<PAGE>
AS FILED WITH THE SEC ON . REGISTRATION NO. 2-81243
--------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM S-6
POST-EFFECTIVE AMENDMENT NO. 27
FOR REGISTRATION UNDER THE SECURITIES ACT OF 1933
OF SECURITIES OF UNIT INVESTMENT TRUSTS REGISTERED
ON FORM N-8B-2
------------------
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
(Address and telephone number of principal executive offices)
------------------
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
--------------------
It is proposed that this filing will become effective (check appropriate space):
[] immediately upon filing pursuant to paragraph (b) of Rule 485
[] on May 1, 2000 pursuant to paragraph (b) of Rule 485
-----------
(date)
[] 60 days after filing pursuant to paragraph (a) of Rule 485
[] on ____________________ pursuant to paragraph (a) of Rule 485
<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
46. Brief Description of the
Contract; Pruco Life of New
Jersey Variable Insurance
Account; The Prudential
<PAGE>
N-8B-2 ITEM NUMBER LOCATION
------------------ --------
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, 2000
PRUCO LIFE INSURANCE COMPANY OF NEW JERSEY
<PAGE>
PROSPECTUS
MAY 1, 2000
PRUCO LIFE INSURANCE COMPANY
OF NEW JERSEY
VARIABLE INSURANCE ACCOUNT
VARIABLE
LIFE INSURANCE
CONTRACTS
This prospectus describes an individual variable life insurance contract (the
"Contract") offered by Pruco Life Insurance Company of New Jersey ("Pruco Life
of New Jersey", "us", "we", or "our") 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").
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 (the "Account"), each of which invests in
a corresponding portfolio of The Prudential Series Fund, Inc. (the "Series
Fund"):
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 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
Series Fund portfolios. Pruco Life of New Jersey may add additional investment
options in the future. Please read this prospectus and keep it 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>
<CAPTION>
PAGE
<S> <C>
INTRODUCTION AND SUMMARY.......................................................................................................1
BRIEF DESCRIPTION OF THE CONTRACT...........................................................................................1
CHARGES.....................................................................................................................1
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
VOTING RIGHTS...............................................................................................................6
THE PRUCO LIFE OF NEW JERSEY VARIABLE CONTRACT REAL PROPERTY ACCOUNT........................................................6
WHICH INVESTMENT OPTION SHOULD BE SELECTED?.................................................................................7
DETAILED INFORMATION FOR CONTRACT OWNERS.......................................................................................7
CHARGES AND EXPENSES........................................................................................................7
REQUIREMENTS FOR ISSUANCE OF A CONTRACT.....................................................................................9
SHORT-TERM CANCELLATION RIGHT OR "FREE-LOOK"................................................................................9
PREMIUMS....................................................................................................................9
PREMIUM ADJUSTMENT.........................................................................................................10
ALLOCATION OF PREMIUMS.....................................................................................................10
TRANSFERS..................................................................................................................11
HOW A CONTRACT'S DEATH BENEFIT WILL VARY...................................................................................11
HOW A CONTRACT'S CASH VALUE WILL VARY......................................................................................12
SURRENDER OF A CONTRACT....................................................................................................13
WITHDRAWAL OF A PORTION OF A CONTRACT'S NET CASH VALUE.....................................................................13
WHEN PROCEEDS ARE PAID.....................................................................................................13
LIVING NEEDS BENEFIT.......................................................................................................13
ILLUSTRATIONS OF CASH VALUES, DEATH BENEFITS, AND ACCUMULATED PREMIUMS.....................................................14
CONTRACT LOANS.............................................................................................................16
RIGHT TO EXCHANGE A CONTRACT FOR A FIXED-BENEFIT WHOLE-LIFE POLICY.........................................................16
TAX TREATMENT OF CONTRACT BENEFITS.........................................................................................17
LAPSE AND REINSTATEMENT....................................................................................................19
OPTIONS ON LAPSE...........................................................................................................19
LEGAL CONSIDERATIONS RELATING TO SEX-DISTINCT PREMIUMS AND BENEFITS........................................................20
OTHER GENERAL CONTRACT PROVISIONS..........................................................................................20
RIDERS.....................................................................................................................20
SUBSTITUTION OF SERIES FUND SHARES.........................................................................................21
REPORTS TO CONTRACT OWNERS.................................................................................................21
SALE OF THE CONTRACT AND SALES COMMISSIONS.................................................................................21
STATE REGULATION...........................................................................................................21
EXPERTS....................................................................................................................22
LITIGATION AND REGULATORY PROCEEDINGS......................................................................................22
ADDITIONAL INFORMATION.....................................................................................................22
FINANCIAL STATEMENTS.......................................................................................................23
DIRECTORS AND OFFICERS........................................................................................................24
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.
BRIEF DESCRIPTION OF THE CONTRACT
AS OF JANUARY 1, 1992, PRUCO LIFE OF NEW JERSEY NO LONGER OFFERS THESE CONTRACTS
FOR SALE.
The Variable Life Insurance Contract (the "Contract") is issued by Pruco Life
Insurance Company of New Jersey ("Pruco Life of New Jersey", "we", "us", or
"our"). The Contract is a form of variable life insurance. The value of your
Contract changes every day. The value is the total amount credited to a specific
Contract. On any date it is equal to the sum of the amounts invested in the
subaccounts and the principal amount of any Contract debt plus any interest
earned thereon. Contract debt is the principal amount of all outstanding loans
plus any interest accrued.
A broad objective of the Contract is to provide benefits that will increase in
value if favorable investment results are achieved. You may invest premiums in
one or more of the 13 available subaccounts or the 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.
Although the value of your Contract will increase if there is favorable
investment performance in the investment options you select, investment returns
in the subaccounts are NOT guaranteed. There is a risk that investment
performance will be unfavorable and that the value of your Contract Fund will
decrease. The risk will be different, depending upon which investment options
you choose. See WHICH INVESTMENT OPTION SHOULD BE SELECTED?, page 7.
Variable life insurance contracts are unsuitable as short-term savings vehicles.
Loans may negate any guarantees against lapse (see LAPSE AND REINSTATEMENT, page
19) and possibly may result in adverse tax consequences. See TAX TREATMENT OF
CONTRACT BENEFITS, page 17.
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 7. In brief, and subject
to that fuller description, the following diagram outlines the maximum charges
which Pruco Life of New Jersey may make:
---------------
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.
- --------------------------------------------------------------------------------
1
<PAGE>
- --------------------------------------------------------------------------------
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
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
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 UNDERLYING
PORTFOLIO EXPENSES, chart, below, and PRUCO LIFE OF NEW JERSEY VARIABLE
CONTRACT REAL PROPERTY ACCOUNT, page 6.
o We charge a mortality and expense risk charge, equivalent to an annual rate
of 0.35%, from the assets in the variable investment options.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
MONTHLY CHARGES
o We charge a charge for anticipated mortality, with the maximum charge
based on the 1980 CSO Tables.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
UNDERLYING PORTFOLIO EXPENSES
----------------------------------------------------------------------------------------------------------------
TOTAL
PORTFOLIO INVESTMENT OTHER EXPENSES CONTRACTUAL TOTAL ACTUAL
ADVISORY FEE EXPENSES EXPENSES*
----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Money Market 0.40% 0.02% 0.42% 0.40%
Diversified Bond 0.40% 0.03% 0.43% 0.40%
Government Income 0.40% 0.04% 0.44% 0.44%
Conservative Balanced 0.55% 0.02% 0.57% 0.40%
Flexible Managed 0.60% 0.02% 0.62% 0.40%
High Yield Bond 0.55% 0.05% 0.60% 0.60%
Stock Index 0.35% 0.04% 0.39% 0.39%
Equity Income 0.40% 0.02% 0.42% 0.42%
Equity 0.45% 0.02% 0.47% 0.40%
Prudential Jennison 0.60% 0.03% 0.63% 0.63%
Small Capitalization Stock 0.40% 0.05% 0.45% 0.45%
Global 0.75% 0.09% 0.84% 0.84%
Natural Resources 0.45% 0.12% 0.57% 0.57%
----------------------------------------------------------------------------------------------------------------
</TABLE>
* 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 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.
The death benefit increases or decreases monthly (but not below the guaranteed
minimum amount) depending on the investment results of the subaccount[s] and/or
the Real Property Account in which the Contract participates. It does not change
simply because a premium is paid. The cash value also changes at a rate that
depends upon the investment results, but these changes take place daily rather
than monthly. Each premium payment has the effect of adding to the cash value.
For more detailed information about how the death benefit and cash value change,
see HOW A CONTRACT'S DEATH BENEFIT WILL VARY, page 11 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
2
<PAGE>
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",
"we", or "our") 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 an indirect, 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. Prudential is
currently considering reorganizing itself into a publicly traded stock company
through a process known as "demutualization". On February 10, 1998, Prudential's
Board of Directors authorized management to take preliminary steps necessary to
allow Prudential 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 Prudential's Board of Directors, a
public hearing, voting by qualified policyholders, and regulatory approval.
Prudential is working toward completing this process in 2001 and currently
expects adoption by the Board of Directors to take place in the latter part of
2000. However, there is no certainty that the demutualization will be completed
in this timeframe or that the necessary approvals will be obtained. Also it is
possible that after careful review, Prudential could decide not to demutualize
or could decide to delay its plans.
The plan of reorganization, which has not been fully 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 types, amounts, and
issue years of the policies. As a general rule, owners of Prudential-issued
insurance policies and annuity contracts would be eligible, provided that their
policies were in force on the date Prudential's Board of Directors adopted a
plan of reorganization, while mutual fund customers and customers of
Prudential'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 contractholders of Prudential's
subsidiaries. This does not constitute a proposal, offer, solicitation or
recommendation regarding any plan of reorganization that may be proposed or a
recommendation regarding the ownership of any stock that could be issued in
connection with any such demutualization.
PRUCO LIFE OF NEW JERSEY VARIABLE INSURANCE ACCOUNT
We have established a separate account, the Pruco Life of New Jersey Variable
Insurance Account (the "Account") to hold the assets that are associated with
the Contracts. The Account was established on December 29, 1982 under New Jersey
law and is registered with the Securities and Exchange Commission ("SEC") under
the Investment Company Act of 1940 ("1940 Act") as a unit investment trust,
which is a type of investment company. 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.
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. Pruco Life of New Jersey will
consider any possible adverse impact the transfer might have on the Account
before making any such transfer.
The obligations to Contract owners and beneficiaries arising under the Contract
are general corporate obligations of Pruco Life of New Jersey.
4
<PAGE>
Currently, you may invest in one or a combination of 13 subaccounts. When you
choose a subaccount, we purchase shares of the Series Fund which are held as an
investment for that option. We hold these shares in the Account. We 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.
THE SERIES FUND HAS A SEPARATE PROSPECTUS THAT IS PROVIDED WITH THIS PROSPECTUS.
YOU SHOULD READ THE SERIES FUND PROSPECTUS BEFORE YOU DECIDE TO ALLOCATE ASSETS
TO THE SERIES FUND SUBACCOUNTS. THERE IS NO ASSURANCE THAT THE INVESTMENT
OBJECTIVES OF THE SERIES FUND WILL BE MET.
Listed below are the available portfolios of the Series Fund and their
investment objectives:
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 equity securities, debt
obligations, and money market instruments.
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 equity securities, debt obligations, and money
market instruments.
o HIGH YIELD BOND PORTFOLIO - The investment objective is a high total return.
The Portfolio invests primarily in high yield/high risk debt securities.
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 Stock Index (the "S&P 500").
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 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.
5
<PAGE>
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.
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 7.
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.
VOTING RIGHTS
We are the legal owner of the shares of the Series Fund associated with the
subaccounts. However, we vote the shares in the Series Fund according to voting
instructions we receive from Contract owners. We will mail you a proxy, which is
a form you need to complete and return to us to tell us how you wish us to vote.
When we receive those instructions, we will vote all of the shares we own on
your behalf in accordance with those instructions. We will vote the shares for
which we do not receive instructions and shares that we own, in the same
proportion as the shares for which instructions are received. We may change the
way your voting instructions are calculated if it is required by federal
regulation. Should the applicable federal securities laws or regulations, or
their current interpretation, change so as to permit Pruco Life of New Jersey to
vote shares of the Series Fund in its own right, it may elect to do so.
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
wholly-owned 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.
6
<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, Equity Prudential Jennison, Small Capitalization
Stock, Global, or Natural Resources Portfolios may be desirable options for
Contract owners who are willing to accept such volatility in their Contract
values. Each of these equity portfolios involves 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
CHARGES AND EXPENSES
This section provides a more detailed description of each charge that is
described briefly in the chart on page 1.
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 1999, 1998,
and 1997, Pruco Life of New Jersey received a total of approximately
$1,244,000, $1,329,587, and $1,413,936, 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 1999, 1998, and 1997,
Pruco Life of New Jersey received a total of approximately $507,000,
$1,265,145, and $1,319,547, 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 1999, 1998, and 1997, Pruco
Life of New Jersey received a total of approximately $101,000, $253,029,
and $264,046, respectively, in charges for payment of such taxes.
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<PAGE>
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 1999, 1998, and 1997, Pruco Life of New Jersey
received a total of approximately $61,000, $151,817, and $158,428,
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").
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 1999, 1998, and 1997, Pruco
Life of New Jersey received a total of approximately $601,000, $589,402,
and $539,708, 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 charge.
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 1999, expressed as a
percentage of the average assets during the year, are shown below:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------
TOTAL PORTFOLIO EXPENSES
- ------------------------------------------------------------------------------------------------------------------
TOTAL
PORTFOLIO INVESTMENT ADVISORY OTHER EXPENSES CONTRACTUAL TOTAL ACTUAL
FEE EXPENSES EXPENSES*
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Money Market 0.40% 0.02% 0.42% 0.40%
Diversified Bond 0.40% 0.03% 0.43% 0.40%
Government Income 0.40% 0.04% 0.44% 0.44%
Conservative Balanced 0.55% 0.02% 0.57% 0.40%
Flexible Managed 0.60% 0.02% 0.62% 0.40%
High Yield Bond 0.55% 0.05% 0.60% 0.60%
Stock Index 0.35% 0.04% 0.39% 0.39%
Equity Income 0.40% 0.02% 0.42% 0.42%
Equity 0.45% 0.02% 0.47% 0.40%
Prudential Jennison 0.60% 0.03% 0.63% 0.63%
Small Capitalization Stock 0.40% 0.05% 0.45% 0.45%
Global 0.75% 0.09% 0.84% 0.84%
Natural Resources 0.45% 0.12% 0.57% 0.57%
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
* 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 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.
The earnings of the Account are taxed as part of the operations of Pruco Life of
New Jersey. Currently, no charge is being made to the Account for Pruco Life of
New Jersey's federal income taxes. We will review the question of a
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<PAGE>
charge to the Account for Pruco Life of New Jersey's federal income taxes
periodically. Such a charge may be made in the future 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.
The investment management fee and other expenses charged against the Real
Property Account are described in the attached prospectus for that investment
option.
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.
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 EXPENSES, page 7) 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.
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<PAGE>
The following table shows representative standard and preferred annual premium
amounts for various face amounts:
<TABLE>
<CAPTION>
- --------------------- --------------------------------------- --------------------------------------
$25,000 FACE $100,000 FACE
AMOUNT AMOUNT
--------------------------------------- --------------------------------------
PREFERRED STANDARD PREFERRED STANDARD
- --------------------- ------------------- ------------------- ------------------ -------------------
<S> <C> <C> <C> <C>
Male, age 25 $270.00 $283.25 $ 990.00 $1,043.00
at issue
- --------------------- ------------------- ------------------- ------------------ -------------------
Female, age 35 at $333.75 $342.75 $1,245.00 $1,281.00
issue
- --------------------- ------------------- ------------------- ------------------ -------------------
Male, age 40 $449.00 $484.50 $1,706.00 $1,848.00
at issue
- --------------------- ------------------- ------------------- ------------------ -------------------
</TABLE>
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.
<TABLE>
<CAPTION>
- --------------------- -------------------------------------- ---------------------------------------
$25,000 FACE $100,000 FACE
AMOUNT AMOUNT
-------------------------------------- ---------------------------------------
MONTHLY ANNUAL MONTHLY ANNUAL
- --------------------- ------------------- ------------------ ------------------- -------------------
<S> <C> <C> <C> <C>
Male, age 25 $26.00 $283.25 $ 92.00 $1,043.00
at issue
- --------------------- ------------------- ------------------ ------------------- -------------------
Female, age 35 at $31.00 $342.75 $112.00 $1,281.00
issue
- --------------------- ------------------- ------------------ ------------------- -------------------
Male, age 40 $43.25 $484.50 $161.00 $1,848.00
at issue
- --------------------- ------------------- ------------------ ------------------- -------------------
</TABLE>
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 19.
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.
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 4:00 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,
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<PAGE>
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%.
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 19). 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 20, 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:
11
<PAGE>
(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.
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.
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 15. The following discussion of cash values assumes that there is no
Contract debt, that no premium is in default, and that the net premiums have all
been allocated to a single subaccount.
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.
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.
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.
12
<PAGE>
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 17.
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.
For a brief discussion of the potential tax consequences of the withdrawal of
your excess cash value, see TAX TREATMENT OF CONTRACT BENEFITS, page 17.
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" 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.
13
<PAGE>
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.
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 value has been invested in equal amounts in each of the 13
available portfolios of the Series Fund and no portion of the Contract
value 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 Contract value 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%.
14
<PAGE>
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 0.49%, and
the daily deduction from the Contract value 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 -0.84%, 3.16%, 5.16%, 7.16% and
11.16%, respectively. The actual fees and expenses of the portfolios associated
with a particular Contract may be more or less than 0.49% 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.
15
<PAGE>
<TABLE>
<CAPTION>
ILLUSTRATIONS
-------------
VARIABLE LIFE INSURANCE CONTRACT
MALE ISSUE AGE 25
$50,000 GUARANTEED DEATH BENEFIT
$536.50 ANNUAL PREMIUM FOR STANDARD UNDERWRITING RISK (1)
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 (-0.84% Net) (3.16% Net) (7.16% Net) (-0.84% Net) (3.16% Net) (7.16% Net)
---------- -------------- -------------- -------------- -------------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C> <C> <C>
1 $ 558 $50,000 $50,000 $ 50,012 $ 22 $ 25 $ 28
2 $ 1,138 $50,000 $50,000 $ 50,081 $ 376 $ 396 $ 416
3 $ 1,742 $50,000 $50,000 $ 50,208 $ 729 $ 781 $ 834
4 $ 2,369 $50,000 $50,000 $ 50,394 $1,080 $ 1,178 $ 1,282
5 $ 3,022 $50,000 $50,000 $ 50,641 $1,438 $ 1,598 $ 1,772
6 $ 3,701 $50,000 $50,000 $ 50,948 $1,791 $ 2,029 $ 2,295
7 $ 4,407 $50,000 $50,000 $ 51,316 $2,141 $ 2,473 $ 2,854
8 $ 5,141 $50,000 $50,000 $ 51,746 $2,486 $ 2,929 $ 3,449
9 $ 5,905 $50,000 $50,000 $ 52,237 $2,827 $ 3,396 $ 4,083
10 $ 6,699 $50,000 $50,000 $ 52,790 $3,162 $ 3,874 $ 4,759
15 $11,172 $50,000 $50,000 $ 56,492 $4,734 $ 6,419 $ 8,811
20 $16,615 $50,000 $50,000 $ 61,794 $6,094 $ 9,173 $14,195
25 $23,237 $50,000 $50,000 $ 68,772 $7,231 $12,113 $21,291
30 $31,293 $50,000 $50,000 $ 77,552 $8,121 $15,179 $30,528
40 (Age 65) $53,020 $50,000 $50,000 $101,225 $9,039 $21,248 $57,143
(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
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
VARIABLE LIFE INSURANCE CONTRACT
MALE ISSUE AGE 40
$50,000 GUARANTEED DEATH BENEFIT
$939 ANNUAL PREMIUM FOR STANDARD UNDERWRITING RISK (1)
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 (-0.84% Net) (3.16% Net) (7.16% Net) (-0.84% Net) (3.16% Net) (7.16% Net)
---------- -------------- -------------- -------------- -------------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C> <C> <C>
1 $ 977 $50,000 $50,000 $50,029 $ 197 $ 208 $ 219
2 $ 1,992 $50,000 $50,000 $50,121 $ 815 $ 863 $ 912
3 $ 3,048 $50,000 $50,000 $50,275 $ 1,417 $ 1,527 $ 1,642
4 $ 4,147 $50,000 $50,000 $50,491 $ 2,002 $ 2,199 $ 2,411
5 $ 5,289 $50,000 $50,000 $50,776 $ 2,642 $ 2,955 $ 3,298
6 $ 6,477 $50,000 $50,000 $51,127 $ 3,265 $ 3,721 $ 4,234
7 $ 7,713 $50,000 $50,000 $51,546 $ 3,871 $ 4,498 $ 5,221
8 $ 8,998 $50,000 $50,000 $52,032 $ 4,459 $ 5,284 $ 6,262
9 $10,335 $50,000 $50,000 $52,586 $ 5,031 $ 6,081 $ 7,360
10 $11,725 $50,000 $50,000 $53,207 $ 5,584 $ 6,888 $ 8,517
15 $19,554 $50,000 $50,000 $57,324 $ 8,051 $11,012 $15,247
20 $29,080 $50,000 $50,000 $63,155 $ 9,969 $15,178 $23,749
25 (Age 65) $40,670 $50,000 $50,000 $70,776 $11,330 $19,268 $34,348
(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
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
VARIABLE LIFE INSURANCE CONTRACT
MALE ISSUE AGE 25
$50,000 GUARANTEED DEATH BENEFIT
$536.50 ANNUAL PREMIUM FOR STANDARD UNDERWRITING RISK (1)
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 (-0.84% Net) (5.16% Net) (11.16% Net) (-0.84% Net) (5.16% Net) (11.16% Net)
---------- -------------- -------------- -------------- -------------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C> <C> <C>
1 $ 558 $50,000 $50,004 $ 50,026 $ 22 $ 26 $ 31
2 $ 1,138 $50,000 $50,030 $ 50,184 $ 376 $ 406 $ 437
3 $ 1,742 $50,000 $50,076 $ 50,480 $ 729 $ 807 $ 890
4 $ 2,369 $50,000 $50,143 $ 50,921 $1,080 $ 1,229 $ 1,393
5 $ 3,022 $50,000 $50,230 $ 51,516 $1,438 $ 1,683 $ 1,962
6 $ 3,701 $50,000 $50,339 $ 52,272 $1,791 $ 2,158 $ 2,592
7 $ 4,407 $50,000 $50,467 $ 53,198 $2,141 $ 2,657 $ 3,290
8 $ 5,141 $50,000 $50,615 $ 54,301 $2,486 $ 3,178 $ 4,061
9 $ 5,905 $50,000 $50,783 $ 55,589 $2,827 $ 3,723 $ 4,914
10 $ 6,699 $50,000 $50,969 $ 57,073 $3,162 $ 4,293 $ 5,855
15 $11,172 $50,000 $52,176 $ 67,787 $4,734 $ 7,510 $ 12,215
20 $16,615 $50,000 $53,805 $ 85,192 $6,094 $11,376 $ 22,453
25 $23,237 $50,000 $55,816 $111,492 $7,231 $15,974 $ 38,826
30 $31,293 $50,000 $58,179 $149,847 $8,121 $21,355 $ 64,762
40 (Age 65) $53,020 $50,000 $63,871 $282,392 $9,039 $34,363 $167,630
(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
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
VARIABLE LIFE INSURANCE CONTRACT
MALE ISSUE AGE 40
$50,000 GUARANTEED DEATH BENEFIT
$939 ANNUAL PREMIUM FOR STANDARD UNDERWRITING RISK (1)
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 (-0.84% Net) (5.16% Net) (11.16% Net) (-0.84% Net) (5.16% Net) (11.16% Net)
---------- -------------- -------------- -------------- -------------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C> <C> <C>
1 $ 977 $50,000 $50,011 $ 50,066 $ 197 $ 214 $ 231
2 $ 1,992 $50,000 $50,044 $ 50,276 $ 815 $ 888 $ 962
3 $ 3,048 $50,000 $50,100 $ 50,637 $ 1,417 $ 1,584 $ 1,762
4 $ 4,147 $50,000 $50,177 $ 51,152 $ 2,002 $ 2,303 $ 2,637
5 $ 5,289 $50,000 $50,278 $ 51,841 $ 2,642 $ 3,123 $ 3,674
6 $ 6,477 $50,000 $50,402 $ 52,712 $ 3,265 $ 3,970 $ 4,810
7 $ 7,713 $50,000 $50,547 $ 53,770 $ 3,871 $ 4,846 $ 6,056
8 $ 8,998 $50,000 $50,715 $ 55,025 $ 4,459 $ 5,752 $ 7,419
9 $10,335 $50,000 $50,903 $ 56,486 $ 5,031 $ 6,689 $ 8,914
10 $11,725 $50,000 $51,112 $ 58,161 $ 5,584 $ 7,657 $10,550
15 $19,554 $50,000 $52,450 $ 70,153 $ 8,051 $12,940 $21,322
20 $29,080 $50,000 $54,234 $ 89,463 $ 9,969 $18,928 $37,968
25 (Age 65) $40,670 $50,000 $56,418 $118,493 $11,330 $25,592 $63,448
(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
</TABLE>
<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 1999 ranged from 6.76% to 7.93%.
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
thereon. 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 17, and LAPSE AND REINSTATEMENT, page 19.
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 17.
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
16
<PAGE>
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.
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.
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 TAXATION OF THE
FUND 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 income 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.
17
<PAGE>
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 value 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 excludable 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 and
assignments, made during the two-year period before the time that
the Contract became a Modified Endowment Contract.
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 values or death benefits received under business-owned
life insurance policies.
18
<PAGE>
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 17.
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.
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 17.
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 11 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 15). 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 17.
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
19
<PAGE>
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 17.
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.
20
<PAGE>
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, 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.
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 7.
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.
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.
21
<PAGE>
EXPERTS
The financial statements of Pruco Life of New Jersey as of December 31, 1999 and
1998 and for each of the three years in the period ended December 31, 1999 and
the financial statements of the Account as of December 31, 1999 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 AND REGULATORY PROCEEDINGS
We are subject to legal and regulatory actions in the ordinary course of our
businesses, including class actions. Pending legal regulatory actions include
proceedings specific to our practices and proceedings generally applicable to
business practices in the industries in which we operate. In certain of these
lawsuits, large and/or indeterminate amounts are sought, including punitive or
exemplary damages.
In particular, Pruco Life of New Jersey and Prudential have been subject to
substantial regulatory actions and civil litigation involving individual life
insurance sales practices. In 1996, Prudential, on behalf of itself and many of
its life insurance subsidiaries including Pruco Life of New Jersey, entered into
settlement agreements with relevant insurance regulatory authorities and
plaintiffs in the principal life insurance sales practices class action lawsuit
covering policyholders of individual permanent life insurance policies issued in
the United States from 1982 to 1995. Pursuant to the settlements, the companies
agreed to various changes to their sales and business practices controls and a
series of fines, and are in the process of distributing final remediation relief
to eligible class members. In many instances, claimants have the right to
"appeal" the decision to an independent reviewer. The bulk of such appeals were
resolved in 1999, and the balance is expected to be addressed in 2000. As of
January 31, 2000, Prudential and/or Pruco Life of New Jersey remained a party to
two putative class actions and approximately 158 individual actions relating to
permanent life insurance policies issued in the United States between 1982 and
1995. Additional suits may be filed by individuals who opted out of the
settlements. While the approval of the class action settlement is now final,
Prudential and Pruco Life of New Jersey remain subject to oversight and review
by insurance regulators and other regulatory authorities with respect to their
sales practices and the conduct of the remediation program. The U.S. District
Court has also retained jurisdiction as to all matters relating to the
administration, consummation, enforcement and interpretation of the settlements.
Prudential has indemnified Pruco Life of New Jersey for any liabilities incurred
in connection with sales practices litigation covering policyholders of
individual permanent life insurance policies issued in the United States from
1982 to 1995.
In 1999, 1998, 1997 and 1996, Prudential recorded provision in its Consolidated
Statements of Operations of $100 million, $1,150 million, $2,030 million and
$1,125 million, respectively, to provide for estimated remediation costs, and
additional sales practices costs including related administrative costs,
regulatory fines, penalties and related payments, litigation costs and
settlements, including settlements associated with the resolution of claims of
deceptive sales practices asserted by policyholders who elected to "opt-out" of
the class action settlement and litigate their claims against Prudential
separately, and other fees and expenses associated with the resolution of sales
practices issues.
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 Public Reference Section at 450 Fifth Street, N.W.,
Washington, D.C. 20549, or by telephoning (800) SEC-0330, 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.
22
<PAGE>
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.
23
<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 - President, Prudential Individual
Life Insurance since 1998; 1997 to 1998: Senior Vice President, Chief Actuary
and CFO, Prudential Individual Insurance Group; 1995 to 1997: President,
Prudential Select.
WILLIAM M. BETHKE, DIRECTOR - Chief Investment Officer, Prudential 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.
ESTHER H. MILNES, PRESIDENT AND DIRECTOR - Vice President and Chief Actuary,
Prudential Individual Life Insurance since 1999; prior to 1999: Vice President
and Actuary, Prudential Individual Insurance Group.
DAVID R. ODENATH, JR., DIRECTOR - President, Prudential Investments since 1999;
prior to 1999: Senior Vice President and Director of Sales, Investment
Consulting Group, PaineWebber.
I. EDWARD PRICE, VICE CHAIRMAN AND DIRECTOR - Senior Vice President and Actuary,
Prudential Individual Life Insurance since 1998; 1995 to 1998: Senior Vice
President and Actuary, Prudential Individual Insurance Group.
OFFICERS WHO ARE NOT DIRECTORS
C. EDWARD CHAPLIN, TREASURER - Vice President and Treasurer, Prudential since
1995.
JAMES C. DROZANOWSKI, SENIOR VICE PRESIDENT - Vice President, Operations and
Systems, Prudential Individual Financial Services since 1998; 1996 to 1998: Vice
President and Operations Executive, Prudential Individual Insurance Group; 1995
to 1996: President, Credit Card Division, Chase Manhattan Bank.
CLIFFORD E. KIRSCH, CHIEF LEGAL OFFICER AND SECRETARY - Chief Counsel, Variable
Products, Prudential Law Department since 1995.
SHIRLEY H. SHAO, SENIOR VICE PRESIDENT AND CHIEF ACTUARY - Vice President and
Associate Actuary, Prudential since 1996; prior to 1996: Vice President and
Assistant Actuary, Prudential Corporate Risk Management.
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, Salomon
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.
24
<PAGE>
FINANCIAL STATEMENTS OF
PRUCO LIFE OF NEW JERSEY VARIABLE INSURANCE ACCOUNT
<TABLE>
<CAPTION>
STATEMENTS OF NET ASSETS
December 31, 1999
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] ........ $ 7,448,193 $ 8,847,385 $ 75,212,241 $ 53,674,456 $ 16,498,630
Receivable from (Payable to) Pruco Life
of New Jersey [Note 2] ........................ 6,668 (2,187) (4,244) (4,516) (9,182)
------------ ------------ ------------- ------------- -------------
Net Assets ...................................... $ 7,454,861 $ 8,845,198 $ 75,207,997 $ 53,669,940 $ 16,489,448
============ ============ ============= ============= =============
NET ASSETS, representing:
Equity of contract owners [Note 4] .............. $ 7,454,861 $ 8,845,198 $ 75,207,997 $ 53,669,940 $ 16,489,448
------------ ------------ ------------- ------------- -------------
$ 7,454,861 $ 8,845,198 $ 75,207,997 $ 53,669,940 $ 16,489,448
============ ============ ============= ============= =============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS ON PAGES A15 THROUGH A19
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>
$ 661,042 $ 3,990,630 $ 1,536,306 $ 501,590 $ 935,578 $ 277,430 $ 2,237,321 $ 468,238
51 (15,550) (771) (587) 8 (19) 11,533 (15)
----------- ------------ ------------ ----------- ----------- ------------ ------------ -----------
$ 661,093 $ 3,975,080 $ 1,535,535 $ 501,003 $ 935,586 $ 277,411 $ 2,248,854 $ 468,223
=========== ============ ============ =========== =========== =========== ============ ===========
$ 661,093 $ 3,975,080 $ 1,535,535 $ 501,003 $ 935,586 $ 277,411 $ 2,248,854 $ 468,223
----------- ------------ ------------ ----------- ----------- ------------ ------------ -----------
$ 661,093 $ 3,975,080 $ 1,535,535 $ 501,003 $ 935,586 $ 277,411 $ 2,248,854 $ 468,223
=========== ============ ============ =========== =========== =========== ============ ===========
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS ON PAGES A15 THROUGH A19
A2
<PAGE>
FINANCIAL STATEMENTS OF
PRUCO LIFE OF NEW JERSEY VARIABLE INSURANCE ACCOUNT
STATEMENTS OF OPERATIONS
For the years ended December 31, 1999, 1998 and 1997
<TABLE>
<CAPTION>
SUBACCOUNTS
---------------------------------------------------------------------
MONEY MARKET DIVERSIFIED BOND
PORTFOLIO PORTFOLIO
---------------------------------------------------------------------
1999 1998 1997 1999 1998 1997
--------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
INVESTMENT INCOME
Dividend income .......................... $ 362,319 $ 389,451 $ 395,859 $ 0 $ 579,037 $ 670,755
--------- --------- --------- --------- --------- ---------
EXPENSES
Charges to contract owners for assuming
mortality risk and expense risk [Note 5A] 25,993 26,023 26,160 31,951 32,991 31,965
Reimbursement for excess expenses
[Note 5B] ............................... (1,820) (1,156) (1,637) (2,403) (2,287) (2,222)
--------- --------- --------- --------- --------- ---------
NET EXPENSES ............................... 24,173 24,867 24,523 29,548 30,704 29,743
--------- --------- --------- --------- --------- ---------
NET INVESTMENT INCOME (LOSS) ............... 338,146 364,584 371,336 (29,548) 548,333 641,012
--------- --------- --------- --------- --------- ---------
NET REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS
Capital gains distributions received ... 0 0 0 25,652 34,260 107,085
Realized gain (loss) on shares
redeemed ............................. 0 0 0 15,866 27,467 31,192
Net change in unrealized gain (loss)
on investments ....................... 0 0 0 (113,279) 8,069 (61,534)
--------- --------- --------- --------- --------- ---------
NET GAIN (LOSS) ON INVESTMENTS ............. 0 0 0 (71,761) 69,796 76,743
--------- --------- --------- --------- --------- ---------
NET INCREASE (DECREASE) IN NET
ASSETS RESULTING FROM
OPERATIONS ............................... $ 338,146 $ 364,584 $ 371,336 $(101,309) $ 618,129 $ 717,755
========= ========= ========= ========= ========= =========
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS ON PAGES A15 THROUGH A19
A3
<PAGE>
<TABLE>
<CAPTION>
SUBACCOUNTS (CONTINUED)
- ----------------------------------------------------------------------------------------------------------------------------
EQUITY FLEXIBLE MANAGED CONSERVATIVE BALANCED
PORTFOLIO PORTFOLIO PORTFOLIO
- ----------------------------------------------------------------------------------------------------------------------------
1999 1998 1997 1999 1998 1997 1999 1998 1997
- ----------- ----------- ------------ ----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$ 1,269,321 $ 1,352,909 $ 1,547,755 $ 2,458 $ 1,740,666 $ 1,489,267 $ 672,470 $ 688,553 $ 693,049
- ----------- ----------- ------------ ----------- ----------- ----------- ----------- ----------- -----------
262,583 259,745 235,462 188,736 186,849 172,500 57,832 56,690 52,340
(61,954) (64,790) (52,324) (126,390) (121,578) (111,717) (29,688) (27,982) (24,531)
- ----------- ----------- ------------ ----------- ----------- ----------- ----------- ----------- -----------
200,629 194,955 183,138 62,346 65,271 60,783 28,144 28,708 27,809
- ----------- ----------- ------------ ----------- ----------- ----------- ----------- ----------- -----------
1,068,692 1,157,954 1,364,617 (59,888) 1,675,395 1,428,484 644,326 659,845 665,240
- ----------- ----------- ------------ ----------- ----------- ----------- ----------- ----------- -----------
8,895,243 8,051,421 3,835,699 623,543 5,514,866 7,709,982 94,164 985,493 1,660,730
2,453,736 1,865,617 1,973,839 384,179 320,052 642,952 100,561 71,074 145,076
(3,714,514) (4,714,936) 7,305,038 3,049,000 (2,394,532) (1,736,264) 204,904 46,644 (620,598)
- ----------- ----------- ------------ ----------- ----------- ----------- ----------- ----------- -----------
7,634,465 5,202,102 13,114,576 4,056,722 3,440,386 6,616,670 399,629 1,103,211 1,185,208
- ----------- ----------- ------------ ----------- ----------- ----------- ----------- ----------- -----------
$ 8,703,157 $ 6,360,056 $ 14,479,193 $ 3,996,834 $ 5,115,781 $ 8,045,154 $ 1,043,955 $ 1,763,056 $ 1,850,448
=========== =========== ============ =========== =========== =========== =========== =========== ===========
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS ON PAGES A15 THROUGH A19
A4
<PAGE>
FINANCIAL STATEMENTS OF
PRUCO LIFE OF NEW JERSEY VARIABLE INSURANCE ACCOUNT
<TABLE>
<CAPTION>
STATEMENTS OF OPERATIONS
For the years ended December 31, 1999, 1998 and 1997
SUBACCOUNTS
------------------------------------------------------------------------
HIGH YIELD BOND STOCK INDEX
PORTFOLIO PORTFOLIO
----------------------------------- ---------------------------------
1999 1998 1997 1999 1998 1997
--------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
INVESTMENT INCOME
Dividend income .......................... $ 2,047 $ 79,250 $ 78,208 $ 37,475 $ 29,293 $ 24,485
--------- --------- --------- --------- --------- ---------
EXPENSES
Charges to contract owners for assuming
mortality risk and expense risk [Note 5A] 2,488 2,953 2,871 11,953 8,149 5,529
Reimbursement for excess expenses
[Note 5B] ............................... 0 0 0 0 0 0
--------- --------- --------- --------- --------- ---------
NET EXPENSES ............................... 2,488 2,953 2,871 11,953 8,149 5,529
--------- --------- --------- --------- --------- ---------
NET INVESTMENT INCOME (LOSS) ............... (441) 76,297 75,337 25,522 21,144 18,956
--------- --------- --------- --------- --------- ---------
NET REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS
Capital gains distributions received ... 0 0 0 46,334 42,740 54,559
Realized gain (loss) on shares
redeemed ............................. (12,832) (3,555) 1,843 128,103 68,477 33,392
Net change in unrealized gain (loss)
on investments ....................... 43,844 (95,116) 26,710 440,992 444,688 311,884
--------- --------- --------- --------- --------- ---------
NET GAIN (LOSS) ON INVESTMENTS ............. 31,012 (98,671) 28,553 615,429 555,905 399,835
--------- --------- --------- --------- --------- ---------
NET INCREASE (DECREASE) IN NET
ASSETS RESULTING FROM
OPERATIONS ............................... $ 30,571 $ (22,374) $ 103,890 $ 640,951 $ 577,049 $ 418,791
========= ========= ========= ========= ========= =========
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS ON PAGES A15 THROUGH A19
A5
<PAGE>
<TABLE>
<CAPTION>
SUBACCOUNTS (CONTINUED)
- --------------------------------------------------------------------------------------------------------------
EQUITY INCOME NATURAL RESOURCES GLOBAL
PORTFOLIO PORTFOLIO PORTFOLIO
- ----------------------------------- ----------------------------------- ---------------------------------
1999 1998 1997 1999 1998 1997 1999 1998 1997
- --------- --------- --------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$ 36,153 $ 42,232 $ 30,966 $ 3,015 $ 3,651 $ 3,243 $ 2,893 $ 6,970 $ 5,170
- --------- --------- --------- --------- --------- --------- --------- --------- ---------
5,483 5,557 4,095 1,533 1,565 2,285 2,385 1,762 1,392
0 0 0 0 0 0 0 0 0
- --------- --------- --------- --------- --------- --------- --------- --------- ---------
5,483 5,557 4,095 1,533 1,565 2,285 2,385 1,762 1,392
- --------- --------- --------- --------- --------- --------- --------- --------- ---------
30,670 36,675 26,871 1,482 2,086 958 508 5,208 3,778
- --------- --------- --------- --------- --------- --------- --------- --------- ---------
173,454 94,491 127,080 0 24,327 68,387 5,071 23,442 20,851
50,758 14,573 9,068 (6,651) (14,753) 20,414 15,879 9,640 7,185
(65,315) (203,765) 193,110 168,280 (90,245) (158,871) 275,141 70,052 (15,824)
- --------- --------- --------- --------- --------- --------- --------- --------- ---------
158,897 (94,701) 329,258 161,629 (80,671) (70,070) 296,091 103,134 12,212
- --------- --------- --------- --------- --------- --------- --------- --------- ---------
$ 189,567 $ (58,026) $ 356,129 $ 163,111 $ (78,585) $ (69,112) $ 296,599 $ 108,342 $ 15,990
========= ========= ========= ========= ========= ========= ========= ========= =========
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS ON PAGES A15 THROUGH A19
A6
<PAGE>
FINANCIAL STATEMENTS OF
PRUCO LIFE OF NEW JERSEY VARIABLE INSURANCE ACCOUNT
<TABLE>
<CAPTION>
STATEMENTS OF OPERATIONS
For the years ended December 31, 1999, 1998 and 1997
SUBACCOUNTS
----------------------------------------------------------------------------------
GOVERNMENT INCOME PRUDENTIAL JENNISON
PORTFOLIO PORTFOLIO
------------------------------------- --------------------------------------
1999 1998 1997 1999 1998 1997
-------- --------- --------- --------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
INVESTMENT INCOME
Dividend income $ 0 $ 16,784 $ 15,463 $ 2,554 $ 1,176 $ 597
-------- --------- --------- --------- ---------- ----------
EXPENSES
Charges to contract owners for assuming
mortality risk and expense risk [Note 5A] .. 932 1,015 783 5,036 1,881 863
Reimbursement for excess expenses
[Note 5B] .................................. 0 0 0 0 0 0
-------- --------- --------- --------- ---------- ----------
NET EXPENSES ................................. 932 1,015 783 5,036 1,881 863
-------- --------- --------- --------- ---------- ----------
NET INVESTMENT INCOME (LOSS) ................. (932) 15,769 14,680 (2,482) (705) (266
-------- --------- --------- --------- ---------- ----------
NET REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS
Capital gains distributions received ..... 0 0 0 86,720 11,454 20,173
Realized gain (loss) on shares
redeemed ............................... 504 7,606 1,148 40,016 7,750 1,091
Net change in unrealized gain (loss)
on investments ......................... (7,670) 2,544 5,720 434,782 163,065 37,821
-------- --------- --------- --------- ---------- ----------
NET GAIN (LOSS) ON INVESTMENTS ............... (7,166) 10,150 6,868 561,518 182,269 59,085
-------- --------- --------- --------- ---------- ----------
NET INCREASE (DECREASE) IN NET
ASSETS RESULTING FROM
OPERATIONS ................................. $ (8,098) $ 25,919 $ 21,548 $ 559,036 $ 181,564 $ 58,819
======== ========= ========= ========= ========== ==========
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS ON PAGES A15 THROUGH A19
A7
<PAGE>
SUBACCOUNTS (CONTINUED)
- ------------------------------------
SMALL CAPITALIZATION STOCK
PORTFOLIO
- ------------------------------------
1999 1998 1997
- --------- --------- ---------
$ 0 $ 1,970 $ 1,097
- --------- --------- ---------
1,381 1,112 531
0 0 0
- --------- --------- ---------
1,381 1,112 531
- --------- --------- ---------
(1,381) 858 566
- --------- --------- ---------
7,061 22,061 17,900
(3,846) (1,664) 0
50,636 (26,749) 12,183
- --------- --------- ---------
53,851 (6,352) 30,083
- --------- --------- ---------
$ 52,470 $ (5,494) $ 30,649
========= ========= =========
SEE NOTES TO FINANCIAL STATEMENTS ON PAGES A15 THROUGH A19
A8
<PAGE>
<TABLE>
<CAPTION>
FINANCIAL STATEMENTS OF
PRUCO LIFE OF NEW JERSEY VARIABLE INSURANCE ACCOUNT
STATEMENTS OF CHANGES IN NET ASSETS
For the years ended December 31, 1999, 1998 and 1997
SUBACCOUNTS
-------------------------------------------------------------------------------
MONEY DIVERSIFIED
MARKET BOND
PORTFOLIO PORTFOLIO
-------------------------------------- --------------------------------------
1999 1998 1997 1999 1998 1997
<S> <C> <C> <C> <C> <C> <C>
OPERATIONS
Net investment income (loss) ............ $ 338,146 $ 364,584 $ 371,336 $ (29,548) $ 548,333 $ 641,012
Capital gains distributions received .... 0 0 0 25,652 34,260 107,085
Realized gain (loss) on shares redeemed . 0 0 0 15,866 27,467 31,192
Net change in unrealized gain (loss) on
investments ........................... 0 0 0 (113,279) 8,069 (61,534)
---------- ---------- ---------- ---------- ---------- ----------
NET INCREASE (DECREASE) IN
NET ASSETS RESULTING FROM
OPERATIONS .............................. 338,146 364,584 371,336 (101,309) 618,129 717,755
---------- ---------- ---------- ---------- ---------- ----------
PREMIUM PAYMENTS
AND OTHER OPERATING TRANSFERS
Contract Owner Net Payments ............. 171,623 597,386 700,249 235,295 666,802 716,991
Policy Loans ............................ (119,463) (112,827) (113,588) (150,488) (168,726) (160,351)
Policy Loan Repayments and Interest ..... 178,631 204,283 106,760 205,808 131,092 140,633
Surrenders, Withdrawals and Death
Benefits .............................. (493,278) (753,646) (435,318) (589,747) (579,540) (654,376)
Net Transfers From (To) Other Subaccounts
or Fixed Rate Option .................. 69,185 (46,565) (243,617) (13,661) (130,070) (323,521)
Administrative and Other Charges ........ (230,471) (240,106) (259,809) (256,649) (272,056) (277,683)
---------- ---------- ---------- ---------- ---------- ----------
NET INCREASE (DECREASE) IN NET
ASSETS RESULTING FROM PREMIUM
PAYMENTS AND OTHER OPERATING
TRANSFERS ............................... (423,773) (351,475) (245,323) (569,442) (352,498) (558,307)
---------- ---------- ---------- ---------- ---------- ----------
NET INCREASE (DECREASE) IN NET
ASSETS RETAINED IN THE
ACCOUNT [Note 7] ........................ 0 (6,824) 2,846 0 (5,990) 3,051
---------- ---------- ---------- ---------- ---------- ----------
TOTAL INCREASE (DECREASE) IN NET
ASSETS .................................. (85,627) 6,285 128,859 (670,751) 259,641 162,499
NET ASSETS
Beginning of year ....................... 7,540,488 7,534,203 7,405,344 9,515,949 9,256,308 9,093,809
---------- ---------- ---------- ---------- ---------- ----------
End of period year ...................... $7,454,861 $7,540,488 $7,534,203 $8,845,198 $9,515,949 $9,256,308
========== ========== ========== ========== ========== ==========
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS ON PAGES A15 THROUGH A19
A9
<PAGE>
<TABLE>
<CAPTION>
SUBACCOUNTS (CONTINUED)
- ---------------------------------------------------------------------------------------------------------------------------
FLEXIBLE CONSERVATIVE
EQUITY MANAGED BALANCED
PORTFOLIO PORTFOLIO PORTFOLIO
- --------------------------------------- --------------------------------------- ---------------------------------------
1999 1998 1997 1999 1998 1997 1999 1998 1997
- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$ 1,068,692 $ 1,157,954 $ 1,364,617 $ (59,888) $ 1,675,395 $ 1,428,484 $ 644,326 $ 659,845 $ 665,240
8,895,243 8,051,421 3,835,699 623,543 5,514,866 7,709,982 94,164 985,493 1,660,730
2,453,736 1,865,617 1,973,839 384,179 320,052 642,952 100,561 71,074 145,076
(3,714,514) (4,714,936) 7,305,038 3,049,000 (2,394,532) (1,736,264) 204,904 46,644 (620,598)
- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
8,703,157 6,360,056 14,479,193 3,996,834 5,115,781 8,045,154 1,043,955 1,763,056 1,850,448
- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
1,014,963 3,631,338 3,577,509 1,031,361 3,576,134 3,720,861 373,510 1,290,526 1,351,138
(1,485,284) (1,962,410) (1,856,989) (966,494) (1,185,095) (988,351) (237,299) (264,965) (280,851)
1,630,438 1,133,698 933,614 1,032,283 749,697 710,569 261,251 207,704 165,714
(5,413,296) (4,560,147) (5,480,536) (3,792,459) (3,235,200) (4,256,006) (1,099,447) (907,183) (1,283,004)
(1,020,269) (220,647) 174,951 (641,474) (444,083) (299,982) (131,860) (153,279) (137,098)
(1,839,389) (1,868,533) (1,779,201) (1,460,643) (1,525,426) (1,521,789) (533,131) (551,367) (546,342)
- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
(7,112,837) (3,846,701) (4,430,652) (4,797,426) (2,063,973) (2,634,698) (1,366,976) (378,564) (730,443)
- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
0 (82,451) (18,211) 0 (24,216) (20,520) 0 (1,080) (23,517)
- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
1,590,320 2,430,904 10,030,330 (800,592) 3,027,592 5,389,936 (323,021) 1,383,412 1,096,488
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
- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
$75,207,997 $73,617,677 $71,186,773 $53,669,940 $54,470,532 $51,442,940 $16,489,448 $16,812,469 $15,429,057
=========== =========== =========== =========== =========== =========== =========== =========== ===========
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS ON PAGES A15 THROUGH A19
A10
<PAGE>
FINANCIAL STATEMENTS OF
PRUCO LIFE OF NEW JERSEY VARIABLE INSURANCE ACCOUNT
STATEMENTS OF CHANGES IN NET ASSETS
For the years ended December 31, 1999, 1998 and 1997
<TABLE>
<CAPTION>
SUBACCOUNTS
---------------------------------------------------------------------------
HIGH
YIELD STOCK
BOND INDEX
PORTFOLIO PORTFOLIO
--------------------------------- ---------------------------------------
1999 1998 1997 1999 1998 1997
--------- --------- --------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
OPERATIONS
Net investment income (loss) ............ $ (441) $ 76,297 $ 75,337 $ 25,522 $ 21,144 $ 18,956
Capital gains distributions ............. 0 0 0 46,334 42,740 54,559
Realized gain (loss) on shares redeemed . (12,832) (3,555) 1,843 128,103 68,477 33,392
Net change in unrealized gain (loss) on
investments ........................... 43,844 (95,116) 26,710 440,992 444,688 311,884
--------- --------- --------- ----------- ----------- -----------
NET INCREASE (DECREASE) IN
NET ASSETS RESULTING FROM
OPERATIONS .............................. 30,571 (22,374) 103,890 640,951 577,049 418,791
--------- --------- --------- ----------- ----------- -----------
PREMIUM PAYMENTS
AND OTHER OPERATING TRANSFERS
Contract Owner Net Payments ............. (8,647) 64,819 69,568 66,069 146,613 140,823
Policy Loans ............................ (13,395) (30,617) (9,759) (75,822) (75,909) (35,127)
Policy Loan Repayments and Interest ..... 20,691 9,055 12,569 57,683 34,818 19,671
Surrenders, Withdrawals and Death
Benefits .............................. (88,150) (72,961) (57,221) (181,043) (122,569) (128,835)
Net Transfers From (To) Other Subaccounts
or Fixed Rate Option .................. (23,925) (9,974) (22,882) 702,064 395,662 393,552
Administrative and Other Charges ........ (20,944) (25,859) (27,004) (90,381) (68,348) (51,771)
--------- --------- --------- ----------- ----------- -----------
NET INCREASE (DECREASE) IN NET
ASSETS RESULTING FROM PREMIUM
PAYMENTS AND OTHER OPERATING
TRANSFERS ............................... (134,370) (65,537) (34,729) 478,570 310,267 338,313
--------- --------- --------- ----------- ----------- -----------
NET INCREASE (DECREASE) IN NET
ASSETS RETAINED IN THE
ACCOUNT [Note 7] ........................ 0 (253) (2,400) 0 (5,063) 216
--------- --------- --------- ----------- ----------- -----------
TOTAL INCREASE (DECREASE) IN NET
ASSETS .................................. (103,799) (88,164) 66,761 1,119,521 882,253 757,320
--------- --------- --------- ----------- ----------- -----------
NET ASSETS
Beginning of year ....................... 764,892 853,056 786,295 2,855,559 1,973,306 1,215,986
--------- --------- --------- ----------- ----------- -----------
End of year ............................. $ 661,093 $ 764,892 $ 853,056 $ 3,975,080 $ 2,855,559 $ 1,973,306
========= ========= ========= =========== =========== ===========
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS ON PAGES A15 THROUGH A19
A11
<PAGE>
<TABLE>
<CAPTION>
SUBACCOUNTS (CONTINUED)
- --------------------------------------------------------------------------------------------------------------
EQUITY NATURAL
INCOME RESOURCES GLOBAL
PORTFOLIO PORTFOLIO PORTFOLIO
--------------------------------------- --------------------------------- ---------------------------------
1999 1998 1997 1999 1998 1997 1999 1998 1997
----------- ----------- ----------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$ 30,670 $ 36,675 $ 26,871 $ 1,482 $ 2,086 $ 958 $ 508 $ 5,208 $ 3,778
173,454 94,491 127,080 0 24,327 68,387 5,071 23,442 20,851
50,758 14,573 9,068 (6,651) (14,753) 20,414 15,879 9,640 7,185
(65,315) (203,765) 193,110 168,280 (90,245) (158,871) 275,141 70,052 (15,824)
----------- ----------- ----------- --------- --------- --------- --------- --------- ---------
189,567 (58,026) 356,129 163,111 (78,585) (69,112) 296,599 108,342 15,990
----------- ----------- ----------- --------- --------- --------- --------- --------- ---------
58,134 89,540 88,734 27,347 50,773 63,148 21,382 32,171 35,049
(25,518) (53,098) (41,052) (7,742) (14,329) (18,825) (10,914) (15,452) (12,653)
20,073 18,892 14,335 15,909 9,234 8,366 8,568 7,909 59,198
(148,018) (69,899) (47,860) (26,280) (28,959) (46,965) (33,049) (17,852) (30,143)
(89,956) 258,893 140,019 (34,953) (68,079) (61,191) 104,949 19,427 83,688
(41,561) (43,041) (34,757) (14,749) (16,191) (22,839) (17,270) (14,020) (11,448)
----------- ----------- ----------- --------- --------- --------- --------- --------- ---------
(226,846) 201,287 119,419 (40,468) (67,551) (78,306) 73,666 12,183 123,691
----------- ----------- ----------- --------- --------- --------- --------- --------- ---------
0 788 (4,821) 0 (11,580) 11,590 0 (4,404) (299)
----------- ----------- ----------- --------- --------- --------- --------- --------- ---------
(37,279) 144,049 470,727 122,643 (157,716) (135,828) 370,265 116,121 139,382
----------- ----------- ----------- --------- --------- --------- --------- --------- ---------
1,572,814 1,428,765 958,038 378,360 536,076 671,904 565,321 449,200 309,818
----------- ----------- ----------- --------- --------- --------- --------- --------- ---------
$ 1,535,535 $ 1,572,814 $ 1,428,765 $ 501,003 $ 378,360 $ 536,076 $ 935,586 $ 565,321 $ 449,200
=========== =========== =========== ========= ========= ========= ========= ========= =========
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS ON PAGES A15 THROUGH A19
A12
<PAGE>
<TABLE>
<CAPTION>
FINANCIAL STATEMENTS OF
PRUCO LIFE OF NEW JERSEY VARIABLE INSURANCE ACCOUNT
STATEMENTS OF CHANGES IN NET ASSETS
For the years ended December 31, 1999, 1998 and 1997
SUBACCOUNTS
--------------------------------- -----------------------------------
GOVERNMENT PRUDENTIAL
INCOME JENNISON
PORTFOLIO PORTFOLIO
--------------------------------- -----------------------------------
1999 1998 1997 1999 1998 1997
--------- --------- --------- ----------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
OPERATIONS
Net investment income (loss) ............ $ (932) $ 15,769 $ 14,680 $ (2,482) $ (705) $ (266)
Capital gains distributions received .... 0 0 0 86,720 11,454 20,173
Realized gain (loss) on shares redeemed . 504 7,606 1,148 40,016 7,750 1,091
Net change in unrealized gain (loss) on
investments ........................... (7,670) 2,544 5,720 434,782 163,065 37,821
--------- --------- --------- ----------- --------- ---------
NET INCREASE (DECREASE) IN
NET ASSETS RESULTING FROM
OPERATIONS .............................. (8,098) 25,919 21,548 559,036 181,564 58,819
--------- --------- --------- ----------- --------- ---------
PREMIUM PAYMENTS
AND OTHER OPERATING TRANSFERS
Contract Owner Net Payments ............. 9,054 17,445 17,854 (6,509) 32,717 20,829
Policy Loans ............................ (1,550) (358) (7,824) (45,262) (18,750) 220
Policy Loan Repayments and Interest ..... 2,882 2,612 1,270 22,405 11,779 2,194
Surrenders, Withdrawals and Death
Benefits .............................. (10,184) (22,473) (4,944) (62,887) (28,653) (16,018)
Net Transfers From (To) Other Subaccounts
or Fixed Rate Option .................. 19,380 28,203 (5,176) 1,007,611 294,460 147,432
Administrative and Other Charges ........ (7,479) (8,375) (7,390) (33,543) (21,843) (7,152)
--------- --------- --------- ----------- --------- ---------
NET INCREASE (DECREASE) IN NET
ASSETS RESULTING FROM PREMIUM
PAYMENTS AND OTHER OPERATING
TRANSFERS ............................... 12,103 17,054 (6,210) 881,815 269,710 147,505
--------- --------- --------- ----------- --------- ---------
NET INCREASE (DECREASE) IN NET
ASSETS RETAINED IN THE
ACCOUNT [Note 7] ........................ 0 (1,132) (2,849) 0 445 358
--------- --------- --------- ----------- --------- ---------
TOTAL INCREASE (DECREASE) IN NET
ASSETS .................................. 4,005 41,841 12,489 1,440,851 451,719 206,682
NET ASSETS
Beginning of year ....................... 273,406 231,565 219,076 808,003 356,284 149,602
--------- --------- --------- ----------- --------- ---------
End of year ............................. $ 277,411 $ 273,406 $ 231,565 $ 2,248,854 $ 808,003 $ 356,284
========= ========= ========= =========== ========= =========
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS ON PAGES A15 THROUGH A19
A13
<PAGE>
<TABLE>
<CAPTION>
SUBACCOUNTS (CONTINUED)
---------------------------------
CAPITALIZATION
STOCK
PORTFOLIO
---------------------------------
1999 1998 1997
--------- --------- ---------
<S> <C> <C>
$ (1,381) $ 858 $ 566
7,061 22,061 17,900
(3,846) (1,664) 0
50,636 (26,749) 12,183
--------- --------- ---------
52,470 (5,494) 30,649
--------- --------- ---------
25,216 25,801 14,283
(5,584) (7,688) (2,361)
5,366 6,630 2,474
(32,658) (9,964) (7,245)
67,426 93,747 174,351
(9,966) (8,768) (4,145)
--------- --------- ---------
49,800 99,758 177,357
--------- --------- ---------
0 (3,180) 5,174
--------- --------- ---------
102,270 91,084 213,180
365,953 274,869 61,689
--------- --------- ---------
$ 468,223 $ 365,953 $ 274,869
========= ========= =========
</TABLE>
NOTES TO FINANCIAL STATEMENTS ON PAGES A15 THROUGH A19
A14
<PAGE>
NOTES TO FINANCIAL STATEMENTS OF
PRUCO LIFE OF NEW JERSEY VARIABLE INSURANCE ACCOUNT
DECEMBER 31, 1999
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
accounting principles generally accepted in the United States. 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.
Receivable from (Payable to) Pruco Life of New Jersey--At times, Pruco
Life of New Jersey may owe an amount to or expect to receive an amount
from the Account primarily related to processing contract owner
payments, surrenders, withdrawals and death benefits. This amount is
reflected in the Account's Statements of Net Assets as either a
receivable from or payable to Pruco Life of New Jersey. The receivable
and or payable does not have an effect on the Contract owner's account
or the related unit value.
A15
<PAGE>
NOTE 3: INVESTMENT INFORMATION FOR THE PRUDENTIAL SERIES FUND, INC. PORTFOLIOS
The net asset value per share for each portfolio of the Series Fund,
the number of shares (rounded) of each portfolio held by the
subaccounts of the Account and the aggregate cost of investments in
such shares at December 31, 1999 were as follows:
<TABLE>
<CAPTION>
PORTFOLIOS
---------------------------------------------------------------------
MONEY DIVERSIFIED FLEXIBLE CONSERVATIVE
MARKET BOND EQUITY MANAGED BALANCED
---------- ---------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Number of shares (rounded): ........... 744,819 807,980 2,602,500 3,042,769 1,074,130
Net asset value per share: ............ $ 10.00 $ 10.95 $ 28.90 $ 17.64 $ 15.36
Cost: ................................. $7,448,193 $8,662,652 $56,544,630 $48,086,883 $15,379,819
PORTFOLIOS (CONTINUED)
---------------------------------------------------------------------
HIGH YIELD STOCK EQUITY NATURAL
BOND INDEX INCOME RESOURCES GLOBAL
---------- ---------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Number of shares (rounded): .......... 87,904 89,778 78,704 28,860 30,199
Net asset value per share: ........... $ 7.52 $ 44.45 $ 19.52 $ 17.38 $ 30.98
Cost: ................................ $ 691,403 $2,368,699 $ 1,453,010 $ 451,080 $ 562,777
PORTFOLIOS (CONTINUED)
---------------------------------------
SMALL
GOVERNMENT PRUDENTIAL CAPITALIZATION
INCOME JENNISON STOCK
---------- ---------- -----------
<S> <C> <C> <C>
Number of shares (rounded): .......... 24,020 69,074 28,815
Net asset value per share: ........... $ 11.55 $ 32.39 $ 16.25
Cost: ................................ $ 279,439 $1,588,191 $ 425,594
NOTE 4: CONTRACT OWNER UNIT INFORMATION
Outstanding contract owner units (rounded), unit values and total
value of contract owner equity at December 31, 1999 were as follows:
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
(rounded) ............................ 2,811,585 2,246,611 7,568,809 8,190,208 3,194,410
Unit Value ........................... $ 2.65148 $ 3.93713 $ 9.93657 $ 6.55294 $ 5.16197
---------- ---------- ----------- ----------- -----------
TOTAL CONTRACT OWNER EQUITY .......... $7,454,861 $8,845,198 $75,207,997 $53,669,940 $16,489,448
========== ========== =========== =========== ===========
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
(rounded) ........................... 257,809 621,602 316,643 154,904 356,335
Unit Value ........................... $ 2.56427 $ 6.39489 $ 4.84942 $ 3.23428 $ 2.62558
---------- ---------- ----------- ----------- -----------
TOTAL CONTRACT OWNER EQUITY .......... $ 661,093 $3,975,080 $ 1,535,535 $ 501,003 $ 935,586
========== ========== =========== =========== ===========
SUBACCOUNTS (CONTINUED)
---------------------------------------
SMALL
GOVERNMENT PRUDENTIAL CAPITALIZATION
INCOME JENNISON STOCK
PORTFOLIO PORTFOLIO PORTFOLIO
---------- ---------- -----------
<S> <C> <C> <C>
Contract Owner Units Outstanding
(rounded) ........................... 130,017 618,106 236,702
Unit Value ........................... $ 2.13365 $ 3.63830 $ 1.97811
---------- ---------- -----------
TOTAL CONTRACT OWNER EQUITY .......... $ 277,411 $2,248,854 $ 468,223
========== ========== ===========
</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 and Other Related 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 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 8: UNIT ACTIVITY
Transactions in units (including transfers among subaccounts) for the
years ended December 31, 1999, 1998 and 1997 were as follows:
<TABLE>
<CAPTION>
SUBACCOUNTS
------------------------------------------------------------------------------
MONEY MARKET DIVERSIFIED BOND
PORTFOLIO PORTFOLIO
------------------------------------ ------------------------------------
1999 1998 1997 1999 1998 1997
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Contract Owner
Contributions: 177,096 405,390 396,610 154,073 229,450 259,045
Contract Owner
Redemptions: (341,295) (550,086) (500,352) (299,011) (320,963) (415,661)
SUBACCOUNTS (CONTINUED)
------------------------------------------------------------------------------
EQUITY FLEXIBLE MANAGED
PORTFOLIO PORTFOLIO
------------------------------------ ------------------------------------
1999 1998 1997 1999 1998 1997
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Contract Owner
Contributions: 356,823 634,805 752,863 371,009 802,018 960,270
Contract Owner
Redemptions: (1,099,352) (1,078,771) (1,344,427) (1,129,217) (1,153,597) (1,468,518)
SUBACCOUNTS (CONTINUED)
------------------------------------------------------------------------------
CONSERVATIVE BALANCED HIGH YIELD BOND
PORTFOLIO PORTFOLIO
------------------------------------ ------------------------------------
1999 1998 1997 1999 1998 1997
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Contract Owner
Contributions: 165,699 360,102 398,550 15,083 37,224 47,298
Contract Owner
Redemptions: (440,703) (441,834) (574,880) (68,271) (63,535) (61,560)
SUBACCOUNTS (CONTINUED)
------------------------------------------------------------------------------
STOCK INDEX EQUITY INCOME
PORTFOLIO PORTFOLIO
------------------------------------ ------------------------------------
1999 1998 1997 1999 1998 1997
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Contract Owner
Contributions: 180,643 141,390 163,038 34,858 91,452 70,094
Contract Owner
Redemptions: (95,463) (78,424) (74,708) (81,892) (49,149) (40,382)
SUBACCOUNTS (CONTINUED)
------------------------------------------------------------------------------
NATURAL RESOURCES GLOBAL
PORTFOLIO PORTFOLIO
------------------------------------ ------------------------------------
1999 1998 1997 1999 1998 1997
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Contract Owner
Contributions: 21,919 31,880 42,321 83,106 68,736 152,528
Contract Owner
Redemptions: (37,208) (56,742) (67,261) (44,894) (62,107) (68,510)
</TABLE>
A18
<PAGE>
NOTE 8: UNIT ACTIVITY (CONTINUED)
<TABLE>
<CAPTION>
SUBACCOUNTS (CONTINUED)
------------------------------------------------------------------------------
GOVERNMENT INCOME PRUDENTIAL JENNISON
PORTFOLIO PORTFOLIO
------------------------------------ ------------------------------------
1999 1998 1997 1999 1998 1997
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Contract Owner
Contributions: 18,899 111,876 66,556 379,610 176,784 117,546
Contract Owner
Redemptions: (13,128) (102,023) (69,307) (76,252) (51,706) (31,209)
<CAPTION>
SUBACCOUNTS (CONTINUED)
-------------------------------------
SMALL CAPITALIZATION
STOCK PORTFOLIO
------------------------------------
1999 1998 1997
-------- -------- --------
<S> <C> <C> <C>
Contract Owner
Contributions: 87,066 89,936 119,968
Contract Owner
Redemptions: (58,103) (34,090) (11,823)
</TABLE>
NOTE 9: 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, 1999
were as follows:
<TABLE>
<CAPTION>
PORTFOLIOS
-----------------------------------------------------------------------------------
MONEY DIVERSIFIED FLEXIBLE CONSERVATIVE
MARKET BOND EQUITY MANAGED BALANCED
--------- --------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Purchases ............. $ 341,491 $ 272,785 $ 186,871 $ 391,252 $ 322,536
Sales ................. $(796,105) $ (869,588) $(7,496,093) $(5,246,507) $(1,708,475)
PORTFOLIOS (CONTINUED)
-----------------------------------------------------------------------------------
HIGH YIELD STOCK EQUITY NATURAL
BOND INDEX INCOME RESOURCES GLOBAL
--------- --------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Purchases ............. $ 57,393 $ 304,247 $ 105,899 $ 52,871 $ 149,427
Sales ................. $(194,302) $ (322,079) $ (337,457) $ (94,285) $ (78,153)
PORTFOLIOS (CONTINUED)
------------------------------------------------
SMALL
GOVERTMENT PRUDENTIAL CAPITALIZATION
INCOME JENNISON STOCK
--------- --------- -----------
<S> <C> <C> <C>
Purchases ............. $ 66,028 $ 1,044,651 $ 119,350
Sales ................. $ (54,839) $ (179,404) $ (70,916)
</TABLE>
A19
<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, 1999, 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 accounting principles generally accepted
in the United States. 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 auditing
standards generally accepted in the United States, 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, 1999, provide a reasonable basis for the opinion expressed above.
PricewaterhouseCoopers LLP
New York, New York
March 17, 2000
A20
<PAGE>
Pruco Life Insurance Company of New Jersey
Statements of Financial Position
December 31, 1999 and 1998 (In Thousands)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1999 1998
----------------- ---------------
<S> <C> <C>
ASSETS
Fixed maturities
Available for sale, at fair value (amortized cost, 1999: $604,223; and $ 585,271 $ 622,990
1998: $617,758)
Held to maturity, at amortized cost (fair value, 1999: $6,938) 7,470 -
Policy loans 143,815 139,443
Short-term investments 27,473 53,761
Other long-term investments 2,520 2,421
----------------- ---------------
Total investments 766,549 818,615
Cash 117 45
Deferred policy acquisition costs 129,184 113,923
Accrued investment income 12,492 12,209
Receivables from affiliate 16,231 -
Other assets 474 15,379
Separate Account assets 1,827,484 1,450,986
----------------- ---------------
TOTAL ASSETS $2,752,531 $2,411,157
================= ===============
LIABILITIES AND STOCKHOLDER'S EQUITY
Liabilities
Policyholders' account balances $ 414,917 $ 414,546
Future policy benefits and other policyholder liabilities 105,861 89,832
Cash collateral for loaned securities 17,900 34,424
Securities sold under agreements to repurchase - 27,210
Income taxes payable 27,829 25,325
Payables to affiliate - 3,492
Other liabilities 7,571 19,489
Separate Account liabilities 1,827,484 1,450,986
----------------- ---------------
Total liabilities 2,401,562 2,065,304
----------------- ---------------
Contingencies - (See Footnote 11)
Stockholder's Equity
Common stock, $5 par value;
400,000 shares, authorized;
issued and outstanding at
December 31, 1999 and 1998 2,000 2,000
Paid-in-capital 125,000 125,000
Retained earnings 230,057 217,260
Accumulated other comprehensive (loss) income (6,088) 1,593
----------------- ---------------
Total stockholder's equity 350,969 345,853
----------------- ---------------
TOTAL LIABILITIES AND
STOCKHOLDER'S EQUITY $2,752,531 $2,411,157
================= ===============
</TABLE>
See Notes to Financial Statements
B1
<PAGE>
Pruco Life Insurance Company of New Jersey
Statements of Operations and Comprehensive Income
Years Ended December 31, 1999, 1998, and 1997 (In Thousands)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1999 1998 1997
---------------- ----------------- ----------------
<S> <C> <C> <C>
REVENUES
Premiums $ 6,742 $ 7,282 $ 6,832
Policy charges and fee income 52,714 53,152 56,687
Net investment income 47,600 47,032 46,324
Realized investment (losses) gains, net (5,013) 8,446 1,707
Asset management fees 7,407 5,641 5,287
Other income 386 114 -
---------------- ----------------- ----------------
Total revenues 109,836 121,667 116,837
---------------- ----------------- ----------------
BENEFITS AND EXPENSES
Policyholders' benefits 26,237 30,679 39,727
Interest credited to policyholders' account 18,846 19,038 19,372
balances
General, administrative and other expenses 45,065 22,557 27,541
---------------- ----------------- ----------------
Total benefits and expenses 90,148 72,274 86,640
---------------- ----------------- ----------------
Income from operations before income taxes 19,688 49,393 30,197
---------------- ----------------- ----------------
Income tax provision 6,891 17,570 10,974
---------------- ----------------- ----------------
NET INCOME $ 12,797 $ 31,823 $ 19,223
================ ================= ================
Net unrealized investment (losses) gains on
securities, net of reclassification adjustment and
taxes (7,681) (1,363) 924
---------------- ----------------- ----------------
TOTAL COMPREHENSIVE INCOME $ 5,116 $ 30,460 $ 20,147
================ ================= ================
</TABLE>
See Notes to Financial Statements
B2
<PAGE>
Pruco Life Insurance Company of New Jersey
Statements of Changes in Stockholder's Equity
Years Ended December 31, 1999, 1998, and 1997 (In Thousands)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Accumulated
other Total
Common Paid - in - Retained comprehensive stockholder's
stock capital earnings income (loss) equity
------------ ----------- --------- ------------- ---------------
<S> <C> <C> <C> <C> <C>
Balance, January 1, 1997 $ 2,000 $ 125,000 $ 166,214 $ 2,032 $ 295,246
Net income - - 19,223 - 19,223
Change in net unrealized
investment (losses) gains,
net of reclassification
and taxes 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 (losses) gains,
net of reclassification
and taxes - - - (1,363) (1,363)
--------- --------- --------- --------- ---------
Balance, December 31, 1998 2,000 125,000 217,260 1,593 345,853
Net income - - 12,797 - 12,797
Change in net unrealized
investment (losses) gains,
net of reclassification
and taxes - - - (7,681) (7,681)
--------- --------- --------- --------- ---------
Balance, December 31, 1999 $ 2,000 $ 125,000 $ 230,057 $ (6,088) $ 350,969
========= ========= ========= ========= =========
</TABLE>
See Notes to Financial Statements
B3
<PAGE>
Pruco Life Insurance Company of New Jersey
Statements of Cash Flows
Years Ended December 31, 1999, 1998, and 1997 (In Thousands)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1999 1998 1997
--------------------------------------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 12,797 $ 31,823 $ 19,223
Adjustments to reconcile net income to net cash (used in)
provided by
operating activities:
Policy charges and fee income (11,399) (5,180) (7,841)
Interest credited to policyholders' account balances 18,846 19,038 19,372
Realized investment losses (gains), net 5,013 (8,446) (1,707)
Amortization and other non-cash items 18,092 2,497 (342)
Change in:
Future policy benefits and other policyholders' 16,029 5,304 8,277
liabilities
Accrued investment income (283) 1,866 (1,167)
Policy loans (4,372) (12,137) (13,388)
Payable to affiliates (19,723) (815) (1,752)
Deferred policy acquisition costs (15,261) (12,298) 5,340
Income taxes payable 2,504 (9,826) 9,006
Other, net 2,987 (8,954) 2,812
----------- ----------- -----------
Cash Flows From Operating Activities 25,230 2,872 37,833
----------- ----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from the sale/maturity of:
Fixed maturities:
Available for sale 702,380 1,001,096 645,355
Payments for the purchase of:
Fixed maturities:
Available for sale (695,198) (1,029,988) (679,709)
Held to maturity (7,470) -- --
Other long term investments, net 99 (854) 1,629
Cash collateral for loaned securities, net (16,524) 761 33,663
Securities sold under agreements to repurchase, net (27,210) 27,210 --
Short term investments, net 26,296 (1,297) (35,461)
----------- ----------- -----------
Cash Flows Used in Investing Activities (17,627) (3,072) (34,523)
----------- ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Policyholders' account balances:
Deposits 256,842 298,391 134,020
Withdrawals (264,373) (298,149) (141,255)
----------- ----------- -----------
Cash Flows (Used in) From Financing Activities (7,531) 242 (7,235)
----------- ----------- -----------
Net increase (decrease) in Cash 72 42 (3,925)
Cash, beginning of year 45 3 3,928
----------- ----------- -----------
CASH, END OF PERIOD $ 117 $ 45 $ 3
=========== =========== ===========
SUPPLEMENTAL CASH FLOW INFORMATION
Income taxes paid $ 480 $ 27,083 $ 1,896
=========== =========== ===========
</TABLE>
See Notes to Financial Statements
B4
<PAGE>
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. Prudential is currently considering reorganizing itself into a
publicly traded stock company through a process known as "demutualization."
On February 10, 1998, Prudential's Board of Directors authorized management
to take the preliminary steps necessary to allow Prudential 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 Prudential's Board of Directors, a
public hearing, approval by two-thirds of the qualified policyholders who
vote on the plan review and approval by the New Jersey Department of Banking
and Insurance. Prudential's management is in the process of developing a
proposed plan of demutualization, although there can be no assurance that
Prudential's Board of Directors will approve such a plan. Prudential's
decision whether to demutualize is not expected to have a material effect on
the Company's operations.
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.
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 accounting principles generally accepted in the United States ("GAAP").
The Company has extensive transactions and relationships with Prudential and
other affiliates, as more fully described in Footnote 13. Due to these
relationships, it is possible that the terms of those transactions are not
the same as those that would result from transactions among wholly unrelated
parties.
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, in particular deferred policy acquisition costs
("DAC") and future policy benefits, 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 DAC and policyholders' account balances 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, including 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 (losses), net, are computed using the specific
identification method. Costs of fixed maturities are adjusted for impairments
considered to be other than temporary.
Cash
Cash includes cash on hand, amounts due from banks, and money market
instruments.
B5
<PAGE>
Notes to Financial Statements
- --------------------------------------------------------------------------------
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
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.
Policy acquisition costs related to interest-sensitive products and certain
investment-type products are deferred and amortized over the expected life of
the contracts (periods ranging from 15 to 30 years) in proportion to
estimated gross profits arising principally from investment results,
mortality and expense margins, and surrender charges based on historical and
anticipated future experience, which is updated periodically. The effect of
changes to estimated gross profits on unamortized deferred acquisition costs
is reflected in "General and administrative expenses" 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% and 105% of the fair value of the domestic and
foreign securities, respectively. 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 because the debtor typically has the right to redeem the
collateral on short notice. 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. Assets to be repurchased are the same, or
substantially the same, as the assets transferred and the transferor, through
right of substitution, maintains the right and ability to redeem the
collateral on short notice. The market value of securities to be repurchased
is monitored and additional collateral is obtained, 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
Consolidated Statements of Operations. Mortality, policy administration and
surrender charges on the accounts are included in "Policy charges and fee
income."
B6
<PAGE>
Notes to Financial Statements
- --------------------------------------------------------------------------------
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
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 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.
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 DAC.
Asset Management Fees
The Company receives asset management fee income from Separate Account
policyholder account balances invested in the Prudential Series Fund ("PSF").
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
seek to reduce 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 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 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.
B7
<PAGE>
Notes to Financial Statements
- --------------------------------------------------------------------------------
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
New Accounting Pronouncements
In June 1998, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("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 does not
apply to most traditional insurance contracts. However, certain hybrid
contracts that contain features which may 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.
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).
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
derivatives 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, as amended, as of January 1, 2001 and is currently
assessing the effect of the new standard.
In October 1998, the American Institute of Certified Public Accountants
("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 presentation.
B8
<PAGE>
Notes to Financial Statements
- --------------------------------------------------------------------------------
3. INVESTMENTS
Fixed Maturities
The following tables provide additional information relating to fixed
maturities as of December 31:
<TABLE>
<CAPTION>
1999
--------------------------------------------------------------
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 $ 9,489 $ - $ 63 $ 9,426
Foreign government bonds 5,000 - 68 4,932
Corporate Securities 588,695 681 19,499 569,877
Mortgage-backed securities 1,039 - 3 1,036
--------- ------- -------- ---------
Total fixed maturities available for $ 604,223 $ 681 $ 19,633 $ 585,271
sale
Fixed Maturities held to maturity
Corporate Securities $ 7,470 $ - $ 531 $ 6,938
--------- ------- -------- ---------
Total fixed maturities held to $ 7,470 $ - $ 532 $ 6,938
maturity
========= ======== ======== =========
</TABLE>
<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 529,844 7,273 2,633 534,484
Mortgage-backed securities 1,507 - 1 1,506
--------- ------- -------- ---------
Total fixed maturities available for
sale $ 617,758 $ 8,420 $ 3,188 $ 622,990
========= ======== ======== =========
</TABLE>
B9
<PAGE>
Notes to Financial Statements
- --------------------------------------------------------------------------------
3. INVESTMENTS (continued)
The amortized cost and estimated fair value of fixed maturities, categorized
by contractual maturities at December 31, 1999, are shown below:
<TABLE>
<CAPTION>
Available for Sale Held to Maturity
------------------------------------ ---------------------------------------
Amortized Estimated Fair Amortized Estimated Fair
Cost Value Cost Value
------------------------------------ ------------------- ------------------
(In Thousands) (In Thousands)
<S> <C> <C> <C> <C>
Due in one year or less $ 78,150 $ 76,922 $ - $ -
Due after one year through five 187,710 183,686 - -
years
Due after five years through ten 268,224 257,241 7,470 6,938
years
Due after ten years 70,139 67,422 - -
---------- ----------- --------- ----------
Total $ 604,223 $ 585,271 $ 7,470 $ 6,938
========== =========== ========= ==========
</TABLE>
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 1999,
1998, and 1997 were $698.8 million, $990.7 million, and $635.4 million,
respectively. Gross gains of $3.5 million, $8.8 million, and $2.9 million,
and gross losses of $8.0 million, $1.8 million, and $1.2 million were
realized on those sales during 1999, 1998, and 1997, respectively. Proceeds
from maturities of fixed maturities available for sale during 1999, 1998, and
1997 were $3.6 million, $10.4 million, and $10.0 million, respectively.
During the years ended December 31, 1999, 1998, and 1997, there were no
securities classified as held to maturity that were sold.
Special Deposits
Fixed maturities of $.5 million at both December 31, 1999 and 1998
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>
1999 1998 1997
---------- ---------- -----------
(In Thousands)
<S> <C> <C> <C>
Fixed maturities - AFS & HTM $ 39,538 $ 39,478 $ 37,563
Policy loans 7,641 7,350 6,596
Short-term investments 2,516 3,502 3,023
Other 60 (842) 333
--------- --------- ----------
Gross investment income 49,755 49,488 47,515
Less investment expenses (2,155) (2,456) (1,191)
--------- --------- ----------
Net investment income $ 47,600 $ 47,032 $ 46,324
========= ========== ==========
Realized investment gains (losses), net, including charges for other than
temporary reductions in value, for the years ended December 31, were as
follows:
1999 1998 1997
------------------ ------------------ -------------------
(In Thousands)
Realized investment gains $ 6,436 $ 17,957 $ 2,898
Realized investment losses (11,449) (9,511) (1,191)
---------- ---------- ---------
Realized investment (losses) gains, net $ (5,013) $ 8,446 $ 1,707
========== ========== =========
</TABLE>
B10
<PAGE>
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 including in "Other comprehensive income (loss)" those
items that are included as part of "net income" for a period that also had
been part of "Other comprehensive income (loss)" in earlier periods. The
amounts for the years ended December 31, net of tax, are as follows:
<TABLE>
<CAPTION>
Accumulated
other
comprehensive
income (loss)
Deferred Deferred related to net
Unrealized policy Policyholders' income tax unrealized
gains (losses) acquisition Account (liability) investment
on investments costs Balances benefit gains (losses)
----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Balance, December 31, 1996 $ 4,170 $ (1,209) $330 $ (1,259) $ 2,032
Net investment gains on investments
arising during the period 4,788 (1,676) 3,112
Reclassification adjustment for
(losses) included in net income (1,706) 597 (1,109)
Impact of net unrealized investment
(losses) on deferred policy
acquisition costs (2,170) 759 (1,411)
Impact of net unrealized investment
gains on policyholders' account
balances 519 (187) 332
--------- -------- --------- --------- --------
Balance, December 31, 1997 $ 7,252 $ (3,379) $ 849 $ (1,766) $ 2,956
Net investment gains on investments
arising during the period 4,966 (1,662) 3,304
Reclassification adjustment for
(losses) included in net income (6,985) 2,338 (4,647)
Impact of net unrealized investment
(losses) on deferred policy
acquisition costs (166) 58 (108)
Impact of net unrealized investment
gains on policyholders' account
balances 138 (50) 88
--------- -------- --------- --------- --------
Balance, December 31, 1998 $ 5,233 $(3,545) $ 987 $ (1,082) $ 1,593
Net investment (losses) on investments
arising during the period (28,794) 10,366 (18,428)
Reclassification adjustment for gains
included in net income 4,610 (1,660) 2,950
Impact of net unrealized investment
gains on deferred policy acquisition
costs 14,681 (5,285) 9,396
Impact of net unrealized investment
(losses) on policyholders' account
balances (2,499) 900 (1,599)
--------- -------- --------- --------- --------
Balance, December 31, 1999 $ (18,951) $ 11,136 $ (1,512) $ 3,239 $ (6,088)
========= ========= ========= ========= ========
</TABLE>
B11
<PAGE>
Notes to Financial Statements
- --------------------------------------------------------------------------------
4. DEFERRED POLICY ACQUISITION COSTS
The balance of and changes in deferred policy acquisition costs for the year
ended December 31, are as follows:
<TABLE>
<CAPTION>
1999
---------------------
(In Thousands)
<S> <C>
Balance, beginning of year $ 113,923
Capitalization of commissions, sales and issue 13,439
expenses
Amortization (12,859)
Change in unrealized investment losses 14,681
---------------------
Balance, end of year $ 129,184
=====================
</TABLE>
5. POLICYHOLDERS' LIABILITIES
Future policy benefits and other policyholder liabilities at December 31 are
as follows:
<TABLE>
<CAPTION>
1999 1998
------------------- -------------------
(In Thousands)
<S> <C> <C>
Life insurance $ 100,686 $ 84,825
Annuities 5,175 5,007
------------------- -------------------
$ 105,861 $ 89,832
=================== ===================
</TABLE>
Life insurance liabilities include reserves for death and endowment policy
benefits. Annuity liabilities include reserves for immediate annuities.
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 3.5% to 8.75% Present value of
annuities Mortality Table with expected future payment
certain modifications based on historical
experience
Policyholders' account balances at December 31, are as follows:
<CAPTION>
1999 1998
------------------- -------------------
(In Thousands)
<S> <C> <C>
Individual annuities $ 150,687 $ 148,327
Interest-sensitive life contracts 264,230 266,219
------------------- -------------------
$ 414,917 $ 414,546
=================== ===================
</TABLE>
Policyholders' account balances for interest-sensitive life and individual
annuities 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.
B12
<PAGE>
Notes to Financial Statements
- --------------------------------------------------------------------------------
5. POLICYHOLDERS' LIABILITIES (continued)
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 4.0% to 5.4 % Various up to 10 years
contracts
Individual annuities 3.0% to 5.6% 0% to 8% for up to 8 years
</TABLE>
6. REINSURANCE
The Company participates in reinsurance with Prudential 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 of 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.
<TABLE>
<CAPTION>
1999 1998 1997
------------------ ------------------ -------------------
(In Thousands)
<S> <C> <C> <C>
Reinsurance premiums ceded - affiliated $ (17) $ (28) $ (12)
================== ================== ===================
Policyholders' benefits ceded $ 0 $ 0 $ 0
================== ================== ===================
</TABLE>
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:
<TABLE>
<CAPTION>
1999 1998
------------ ------------
(In Thousands)
<S> <C> <C>
Life insurance - affiliated $16 $ 31
============ ============
</TABLE>
B13
<PAGE>
Notes to Financial Statements
- --------------------------------------------------------------------------------
7. INCOME TAXES
The components of income taxes for the years ended December 31, are as
follows:
<TABLE>
<CAPTION>
1999 1998 1997
----------------- ---------------- -----------------
(In Thousands)
<S> <C> <C> <C>
Current tax expense (benefit):
U.S. $ 6,769 $14,786 $12,880
State and local 178 523 399
----------------- ---------------- -----------------
Total 6,947 15,309 13,279
----------------- ---------------- -----------------
Deferred tax expense (benefit):
U.S. (54) 2,198 (2,305)
State and local (2) 63 -
----------------- ---------------- -----------------
Total (56) 2,261 (2,305)
----------------- ---------------- -----------------
Total income tax expense $ 6,891 $17,570 $10,974
================= ================ =================
</TABLE>
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:
<TABLE>
<CAPTION>
1999 1998 1997
----------------- ---------------- -----------------
(In Thousands)
<S> <C> <C> <C>
Expected federal income tax expense $6,891 $17,288 $10,569
State and local income taxes 115 381 259
Other (115) (99) 146
----------------- ---------------- -----------------
Total income tax expense $6,891 $17,570 $10,974
================= ================ =================
</TABLE>
Deferred tax assets and liabilities at December 31, resulted from the items
listed in the following table:
<TABLE>
<CAPTION>
1999 1998
---------------- ----------------
(In Thousands)
<S> <C> <C>
Deferred tax assets:
Insurance reserves $ 9,711 $10,016
Net unrealized (gains) losses on 6,823 (1,884)
securities
Investment gains 2,083 -
---------------- ----------------
Deferred tax assets $18,617 $8,132
---------------- ----------------
Deferred tax liabilities:
Deferred acquisition costs 37,174 28,509
Investment gains - 963
Other 879 2,375
---------------- ----------------
Deferred tax liabilities 38,053 31,847
---------------- ----------------
Net deferred tax liability $19,436 $23,715
================ ================
</TABLE>
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, 1999 and
1998, respectively, the Company had no federal or state operating loss
carryforwards for tax purposes.
B14
<PAGE>
Notes to Financial Statements
- --------------------------------------------------------------------------------
7. INCOME TAXES (continued)
The Internal Revenue Service (the "Service") has completed examinations of
the consolidated federal income tax returns through 1992. The Service has
begun their examination of the years 1993 through 1995.
8. 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>
1999 1998 1997
------- ------ --------
(In Thousands)
<S> <C> <C> <C>
Statutory net income $ 20,221 $ 18,704 $ 18,306
Adjustments to reconcile to net income on a GAAP basis:
Amortization and capitalization of deferred 580 12,464 (3,170)
acquisition costs
Deferred premium (314) 534 198
Insurance revenues and expenses 983 (808) 2,324
Income taxes (139) (2,973) 2,517
Valuation of investments (3,199) 5,896 1,707
Amortization of IMR (2,089) (2,102) (1,850)
Asset management fees (2,050) -- --
Other, net (1,196) 108 (809)
-------- -------- --------
GAAP net income $ 12,797 $ 31,823 $ 19,223
======== ======== ========
<CAPTION>
1999 1998
---------------- ----------------
(In Thousands)
<S> <C> <C>
Statutory surplus $274,437 $252,530
Adjustments to reconcile to equity on a GAAP basis:
Valuation of investments (9,644) 20,799
Deferred acquisition costs 129,184 113,923
Deferred premium (1,159) (1,473)
Insurance liabilities (23,889) (18,141)
Income Taxes (17,977) (21,716)
Asset management fees (2,050) -
Other, net 2,067 (69)
---------------- ----------------
GAAP stockholder's equity $350,969 $345,853
================ ================
</TABLE>
9. 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).
B15
<PAGE>
Notes to Financial Statements
- --------------------------------------------------------------------------------
9. FAIR VALUE OF FINANCIAL INSTRUMENTS (continued)
Fixed maturities
Estimated fair values for fixed maturities are based on quoted market prices
or estimates from independent pricing services.
Policy loans
The 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.
Investment contracts
Estimated fair values of investment contracts are derived by using the
policyholder's account balance.
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>
1999 1998
---------------------------------- -----------------------------------
Carrying Estimated Carrying Estimated
Value Fair Value Value Fair Value
---------------- ----------------- ----------------- -----------------
(In Thousands)
<S> <C> <C> <C> <C>
Financial Assets:
Fixed maturities:
Available for sale $ 585,271 $585,271 $622,990 $622,990
Held to maturity 7,470 6,938 - -
Policy loans 143,815 136,990 139,443 146,504
Short-term investments 27,473 27,473 53,761 53,761
Cash 117 117 45 45
Separate Accounts assets 1,827,484 1,827,484 1,450,986 1,450,986
Financial Liabilities:
Investment contracts $ 92,096 $ 92,096 $ 87,948 $ 87,948
Cash collateral for loaned 17,900 17,900 34,424 34,424
securities
Securities sold under
agreements to repurchase - - 27,210 27,210
Separate Accounts liabilities 1,827,484 1,827,484 1,450,986 1,450,986
Derivatives 597 597 - -
</TABLE>
10. 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 and to manage the duration of assets to better
match the duration of liabilities supported by those assets. 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. Treasury futures move substantially in value as interest
rates change and can be used to either modify 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.
B16
<PAGE>
Notes to Financial Statements
- --------------------------------------------------------------------------------
10. DERIVATIVE AND OFF-BALANCE SHEET CREDIT-RELATED INSTRUMENTS (continued)
If futures 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 notional
and fair value of futures contracts was $46.4 million and $(.6) million at
December 31, 1999, respectively. There were no open futures contracts at
December 31, 1998.
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. As of December 31, 1999
100% of the notional consisted of interest rate derivatives.
11. CONTINGENCIES
Various lawsuits against the Company have arisen in the course of the
Company's business. In certain of these matters, large and/or indeterminate
amounts are sought.
On October 28, 1996, the Company entered into a Stipulation of Settlement
with attorneys for the plaintiffs in a consolidated class action lawsuit
pending in a Multi-District Litigation proceeding in the U.S. District Court
for the District of New Jersey. The class action suit involved alleged
improprieties in connection with the sale, servicing and operation of
permanent life insurance policies from 1982 through 1995. Pursuant to the
settlement, the Company has participated in a remediation program pursuant to
which relief was offered to policyowners who were misled when they purchased
permanent life insurance policies in the United States from 1982 to 1995.
Prudential has agreed to indemnify the Company for any liability incurred in
connection with that litigation.
The balance of the Company's litigation is subject to many uncertainties, and
given the complexity and scope, the outcomes cannot be predicted with
precision. Management believes that any ultimate liability which could result
from such litigation would not have a material adverse effect on the
Company's financial position.
12. 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 earned surplus derived from
realized net profits.
13. RELATED PARTY TRANSACTIONS
Service Agreements
Prudential and the Company operate under service and lease agreements whereby
services of officers and employees, supplies, use of equipment and office
space are provided by Prudential. Prudential periodically reviews its methods
for determining the level of administrative expenses charged to the Company.
Late in 1998, Prudential revised its allocation methodology to more closely
align allocations based on business processes, resulting in increased
allocations from 1998 levels. Management believes that the updated
methodology is reasonable and better reflects actual costs incurred by
Prudential to process transactions on behalf of the Company. The net cost of
these services allocated to the Company were $28.3 million, $23.5 million and
$16.2 million for the years ended December 31, 1999, 1998, and 1997,
respectively.
In addition, the Company received allocated distribution expenses from
Prudential's retail agency network. Beginning in 1999, market based
distribution transfer pricing was the basis for allocating costs to each
product line that distributes products through Prudential's retail agency
channels. A majority of these distribution expenses have been capitalized by
the Company as DAC.
The Company receives asset management fees from Pruco Life for its
policyholder account balances invested in the Prudential Series Fund ("PSF")
managed by Pruco Life. The Company received from Pruco Life its allocable
shares of such compensation in the amount of $7.4 million, $5.6 million, and
$5.3 million, during 1999, 1998, and 1997, respectively, recorded as "Asset
management fee income" in the Statements of Operations and Comprehensive
Income.
B17
<PAGE>
Notes to Financial Statements
- --------------------------------------------------------------------------------
13. RELATED PARTY TRANSACTIONS (continued)
The Company pays an asset management fee to Prudential Global Asset
Management ("PGAM") for managing the Separate Account investment portfolio.
The expense for the year was $3.0 million, which is shown in general,
administrative and other expenses.
The Company has sold a Corporate Owned Life Insurance ("COLI") policy to
Prudential. The cash surrender value included in Separate Accounts at
December 31, 1999 was $199.0 million.
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, 1999,
1998, and 1997.
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, 1999.
B18
<PAGE>
Report of Independent Accountants
To the Board of Directors and Stockholder 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 (an indirect, wholly-owned
subsidiary of the Prudential Insurance Company of America) at December 31,
1999 and 1998, and the results of its operations and its cash flows for each
of the three years in the period ended December 31, 1999, in conformity with
accounting principles generally accepted in the United States. 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
auditing standards generally accepted in the United States 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
March 21, 2000
B19
<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.
[LOGO] Prudential
Pruco Life Insurance Company of New Jersey
213 Washington Street, Newark, NJ 07102-2992
Telephone: 800 778-2255
VLI-2 Ed. 5/2000 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 ("Pruco Life 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 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 of New Jersey, 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 Pruco Life of New Jersey"s By-law, Article V, which
relates to indemnification of officers and directors, is incorporated by
reference to Exhibit 1.A.(6)(c) to its Form S-6, Registration No. 333-85117,
filed August 13, 1999.
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 71 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:
- -----------------------
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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 theVariable
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)
</TABLE>
II-2
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
(n) Copy of New York PLY 61-85 Endorsement to the Variable Life
Insurance Contract. (Note 5)
(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
August 4, 1999. (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 YorkIssues. (Note 5)
(ee) Rider for Military Aviation Risk Exclusion - New Jersey Issues. (Note 5)
</TABLE>
II-3
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
(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)
(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)
</TABLE>
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)
(d) David R. Odenath, Jr. (Note 8)
(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.
II-4
<PAGE>
(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 S-6, Registration No. 333-85117,
filed August 13, 1999 on behalf of the Pruco Life of New Jersey
Variable Appreciable Account.
(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.
(Note 8) Incorporated by reference to Post-Effective Amendment No. 13 to Form
S-1, Registration No. 33-20018, filed April 12, 2000 on behalf of the
Pruco Life of New Jersey Variable Contract Real Property Account.
II-5
<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 26th day of April, 2000.
(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. 27 to the Registration Statement has been signed below by the
following persons in the capacities indicated on this 26th day of April, 2000.
SIGNATURE AND TITLE
-------------------
/s/ *
- ----------------------------------
Esther H. Milnes
President and Director
/s/ *
- ----------------------------------
Dennis G. Sullivan
Vice President and Chief Accounting Officer *By: /s/ Thomas C. Castano
---------------------
Thomas C. Castano
(Attorney-in-Fact)
/s/ *
- ----------------------------------
James J. Avery, Jr.
Director
/s/ *
- ----------------------------------
William M. Bethke
Director
/s/ *
- ----------------------------------
David R. Odenath, Jr.
Director
/s/ *
- ----------------------------------
Ira J. Kleinman
Director
/s/ *
- ----------------------------------
I. Edward Price
Director
II-6
<PAGE>
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in the Prospectus constituting part of this
Post-Effective Amendment No. 27 to the registration statement on Form S-6 (the
"Registration Statement") of our report dated March 17, 2000, 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 March 21, 2000, 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 24, 2000
II-7
<PAGE>
EXHIBIT INDEX
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Consent of PricewaterhouseCoopers LLP, independent accountants. Page II-7
3. Opinion and Consent of Clifford E. Kirsch, Esq., as to the legality Page II-9
of the securities being registered.
6. Opinion and Consent of Nancy D. Davis, FSA, MAAA, as to actuarial Page II-10
matters pertaining to the securities being registered.
</TABLE>
II-8
<PAGE>
EXHIBIT 3
April 24, 2000
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
<PAGE>
EXHIBIT 6
April 24, 2000
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 (the
"Contracts") under the Securities Act of 1933. The prospectus included in
Post-Effective Amendment No. 27 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 cash values and death benefits included
in the section entitled "Illustrations of Cash Values, Death
Benefits, and Accumulated Premiums," 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.
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
