance with applicable federal regulations. If Pruco Life of New
Jersey 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 of New Jersey 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 of New Jersey 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 any such
substitution.
REPORTS TO CONTRACT OWNERS
Once each Contract year (except where the Contract is inforce as fixed extended
term insurance or fixed reduced paid-up insurance), Pruco Life of New Jersey
will send you a statement that provides certain information pertinent to your
own Contract. This statement will detail values and transactions made and
specific Contract data that apply only to your particular Contract. On request,
you will be sent a current statement in a form similar to that of the annual
statement described above, but Pruco Life of New Jersey may limit the number of
such requests or impose a reasonable charge if such requests are made too
frequently.
You 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
portfolio.
STATE REGULATION
Pruco Life of New Jersey is subject to regulation and supervision by the
Department of Insurance of the State of New Jersey, 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.
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Pruco Life of New Jersey 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.
In addition to the annual statements referred to above, Pruco Life of New Jersey
is required to file with New Jersey 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 of Pruco Life of New Jersey as of December 31, 1998 and
1997 and for each of the three years in the period ended December 31, 1998 and
the financial statements of the Account as of December 31, 1998 and for each of
the three years in the period then ended included in this prospectus have been
so included in reliance on the reports of PricewaterhouseCoopers LLP,
independent accountants, given on the authority of said firm as experts in
auditing and accounting. PricewaterhouseCoopers LLP's principal business address
is 1177 Avenue of the Americas, New York, New York 10036.
Actuarial matters included in this prospectus have been examined by Nancy D.
Davis, FSA, MAAA, Vice President and Actuary of Prudential, whose opinion is
filed as an exhibit to the registration statement.
LITIGATION
Several actions have been brought against Pruco Life of New Jersey alleging that
Pruco Life of New Jersey and its agents engaged in improper life insurance sales
practices. Prudential has agreed to indemnify Pruco Life of New Jersey for
losses, if any, resulting from such litigation. No other significant litigation
is being brought against Pruco Life of New Jersey that would have a material
effect on its financial position.
YEAR 2000 COMPLIANCE
The services provided to you as a purchaser of a Variable Life Insurance
Contract depend on the smooth functioning of numerous computer systems. Many
computer systems in use today are programmed to recognize only the last two
digits of a date as the year. As a result, any systems using this kind of
programming can not distinguish a date using "00" and may treat it as "1900"
instead of "2000." This problem may impact computer systems that store business
information, but it could also affect other equipment used in our business like
telephone, fax machines and elevators. If this problem is not corrected, the
"Year 2000" issue could affect the accuracy and integrity of business records.
Prudential's regular business operations could be interrupted as well as those
of other companies that deal with us.
In addition, the operations of the mutual funds associated with the Variable
Life Insurance Contract could experience problems resulting from the Year 2000
issue. Please refer to the respective mutual fund's prospectus for information
regarding their approach to Year 2000 concerns. The following describes
Prudential's effort to address Year 2000 concerns.
To address this potential problem Prudential, as the ultimate parent company of
Pruco Life of New Jersey, organized its Year 2000 efforts around the following
three areas: o BUSINESS SYSTEMS - Computer programs directly used to support our
business; o INFRASTRUCTURE - Computers and other business equipment like
telephones and fax machines; and o BUSINESS PARTNERS - Year 2000 readiness of
essential business partners.
BUSINESS SYSTEMS. The business systems component includes a wide range of
computer programs that directly support Prudential's business operations
including systems for: insurance product processing, securities trading,
personnel record keeping and general accounting systems. All business systems
were analyzed to determine whether each computer program with a Year 2000
problem should be retired, replaced or renovated. The majority of this work has
been completed. A few remaining programs are currently being tested and
completion of this process is expected by June 1999.
INFRASTRUCTURE. As with business applications, we established a specific
methodology and process for addressing infrastructure issues. The infrastructure
effort includes mainframe computer system hardware and operating system
software, mid-range systems and servers, telecommunications equipment and
systems, buildings and facilities systems, personal computers, and vendor
hardware and software. Other than desktop systems, substantially all other
infrastructure systems have been tested. Presently a small number of midrange
computers, and building and facility
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systems are still in the testing phase. We expect to have the infrastructure
implementation process completed by June 1999.
BUSINESS PARTNERS. Prudential recognizes the importance of determining the Year
2000 readiness of external business relationships especially those that involve
electronic data transfer products and services, and products that impact our
essential business processes. Prudential first classified each business partner
as "highly critical" or "less critical" to our business and then began to
develop risk assessment and contingency plans to address the potential that a
business partner could experience a Year 2000 failure. All highly critical
business partner relationships have been assessed and contingency planning is
completed. Risk assessment and contingency planning continues for less critical
business partners, and the target completion date for these relationships is
June 1999.
Prudential believes that the Business Systems, Infrastructure and Business
Partners components of the Year 2000 project are substantially on schedule. A
small number of the projects may not meet their targeted completion date.
However, Prudential expects that these projects will be completed by September,
1999. If there are any delays, they should not have a significant impact on the
timing of the project as a whole.
THE COST OF YEAR 2000 READINESS
Prudential is funding the Year 2000 program from internal operating budgets, and
estimates that its total costs to address the Year 2000 issue will total
approximately $220 million. Because these expenses were part of the operating
budget, they did not impact the management of Variable Life Insurance Contracts.
During the course of the Year 2000 program, some optional computer projects have
been delayed, but these delays have not had any material effect on Variable Life
Insurance Contracts.
YEAR 2000 RISKS AND CONTINGENCY PLANNING
Prudential believes that it is well positioned to lessen the impact of the Year
2000 problem. However, given the nature of this issue, we can not be 100%
certain that we are completely prepared, particularly because we can not be
certain of Year 2000 readiness of third parties. As a result, we are unable to
determine at this time whether the consequences of Year 2000 failures may have a
material adverse effect on the results of Prudential's operations, liquidity or
financial condition. In the worst case, it is possible that a Year 2000
technology failure, whether internal or external, could have a material impact
on Prudential's results of operations, liquidity, or financial position. If
Prudential is unable to address the Year 2000 problem, we may have difficulty in
responding to your incoming phone calls, calculating your unit values or
processing withdrawals and purchase payments. It is also possible that the
mutual funds associated with the Variable Life Insurance Contract will be unable
to value their securities, in turn creating difficulties in purchasing or
selling shares of the respective mutual fund and calculating corresponding unit
asset values. The objective of Prudential's Year 2000 program has been to reduce
these risks as much as possible.
Most of the operations of the Variable Life Insurance Contract involve such a
large number of individual transactions that they can only be handled with the
help of computers. As a result, our current contingency plans include responses
to the failure of specific business programs or infrastructure components.
However, our contingency responses are now being reviewed and we expect to
finalize them by June, 1999 to ensure that they are workable under the special
conditions of a Year 2000 failure. Prudential believes that with the completion
of its Year 2000 program as scheduled, the possibility of significant
interruptions of normal operations will be reduced.
ADDITIONAL INFORMATION
Pruco Life of New Jersey has filed a registration statement 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 of New Jersey. Its
address and telephone number are set forth on the cover of this prospectus.
FINANCIAL STATEMENTS
The financial statements of the Account should be distinguished from the
financial statements of Pruco Life of New Jersey, which should be considered
only as bearing upon the ability of Pruco Life of New Jersey to meet its
obligations under the Contracts.
25
<PAGE>
DIRECTORS AND OFFICERS
The directors and major officers of Pruco Life of New Jersey, listed with their
principal occupations during the past five years, are shown below.
DIRECTORS OF PRUCO LIFE OF NEW JERSEY
JAMES J. AVERY, JR., CHAIRMAN AND DIRECTOR. -- Senior Vice President and Chief
Actuary, Prudential Individual Insurance Group since 1997; 1995 to 1997:
President of Prudential Select; Prior to 1995: Chief Operating Officer of
Prudential Select.
WILLIAM M. BETHKE, DIRECTOR. -- Chief Investment Officer since 1997; Prior to
1997: President, Prudential Capital Markets Group.
IRA J. KLEINMAN, DIRECTOR. -- Executive Vice President, Prudential International
Insurance Group since 1997; 1995 to 1997: Chief Marketing and Product
Development Officer, Prudential Individual Insurance Group; Prior to 1995:
President, Prudential Select.
ESTHER H. MILNES, PRESIDENT AND DIRECTOR. -- Vice President and Actuary,
Prudential Individual Insurance Group since 1996; Prior to 1996: Senior Vice
President and Chief Actuary, Prudential Insurance and Financial Services.
I. EDWARD PRICE, VICE CHAIRMAN AND DIRECTOR. -- Senior Vice President and
Actuary, Prudential Individual Insurance Group since 1995; Prior to 1995: Chief
Executive Officer, Prudential International Insurance.
OFFICERS WHO ARE NOT DIRECTORS
C. EDWARD CHAPLIN, TREASURER. -- Vice President and Treasurer of Prudential
since 1995; Prior to 1995: Managing Director and Assistant Treasurer of
Prudential.
JAMES C. DROZANOWSKI, SENIOR VICE PRESIDENT. -- Vice President and Operations
Executive, Prudential Individual Insurance Group since 1996; 1995 to 1996:
President and Chief Executive Officer of Chase Manhattan Bank; Prior to 1995:
Vice President, North America Customer Services, Chase Manhattan Bank.
CLIFFORD E. KIRSCH, CHIEF LEGAL OFFICER AND SECRETARY. -- Chief Counsel,
Variable Products, Law Department of Prudential since 1995; Prior to 1995:
Associate General Counsel with Paine Webber.
FRANK P. MARINO, SENIOR VICE PRESIDENT. -- Vice President, Policyowner Relations
Department, Prudential Individual Insurance Group since 1996; Prior to 1996:
Senior Vice President, Prudential Mutual Fund Services.
EDWARD A. MINOGUE, SENIOR VICE PRESIDENT. -- Vice President, Annuity Services,
Prudential Investments since 1997; Prior to 1997: Director, Merrill Lynch.
IMANTS SAKSONS, SENIOR VICE PRESIDENT. -- Vice President, Compliance, Prudential
Individual Financial Services since 1998; Prior to 1998: Vice President, Market
Conduct, U.S. Operations, Manulife Financial.
SHIRLEY H. SHAO, SENIOR VICE PRESIDENT AND CHIEF ACTUARY. -- Vice President and
Associate Actuary, Prudential.
DENNIS G. SULLIVAN, VICE PRESIDENT AND CHIEF ACCOUNTING OFFICER. -- Vice
President and Deputy Controller, Prudential since 1998; 1997 to 1998, Vice
President and Controller, ContiFinancial Corporation; Prior to 1997, Director,
Saloman Brothers.
The business address of all directors and officers of Pruco Life of New Jersey
is 213 Washington Street, Newark, New Jersey 07102-2992.
Pruco Life of New Jersey directors and officers are elected annually.
26
<PAGE>
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<PAGE>
<TABLE>
FINANCIAL STATEMENTS OF
PRUCO LIFE OF NEW JERSEY VARIABLE INSURANCE ACCOUNT
<CAPTION>
STATEMENTS OF NET ASSETS
December 31, 1998
SUBACCOUNTS
--------------------------------------------------------------------------------
MONEY DIVERSIFIED FLEXIBLE CONSERVATIVE
MARKET BOND EQUITY MANAGED BALANCED
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
ASSETS
Investment in The Prudential Series Fund, Inc.
Portfolios, at net asset value [Note 3]..... $ 7,540,488 $ 9,515,949 $ 73,617,677 $ 54,470,532 $ 16,812,469
------------ ------------ ------------ ------------ ------------
Net Assets..................................... $ 7,540,488 $ 9,515,949 $ 73,617,677 $ 54,470,532 $ 16,812,469
============ ============ ============ ============ ============
NET ASSETS, representing:
Equity of contract owners...................... $ 7,540,488 $ 9,515,949 $ 73,617,677 $ 54,470,532 $ 16,812,469
------------ ------------ ------------ ------------ ------------
$ 7,540,488 $ 9,515,949 $ 73,617,677 $ 54,470,532 $ 16,812,469
============ ============ ============ ============ ============
SEE NOTES TO FINANCIAL STATEMENTS ON PAGES A15 THROUGH A22
</TABLE>
A1
<PAGE>
<TABLE>
<CAPTION>
SUBACCOUNTS (CONTINUED)
- ------------------------------------------------------------------------------------------------------------------------------------
HIGH SMALL
YIELD STOCK EQUITY NATURAL GOVERNMENT PRUDENTIAL CAPITALIZATION
BOND INDEX INCOME RESOURCES GLOBAL INCOME JENNISON STOCK
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
- ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
$ 764,892 $ 2,855,559 $ 1,572,814 $ 378,360 $ 565,321 $ 273,406 $ 808,003 $ 365,953
- ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
$ 764,892 $ 2,855,559 $ 1,572,814 $ 378,360 $ 565,321 $ 273,406 $ 808,003 $ 365,953
============ ============ ============ ============ ============ ============ ============ ============
$ 764,892 $ 2,855,559 $ 1,572,814 $ 378,360 $ 565,321 $ 273,406 $ 808,003 $ 365,953
- ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
$ 764,892 $ 2,855,559 $ 1,572,814 $ 378,360 $ 565,321 $ 273,406 $ 808,003 $ 365,953
============ ============ ============ ============ ============ ============ ============ ============
SEE NOTES TO FINANCIAL STATEMENTS ON PAGES A15 THROUGH A22
</TABLE>
A2
<PAGE>
<TABLE>
FINANCIAL STATEMENTS OF
PRUCO LIFE OF NEW JERSEY VARIABLE INSURANCE ACCOUNT
<CAPTION>
STATEMENTS OF OPERATIONS
For the years ended December 31, 1998, 1997 and 1996
SUBACCOUNTS
-----------------------------------------------------------------------------------
MONEY DIVERSIFIED
MARKET BOND
PORTFOLIO PORTFOLIO
------------ ------------ ------------ ------------ ------------ ------------
1998 1997 1996 1998 1997 1996
------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
INVESTMENT INCOME
Dividend income.......................... $ 389,451 $ 395,859 $ 376,664 $ 579,037 $ 670,755 $ 572,577
------------ ------------ ------------ ------------ ------------ ------------
EXPENSES
Charges to contract owners for assuming
mortality risk and expense risk
[Note 5A] ............................. 26,023 26,160 25,789 32,991 31,965 30,958
Reimbursement for excess expenses
[Note 5B] ............................. (1,156) (1,637) (3,135) (2,287) (2,222) (4,351)
------------ ------------ ------------ ------------ ------------ ------------
NET EXPENSES............................... 24,867 24,523 22,654 30,704 29,743 26,607
------------ ------------ ------------ ------------ ------------ ------------
NET INVESTMENT INCOME (LOSS)............... 364,584 371,336 354,010 548,333 641,012 545,970
------------ ------------ ------------ ------------ ------------ ------------
NET REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS
Capital gains distributions received..... 0 0 0 34,260 107,085 0
Realized gain (loss) on shares redeemed.. 0 0 0 27,467 31,192 18,879
Net change in unrealized gain (loss) on
investments ........................... 0 0 0 8,069 (61,534) (202,485)
------------ ------------ ------------ ------------ ------------ ------------
NET GAIN (LOSS) ON INVESTMENTS ............ 0 0 0 69,796 76,743 (183,606)
------------ ------------ ------------ ------------ ------------ ------------
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS................ $ 364,584 $ 371,336 $ 354,010 $ 618,129 $ 717,755 $ 362,364
============ ============ ============ ============ ============ ============
SEE NOTES TO FINANCIAL STATEMENTS ON PAGES A15 THROUGH A22
</TABLE>
A3
<PAGE>
<TABLE>
<CAPTION>
SUBACCOUNTS (CONTINUED)
- ------------------------------------------------------------------------------------------------------------------------------
FLEXIBLE CONSERVATIVE
EQUITY MANAGED BALANCED
PORTFOLIO PORTFOLIO PORTFOLIO
- ---------------------------------------- ---------------------------------------- ----------------------------------------
1998 1997 1996 1998 1997 1996 1998 1997 1996
- ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$ 1,352,909 $ 1,547,755 $ 1,392,741 $ 1,740,666 $ 1,489,267 $ 1,346,257 $ 688,553 $ 693,049 $ 559,825
- ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
259,745 235,462 197,786 186,849 172,500 152,413 56,690 52,340 47,258
(64,790) (52,324) (62,284) (121,578) (111,717) (109,842) (27,982) (24,531) (27,100)
- ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
194,955 183,138 135,502 65,271 60,783 42,571 28,708 27,809 20,158
- ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
1,157,954 1,364,617 1,257,239 1,675,395 1,428,484 1,303,686 659,845 665,240 539,667
- ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
8,051,421 3,835,699 5,412,079 5,514,866 7,709,982 4,325,923 985,493 1,660,730 875,158
1,865,617 1,973,839 739,386 320,052 642,952 354,578 71,074 145,076 58,696
(4,714,936) 7,305,038 2,147,359 (2,394,532) (1,736,264) (414,332) 46,644 (620,598) 135,494
- ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
5,202,102 13,114,576 8,298,824 3,440,386 6,616,670 4,266,169 1,103,211 1,185,208 1,069,348
- ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
$ 6,360,056 $ 14,479,193 $ 9,556,063 $ 5,115,781 $ 8,045,154 $ 5,569,855 $ 1,763,056 $ 1,850,448 $ 1,609,015
============ ============ ============ ============ ============ ============ ============ ============ ============
SEE NOTES TO FINANCIAL STATEMENTS ON PAGES A15 THROUGH A22
</TABLE>
A4
<PAGE>
<TABLE>
FINANCIAL STATEMENTS OF
PRUCO LIFE OF NEW JERSEY VARIABLE INSURANCE ACCOUNT
<CAPTION>
STATEMENTS OF OPERATIONS
For the years ended December 31, 1998, 1997 and 1996
SUBACCOUNTS
-----------------------------------------------------------------------------------
HIGH
YIELD STOCK
BOND INDEX
PORTFOLIO PORTFOLIO
------------ ------------ ------------ ------------ ------------ ------------
1998 1997 1996 1998 1997 1996
------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
INVESTMENT INCOME
Dividend income.......................... $ 79,250 $ 78,208 $ 75,412 $ 29,293 $ 24,485 $ 19,258
------------ ------------ ------------ ------------ ------------ ------------
EXPENSES
Charges to contract owners for assuming
mortality risk and expense risk
[Note 5A] ............................. 2,953 2,871 2,748 8,149 5,529 3,576
Reimbursement for excess expenses
[Note 5B] ............................. 0 0 0 0 0 0
------------ ------------ ------------ ------------ ------------ ------------
NET EXPENSES............................... 2,953 2,871 2,748 8,149 5,529 3,576
------------ ------------ ------------ ------------ ------------ ------------
NET INVESTMENT INCOME (LOSS)............... 76,297 75,337 72,664 21,144 18,956 15,682
------------ ------------ ------------ ------------ ------------ ------------
NET REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS
Capital gains distributions received..... 0 0 0 42,740 54,559 13,471
Realized gain (loss) on shares redeemed.. (3,555) 1,843 2,155 68,477 33,392 11,266
Net change in unrealized gain (loss) on
investments ........................... (95,116) 26,710 7,745 444,688 311,884 164,641
------------ ------------ ------------ ------------ ------------ ------------
NET GAIN (LOSS) ON INVESTMENTS............ (98,671) 28,553 9,900 555,905 399,835 189,378
------------ ------------ ------------ ------------ ------------ ------------
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS............... $ (22,374) $ 103,890 $ 82,564 $ 577,049 $ 418,791 $ 205,060
============ ============ ============ ============ ============ ============
SEE NOTES TO FINANCIAL STATEMENTS ON PAGES A15 THROUGH A22
</TABLE>
A5
<PAGE>
<TABLE>
<CAPTION>
SUBACCOUNTS (CONTINUED)
- ------------------------------------------------------------------------------------------------------------------------------
EQUITY NATURAL
INCOME RESOURCES GLOBAL
PORTFOLIO PORTFOLIO PORTFOLIO
- ---------------------------------------- ---------------------------------------- ----------------------------------------
1998 1997 1996 1998 1997 1996 1998 1997 1996
- ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$ 42,232 $ 30,966 $ 29,747 $ 3,651 $ 3,243 $ 3,948 $ 6,970 $ 5,170 $ 6,501
- ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
5,557 4,095 2,940 1,565 2,285 1,958 1,762 1,392 880
0 0 0 0 0 0 0 0 0
- ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
5,557 4,095 2,940 1,565 2,285 1,958 1,762 1,392 880
- ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
36,675 26,871 26,807 2,086 958 1,990 5,208 3,778 5,621
- ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
94,491 127,080 29,626 24,327 68,387 77,762 23,442 20,851 4,714
14,573 9,068 4,920 (14,753) 20,414 4,345 9,640 7,185 4,074
(203,765) 193,110 104,296 (90,245) (158,871) 56,286 70,052 (15,824) 31,135
- ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
(94,701) 329,258 138,842 (80,671) (70,070) 138,393 103,134 12,212 39,923
- ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
$ (58,026) $ 356,129 $ 165,649 $ (78,585) $ (69,112) $ 140,383 $ 108,342 $ 15,990 $ 45,544
============ ============ ============ ============ ============ ============ ============ ============ ============
SEE NOTES TO FINANCIAL STATEMENTS ON PAGES A15 THROUGH A22
</TABLE>
A6
<PAGE>
<TABLE>
FINANCIAL STATEMENTS OF
PRUCO LIFE OF NEW JERSEY VARIABLE INSURANCE ACCOUNT
<CAPTION>
STATEMENTS OF OPERATIONS
For the years ended December 31, 1998, 1997 and 1996
SUBACCOUNTS
-----------------------------------------------------------------------------------
GOVERNMENT PRUDENTIAL
INCOME JENNISON
PORTFOLIO PORTFOLIO
------------ ------------ ------------ ------------ ------------ ------------
1998 1997 1996 1998 1997 1996
------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
INVESTMENT INCOME
Dividend income.......................... $ 16,784 $ 15,463 $ 13,036 $ 1,176 $ 597 $ 251
------------ ------------ ------------ ------------ ------------ ------------
EXPENSES
Charges to contract owners for assuming
mortality risk and expense risk
[Note 5A] ............................. 1,015 783 718 1,881 863 310
Reimbursement for excess expenses
[Note 5B] ............................. 0 0 0 0 0 0
------------ ------------ ------------ ------------ ------------ ------------
NET EXPENSES............................... 1,015 783 718 1,881 863 310
------------ ------------ ------------ ------------ ------------ ------------
NET INVESTMENT INCOME (LOSS)............... 15,769 14,680 12,318 (705) (266) (59)
------------ ------------ ------------ ------------ ------------ ------------
NET REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS
Capital gains distributions received..... 0 0 0 11,454 20,173 0
Realized gain (loss) on shares redeemed.. 7,606 1,148 278 7,750 1,091 254
Net change in unrealized gain (loss) on
investments ............................. 2,544 5,720 (8,709) 163,065 37,821 12,809
------------ ------------ ------------ ------------ ------------ ------------
NET GAIN (LOSS) ON INVESTMENTS ............ 10,150 6,868 (8,431) 182,269 59,085 13,063
------------ ------------ ------------ ------------ ------------ ------------
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS................ $ 25,919 $ 21,548 $ 3,887 $ 181,564 $ 58,819 $ 13,004
============ ============ ============ ============ ============ ============
SEE NOTES TO FINANCIAL STATEMENTS ON PAGES A15 THROUGH A22
</TABLE>
A7
<PAGE>
<TABLE>
<CAPTION>
SUBACCOUNTS (CONTINUED)
- ----------------------------------------
SMALL
CAPITALIZATION
STOCK
PORTFOLIO
- ------------ ------------ ------------
1998 1997 1996
- ------------ ------------ ------------
<S> <C> <C>
$ 1,970 $ 1,097 $ 345
- ------------ ------------ ------------
1,112 531 123
0 0 0
- ------------ ------------ ------------
1,112 531 123
- ------------ ------------ ------------
858 566 222
- ------------ ------------ ------------
22,061 17,900 1,130
(1,664) 0 89
(26,749) 12,183 5,484
- ------------ ------------ ------------
(6,352) 30,083 6,703
- ------------ ------------ ------------
$ (5,494) $ 30,649 $ 6,925
============ ============ ============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS ON PAGES A15 THROUGH A22
A8
<PAGE>
<TABLE>
FINANCIAL STATEMENTS OF
PRUCO LIFE OF NEW JERSEY VARIABLE INSURANCE ACCOUNT
<CAPTION>
STATEMENTS OF CHANGES IN NET ASSETS
For the years ended December 31, 1998, 1997 and 1996
SUBACCOUNTS
-----------------------------------------------------------------------------------
MONEY DIVERSIFIED
MARKET BOND
PORTFOLIO PORTFOLIO
------------ ------------ ------------ ------------ ------------ ------------
1998 1997 1996 1998 1997 1996
------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
OPERATIONS
Net investment income (loss)............. $ 364,584 $ 371,336 $ 354,010 $ 548,333 $ 641,012 $ 545,970
Capital gains distributions received..... 0 0 0 34,260 107,085 0
Realized gain (loss) on shares redeemed.. 0 0 0 27,467 31,192 18,879
Net change in unrealized gain (loss)
on investments ........................ 0 0 0 8,069 (61,534) (202,485)
------------ ------------ ------------ ------------ ------------ ------------
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS............... 364,584 371,336 354,010 618,129 717,755 362,364
------------ ------------ ------------ ------------ ------------ ------------
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM PREMIUM PAYMENTS
AND OTHER OPERATING TRANSFERS
[Note 7]................................ (351,475) (245,323) (273,457) (352,498) (558,307) (266,782)
------------ ------------ ------------ ------------ ------------ ------------
NET INCREASE (DECREASE) IN NET ASSETS
RETAINED IN THE ACCOUNT
[Note 8]................................ (6,824) 2,846 (15,890) (5,990) 3,051 (13,611)
------------ ------------ ------------ ------------ ------------ ------------
TOTAL INCREASE (DECREASE) IN NET ASSETS.... 6,285 128,859 64,663 259,641 162,499 81,971
NET ASSETS
Beginning of year....................... 7,534,203 7,405,344 7,340,681 9,256,308 9,093,809 9,011,838
------------ ------------ ------------ ------------ ------------ ------------
End of year............................. $ 7,540,488 $ 7,534,203 $ 7,405,344 $ 9,515,949 $ 9,256,308 $ 9,093,809
============ ============ ============ ============ ============ ============
SEE NOTES TO FINANCIAL STATEMENTS ON PAGES A15 THROUGH A22
</TABLE>
A9
<PAGE>
<TABLE>
<CAPTION>
SUBACCOUNTS (CONTINUED)
- ------------------------------------------------------------------------------------------------------------------------------
FLEXIBLE CONSERVATIVE
EQUITY MANAGED BALANCED
PORTFOLIO PORTFOLIO PORTFOLIO
- ---------------------------------------- ---------------------------------------- ----------------------------------------
1998 1997 1996 1998 1997 1996 1998 1997 1996
- ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$ 1,157,954 $ 1,364,617 $ 1,257,239 $ 1,675,395 $ 1,428,484 $ 1,303,686 $ 659,845 $ 665,240 $ 539,667
8,051,421 3,835,699 5,412,079 5,514,866 7,709,982 4,325,923 985,493 1,660,730 875,158
1,865,617 1,973,839 739,386 320,052 642,952 354,578 71,074 145,076 58,696
(4,714,936) 7,305,038 2,147,359 (2,394,532) (1,736,264) (414,332) 46,644 (620,598) 135,494
- ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
6,360,056 14,479,193 9,556,063 5,115,781 8,045,154 5,569,855 1,763,056 1,850,448 1,609,015
- ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
(3,846,701) (4,430,652) (1,767,989) (2,063,973) (2,634,698) (1,212,218) (378,564) (730,443) (173,029)
- ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
(82,451) (18,211) 35,491 (24,216) (20,520) (63,212) (1,080) (23,517) (6,813)
- ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
2,430,904 10,030,330 7,823,565 3,027,592 5,389,936 4,294,425 1,383,412 1,096,488 1,429,173
71,186,773 61,156,443 53,332,878 51,442,940 46,053,004 41,758,579 15,429,057 14,332,569 12,903,396
- ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
$ 73,617,677 $ 71,186,773 $ 61,156,443 $ 54,470,532 $ 51,442,940 $ 46,053,004 $ 16,812,469 $ 15,429,057 $ 14,332,569
============ ============ ============ ============ ============ ============ ============ ============ ============
SEE NOTES TO FINANCIAL STATEMENTS ON PAGES A15 THROUGH A22
</TABLE>
A10
<PAGE>
<TABLE>
FINANCIAL STATEMENTS OF
PRUCO LIFE OF NEW JERSEY VARIABLE INSURANCE ACCOUNT
<CAPTION>
STATEMENTS OF CHANGES IN NET ASSETS
For the years ended December 31, 1998, 1997 and 1996
SUBACCOUNTS
-----------------------------------------------------------------------------------
HIGH
YIELD STOCK
BOND INDEX
PORTFOLIO PORTFOLIO
------------ ------------ ------------ ------------ ------------ ------------
1998 1997 1996 1998 1997 1996
------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
OPERATIONS
Net investment income (loss)............. $ 76,297 $ 75,337 $ 72,664 $ 21,144 $ 18,956 $ 15,682
Capital gains distributions received..... 0 0 0 42,740 54,559 13,471
Realized gain (loss) on shares redeemed.. (3,555) 1,843 2,155 68,477 33,392 11,266
Net change in unrealized gain (loss)
on investments ........................ (95,116) 26,710 7,745 444,688 311,884 164,641
------------ ------------ ------------ ------------ ------------ ------------
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS................ (22,374) 103,890 82,564 577,049 418,791 205,060
------------ ------------ ------------ ------------ ------------ ------------
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM PREMIUM PAYMENTS
AND OTHER OPERATING TRANSFERS
[Note 7]................................. (65,537) (34,729) (61,336) 310,267 338,313 149,521
------------ ------------ ------------ ------------ ------------ ------------
NET INCREASE (DECREASE) IN NET ASSETS
RETAINED IN THE ACCOUNT
[Note 8]................................. (253) (2,400) (916) (5,063) 216 6,642
------------ ------------ ------------ ------------ ------------ ------------
TOTAL INCREASE (DECREASE) IN NET ASSETS.... (88,164) 66,761 20,312 882,253 757,320 361,223
NET ASSETS
Beginning of year....................... 853,056 786,295 765,983 1,973,306 1,215,986 854,763
------------ ------------ ------------ ------------ ------------ ------------
End of year............................. $ 764,892 $ 853,056 $ 786,295 $ 2,855,559 $ 1,973,306 $ 1,215,986
============ ============ ============ ============ ============ ============
SEE NOTES TO FINANCIAL STATEMENTS ON PAGES A15 THROUGH A22
</TABLE>
A11
<PAGE>
<TABLE>
<CAPTION>
SUBACCOUNTS (CONTINUED)
- ------------------------------------------------------------------------------------------------------------------------------
EQUITY NATURAL
INCOME RESOURCES GLOBAL
PORTFOLIO PORTFOLIO PORTFOLIO
- ---------------------------------------- ---------------------------------------- ----------------------------------------
1998 1997 1996 1998 1997 1996 1998 1997 1996
- ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$ 36,675 $ 26,871 $ 26,807 $ 2,086 $ 958 $ 1,990 $ 5,208 $ 3,778 $ 5,621
94,491 127,080 29,626 24,327 68,387 77,762 23,442 20,851 4,714
14,573 9,068 4,920 (14,753) 20,414 4,345 9,640 7,185 4,074
(203,765) 193,110 104,296 (90,245) (158,871) 56,286 70,052 (15,824) 31,135
- ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
(58,026) 356,129 165,649 (78,585) (69,112) 140,383 108,342 15,990 45,544
- ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
201,287 119,419 24,565 (67,551) (78,306) 100,563 12,183 123,691 53,788
- ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
788 (4,821) 2,376 (11,580) 11,590 (7,604) (4,404) (299) 92
- ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
144,049 470,727 192,590 (157,716) (135,828) 233,342 116,121 139,382 99,424
1,428,765 958,038 765,448 536,076 671,904 438,562 449,200 309,818 210,394
- ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
$ 1,572,814 $ 1,428,765 $ 958,038 $ 378,360 $ 536,076 $ 671,904 $ 565,321 $ 449,200 $ 309,818
============ ============ ============ ============ ============ ============ ============ ============ ============
SEE NOTES TO FINANCIAL STATEMENTS ON PAGES A15 THROUGH A22
</TABLE>
A12
<PAGE>
<TABLE>
FINANCIAL STATEMENTS OF
PRUCO LIFE OF NEW JERSEY VARIABLE INSURANCE ACCOUNT
<CAPTION>
STATEMENTS OF CHANGES IN NET ASSETS
For the years ended December 31, 1998, 1997 and 1996
SUBACCOUNTS
-----------------------------------------------------------------------------------
GOVERNMENT PRUDENTIAL
INCOME JENNISON
PORTFOLIO PORTFOLIO
------------ ------------ ------------ ------------ ------------ ------------
1998 1997 1996 1998 1997 1996
------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
OPERATIONS
Net investment income (loss)............. $ 15,769 $ 14,680 $ 12,318 $ (705) $ (266) $ (59)
Capital gains distributions received..... 0 0 0 11,454 20,173 0
Realized gain (loss) on shares redeemed.. 7,606 1,148 278 7,750 1,091 254
Net change in unrealized gain (loss)
on investments ........................ 2,544 5,720 (8,709) 163,065 37,821 12,809
------------ ------------ ------------ ------------ ------------ ------------
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS................ 25,919 21,548 3,887 181,564 58,819 13,004
------------ ------------ ------------ ------------ ------------ ------------
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM PREMIUM PAYMENTS
AND OTHER OPERATING TRANSFERS
[Note 7]................................. 17,054 (6,210) 2,777 269,710 147,505 104,802
------------ ------------ ------------ ------------ ------------ ------------
NET INCREASE (DECREASE) IN NET ASSETS
RETAINED IN THE ACCOUNT
[Note 8]................................. (1,132) (2,849) 1,959 445 358 (9,491)
------------ ------------ ------------ ------------ ------------ ------------
TOTAL INCREASE (DECREASE) IN NET ASSETS.... 41,8410 12,489 8,623 451,719 206,682 108,315
NET ASSETS
Beginning of year....................... 231,565 219,076 210,453 356,284 149,602 41,287
------------ ------------ ------------ ------------ ------------ ------------
End of year............................. $ 273,406 $ 231,565 $ 219,076 $ 808,003 $ 356,284 $ 149,602
============ ============ ============ ============ ============ ============
SEE NOTES TO FINANCIAL STATEMENTS ON PAGES A15 THROUGH A22
</TABLE>
A13
<PAGE>
<TABLE>
<CAPTION>
SUBACCOUNTS (CONTINUED)
- ----------------------------------------
SMALL
CAPITALIZATION
STOCK
PORTFOLIO
- ----------------------------------------
1998 1997 1996
- ------------ ------------ ------------
<S> <C> <C>
$ 858 $ 566 $ 222
22,061 17,900 1,130
(1,664) 0 89
(26,749) 12,183 5,484
- ------------ ------------ ------------
(5,494) 30,649 6,925
- ------------ ------------ ------------
99,758 177,357 47,113
- ------------ ------------ ------------
(3,180) 5,174 (11,989)
91,084 213,180 42,049
274,869 61,689 19,640
- ------------ ------------ ------------
$ 365,953 $ 274,869 $ 61,689
============ ============ ============
SEE NOTES TO FINANCIAL STATEMENTS ON PAGES A15 THROUGH A22
</TABLE>
A14
<PAGE>
NOTES TO FINANCIAL STATEMENTS OF
PRUCO LIFE OF NEW JERSEY VARIABLE INSURANCE ACCOUNT
DECEMBER 31, 1998
NOTE 1: GENERAL
Pruco Life of New Jersey Variable Insurance Account ("the Account") was
established on November 10, 1982 under New Jersey law as a separate
investment account of Pruco Life Insurance Company of New Jersey
("Pruco Life of New Jersey") which is a wholly-owned subsidiary of
Pruco Life Insurance Company (an Arizona domiciled company) and is
indirectly wholly-owned by The Prudential Insurance Company of America
("Prudential"). The assets of the Account are segregated from Pruco
Life of New Jersey'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 Prudential.
New sales of the product which invests in the Account were discontinued
as of January 1, 1992. However, premium payments made by contract
owners existing at that date will continue to be received by the
Account.
NOTE 2: SIGNIFICANT ACCOUNTING POLICIES
The accompanying financial statements are prepared in conformity with
generally accepted accounting principles ("GAAP"). The preparation of
the financial statements in conformity with GAAP requires management to
make estimates and assumptions that affect the reported amounts and
disclosures. Actual results could differ from those estimates.
Investments--The investments in shares of the Series Fund are stated at
the net asset value of the respective portfolio.
Security Transactions--Realized gains and losses on security
transactions are reported on an average cost basis. Purchase and sale
transactions are recorded as of the trade date of the security being
purchased or sold.
Distributions Received--Dividend and capital gain distributions
received are reinvested in additional shares of the Series Fund and are
recorded on the ex-dividend date.
A15
<PAGE>
NOTE 3: INVESTMENT INFORMATION FOR THE PRUDENTIAL SERIES FUND, INC. PORTFOLIOS
The net asset value per share (rounded) 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, 1998 were as follows:
<TABLE>
<CAPTION>
PORTFOLIOS
------------------------------------------------------------------------
MONEY DIVERSIFIED FLEXIBLE CONSERVATIVE
MARKET BOND EQUITY MANAGED BALANCED
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Number of shares: ....................... 754,049 860,302 2,483,995 3,289,132 1,114,844
Net asset value per share (rounded): .... $ 10.00 $ 11.06 $ 29.64 $ 16.56 $ 15.08
Cost: ................................... $ 7,540,488 $ 9,217,937 $ 51,235,552 $ 51,931,959 $ 15,898,562
<CAPTION>
PORTFOLIOS (CONTINUED)
------------------------------------------------------------------------
HIGH
YIELD STOCK EQUITY NATURAL
BOND INDEX INCOME RESOURCES GLOBAL
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Number of shares: ....................... 106,119 75,664 78,513 31,573 26,720
Net asset value per share (rounded): .... $ 7.21 $ 37.74 $ 20.03 $ 11.98 $ 21.16
Cost: ................................... $ 839,097 $ 1,674,620 $ 1,424,203 $ 496,130 $ 467,661
<CAPTION>
PORTFOLIOS (CONTINUED)
-------------------------------------------
SMALL
GOVERNMENT PRUDENTIAL CAPITALIZATION
INCOME JENNISON STOCK
------------ ------------ -------------
<S> <C> <C> <C>
Number of shares: ....................... 23,032 33,798 24,877
Net asset value per share (rounded): .... $ 11.87 $ 23.91 $ 14.71
Cost: ................................... $ 267,745 $ 593,655 $ 373,945
</TABLE>
NOTE 4: CONTRACT OWNER UNIT INFORMATION
Outstanding contract owner units, unit values and total value of
contract owner equity at December 31, 1998 were as follows:
<TABLE>
<CAPTION>
SUBACCOUNTS
------------------------------------------------------------------------
MONEY DIVERSIFIED FLEXIBLE CONSERVATIVE
MARKET BOND EQUITY MANAGED BALANCED
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Contract Owner Units Outstanding......... 2,975,784 2,391,549 8,311,338 8,948,416 3,469,414
Unit Value............................... $ 2.53395 $ 3.97899 $ 8.85750 $ 6.08717 $ 4.84591
------------ ------------ ------------ ------------ ------------
TOTAL CONTRACT OWNER EQUITY.............. $ 7,540,488 $ 9,515,949 $ 73,617,677 $ 54,470,532 $ 16,812,469
============ ============ ============ ============ ============
<CAPTION>
SUBACCOUNTS (CONTINUED)
------------------------------------------------------------------------
HIGH
YIELD STOCK EQUITY NATURAL
BOND INDEX INCOME RESOURCES GLOBAL
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Contract Owner Units Outstanding......... 310,997 536,422 363,677 170,193 318,123
Unit Value............................... $ 2.45948 $ 5.32334 $ 4.32476 $ 2.22312 $ 1.77705
------------ ------------ ------------ ------------ ------------
TOTAL CONTRACT OWNER EQUITY.............. $ 764,892 $ 2,855,559 $ 1,572,814 $ 378,360 $ 565,321
============ ============ ============ ============ ============
<CAPTION>
SUBACCOUNTS (CONTINUED)
-------------------------------------------
SMALL
GOVERNMENT PRUDENTIAL CAPITALIZATION
INCOME JENNISON STOCK
PORTFOLIO PORTFOLIO PORTFOLIO
------------ ------------ -------------
<S> <C> <C> <C>
Contract Owner Units Outstanding......... 124,246 314,748 207,739
Unit Value............................... $ 2.20052 $ 2.56714 $ 1.76160
------------ ------------ -------------
TOTAL CONTRACT OWNER EQUITY.............. $ 273,406 $ 808,003 $ 365,953
============ ============ =============
</TABLE>
A16
<PAGE>
NOTE 5: 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. Mortality risk is
that contract owners may not live as long as estimated and expense
risk is that the cost of issuing and administering the policies may
exceed related charges by Pruco Life of New Jersey.
B. Expense Reimbursement
Pursuant to a prior merger agreement, the Account is reimbursed by
Pruco Life of New Jersey for expenses in excess of 0.40% of the
average daily net assets incurred by the Money Market, Diversified
Bond, Equity, Flexible Managed, and Conservative Balanced Portfolios
of the Series Fund.
C. Cost of Insurance Charges
Contract owner contributions are subject to certain deductions prior
to being invested in the Account. The deductions are for (1) state
premium taxes; (2) sales charges which are deducted in order to
compensate Pruco Life of New Jersey for the cost of selling the
contract. Contracts are also subject to charges for the costs of
administering the contract and to compensate Pruco Life of New
Jersey for the guaranteed minimum death benefit risk.
NOTE 6: TAXES
Pruco Life of New Jersey is taxed as a "life insurance company" as
defined by the Internal Revenue Code and the results of operations of
the Account form a part of Prudential's consolidated federal tax
return. Under current federal law, no federal income taxes are payable
by the Account. As such, no provision for tax liability has been
recorded in these financial statements.
A17
<PAGE>
NOTE 7: NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM PREMIUM PAYMENTS
AND OTHER OPERATING TRANSFERS
The following amounts represent components of contract owner activity
for the years ended December 31, 1998 and 1997:
<TABLE>
<CAPTION>
SUBACCOUNTS
----------------------------------------------------------
MONEY MARKET DIVERSIFIED BOND
PORTFOLIO PORTFOLIO
----------------------------------------------------------
1998 1997 1998 1997
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Contract Owner Net Payments............................. $ 597,386 $ 700,249 $ 666,802 $ 716,991
Policy Loans............................................ (112,827) (113,588) (168,726) (160,351)
Policy Loan Repayment and Interest...................... 204,283 106,760 131,092 140,633
Surrenders, Withdrawals and Death Benefits.............. (753,646) (435,318) (579,540) (654,376)
Net Transfers From (To) Other Subaccounts or Fixed
Rate Options.......................................... (46,565) (243,617) (130,070) (323,521)
Administrative and Other Charges........................ (240,106) (259,809) (272,056) (277,683)
------------ ------------ ------------ ------------
Net Increase (Decrease) in Net Assets Resulting from
Premium Payments and Other Operating Transfers........ $ (351,475) $ (245,323) $ (352,498) $ (558,307)
============ ============ ============ ============
<CAPTION>
SUBACCOUNTS (CONTINUED)
----------------------------------------------------------
EQUITY FLEXIBLE MANAGED
PORTFOLIO PORTFOLIO
----------------------------------------------------------
1998 1997 1998 1997
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Contract Owner Net Payments............................. $ 3,631,338 $ 3,577,509 $ 3,576,134 $ 3,720,861
Policy Loans............................................ (1,962,410) (1,856,989) (1,185,095) (988,351)
Policy Loan Repayment and Interest...................... 1,133,698 933,614 749,697 710,569
Surrenders, Withdrawals and Death Benefits.............. (4,560,147) (5,480,536) (3,235,200) (4,256,006)
Net Transfers From (To) Other Subaccounts or Fixed
Rate Options.......................................... (220,647) 174,951 (444,083) (299,982)
Administrative and Other Charges........................ (1,868,533) (1,779,201) (1,525,426) (1,521,789)
------------ ------------ ------------ ------------
Net Increase (Decrease) in Net Assets Resulting from
Premium Payments and Other Operating Transfers........ $ (3,846,701) $ (4,430,652) $ (2,063,973) $ (2,634,698)
============ ============ ============ ============
<CAPTION>
SUBACCOUNTS (CONTINUED)
----------------------------------------------------------
CONSERVATIVE BALANCED HIGH YIELD BOND
PORTFOLIO PORTFOLIO
----------------------------------------------------------
1998 1997 1998 1997
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Contract Owner Net Payments............................. $ 1,290,526 $ 1,351,138 $ 64,819 $ 69,568
Policy Loans............................................ (264,965) (280,851) (30,617) (9,759)
Policy Loan Repayment and Interest...................... 207,704 165,714 9,055 12,569
Surrenders, Withdrawals and Death Benefits.............. (907,183) (1,283,004) (72,961) (57,221)
Net Transfers From (To) Other Subaccounts or Fixed
Rate Options.......................................... (153,279) (137,098) (9,974) (22,882)
Administrative and Other Charges........................ (551,367) (546,342) (25,859) (27,004)
------------ ------------ ------------ ------------
Net Increase (Decrease) in Net Assets Resulting from
Premium Payments and Other Operating Transfers........ $ (378,564) $ (730,443) $ (65,537) $ (34,729)
============ ============ ============ ============
</TABLE>
A18
<PAGE>
Note 7: Net Increase (Decrease) in Net Assets Resulting from Premium Payments
and Other Operating Transfers (Continued)
<TABLE>
<CAPTION>
SUBACCOUNTS (CONTINUED)
----------------------------------------------------------
STOCK INDEX EQUITY INCOME
PORTFOLIO PORTFOLIO
----------------------------------------------------------
1998 1997 1998 1997
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Contract Owner Net Payments............................. $ 146,613 $ 140,823 $ 89,540 $ 88,734
Policy Loans............................................ (75,909) (35,127) (53,098) (41,052)
Policy Loan Repayment and Interest...................... 34,818 19,671 18,892 14,335
Surrenders, Withdrawals and Death Benefits.............. (122,569) (128,835) (69,899) (47,860)
Net Transfers From (To) Other Subaccounts or Fixed
Rate Options.......................................... 395,662 393,552 258,893 140,019
Administrative and Other Charges........................ (68,348) (51,771) (43,041) (34,757)
------------ ------------ ------------ ------------
Net Increase (Decrease) in Net Assets Resulting from
Premium Payments and Other Operating Transfers........ $ 310,267 $ 338,313 $ 201,287 $ 119,419
============ ============ ============ ============
<CAPTION>
SUBACCOUNTS (CONTINUED)
----------------------------------------------------------
NATURAL RESOURCES GLOBAL
PORTFOLIO PORTFOLIO
----------------------------------------------------------
1998 1997 1998 1997
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Contract Owner Net Payments............................. $ 50,773 $ 63,148 $ 32,171 $ 35,049
Policy Loans............................................ (14,329) (18,825) (15,452) (12,653)
Policy Loan Repayment and Interest...................... 9,234 8,366 7,909 59,198
Surrenders, Withdrawals and Death Benefits.............. (28,959) (46,965) (17,852) (30,143)
Net Transfers From (To) Other Subaccounts or Fixed
Rate Options.......................................... (68,079) (61,191) 19,427 83,688
Administrative and Other Charges........................ (16,191) (22,839) (14,020) (11,448)
------------ ------------ ------------ ------------
Net Increase (Decrease) in Net Assets Resulting from
Premium Payments and Other Operating Transfers........ $ (67,551) $ (78,306) $ 12,183 $ 123,691
============ ============ ============ ============
<CAPTION>
SUBACCOUNTS (CONTINUED)
----------------------------------------------------------
GOVERNMENT INCOME PRUDENTIAL JENNISON
PORTFOLIO PORTFOLIO
----------------------------------------------------------
1998 1997 1998 1997
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Contract Owner Net Payments............................. $ 17,445 $ 17,854 $ 32,717 $ 20,829
Policy Loans............................................ (358) (7,824) (18,750) 220
Policy Loan Repayment and Interest...................... 2,612 1,270 11,779 2,194
Surrenders, Withdrawals and Death Benefits.............. (22,473) (4,944) (28,653) (16,018)
Net Transfers From (To) Other Subaccounts or Fixed
Rate Options.......................................... 28,203 (5,176) 294,460 147,432
Administrative and Other Charges........................ (8,375) (7,390) (21,843) (7,152)
------------ ------------ ------------ ------------
Net Increase (Decrease) in Net Assets Resulting from
Premium Payments and Other Operating Transfers........ $ 17,054 $ (6,210) $ 269,710 $ 147,505
============ ============ ============ ============
<CAPTION>
SUBACCOUNTS (CONTINUED)
---------------------------
SMALL CAPITALIZATION STOCK
PORTFOLIO
---------------------------
1998 1997
------------ ------------
<S> <C> <C>
Contract Owner Net Payments............................. $ 25,801 $ 14,283
Policy Loans............................................ (7,688) (2,361)
Policy Loan Repayment and Interest...................... 6,630 2,474
Surrenders, Withdrawals and Death Benefits.............. (9,964) (7,245)
Net Transfers From (To) Other Subaccounts or Fixed
Rate Options.......................................... 93,747 174,351
Administrative and Other Charges........................ (8,768) (4,145)
------------ ------------
Net Increase (Decrease) in Net Assets Resulting from
Premium Payments and Other Operating Transfers........ $ 99,758 $ 177,357
============ ============
</TABLE>
A19
<PAGE>
NOTE 8: NET INCREASE (DECREASE) IN NET ASSETS RETAINED IN THE ACCOUNT
The increase (decrease) in net assets retained in the Account
represents the net contributions (withdrawals) of Pruco Life of New
Jersey to (from) the Account. Effective October 13, 1998 Pruco Life of
New Jersey no longer maintains a position in the account. Previously,
Pruco Life of New Jersey maintained a position in the Account for
liquidity purposes including unit purchases and redemptions, fund share
transactions and expense processing.
NOTE 9: UNIT ACTIVITY
Transactions in units (including transfers among subaccounts) for the
years ended December 31, 1998, 1997 and 1996 were as follows:
<TABLE>
<CAPTION>
SUBACCOUNTS
-------------------------------------------------------------------------------------
MONEY DIVERSIFIED
MARKET BOND
PORTFOLIO PORTFOLIO
---------------------------------------- ------------------------------------------
1998 1997 1996 1998 1997 1996
------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Contract Owner Contributions: 405,390 396,610 469,086 229,450 259,045 297,933
Contract Owner Redemptions: (550,086) (500,352) (591,107) (320,963) (415,661) (378,683)
<CAPTION>
SUBACCOUNTS (CONTINUED)
-------------------------------------------------------------------------------------
FLEXIBLE
EQUITY MANAGED
PORTFOLIO PORTFOLIO
---------------------------------------- ------------------------------------------
1998 1997 1996 1998 1997 1996
------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Contract Owner Contributions: 634,805 752,863 925,105 802,018 960,270 1,170,077
Contract Owner Redemptions: (1,078,771) (1,344,427) (1,221,516) (1,153,597) (1,468,518) (1,444,853)
<CAPTION>
SUBACCOUNTS (CONTINUED)
-------------------------------------------------------------------------------------
CONSERVATIVE HIGH YIELD
BALANCED BOND
PORTFOLIO PORTFOLIO
---------------------------------------- ------------------------------------------
1998 1997 1996 1998 1997 1996
------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Contract Owner Contributions: 360,102 398,550 492,415 37,224 47,298 58,551
Contract Owner Redemptions: (441,834) (574,880) (539,429) (63,535) (61,560) (86,929)
<CAPTION>
SUBACCOUNTS (CONTINUED)
-------------------------------------------------------------------------------------
STOCK EQUITY
INDEX INCOME
PORTFOLIO PORTFOLIO
---------------------------------------- ------------------------------------------
1998 1997 1996 1998 1997 1996
------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Contract Owner Contributions: 141,390 163,038 125,597 91,452 70,094 56,306
Contract Owner Redemptions: (78,424) 74,708) (72,698) (49,149) (40,382) (47,941)
<CAPTION>
SUBACCOUNTS (CONTINUED)
-------------------------------------------------------------------------------------
NATURAL
RESOURCES GLOBAL
PORTFOLIO PORTFOLIO
---------------------------------------- ------------------------------------------
1998 1997 1996 1998 1997 1996
------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Contract Owner Contributions: 31,880 42,321 64,999 68,736 152,528 85,485
Contract Owner Redemptions: (56,742) (67,261) (29,067) (62,107) (68,510) (41,936)
</TABLE>
A20
<PAGE>
NOTE 9: UNIT ACTIVITY (CONTINUED)
<TABLE>
<CAPTION>
SUBACCOUNTS (CONTINUED)
-------------------------------------------------------------------------------------
GOVERNMENT PRUDENTIAL
INCOME JENNISON
PORTFOLIO PORTFOLIO
---------------------------------------- ------------------------------------------
1998 1997 1996 1998 1997 1996
------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Contract Owner Contributions: 111,876 66,556 18,121 176,784 117,546 85,473
Contract Owner Redemptions: (102,023) (69,307) (16,710) (51,706) (31,209) (6,977)
<CAPTION>
SUBACCOUNTS (CONTINUED)
----------------------------------------
SMALL CAPITALIZATION
STOCK
PORTFOLIO
----------------------------------------
1998 1997 1996
------------ ------------ ------------
<S> <C> <C> <C>
Contract Owner Contributions: 89,936 119,968 42,084
Contract Owner Redemptions: (34,090) (11,823) (5,765)
</TABLE>
A21
<PAGE>
NOTE 10: PURCHASES AND SALES OF INVESTMENTS
The aggregate costs of purchases and proceeds from sales of investments
in the Series Fund for the year ended December 31, 1998 were as
follows:
<TABLE>
<CAPTION>
PORTFOLIOS
----------------------------------------------------------------------------
MONEY DIVERSIFIED FLEXIBLE CONSERVATIVE
MARKET BOND EQUITY MANAGED BALANCED
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Purchases....................... $ 397,822 $ 251,216 $ 484,613 $ 660,519 $ 443,955
Sales........................... $ (780,988) $ (640,408) $ (4,608,720) $ (2,813,979) $ (844,075)
<CAPTION>
PORTFOLIOS (CONTINUED)
----------------------------------------------------------------------------
HIGH YIELD STOCK EQUITY NATURAL
BOND INDEX INCOME RESOURCES GLOBAL
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Purchases....................... $67,276 $ 473,787 $ 296,782 $ 6,614 $ 82,117
Sales........................... $ (136,020) $ (176,732) $ (91,762) $ (117,311) $ (76,100)
<CAPTION>
PORTFOLIOS (CONTINUED)
---------------------------------------------
SMALL
GOVERNMENT PRUDENTIAL CAPITALIZATION
INCOME JENNISON STOCK
------------ ------------ -------------
<S> <C> <C> <C>
Purchases....................... $ 216,498 $ 315,622 $ 133,290
Sales........................... $ (199,432) $ (47,348) $ (37,824)
</TABLE>
A22
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Contract Owners of the
Pruco Life of New Jersey Variable Insurance Account
and the Board of Directors of
Pruco Life Insurance Company of New Jersey
In our opinion, the accompanying statements of net assets and the related
statements of operations and of changes in net assets present fairly, in all
material respects, the financial position of the subaccounts (Money Market
Portfolio, Diversified Bond Portfolio, Equity Portfolio, Flexible Managed
Portfolio, Conservative Balanced Portfolio, High Yield Bond Portfolio, Stock
Index Portfolio, Equity Income Portfolio, Natural Resources Portfolio, Global
Portfolio, Government Income Portfolio, Prudential Jennison Portfolio and Small
Capitalization Stock Portfolio) of the Pruco Life of New Jersey Variable
Insurance Account at December 31, 1998, the results of each of their operations
and the changes in each of their net assets for each of the three years in the
period then ended, in conformity with generally accepted accounting principles.
These financial statements are the responsibility of Pruco Life Insurance
Company of New Jersey's management; our responsibility is to express an opinion
on these financial statements based on our audits. We conducted our audits of
these financial statements in accordance with generally accepted auditing
standards which 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, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits, which included confirmation of fund shares owned at December 31, 1998,
provide a reasonable basis for the opinion expressed above.
PricewaterhouseCoopers LLP
New York, New York
March 19, 1999
A23
<PAGE>
<TABLE>
Pruco Life Insurance Company of New Jersey
Statements of Financial Position
December 31, 1998 and 1997 (In Thousands)
- --------------------------------------------------------------------------------
<CAPTION>
1998 1997
---------- ----------
<S> <C> <C>
ASSETS
Fixed maturities
Available for sale, at fair value (amortized cost, 1998: $617,758; and
1997: $585,109) $ 622,990 $ 592,361
Policy loans 139,443 127,306
Short-term investments 53,761 52,464
---------- ----------
Total investments 816,194 772,131
Cash 45 3
Deferred policy acquisition costs 113,923 101,625
Accrued investment income 12,209 14,075
Other assets 15,379 4,037
Separate Account assets 1,453,407 1,110,561
---------- ----------
TOTAL ASSETS $2,411,157 $2,002,432
========== ==========
LIABILITIES AND STOCKHOLDER'S EQUITY
Liabilities
Policyholders' account balances $ 413,848 $ 402,601
Future policy benefits and other policyholder liabilities 90,530 85,220
Cash collateral for loaned securities 34,424 33,663
Securities sold under agreements to repurchase 27,210 --
Income taxes payable 1,610 12,963
Net deferred income tax liability 23,715 22,188
Payable to affiliate 3,492 4,307
Other liabilities 19,489 17,103
Separate Account liabilities 1,450,986 1,108,994
---------- ----------
Total liabilities 2,065,304 1,687,039
Contingencies - (See Note 10) ---------- ----------
Stockholder's Equity
Common stock, $5 par value;
400,000 shares, authorized;
issued and outstanding at
December 31, 1998 and 1997 2,000 2,000
Paid-in-capital 125,000 125,000
Retained earnings 217,260 185,437
Accumulated other comprehensive income 1,593 2,956
---------- ----------
Total stockholder's equity 345,853 315,393
---------- ----------
TOTAL LIABILITIES AND
STOCKHOLDER'S EQUITY $2,411,157 $2,002,432
========== ==========
</TABLE>
See Notes to Financial Statements
B-1
<PAGE>
<TABLE>
Pruco Life Insurance Company of New Jersey
Statements of Operations
Years Ended December 31, 1998, 1997, and 1996 (In Thousands)
- --------------------------------------------------------------------------------
<CAPTION>
1998 1997 1996
--------- --------- ---------
<S> <C> <C> <C>
REVENUES
Premiums $ 1,345 $ 1,105 $ 1,345
Policy charges and fee income 56,247 56,382 58,571
Net investment income 47,032 46,324 43,784
Realized investment gains, net 8,446 1,707 1,221
Other income 5,755 5,286 4,047
--------- --------- ---------
Total revenues 118,825 110,804 108,968
--------- --------- ---------
BENEFITS AND EXPENSES
Policyholders' benefits 28,342 33,999 28,653
Interest credited to policyholders' account balances 18,985 19,372 20,069
General, administrative and other expenses 22,105 27,236 12,848
--------- --------- ---------
Total benefits and expenses 69,432 80,607 61,570
--------- --------- ---------
Income from operations before income taxes 49,393 30,197 47,398
--------- --------- ---------
Income taxes
Current 15,309 13,279 12,682
Deferred 2,261 (2,305) 2,929
--------- --------- ---------
Total income taxes 17,570 10,974 15,611
--------- --------- ---------
NET INCOME $ 31,823 $ 19,223 $ 31,787
========= ========= =========
Net unrealized investment gains (losses) on securities,
net of reclassification adjustment (1,363) 924 (4,556)
--------- --------- ---------
TOTAL COMPREHENSIVE INCOME $ 30,460 $ 20,147 $ 27,231
========= ========= =========
</TABLE>
See Notes to Financial Statements
B-2
<PAGE>
<TABLE>
Pruco Life Insurance Company of New Jersey
Statements of Changes in Stockholder's Equity
Years Ended December 31, 1998, 1997, and 1996 (In Thousands)
- --------------------------------------------------------------------------------
<CAPTION>
Accumulated
other Total
Common Paid-in- Retained comprehensive stockholder's
stock capital earnings income equity
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Balance, January 1, 1996 $ 2,000 $ 125,000 $ 134,427 $ 6,588 $ 268,015
Net income -- -- 31,787 -- 31,787
Change in net unrealized
investment gains, net of
reclassification adjustment -- -- -- (4,556) (4,556)
--------- --------- --------- --------- ---------
Balance, December 31, 1996 2,000 125,000 166,214 2,032 295,246
Net income -- -- 19,223 -- 19,223
Change in net unrealized
investment gains, net of
reclassification adjustment -- -- -- 924 924
--------- --------- --------- --------- ---------
Balance, December 31, 1997 2,000 125,000 185,437 2,956 315,393
Net income -- -- 31,823 -- 31,823
Change in net unrealized
investment gains, net of
reclassification adjustment -- -- -- (1,363) (1,363)
--------- --------- --------- --------- ---------
Balance, December 31, 1998 $ 2,000 $ 125,000 $ 217,260 $ 1,593 $ 345,853
========= ========= ========= ========= =========
</TABLE>
See Notes to Financial Statements
B-3
<PAGE>
<TABLE>
Pruco Life Insurance Company of New Jersey
Statements of Cash Flows
Years Ended December 31, 1998, 1997, and 1996 (In Thousands)
- --------------------------------------------------------------------------------
<CAPTION>
1998 1997 1996
----------- ----------- -----------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 31,823 $ 19,223 $ 31,787
Adjustments to reconcile net income to net cash (used in)
provided by operating activities:
Policy charges and fee income (10,871) (7,841) (9,963)
Interest credited to policyholders' account balances 18,985 19,372 20,069
Realized investment gains, net (8,446) (1,707) (1,221)
Amortization and other non-cash items 2,491 (1,046) 10,065
Change in:
Future policy benefits and other policyholders' liabilities 5,310 8,981 7,461
Accrued investment income 1,866 (1,167) (1,329)
Policy loans (12,137) (13,388) (15,724)
Separate Accounts (854) 1,629 (1,335)
Payable to affiliates (815) (1,752) 4,300
Deferred policy acquisition costs (12,298) 5,340 (10,934)
Income taxes payable (11,353) 10,993 1,970
Deferred income tax liability 1,527 (1,987) 366
Other, net (8,955) 2,812 4,669
----------- ----------- -----------
Cash Flows (Used in) From Operating Activities (3,727) 39,462 40,181
----------- ----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from the sale/maturity of:
Fixed maturities:
Available for sale 1,001,096 645,355 901,775
Payments for the purchase of:
Fixed maturities:
Available for sale (1,029,988) (679,709) (956,483)
Cash collateral for loaned securities, net 761 33,663 --
Securities sold under agreements to repurchase, net 27,210 -- --
Short term investments, net (1,297) (35,461) 28,306
----------- ----------- -----------
Cash Flows Used in Investing Activities (2,218) (36,152) (26,402)
----------- ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Policyholders' account balances:
Deposits 300,536 134,020 16,754
Withdrawals (294,549) (141,255) (26,605)
----------- ----------- -----------
Cash Flows From (Used in) Financing Activities 5,987 (7,235) (9,851)
----------- ----------- -----------
Net increase (decrease) in Cash 42 (3,925) 3,928
Cash, beginning of year 3 3,928 --
----------- ----------- -----------
CASH, END OF PERIOD $ 45 $ 3 $ 3,928
=========== =========== ===========
SUPPLEMENTAL CASH FLOW INFORMATION
Income taxes paid $ 27,083 $ 1,896 $ 11,673
=========== =========== ===========
</TABLE>
See Notes to Financial Statements
B-4
<PAGE>
Pruco Life Insurance Company of New Jersey
Notes to Financial Statements
- --------------------------------------------------------------------------------
1. BUSINESS
Pruco Life Insurance Company of New Jersey (the Company) is a stock life
insurance company organized in 1982 under the laws of the state of New Jersey.
It is licensed to sell individual life insurance, variable life insurance,
variable annuities, and fixed annuities (the Contracts) only in the states of
New Jersey and New York.
The Company is a wholly owned subsidiary of Pruco Life Insurance Company (Pruco
Life), a stock life insurance company organized in 1971 under the laws of the
state of Arizona. Pruco Life, in turn, is a wholly owned subsidiary of The
Prudential Insurance Company of America (Prudential), a mutual insurance company
founded in 1875 under the laws of the state of New Jersey. Pruco Life intends to
make additional capital contributions to the Company, as needed, to enable it to
comply with its reserve requirements and fund expenses in connection with its
business. Generally, Pruco Life is under no obligation to make such
contributions and its assets do not back the benefits payable under the
Contracts.
The Company is engaged in a business that is highly competitive because of the
large number of stock and mutual life insurance companies and other entities
engaged in marketing insurance products, and individual annuities. There are
approximately 1,620 stock, mutual and other types of insurers in the life
insurance business in the United States.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The financial statements include the accounts of the Company, a stock life
insurance company. The financial statements have been prepared in accordance
with generally accepted accounting principles ("GAAP").
Use of Estimates
The preparation of financial statements in conformity with GAAP requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of revenues and
expenses during the period. Actual results could differ from those estimates.
Investments
Fixed maturities classified as "available for sale" are carried at estimated
fair value. The amortized cost of fixed maturities is written down to estimated
fair value if a decline in value is considered to be other than temporary.
Unrealized gains and losses on fixed maturities "available for sale" including
the effect on deferred policy acquisition costs and participating annuity
contracts that would result from the realization of unrealized gains and losses,
net of income taxes, are included in a separate component of equity,
"Accumulated other comprehensive income."
Policy loans are carried at unpaid principal balances.
Short-term investments, consists primarily of highly liquid debt instruments
purchased with an original maturity of twelve months or less and are carried at
amortized cost, which approximates fair value.
Realized investment gains, net, are computed using the specific identification
method. Costs of fixed maturity are adjusted for impairments considered to be
other than temporary.
Cash
Cash includes cash on hand, amounts due from banks, and money market
instruments.
Deferred Policy Acquisition Costs
The costs which vary with and that are related primarily to the production of
new insurance business are deferred to the extent that they are deemed
recoverable from future profits. Such costs include certain commissions, costs
of policy issuance and underwriting, and certain variable field office expenses.
Deferred policy acquisition costs are subject to recoverability testing at the
time of policy issue and loss recognition testing at the end of each accounting
period. Deferred policy acquisition costs are adjusted for the impact of
unrealized gains or losses on investments as if these gains or losses had been
realized, with corresponding credits or charges included in equity.
B-5
<PAGE>
Pruco Life Insurance Company of New Jersey
Notes to Financial Statements
- --------------------------------------------------------------------------------
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Acquisition costs related to interest-sensitive life products and
investment-type contracts are deferred and amortized in proportion to total
estimated gross profits arising principally from investment results, mortality
and expense margins and surrender charges based on historical and anticipated
future experience. Amortization periods range from 15 to 30 years. Deferred
policy acquisition costs are analyzed to determine if they are recoverable from
future income, including investment income. If such costs are determined to be
unrecoverable, they are expensed at the time of determination. The effect of
revisions to estimated gross profits on unamortized deferred acquisition costs
is reflected in earnings in the period such estimated gross profits are revised.
Securities loaned
Securities loaned are treated as financing arrangements and are recorded at the
amount of cash received as collateral. The Company obtains collateral in an
amount equal to 102% of the fair value of the securities. The Company monitors
the market value of securities loaned on a daily basis with additional
collateral obtained as necessary. Non-cash collateral received is not reflected
in the statements of financial position. Substantially all of the Company's
securities loaned are with large brokerage firms.
Securities sold under agreements to repurchase
Securities sold under agreements to repurchase are treated as financing
arrangements and are carried at the amounts at which the securities will be
subsequently reacquired, including accrued interest, as specified in the
respective agreements. The Company's policy is to take possession of securities
purchased under agreements to resell. The market value of securities to be
repurchased is monitored and additional collateral is requested, where
appropriate, to protect against credit exposure.
Securities lending and securities repurchase agreements are used to generate net
investment income and facilitate trading activity. These instruments are
short-term in nature (usually 30 days or less). Securities loaned are
collateralized principally by U.S. Government and mortgage-backed securities.
Securities sold under repurchase agreements are collateralized principally by
cash. The carrying amounts of these instruments approximate fair value because
of the relatively short period of time between the origination of the
instruments and their expected realization.
Separate Account Assets and Liabilities
Separate Account assets and liabilities are reported at estimated fair value and
represent segregated funds which are invested for certain policyholders and
other customers. Separate Account assets include common stocks, fixed
maturities, real estate related securities, and short-term investments. The
assets of each account are legally segregated and are not subject to claims that
arise out of any other business of the Company. Investment risks associated with
market value changes are borne by the customers, except to the extent of minimum
guarantees made by the Company with respect to certain accounts. The investment
income and gains or losses for Separate Accounts generally accrue to the
policyholders and are not included in the Statement of Operations. Mortality,
policy administration and surrender charges on the accounts are included in
"Policy charges and fee income."
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 of New Jersey Modified
Guaranteed Annuity Account. The Pruco Life of New Jersey 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 of New Jersey Modified Guaranteed 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 the Company.
Insurance Revenue and Expense Recognition
Premiums from insurance policies are generally recognized when due. Benefits are
recorded as an expense when they are incurred. For traditional life insurance
contracts, a liability for future policy benefits is recorded using the net
level premium method. For individual annuities in payout status, a liability for
future policy benefits is recorded for the present value of expected future
payments based on historical experience.
B-6
<PAGE>
Pruco Life Insurance Company of New Jersey
Notes to Financial Statements
- --------------------------------------------------------------------------------
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Amounts received as payment for interest sensitive life, investment contracts
and variable annuities are reported as deposits to "Policyholders' account
balances." Revenues from these contracts are reflected as "Policy charges and
fee income" and consist primarily of fees assessed during the period against the
policyholders' account balances for mortality charges, policy administration
charges, and surrender charges. In addition, interest earned from the investment
of these account balances is reflected in "Net investment income." Benefits and
expenses for these products include claims in excess of related account
balances, expenses of contract administration, interest credited and
amortization of deferred policy acquisition costs.
Other Income
Other income consists primarily of asset management fees which are received by
the Company from Prudential for services Prudential provides to the Prudential
Series Fund, an underlying investment option of the Separate Accounts.
Derivative Financial Instruments
Derivatives are financial instruments whose values are derived from interest
rates, foreign exchange rates, various financial indices, or the value of
securities or commodities. Derivative financial instruments used by the Company
are futures and can be exchange-traded or contracted in the over-the-counter
market. The Company uses derivative financial instruments to hedge market risk
from changes in interest rates and to alter interest rate or currency exposures
arising from mismatches between assets and liabilities. All derivatives used by
the Company are for other than trading purposes.
To qualify as a hedge, derivatives must be designated as hedges for existing
assets, liabilities, firm commitments, or anticipated transactions which are
identified and probable to occur, and effective in reducing the market risk to
which the Company is exposed. The effectiveness of the derivatives must be
evaluated at the inception of the hedge and throughout the hedge period.
When derivatives qualify as hedges, the changes in the fair value or cash flows
of the derivatives and the hedged items are recognized in earnings in the same
period. If the Company's use of other than trading derivatives does not meet the
criteria to apply hedge accounting, the derivatives are recorded at fair value
in "Other liabilities" in the Statements of Financial Position, and changes in
their fair value are recognized in earnings in "Realized investment gains, net"
without considering changes in the hedged assets or liabilities. Cash flows from
other than trading derivative assets and liabilities are reported in the
operating activities section in the Statements of Cash Flows.
Income Taxes
The Company is a member of the consolidated federal income tax return of
Prudential and files separate company state and local tax returns. Pursuant to
the tax allocation arrangement, total federal income tax expense is determined
on a separate company basis. Members with losses record tax benefits to the
extent such losses are recognized in the consolidated federal tax provision.
Deferred income taxes are generally recognized, based on enacted rates, when
assets and liabilities have different values for financial statement and tax
reporting purposes. A valuation allowance is recorded to reduce a deferred tax
asset to that portion that is expected to be realized.
New Accounting Pronouncements
In June 1996, the Financial Accounting Standards Board ("FASB") issued the
Statement of Financial Accounting Standards ("SFAS") No. 125, "Accounting for
Transfers and Servicing of Financial Assets and Extinguishments of Liabilities"
("SFAS 125"). The statement provides accounting and reporting standards for
transfers and servicing of financial assets and extinguishments of liabilities
and provides consistent standards for distinguishing transfers of financial
assets that are sales from transfers that are secured borrowings. SFAS 125
became effective January 1, 1997 and was applied prospectively. Subsequent to
June 1996, FASB issued SFAS No. 127 "Deferral of the Effective Date of Certain
Provisions of SFAS 125" ("SFAS 127"). SFAS 127 delays the implementation of SFAS
125 for one year for certain transactions, including repurchase agreements,
dollar rolls, securities lending and similar transactions. Adoption of SFAS 125
did not have a material impact on the Company's results of operations, financial
position and liquidity.
On January 1, 1999, the Company adopted the American Institute of Certified
Public Accountants ("AICPA") Statement of Position 97-3, "Accounting by
Insurance and Other Enterprises for Insurance-Related Assessments" ("SOP 97-3").
This statement provides guidance for determining when an insurance company or
other enterprise should recognize a liability for guaranty-fund assessments as
well as guidance for measuring the liability. The adoption of SOP 97-3 is not
expected to have a material effect on the Company's financial position or
results of operations.
B-7
<PAGE>
Pruco Life Insurance Company of New Jersey
Notes to Financial Statements
- --------------------------------------------------------------------------------
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities" which requires that companies recognize all
derivatives as either assets or liabilities in the balance sheet and measure
those instruments at fair value. SFAS No. 133 provides, if certain conditions
are met, that a derivative may be specifically designated as (1) a hedge of the
exposure to changes in the fair value of a recognized asset or liability or an
unrecognized firm commitment (fair value hedge), (2) a hedge of the exposure to
variable cash flows of a forecasted transaction (cash flow hedge), or (3) a
hedge of the foreign currency exposure of a net investment in a foreign
operation, an unrecognized firm commitment, an available-for-sale security or a
foreign-currency-denominated forecasted transaction (foreign currency hedge).
SFAS No. 133 does not apply to most traditional insurance contracts. However,
certain hybrid contracts that contain features which can affect settlement
amounts similarly to derivatives may require separate accounting for the "host
contract" and the underlying "embedded derivative" provisions. The latter
provisions would be accounted for as derivatives as specified by the statement.
Under SFAS No. 133, the accounting for changes in fair value of a derivative
depends on its intended use and designation. For a fair value hedge, the gain or
loss is recognized in earnings in the period of change together with the
offsetting loss or gain on the hedged item. For a cash flow hedge, the effective
portion of the derivative's gain or loss is initially reported as a component of
other comprehensive income and subsequently reclassified into earnings when the
forecasted transaction affects earnings. For a foreign currency hedge, the gain
or loss is reported in other comprehensive income as part of the foreign
currency translation adjustment. For all other items not designated as hedging
instruments, the gain or loss is recognized in earnings in the period of change.
The Company is required to adopt this statement by the first quarter of 2000 and
is currently assessing the effect of the new standard.
In October, 1998, the AICPA issued Statement of Position 98-7, "Deposit
Accounting: Accounting for Insurance and Reinsurance Contracts That Do Not
Transfer Insurance Risk," ("SOP 98-7"). This statement provides guidance on how
to account for insurance and reinsurance contracts that do not transfer
insurance risk. SOP 98-7 is effective for fiscal years beginning after June 15,
1999. The adoption of this statement is not expected to have a material effect
on the Company's financial position or results of operations.
Reclassifications
Certain amounts in the prior years have been reclassified to conform to current
year presentations.
B-8
<PAGE>
Pruco Life Insurance Company of New Jersey
Notes to Financial Statements
- --------------------------------------------------------------------------------
3. INVESTMENTS
Fixed Maturities
The following tables provide additional information relating to fixed maturities
as of December 31:
<TABLE>
<CAPTION>
1998
-----------------------------------------------------
Gross Gross Estimated
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
-------- -------- -------- --------
(In Thousands)
<S> <C> <C> <C> <C>
Fixed maturities available for sale
U.S. Treasury securities and obligations of
U.S. government corporations and agencies $ 51,663 $ 260 $ 318 $ 51,605
Foreign government bonds 34,744 887 236 35,395
Corporate Securities 531,351 7,273 2,634 535,990
-------- -------- -------- --------
Total fixed maturities available for sale $617,758 $ 8,420 $ 3,188 $622,990
======== ======== ======== ========
<CAPTION>
1997
-----------------------------------------------------
Gross Gross Estimated
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
-------- -------- -------- --------
(In Thousands)
<S> <C> <C> <C> <C>
Fixed maturities available for sale
U.S. Treasury securities and obligations of
U.S. government corporations and agencies $ 42,885 $ 340 $ 3 $ 43,222
Foreign government bonds 38,332 551 -- 38,883
Corporate securities 503,892 6,545 181 510,256
-------- -------- -------- --------
Total fixed maturities available for sale $585,109 $ 7,436 $ 184 $592,361
======== ======== ======== ========
</TABLE>
B-9
<PAGE>
Pruco Life Insurance Company of New Jersey
Notes to Financial Statements
- --------------------------------------------------------------------------------
3. INVESTMENTS (continued)
The amortized cost and estimated fair value of fixed maturities, categorized by
contractual maturities at December 31, 1998, are shown below:
Available for Sale
---------------------------
Amortized Estimated
Cost Fair Value
-------- ----------
(In Thousands)
Due in one year or less $ 13,645 $ 13,767
Due after one year through five years 269,252 271,525
Due after five years through ten years 255,280 257,992
Due after ten years 79,581 79,706
-------- --------
Total $617,758 $622,990
======== ========
Actual maturities will differ from contractual maturities because, in certain
circumstances, issuers have the right to call or prepay obligations.
Proceeds from the sale of fixed maturities available for sale during 1998, 1997,
and 1996 were $990.7 million, $635.4 million and $854.8 million, respectively.
Gross gains of $8.8 million, $2.9 million, and $3.9 million and gross losses of
$1.8 million, $1.2 million, and $3.8 million were realized on those sales during
1998, 1997, and 1996, respectively. Proceeds from maturities of fixed maturities
available for sale during 1998, 1997, and 1996 were $10.4 million, $10.0
million, and $47.0 million, respectively.
Writedowns for impairments of fixed maturities which were deemed to be other
than temporary were $.6 million for 1998. There were no impairments of fixed
maturities for the years 1997 and 1996.
The following table describes the credit quality of the fixed maturity
portfolio, based on ratings assigned by the National Association of Insurance
Commissioners ("NAIC") or Standard & Poor's Corporation, an independent rating
agency as of December 31, 1998:
Available for Sale
-------------------------------
Amortized Estimated
Cost Fair Value
--------- ----------
NAIC Standard & Poor's (In Thousands)
1 AAA to AA- $ 303,209 $ 306,693
2 BBB+ to BBB- 286,640 287,888
3 BB+ to BB- 27,134 27,692
4 B+ to B- 704 638
5 CCC or lower 71 79
6 In or near default -- --
--------- ---------
Total $ 617,758 $ 622,990
========= =========
B-10
<PAGE>
Pruco Life Insurance Company of New Jersey
Notes to Financial Statements
- --------------------------------------------------------------------------------
3. INVESTMENTS (continued)
The fixed maturity portfolio consists largely of investment grade assets (rated
"1" or "2" by the NAIC), with such investments accounting for 95% and 96% of the
portfolio at December 31, 1998 and 1997, respectively, based on fair value. As
of both of those dates, no fixed maturities in the portfolio were rated "6" by
the NAIC, defined as public and private placement securities which are currently
non-performing or believed subject to default in the near-term.
The Company continually reviews fixed maturities and identifies potential
problem assets which require additional monitoring. The Company defines
"problem" fixed maturities as those for which principal and/or interest payments
are in default. The Company defines "potential problem" fixed maturities as
assets which are believed to present default risk associated with future debt
service obligations and therefore require more active management. No problem or
potential problem fixed maturities were identified in 1998 or 1997.
Special Deposits
Fixed maturities of $.5 million at both December 31, 1998 and 1997,
respectively, were on deposit with governmental authorities or trustees as
required by certain insurance laws.
Investment Income and Investment Gains and Losses
Net investment income arose from the following sources for the years ended
December 31:
<TABLE>
<CAPTION>
1998 1997 1996
-------- -------- --------
(In Thousands)
<S> <C> <C> <C>
Fixed maturities - available for sale $ 39,478 $ 37,563 $ 36,193
Policy loans 7,350 6,596 5,761
Short-term investments 3,502 3,023 2,504
Other (842) 333 28
-------- -------- --------
Gross investment income 49,488 47,515 44,486
Less investment expenses (2,456) (1,191) (702)
-------- -------- --------
Net investment income $ 47,032 $ 46,324 $ 43,784
======== ======== ========
</TABLE>
Realized investment gains, net, including charges for other than temporary
reductions in value, for the years ended December 31, were as follows:
1998 1997 1996
-------- -------- --------
(In Thousands)
Realized investment gains $ 17,957 $ 2,898 $ 5,232
Realized investment losses (9,511) (1,191) (4,011)
-------- -------- --------
Realized investment gains, net $ 8,446 $ 1,707 $ 1,221
======== ======== ========
B-11
<PAGE>
Pruco Life Insurance Company of New Jersey
Notes to Financial Statements
- --------------------------------------------------------------------------------
3. INVESTMENTS (continued)
Net Unrealized Investment Gains
Net unrealized investment gains on fixed maturities available for sale are
included in the Statements of Financial Position as a component of accumulated
other comprehensive income. Changes in these amounts include adjustments to
avoid double-counting in comprehensive income, items that are included as part
of net income for a period that also have been part of other comprehensive
income in earlier periods. The amounts for the years ended December 31, net of
tax, are as follows:
<TABLE>
<CAPTION>
1998 1997 1996
------- ------- -------
(In Thousands)
<S> <C> <C> <C>
Net unrealized investment gains, beginning of year $ 2,956 $ 2,032 $ 6,588
Changes in net unrealized investment gains attributable to:
Investments:
Net unrealized investment gains on investments arising during the period 3,227 3,228 (6,403)
Reclassification adjustment for gains included in net income 4,539 1,109 860
------- ------- -------
Change in net unrealized investment gains, net of adjustments (1,312) 2,119 (7,263)
Impact of net unrealized investment gains on:
Future policy benefits 57 216 (776)
Deferred policy acquisition costs (108) (1,411) 3,483
------- ------- -------
Change in net unrealized investment gains (1,363) 924 (4,556)
------- ------- -------
Net unrealized investment gains, end of year $ 1,593 $ 2,956 $ 2,032
======= ======= =======
</TABLE>
Unrealized gains (losses) on investments arising during the periods reported in
the above table are net of income tax expense (benefit) of $1.7 million, $1.7
million and $(3.6) million for the years ended December 31, 1998, 1997, and
1996, respectively.
Reclassification adjustments reported in the above table for the years ended
December 31, 1998, 1997, and 1996 are net of income tax expense of $(2.4)
million, $(.6) million and $(.5) million, respectively.
The future policy benefits reported in the above table are net of income tax
expense (benefit) of $.03 million, $0, and $(.4) million for the years ended
December 31, 1998, 1997 and 1996, respectively.
Deferred policy acquisition costs in the above tables for the years ended
December 31, 1998, 1997 and 1996 are net of income tax expense (benefit) of
$(.06) million, $(.8) million and $2.0 million, respectively.
4. POLICYHOLDERS' LIABILITIES
Future policy benefits and other policyholder liabilities at December 31 are as
follows:
1998 1997
------- -------
(In Thousands)
Life insurance $85,523 $80,464
Annuities 5,007 4,756
------- -------
$90,530 $85,220
======= =======
Life insurance liabilities include reserves for death and endowment policy
benefits. Annuity liabilities include reserves for immediate annuities.
B-12
<PAGE>
Pruco Life Insurance Company of New Jersey
Notes to Financial Statements
- --------------------------------------------------------------------------------
4. POLICYHOLDERS' LIABILITIES (continued)
The following table highlights the key assumptions generally utilized in
calculating these reserves:
<TABLE>
<CAPTION>
Product Mortality Interest Rate Estimation Method
- ---------------------- ----------------------- ---------------------- ---------------------------
<S> <C> <C> <C>
Life insurance Generally rates 2.5% to 7.5% Net level premium based
guaranteed in on non-forfeiture
calculating interest rate
cash surrender values
Individual immediate 1983 Individual Annuity 6.25% to 8.75% Present value of
annuities Mortality Table with expected future payment
certain modifications based on historical experience
</TABLE>
Policyholders' account balances at December 31, are as follows:
1998 1997
-------- --------
(In Thousands)
Individual annuities $148,327 $145,120
Interest-sensitive life contracts 265,521 257,481
-------- --------
$413,848 $402,601
======== ========
Policyholders' account balances for interest-sensitive life, individual
annuities, and guaranteed investment contracts are equal to policy account
values plus unearned premiums. The policy account values represent an
accumulation of gross premium payments plus credited interest less withdrawals,
expenses, mortality charges.
Certain contract provisions that determine the policyholder account balances are
as follows:
<TABLE>
<CAPTION>
Product Interest Rate Withdrawal / Surrender Charges
------- ------------- ------------------------------
<S> <C> <C>
Interest sensitive life contracts 4.0% to 5.4% Various up to 10 years
Individual annuities 3.0% to 5.6% 0% to 8% for up to 8 years
</TABLE>
B-13
<PAGE>
Pruco Life Insurance Company of New Jersey
Notes to Financial Statements
- --------------------------------------------------------------------------------
5. REINSURANCE
The Company participates in reinsurance, with Prudential and other companies, in
order to provide greater diversification of business, provide additional
capacity for future growth and limit the maximum net loss potential arising from
large risks. Reinsurance ceded arrangements do not discharge the Company or the
insurance subsidiaries as the primary insurer, except for cases involving a
novation. Ceded balances would represent a liability to the Company in the event
the reinsurers were unable to meet their obligations to the Company under the
terms of the reinsurance agreements. The likelihood of a material reinsurance
liability reassumed by the Company is considered to be remote.
Reinsurance amounts included in the Statement of Operations for the year ended
December 31 are below.
1998 1997 1996
------- ------- -------
(In Thousands)
Direct Premiums $ 1,373 $ 1,117 $ 1,345
Reinsurance ceded-affiliated (28) (12) --
------- ------- -------
Premiums $ 1,345 $ 1,105 $ 1,345
======= ======= =======
Policyholders' benefits ceded $ 15 $ 14 $ 13
======= ======= =======
Reinsurance recoverables, included in "Other assets" in the Company's Statements
of Financial Position, at December 31 include amounts recoverable on unpaid and
paid losses and were as follows:
1998 1997
---- ----
(In Thousands)
Life insurance - affiliated $31 $30
--- ---
$31 $30
=== ===
B-14
<PAGE>
Pruco Life Insurance Company of New Jersey
Notes to Financial Statements
- --------------------------------------------------------------------------------
6. INCOME TAXES
The components of income taxes for the years ended December 31, are as follows:
1998 1997 1996
-------- -------- --------
(In Thousands)
Current tax expense (benefit):
U.S. $ 14,786 $ 12,880 $ 13,589
State and local 523 399 (907)
-------- -------- --------
Total 15,309 13,279 12,682
-------- -------- --------
Deferred tax expense (benefit):
U.S. 2,198 (2,305) 2,848
State and local 63 -- 81
-------- -------- --------
Total 2,261 (2,305) 2,929
-------- -------- --------
Total income tax expense $ 17,570 $ 10,974 $ 15,611
======== ======== ========
The Company's income tax expense for the years ended December 31, differs from
the amount computed by applying the expected federal income tax rate of 35% to
income from operations before income taxes for the following reasons:
1998 1997 1996
-------- -------- --------
(In Thousands)
Expected federal income tax expense $ 17,288 $ 10,569 $ 16,589
State and local income taxes 381 259 (537)
Other (99) 146 (441)
-------- -------- --------
Total income tax expense $ 17,570 $ 10,974 $ 15,611
======== ======== ========
Deferred tax assets and liabilities at December 31, resulted from the items
listed in the following table:
1998 1997
------- -------
(In Thousands)
Deferred income tax assets:
Insurance reserves $10,016 $ 6,907
Other -- --
------- -------
Deferred tax assets $10,016 $ 6,907
------- -------
Deferred income tax liabilities:
Deferred acquisition costs 28,509 24,725
Net investment gains 2,847 4,284
Other 2,375 86
------- -------
Deferred tax liabilities 33,731 29,095
------- -------
Net deferred federal tax liability $23,715 $22,188
======= =======
B-15
<PAGE>
Pruco Life Insurance Company of New Jersey
Notes to Financial Statements
- --------------------------------------------------------------------------------
6. INCOME TAXES (continued)
Management believes that based on its historical pattern of taxable income, the
Company will produce sufficient income in the future to realize its deferred tax
assets after valuation allowance. Adjustments to the valuation allowance will be
made if there is a change in management's assessment of the amount of the
deferred tax asset that is realizable. At December 31, 1998 and 1997,
respectively, the Company had no federal or state operating loss carryforwards
for tax purposes.
The Internal Revenue Service (the "Service") has completed examinations of the
consolidated federal income tax returns through 1989. The Service has examined
the years 1990 through 1992. Discussions are being held with the Service with
respect to proposed adjustments. Management, however, believes there are
adequate defenses against, or sufficient reserves to provide for, such
adjustments. The Service has begun their examination of the years 1993 through
1995.
B-16
<PAGE>
Pruco Life Insurance Company of New Jersey
Notes to Financial Statements
- --------------------------------------------------------------------------------
7. EQUITY
Reconciliation of Statutory Surplus and Net Income
Accounting practices used to prepare statutory financial statements for
regulatory purposes differ in certain instances from GAAP. The following table
reconciles the Company's statutory net income and surplus as of and for the
years ended December 31, determined in accordance with accounting practices
prescribed or permitted by the New Jersey Department of Banking and Insurance
with net income and equity determined using GAAP.
<TABLE>
<CAPTION>
1998 1997 1996
-------- -------- --------
(In Thousands)
<S> <C> <C> <C>
Statutory net income $ 18,704 $ 18,306 $ 24,774
Adjustments to reconcile to net income on a GAAP basis:
Deferred acquisition costs 12,464 (3,170) 5,656
Deferred premium 534 198 221
Insurance liabilities (808) 2,324 4,784
Deferred taxes (2,261) 2,305 (2,929)
Valuation of investments 3,794 (143) (765)
Other, net (604) (597) 46
-------- -------- --------
GAAP net income $ 31,823 $ 19,223 $ 31,787
======== ======== ========
</TABLE>
<TABLE>
<CAPTION>
1998 1997
--------- ---------
(In Thousands)
<S> <C> <C>
Statutory surplus $ 252,530 $ 235,958
Adjustments to reconcile to equity on a GAAP basis:
Valuation of investments 20,799 18,540
Deferred acquisition costs 113,923 101,625
Deferred premium (1,473) (2,007)
Insurance liabilities (18,141) (19,120)
Deferred taxes (23,715) (22,188)
Other, net 1,930 2,585
--------- ---------
GAAP stockholder's equity $ 345,853 $ 315,393
========= =========
</TABLE>
8. FAIR VALUE OF FINANCIAL INSTRUMENTS
The estimated fair values presented below have been determined using available
information and valuation methodologies. Considerable judgment is applied in
interpreting data to develop the estimates of fair value. Accordingly, such
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 approximates estimated
fair value).
Fixed maturities
Estimated fair values for fixed maturities are based on quoted market prices or
estimates from independent pricing services.
Policy loans
Estimated fair value of policy loans is calculated using a discounted cash flow
model based upon current U.S. Treasury rates and historical loan repayments.
B-17
<PAGE>
Pruco Life Insurance Company of New Jersey
Notes to Financial Statements
- --------------------------------------------------------------------------------
8. FAIR VALUE OF FINANCIAL INSTRUMENTS (continued)
Policyholders' account balances
Estimated fair values of policyholders' account balances are derived by using
discounted projected cash flows, based on interest rates being offered for
similar contracts, with maturities consistent with those remaining for the
contracts being valued.
Derivative financial instruments
The fair value of futures is estimated based on market quotes for transactions
with similar terms. The following table discloses the carrying amounts and
estimated fair values of the Company's financial instruments at December 31,:
<TABLE>
<CAPTION>
1998 1997
--------------------------- ---------------------------
Carrying Estimated Carrying Estimated
Value Fair Value Value Fair Value
---------- ---------- ---------- ----------
(In Thousands)
<S> <C> <C> <C> <C>
Financial Assets:
Fixed maturities available for sale $ 622,990 $ 622,990 $ 592,361 $ 592,361
Policy loans 139,443 146,504 127,306 126,262
Short-term investments 53,761 53,761 52,464 52,464
Cash 45 45 3 3
Separate Accounts assets 1,453,407 1,453,407 1,110,561 1,110,561
Financial Liabilities:
Policyholders'
account balances $ 413,848 $ 414,602 $ 402,601 $ 401,267
Cash collateral for loaned
securities 61,634 61,634 33,663 33,663
Separate Accounts liabilities 1,450,986 1,450,986 1,108,994 1,108,994
Derivatives -- -- 83 83
</TABLE>
9. DERIVATIVE AND OFF-BALANCE SHEET CREDIT-RELATED INSTRUMENTS
Futures
The Company uses exchange-traded Treasury futures to reduce market risks from
changes in interest rates, to alter mismatches between the duration of assets in
a portfolio and the duration of liabilities supported by those assets, and to
hedge against changes in the value of securities it owns or anticipates
acquiring. The Company enters into exchange-traded futures with regulated
futures commissions merchants who are members of a trading exchange. The fair
value of futures is estimated based on market quotes for a transaction with
similar terms.
Under exchange-traded futures, the Company agrees to purchase a specified number
of contracts with other parties and to post variation margin on a daily basis in
an amount equal to the difference in the daily market values of those contracts.
Futures are typically used to hedge duration mismatches between assets and
liabilities by replicating Treasury performance. Treasury futures move
substantially in value as interest rates change and can be used to either
generate new or hedge existing interest rate risk. This strategy protects
against the risk that cash flow requirements may necessitate liquidation of
investments at unfavorable prices resulting from increases in interest rates.
This strategy can be a more cost effective way of temporarily reducing the
Company's exposure to a market decline than selling fixed income securities and
purchasing a similar portfolio when such a decline is believed to be over.
B-18
<PAGE>
Pruco Life Insurance Company of New Jersey
Notes to Financial Statements
- --------------------------------------------------------------------------------
9. DERIVATIVE AND OFF-BALANCE SHEET CREDIT-RELATED INSTRUMENTS (continued)
For futures that meet hedge accounting criteria, changes in their fair value are
deferred and recognized as an adjustment to the carrying value of the hedged
item. Deferred gains or losses from the hedges for interest-bearing financial
instruments are amortized as a yield adjustment over the remaining lives of the
hedged item. Futures that do not qualify as hedges are carried at fair value
with changes in value reported in current period earnings. The fair value of
futures contracts was immaterial at December 31, 1998 and 1997.
Credit Risk
The current credit exposure of the Company's derivative contracts is limited to
the fair value at the reporting date. Credit risk is managed by entering into
transactions with creditworthy counterparties and obtaining collateral where
appropriate and customary. The Company also attempts to minimize its exposure to
credit risk through the use of various credit monitoring techniques. All of the
net credit exposure for the Company from derivative contracts is with
investment-grade counterparties.
10. 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 Prudential, the Company and agents appointed by Prudential and the
Company. Prudential has agreed to indemnify the Company for any and all losses
resulting from such litigation.
In the normal course of business, the Company is subject to various claims and
assessments. Management believes the settlement of these matters would not have
a material effect on the financial position or results of operations of the
Company.
11. DIVIDENDS
The Company is subject to New Jersey law which requires any shareholder dividend
or distribution must be filed with the New Jersey Commissioner of Insurance.
Cash dividends may only be paid out of surplus derived from realized net
profits.
12. RELATED PARTY TRANSACTIONS
Service Agreements
Prudential and Pruco Life of New Jersey operate under service and lease
agreements whereby services of officers and employees, supplies, use of
equipment and office space are provided by Prudential. The net cost of these
services allocated to the Company were $23.5 million, $16.2 million, and $12.2
million for the years ended December 31, 1998, 1997, and 1996, respectively.
These costs are treated in a manner consistent with the Company's policy on
deferred acquisition costs.
Prudential and Pruco Life of New Jersey have an agreement with respect to
administrative services for the Prudential Series Fund. The Company invests in
the various portfolios of the Series Fund through the Separate Accounts. Under
this agreement, Prudential pays compensation to Pruco Life of New Jersey in the
amount equal to a portion of the gross investment advisory fees paid by the
Prudential Series Fund. The Company received from Prudential its allocable
shares of such compensation in the amount of $5.6 million, $5.0 million, and
$3.5 million during 1998, 1997, and 1996 respectively, recorded in "Other
income."
B-19
<PAGE>
Pruco Life Insurance Company of New Jersey
Notes to Financial Statements
- --------------------------------------------------------------------------------
12. RELATED PARTY TRANSACTIONS (continued)
Reinsurance
The Company currently has a reinsurance agreement in place with Prudential (the
reinsurer). The reinsurance agreement is a 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. The Company is not
relieved of its primary obligation to the policyholder as a result of these
reinsurance transactions. These agreements had no material effect on net income
for the years ended December 31, 1998, 1997, and 1996.
Debt Agreements
In July 1998, the Company established a revolving line of credit facility with
Prudential Funding Corporation, a wholly-owned subsidiary of Prudential. There
is no outstanding debt relating to this credit facility as of December 31, 1998.
B-20
<PAGE>
Report of Independent Accountants
---------------------------------
To the Board of Directors of
Pruco Life Insurance Company of New Jersey
In our opinion, the accompanying statements of financial position and the
related statements of operations, of changes in stockholder's equity and of cash
flows present fairly, in all material respects, the financial position of Pruco
Life Insurance Company of New Jersey at December 31, 1998 and 1997, and the
results of its operations and its cash flows for each of the three years in the
period ended December 31, 1998, in conformity with generally accepted accounting
principles. 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 of these statements in
accordance with generally accepted auditing standards which 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, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for the opinion expressed
above.
PricewaterhouseCoopers LLP
New York, New York
February 26, 1999
B-21
<PAGE>
VARIABLE LIFE
INSURANCE
Variable Life Insurance was issued by Pruco Life Insurance Company of New
Jersey, 213 Washington Street, Newark, NJ 07102-2992 and offered through Pruco
Securities Corporation, 751 Broad Street, Newark, NJ 07102-3777, both
subsidiaries of The Prudential Insurance Company of America, 751 Broad Street,
Newark, NJ 07102-3777.
[Prudential Logo]
Pruco Life Insurance Company of New Jersey
213 Washington Street, Newark, NJ 07102-2992
Telephone: 800 778-2255
VLI-2 Ed. 5/99 CAT# 646965I
<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.
REPRESENTATION WITH RESPECT TO CHARGES
Pruco Life Insurance Company of New Jersey represents that the fees and charges
deducted under the variable life insurance contracts registered by this
registration statement, in the aggregate, are reasonable in relation to the
services rendered, the expenses expected to be incurred, and the risks assumed
by Pruco Life Insurance Company of New Jersey.
UNDERTAKING WITH RESPECT TO INDEMNIFICATION
The Registrant, in conjunction with certain affiliates, maintains insurance on
behalf of any person who is or was a trustee, director, officer, employee, or
agent of the Registrant, or who is or was serving at the request of the
Registrant as a trustee, director, officer, employee or agent of such other
affiliated trust or corporation, against any liability asserted against and
incurred by him or her arising out of his or her position with such trust or
corporation.
New Jersey, being the state or organization of Pruco Life Insurance Company of
New Jersey ("PLNJ"), permits entities organized under its jurisdiction to
indemnify directors and officers with certain limitations. The relevant
provisions of New Jersey law permitting indemnification can be found in Section
14A:3-5 of the New Jersey Statutes Annotated. The text of PLNJ's By-law, Article
V, which relates to indemnification of officers and directors, is incorporated
by reference to Exhibit 3(ii) to its Form 10-Q, SEC File No. 333-18053, filed
August 15, 1997.
Insofar as indemnification for liabilities arising under the Securities Act of
1933 (the "Act") 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.
The Cross-reference to items required by Form N-8B-2.
The prospectus consisting of 79 pages.
The undertaking to file reports.
The representation with respect to charges.
The undertaking with respect to indemnification.
The signatures.
Written consents of the following persons:
1. PricewaterhouseCoopers LLP, independent accountants.
2. Clifford E. Kirsch, Esq.
3. Nancy D. Davis, FSA, MAAA
The following exhibits:
<TABLE>
<S> <C>
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 of New Jersey establishing the
Pruco Life of New Jersey Variable Insurance Account. (Note 5)
(2) Not Applicable.
(3) Distributing Contracts:
(a) Distribution Agreement between Pruco Securities
Corporation and Pruco Life Insurance Company of New
Jersey. (Note 5)
(b) Proposed form of Agreement between Pruco Securities
Corporation and independent brokers with respect to the
Sale of the Contracts. (Note 5)
(c) Schedules of Sales Commissions. (Note 5)
(4) Not Applicable.
(5) (a) Variable Life Insurance Contract. (Note 5)
(b) Illustrative Tabular Cash Values. (Note 5)
(c) Copy of New York PLY-5 Endorsement to the Variable Life
Contract. (Note 5) (d) Copy of New York and New Jersey PLY-6
Endorsement to the Variable Life Contract.
(Note 5)
(e) Copy of New York PLY 39 Endorsement to the Variable Life Contract. (Note 5)
(f) Copy of New Jersey PLIY 39 Endorsement to the Variable Life Contract. (Note 5)
(g) Copy of New York jacket to the Variable Life Insurance Contract. (Note 5)
(h) Copy of page 5 to the Variable Life Insurance Contract--New York issues. (Note 5)
(i) Copy of page 7 to the Variable Life Insurance Contract--New York issues. (Note 5)
(j) Copy of New York and New Jersey PLY 50 Endorsement to the Variable Life Insurance
Contract. (Note 5)
(k) Copy of New York PLY 36 Endorsement to the Variable Life Insurance Contract. (Note 5)
(l) Copy of New Jersey PLIY 38 Endorsement to the Variable Life Insurance Contract. (Note
5)
(m) Copy of New Jersey PLIY 62-85 Endorsement to the Variable
Life Insurance Contract. (Note 5)
(n) Copy of New York PLY 61-85 Endorsement to the Variable
Life Insurance Contract. (Note 5)
</TABLE>
II-2
<PAGE>
<TABLE>
<S> <C>
(6) (a) Articles of Incorporation of Pruco Life Insurance Company
of New Jersey, as amended March 11, 1983. (Note 2)
(b) Certificate of Amendment of the Articles of Incorporation
of Pruco Life Insurance Company of New Jersey, February
12, 1998. (Note 7)
(c) By-laws of Pruco Life Insurance Company of New Jersey, as
amended May 5, 1997. (Note 6)
(7) Not Applicable.
(8) Not Applicable.
(9) Not Applicable.
(10) (a) Application Form for Variable Life Insurance Contract. (Note 5)
(b) Supplement to the Application for Variable Life Insurance Contract. (Note 5)
(c) Application Form for Variable Life Insurance Contract--New York issues. (Note 5)
(d) Application Form for Variable Life Insurance Contract--New Jersey issues. (Note 5)
(11) Form of Notice of Withdrawal Right. (Note 5)
(12) Memorandum describing Pruco Life of New Jersey'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 5)
(13) Available Contract Riders.
(a) Rider for Insured's Waiver of Premium Benefit. (Note 5)
(b) Rider for Insured's Accidental Death Benefit. (Note 5)
(c) Rider for Term Insurance Benefit on Life of Insured-Decreasing Amount. (Note 5)
(d) Rider for Option to Purchase Additional Insurance on Life of Insured. (Note 5)
(e) Rider for Interim Term Insurance Benefit. (Note 5)
(f) Rider for Term Insurance Benefit on Life of Insured Spouse-Decreasing Amount. (Note 5)
(g) Rider for Level Term Insurance Benefit on Dependent Children. (Note 5)
(h) Rider Exempting Child from Reinstatement--New York Issues. (Note 5)
(i) Rider Exempting Child from Reinstatement--New Jersey Issues. (Note 5)
(j) Rider for Level Term Insurance Benefit on Dependent Children--New York Issues. (Note
5)
(k) Rider for Level Term Insurance Benefit on Dependent Children--New Jersey Issues. (Note
5)
(l) Rider for Reduced Paid-Up Insurance--New York Issues. (Note 5)
(m) Rider for Reduced Paid-Up Insurance--New Jersey Issues. (Note 5)
(n) Rider for Insured's Waiver of Premium Benefit--New York Issues. (Note 5)
(o) Rider for Insured's Waiver of Premium Benefit--New Jersey Issues. (Note 5)
(p) Rider for Insured's Accidental Death Benefit--New York Issues. (Note 5)
(q) Rider for Insured's Accidental Death Benefit--New Jersey Issues. (Note 5)
(r) Rider Defining Incontestability Period--New York Issues. (Note 5)
(s) Rider Defining Incontestability Period--New Jersey Issues. (Note 5)
(t) Rider Defining Incontestability Period--New York Issues. (Note 5)
(u) Rider Defining Incontestability Period--New Jersey Issues. (Note 5)
(v) Rider for Modification of Insured's Waiver of Premium Benefit Provision--New York Issues.
(Note 5)
(w) Rider for Modification of Insured's Waiver of Premium Benefit Provision--New Jersey
Issues. (Note 5)
(x) Rider for Termination of Benefit--New York Issues. (Note 5)
(y) Rider for Termination of Benefit--New Jersey Issues. (Note 5)
(z) Rider for Automatic Premium Loan--New York Issues. (Note 5)
(aa) Rider for Automatic Premium Loan--New Jersey Issues. (Note 5)
(bb) Rider for Aviation Risk Exclusion--New York Issues. (Note 5)
(cc) Rider for Aviation Risk Exclusion--New Jersey Issues. (Note 5)
(dd) Rider for Military Aviation Risk Exclusion--New York Issues. (Note 5)
(ee) Rider for Military Aviation Risk Exclusion--New Jersey Issues. (Note 5)
(ff) Rider for War Risk Exclusion--New York Issues. (Note 5)
(gg) Rider for War Risk Exclusion--New Jersey Issues. (Note 5)
(hh) Rider for Defining Incontestability Period--New York Issues. (Note 5)
(ii) Rider for Defining Incontestability Period--New Jersey Issues. (Note 5)
(jj) Rider for Suicide Provision--New York Issues. (Note 5)
(kk) Rider for Ownership and Control--New York Issues. (Note 5)
(ll) Rider for Ownership and Control--New Jersey Issues. (Note 5)
</TABLE>
II-3
<PAGE>
<TABLE>
<S> <C>
(mm) Rider for Applicant's Waiver of Premium Benefit--New York Issues. (Note 5)
(nn) Rider for Applicant's Waiver of Premium Benefit--New Jersey Issues. (Note 5)
(oo) Rider for Level Term Insurance Benefit on Life of Insured--New York and New Jersey
Issues. (Note 5)
(pp) Rider for Special Premium Remittance Plan--New York Issues. (Note 5)
(qq) Rider for Variable Loan Interest Rate--New York Issues. (Note 5)
(rr) Rider for Special Premium Remittance Plan--New Jersey Issues. (Note 5)
(ss) Rider for Variable Loan Interest Rate--New Jersey Issues. (Note 5)
(tt) Rider for Decreasing Term Insurance Benefit--New York and New Jersey Issues. (Note 5)
(uu) Rider for Variable Reduced Paid-Up Insurance--New York Issues. (Note 5)
(vv) Rider for Variable Reduced Paid-Up Insurance--New Jersey Issues. (Note 5)
(ww) Rider for Decreasing Term Insurance on Life of Insured Spouse--New York Issues. (Note
5)
(xx) Rider for Decreasing Term Insurance Benefit on life of
Insured Spouse--New Jersey Issues. (Note 5)
(yy) Rider for Variable Loan Interest Rate--New Jersey Issues. (Note 5)
(zz) Rider for Variable Loan Interest Rate--New York Issues. (Note 5)
(aaa) Rider providing Options on Lapse--New Jersey Issues. (Note 5)
(bbb) Rider providing Options on Lapse--New York Issues. (Note 5)
(ccc) Living Needs Benefit Rider for use in New Jersey. (Note 5)
(ddd) Living Needs Benefit Rider for use in New York. (Note 5)
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) William M. Bethke, Ira J. Kleinman,
Esther H. Milnes, I. Edward Price (Note 3)
(b) James J. Avery, Jr. (Note 4)
(c) Dennis G. Sullivan (Note 7)
(Note 1) Filed herewith.
(Note 2) Incorporated by reference to Post-Effective Amendment No. 26 to Form S-6, Registration No. 2-89780,
filed April 28, 1997 on behalf of the Pruco Life of New Jersey Variable Appreciable Account.
(Note 3) Incorporated by reference to Form N-4, Registration No. 333-18117, filed December 18, 1996 on behalf
of the Pruco Life of New Jersey Flexible Premium Variable Annuity Account.
(Note 4) Incorporated by reference to Post-Effective Amendment No. 10 to Form S-1, Registration No. 33-20018,
filed April 9, 1998 on behalf of the Pruco Life of New Jersey Variable Contract Real Property Account.
(Note 5) Incorporated by reference to Post-Effective Amendment No. 24 to this Registration Statement, filed April
29, 1997.
(Note 6) Incorporated by reference to Form 10-Q, Registration No. 333-18053, filed August 15, 1997 on behalf
of the Pruco Life Insurance Company of New Jersey.
(Note 7) Incorporated by reference to Post-Effective Amendment No. 12 to Form S-1, Registration No. 33-20018,
filed April 19, 1999 on behalf of the Pruco Life of New Jersey Variable Contract Real Property Account.
</TABLE>
II-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant, the
Pruco Life of New Jersey 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 23rd day of April, 1999.
(Seal) PRUCO LIFE OF NEW JERSEY VARIABLE INSURANCE ACCOUNT
(Registrant)
By: PRUCO LIFE INSURANCE COMPANY OF NEW JERSEY
(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. 26 to the Registration Statement has been signed below by the
following persons in the capacities indicated on this 23rd day of April, 1999.
SIGNATURE AND TITLE
-------------------
/s/ *
- -----------------------
Esther H. Milnes
President and Director
/s/ *
- -----------------------
Dennis G. Sullivan
Vice President and Chief Accounting Officer
/s/ * *By: /s/ Thomas C. Castano
- ----------------------- -------------------------
James J. Avery, Jr. Thomas C. Castano
Director (Attorney-in-Fact)
/s/ *
- -----------------------
William M. Bethke
Director
/s/ *
- -----------------------
Ira J. Kleinman
Director
/s/ *
- -----------------------
I. Edward Price
Director
II-5
<PAGE>
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in the Prospectus constituting part of this
Post-Effective Amendment No. 26 to the registration statement on Form S-6 (the
"Registration Statement") of our report dated March 19, 1999, relating to the
financial statements of the Pruco Life of New Jersey Variable Insurance Account,
which appears in such Prospectus.
We also consent to the use in the Prospectus constituting part of this
Registration Statement of our report dated February 26, 1999, relating to the
financial statements of Pruco Life Insurance Company of New Jersey, which
appears in such Prospectus.
We also consent to the reference to us under the heading "Experts" in the
Prospectus.
PricewaterhouseCoopers LLP
New York, New York
April 23, 1999
II-6
<PAGE>
EXHIBIT INDEX
Consent of PricewaterhouseCoopers LLP, independent Page II-6
accountants.
3. Opinion and Consent of Clifford E. Kirsch, Esq., as to Page II-8
the legality of the securities being registered.
6. Opinion and Consent of Nancy D. Davis, FSA, MAAA, as to Page II-9
actuarial matters pertaining to the securities being
registered.
II-7
Exhibit 3
April 23, 1999
Pruco Life Insurance Company
of New Jersey
213 Washington Street
Newark, New Jersey 07102-2992
Gentlemen:
In my capacity as Chief Legal Officer and Assistant Secretary of Pruco Life
Insurance Company of New Jersey ("Pruco Life of New Jersey"), I have reviewed
the establishment of Pruco Life of New Jersey Variable Insurance Account (the
"Account") on December 29, 1982 by the Executive Committee of the Board of
Directors of Pruco Life of New Jersey as a separate account for assets
applicable to certain variable life insurance contracts, pursuant to the
provisions of Section 17B:28-7 of the Revised Statutes of New Jersey. I was
responsible for oversight of the preparation and review of the Registration
Statement on Form S-6, as amended, filed by Pruco Life of New Jersey with the
Securities and Exchange Commission (Registration No. 2-81243) 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 of New Jersey was duly organized under the laws of New
Jersey 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 New Jersey
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 of New Jersey may conduct.
(4) The variable life insurance contracts are legal and binding
obligations of Pruco Life of New Jersey 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,
/s/
- -----------------------
Clifford E. Kirsch
II-8
Exhibit 6
April 23, 1999
Pruco Life Insurance Company of New Jersey
213 Washington Street
Newark, New Jersey 07102-2992
To Pruco Life Insurance Company of New Jersey:
This opinion is furnished in connection with the registration by Pruco Life
Insurance Company of New Jersey of variable life insurance contracts
("Contracts") under the Securities Act of 1933. The prospectus included in
Post-Effective Amendment No. 26 to Registration Statement No. 2-81243 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 illustration 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,
/s/
- -----------------------
Nancy D. Davis, FSA, MAAA
Vice President and Actuary
The Prudential Insurance Company of America
II-9
