<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1995
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
Commission file number 33-37587
PRUCO LIFE INSURANCE COMPANY
(Exact name of Registrant as specified in its charter)
Arizona 22-1944557
------------------------------------------- ---------------------------------
(State or other (IRS Employer Identification No.)
jurisdiction, incorporation or organization)
213 Washington Street, Newark, New Jersey 07102-2992
------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(201) 802-6149
------------------------------------------------------
(Registrant's Telephone Number, including area code)
Securities registered pursuant to Section 12 (b) of the Act: NONE
Securities registered pursuant to Section 12 (g) of the Act: NONE
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. YES X NO
--- ---
State the aggregate market value of the voting stock held by non-affiliates
of the registrant: NONE
Indicate the number of shares outstanding of each of the registrant's
classes of common stock, as of August 15, 1995: Common stock, par value of $10
per share: 250,000 shares outstanding
<PAGE>
PRUCO LIFE INSURANCE COMPANY
(Registrant)
INDEX
Page
No.
Cover Page -
Index 2
PART I - FINANCIAL INFORMATION
Item 1. Condensed Consolidated Financial Statements
Statements of Financial Position - June 30, 1995
(Unaudited) and December 31, 1994 3
Statements of Operations (Unaudited) - Periods Ended
June 30, 1995 and 1994 4
Statements of Cash Flows (Unaudited) - Periods Ended
June 30, 1995 and 1994 5
Notes to the Consolidated Financial Statements
(Unaudited) 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 7
PART II - OTHER INFORMATION
Item 1. Legal Proceedings 9
Item 2. Change in Securities 9
Item 3. Defaults Upon Senior Securities 9
Item 4. Submission of Matters to a Vote of Security Holders 9
Item 5. Other Information 9
Item 6. Exhibits, Financial Statements and Reports on Form 8-K 9
Signature Page 11
2
<PAGE>
CONSOLIDATED FINANCIAL STATEMENTS OF
PRUCO LIFE INSURANCE COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
<TABLE>
<CAPTION>
(UNAUDITED)
JUNE 30, DECEMBER 31,
1995 1994
----------- ------------
($000'S)
<S> <C> <C>
ASSETS
Fixed maturities (market value $2,635,977
and $2,596,171). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $2,573,605 $2,647,315
Equity securities (cost $6,903 and $5,434). . . . . . . . . . . . . . . . . . . 8,067 3,326
Mortgage loans. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65,142 71,919
Investment real estate. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,120 7,189
Policy loans. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 530,255 493,862
Other long-term investments . . . . . . . . . . . . . . . . . . . . . . . . . . 4,550 4,044
Short-term investments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 196,502 191,455
---------- ----------
Total Investments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,382,241 3,419,110
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34,519 27,780
Accrued investment income . . . . . . . . . . . . . . . . . . . . . . . . . . . 56,033 59,382
Premiums due and deferred . . . . . . . . . . . . . . . . . . . . . . . . . . . 17,901 16,821
Receivable from affiliates. . . . . . . . . . . . . . . . . . . . . . . . . . . 7,058 7,517
Federal income taxes from affiliate . . . . . . . . . . . . . . . . . . . . . . - 23,306
Other assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14,175 25,102
Assets held in Separate Accounts. . . . . . . . . . . . . . . . . . . . . . . . 3,916,374 3,511,784
---------- ----------
TOTAL ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $7,428,301 $7,090,802
---------- ----------
---------- ----------
LIABILITIES AND STOCKHOLDER'S EQUITY
LIABILITIES:
Policy liabilities and insurance reserves:
Future policy benefits and claims. . . . . . . . . . . . . . . . . . . . . $2,596,353 $2,767,552
Other policy claims and benefits payable . . . . . . . . . . . . . . . . . 13,662 15,184
Interest maintenance reserve (IMR) . . . . . . . . . . . . . . . . . . . . 22,067 21,802
Payable to affiliates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37,236 30,257
Federal income taxes-to affiliate . . . . . . . . . . . . . . . . . . . . . . . 15,032 -
Other liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 140,084 131,695
Asset valuation reserve (AVR) . . . . . . . . . . . . . . . . . . . . . . . . . 34,419 23,690
Liabilities related to Separate Accounts. . . . . . . . . . . . . . . . . . . . 3,826,985 3,424,535
---------- ----------
TOTAL LIABILITIES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,685,838 6,414,715
---------- ----------
STOCKHOLDER'S EQUITY:
Common Stock, $10 par value; authorized,
1,000,000 shares, issued and outstanding,
250,000 shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,500 2,500
Paid-in Capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 439,582 439,582
Unassigned surplus. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 300,381 234,005
---------- ----------
TOTAL STOCKHOLDER'S EQUITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 742,463 676,087
---------- ----------
TOTAL LIABILITIES AND STOCKHOLDER'S EQUITY . . . . . . . . . . . . . . . . . . . . . $7,428,301 $7,090,802
---------- ----------
---------- ----------
</TABLE>
SEE NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
3
<PAGE>
CONSOLIDATED FINANCIAL STATEMENTS OF
PRUCO LIFE INSURANCE COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS ENDED THREE MONTHS ENDED
JUNE 30, JUNE 30,
1995 1994 1995 1994
------ ------ ------ ------
($000'S) ($000'S)
<S> <C> <C> <C> <C>
REVENUE
Premiums and annuity considerations. . . . . . . . . . . . . . $274,092 $ 298,787 $134,118 $145,812
Net investment income. . . . . . . . . . . . . . . . . . . . . 125,669 121,969 62,065 62,447
Net realized investment gains/(losses) . . . . . . . . . . . . (1,191) (7,455) 19 (6,546)
Other income . . . . . . . . . . . . . . . . . . . . . . . . . 27,303 5,109 23,643 2,873
-------- -------- -------- --------
TOTAL REVENUE. . . . . . . . . . . . . . . . . . . . . . . . . . 425,873 418,410 219,845 204,586
-------- -------- -------- --------
BENEFITS AND EXPENSES
Current and future benefits and claims . . . . . . . . . . . . 252,226 268,624 135,902 134,909
Commission expenses. . . . . . . . . . . . . . . . . . . . . . 12,509 15,104 6,303 7,690
General, administrative and other expenses . . . . . . . . . . 59,199 53,093 31,652 29,646
-------- -------- -------- --------
TOTAL BENEFITS AND EXPENSES. . . . . . . . . . . . . . . . . . . 323,934 336,821 173,857 172,245
-------- -------- -------- --------
Income before provision
in lieu of federal income tax. . . . . . . . . . . . . . . . 101,939 81,589 45,988 32,341
Provision in lieu of federal
income tax . . . . . . . . . . . . . . . . . . . . . . . . . 32,916 29,828 12,446 11,829
-------- -------- -------- --------
NET INCOME . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 69,023 $ 51,761 $ 33,542 $ 20,512
-------- -------- -------- --------
-------- -------- -------- --------
</TABLE>
SEE NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
4
<PAGE>
CONSOLIDATED FINANCIAL STATEMENTS OF
PRUCO LIFE INSURANCE COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30,
1995 1994
------ ------
($000'S)
<S> <C> <C>
CASH FLOW FROM OPERATING ACTIVITIES
Net income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . $ 69,023 $ 51,761
Adjustments to reconcile net income
to net cash from operations:. . . . . . .. . . . . . . . . . . . . . . . . (142,617) (197,367)
--------- ---------
CASH FLOW FROM OPERATING ACTIVITIES. . . . . . . . . . . . . . . . . . . . . . . . . (73,594) (145,606)
--------- ---------
CASH FLOW FROM INVESTING ACTIVITIES
Proceeds from the sale/maturity of:
Fixed maturities. . . . . . . . . . . . .. . . . . . . . . . . . . . . . . 995,311 1,670,311
Equity securities . . . . . . . . . . . .. . . . . . . . . . . . . . . . . 611 17
Mortgage loans . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . 6,807 4,297
Other long-term investments . . . . . . .. . . . . . . . . . . . . . . . . 120 1,157
Investment in Real Estate. . . . . . . . . . . . . . . . . . . . . . . . . 2,925 -
Payments for the purchase of:
Fixed maturities . . . . . . . . . . . .. . . . . . . . . . . . . . . . . (917,788) (1,534,974)
Equity securities . . . . . . . . . . . .. . . . . . . . . . . . . . . . . (2,047) (97)
Other long-term investments . . . . . . .. . . . . . . . . . . . . . . . . (626) (307)
Net proceeds (payments) of short-term
investments . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . (4,980) 18,648
--------- ---------
CASH FLOW FROM INVESTING ACTIVITIES. . . . . . . . . . . . . . . . . . . . . . . . . 80,333 159,052
--------- ---------
Net increase (decrease) in Cash . . . . . . . . . . . . . . . . . . . . . . . . 6,739 13,446
Cash, beginning of period . . . . . . . . . . . . . . . . . . . . . . . . . . . 27,780 671
--------- ---------
CASH, END OF PERIOD . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 34,519 $ 14,117
--------- ---------
--------- ---------
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash received/paid in lieu of income taxes. . . . . . . . . . . . . . . . . . . $ 0 $ 40,719
--------- ---------
--------- ---------
</TABLE>
SEE NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
5
<PAGE>
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS OF
PRUCO LIFE INSURANCE COMPANY AND SUBSIDIARIES
FOR THE PERIODS ENDED JUNE 30, 1995 AND 1994 (UNAUDITED)
1. GENERAL
The accompanying unaudited financial statements have been prepared in
accordance with generally accepted accounting principles (GAAP), which are
considered statutory accounting practices for a wholly owned stock
subsidiary of a mutual life insurance company. The Financial Accounting
Standards Board (the "FASB") issued Interpretation No. 40, "Applicability
of Generally Accepted Accounting Principles to Mutual Life Insurance and
Other Enterprises", which as amended is effective for fiscal years
beginning after December 15, 1995. Interpretation No. 40 changes the
current practice of the Company with respect to utilizing statutory basis
financial statements for general purposes in that it would not allow such
financial statements to be referred to as having been prepared in
accordance with GAAP pronouncements, unless specifically exempted.
Implementation of the Interpretation will require significant effort and
judgement as to determining GAAP for insurance operations. The Company is
currently unable to determine the impact of Interpretation No. 40 on its
financial statements.
Certain financial information which is normally included in financial
statements, prepared in accordance with generally accepted accounting
principles, but which is not required for interim reporting purposes, has
been omitted. The financial statements for the six months ended June 30,
1995 and 1994 include all adjustments (consisting of only normal recurring
accruals) which, in the opinion of management, are necessary for a fair
presentation of results for that interim period. The results for the six
months ended June 30, 1995 and 1994, are not necessarily indicative of the
results for a full year. These statements should be read in conjunction
with the consolidated financial statements and notes thereto included on
Form 10-K for the fiscal year ended December 31, 1994.
6
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Pruco Life Insurance Company consists of Pruco Life Insurance Company (Pruco
Life), Pruco Life Insurance Company of New Jersey and The Prudential Life
Insurance Company of Arizona (collectively, the Company). Pruco Life is a wholly
owned subsidiary of The Prudential Insurance Company of America (The
Prudential), a mutual life insurance company. The Company markets individual
life insurance and single pay deferred annuities primarily through The
Prudential's sales force. The Company held over $7.4 billion in assets at June
30, 1995, $3.9 billion of which were held in Separate Accounts under variable
life insurance policies and variable annuity contracts. The remaining assets
were held in the general account for investment primarily in bonds, short-term
investments and mortgage loans.
1. RESULTS OF OPERATIONS (FOR THE SIX MONTHS ENDED JUNE 30, 1995, COMPARED
WITH THE SIX MONTHS ENDED JUNE 30, 1994)
Net income for the six month period ended June 30, 1995 was $69 million. This
represents a $17 million increase over the same period in 1994, most of which is
attributable to improved investment results. In addition, the actual experience
associated with a special provision for non-guaranteed policyholder credits
reserve established at December 31, 1994 was less than had been estimated,
resulting in a slight increase in net income during the current period.
Premiums and annuity considerations decreased from $299 million at June 30, 1994
to $274 million for the same period in 1995. This decrease is primarily due to
the decline in first year premiums for certain life insurance products.
Net investment income and realized capital losses improved from $115 million for
the six month period ended June 30, 1994 to $124 million for the same period
ending June 30, 1995. This improvement was due primarily to the increase in
income generated by mortgage and policy loans. Income from bonds was comparable
to the same period in 1994 as the impact of a lower asset base was offset by a
higher rate of return for the portfolio.
Other income increased $22 million for the six months ended June 30, 1995 over
the six months ended June 30, 1994. This increase was primarily due to a
reclass of the special provision for non-guaranteed policyholder credits from a
miscellaneous reserve to insurance reserves. In addition, the company share of
separate account activity improved from a loss of $3 million for the six months
ended June 30, 1994 to a gain of $5 million for the six months ended June 30,
1995.
Current and future benefits and claims decreased $16 million for the six months
ended June 30, 1995, from the same period in 1994 which is consistent with the
decline in premiums. Withdrawals totaled $377 million for the six month period
ended June 30, 1995 and $315 million for the six month period ended June 30,
1994. However, the higher levels of withdrawals in 1995 were offset by a larger
reduction of reserves at June 30, 1995 compared to the same period in 1994.
Total expenses for the six month period ended June 30, 1995 increased by $4
million from the same period in 1994. General, administrative, and other
expenses for the period ended June 30, 1995, increased $6 million when compared
to the same period in 1994, largely due to the increase in costs being allocated
by The Prudential. Offsetting this increase was a decrease in commission
expenses of $3 million from the same period in 1994, which is consistent with
the decrease in first year premiums.
Provision in lieu of federal income taxes increased $3 million from the same
period in 1994. This increase is relates to the increase to income before taxes.
Net income for the three months ended June 30, 1995 was $34 million. This
represents a $13 million increase over the same period in 1994, most which is
attributable to improved investment results. In addition, the actual experience
associated with a special provision for non-guaranteed policyholder credits
reserve established at
7
<PAGE>
December 31, 1994 was less than had been estimated, resulting in a slight
increase in net income during the three month period ended June 30, 1995.
Premiums and annuity considerations decreased $12 million for the three months
ended June 30, 1995 from the three months ended June 30, 1994 primarily due to
the decline in first year premiums for certain life insurance products.
Net investment income and realized investment gains/(losses) improved from $56
million for the three months ended June 30, 1994 to $62 million for the three
months ended June 30, 1995. This improvement was due primarily to the increase
in income generated by mortgage and policy loans. Income from bonds was
comparable to the same period in 1994 as the impact of a lower asset base was
offset by a higher rate of return for the portfolio.
Other income increased $21 million for the three months ended June 30, 1995 from
the three months ended June 30, 1994 primarily due to a reclass of the special
provision for non-guaranteed policyholder credits from a miscellaneous reserve
to insurance reserves. The company share of separate account activity improved
from a loss of $1 million for the three months ended June 30, 1994 to a gain of
$5 million for the three months ended June 30, 1995.
Total benefits and expenses increased $2 million for the three months ended June
30, 1995 from the same period in 1994. The increase is largely due to general,
administrative and other expenses which increased due to the increase in costs
being allocated by The Prudential.
Provision in lieu for federal income tax remained flat for the three months
ended June 30, 1995 compared to the three months ended June 30, 1994. The
increase of $14 million to income before provision in lieu of federal income tax
for the three months ended June 30, 1995 from the same period in 1994 was offset
by adjustments to taxable income.
2. INVESTMENTS
MORTGAGE LOANS. The balance of mortgage loans at June 30, 1995, was $65 million,
a $7 million decrease from the end of 1994 resulting from the repayment of one
loan during the first quarter of 1995. Currently, the Company has two loans with
restructured terms in the amount of $7 million.
REAL ESTATE. As of June 30, 1995, the Company's investment in real estate was $4
million. Pruco Life sold one property during the first quarter of 1995 for
$3 million, accounting for the decrease in this asset category since the
beginning of the year.
8
<PAGE>
PART II
ITEM 1. LEGAL PROCEEDINGS
Pruco Life is not involved in any litigation that is expected to have a material
effect.
ITEM 2. CHANGES IN SECURITIES
Not applicable.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Not applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITIES HOLDERS
No actions were taken during the first quarter of 1995.
ITEM 5. OTHER INFORMATION
Not applicable.
ITEM 6. EXHIBITS, FINANCIAL STATEMENTS AND REPORTS ON FORM 8-K
(a) (1) and (2) Financial Statements of registrant and subsidiaries are
listed on pages 3-6 hereof and are filed as part of this Report.
(a)(3) EXHIBITS
REGULATION S-K
2. Not applicable.
4. Exhibits
Modified Guaranteed Annuity Contract, incorporated by reference to
Registrant's Form S-1 Registration Statement, Registration No. 33-
37587, filed November 2, 1990.
11. Not applicable.
9
<PAGE>
15. Not applicable.
18. None.
19. Not applicable.
20. Not applicable.
23. None.
24. Not applicable.
25. Not applicable.
28. None.
(b) Reports on 8-K
No reports on Form 8-K were filed during the second quarter of 1995.
10
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
PRUCO LIFE INSURANCE COMPANY
(Registrant)
Signature Title Date
--------- ----- ----
/s/ Esther H. Milnes
-------------------- President and Director August 15, 1995
Esther H. Milnes
/s/ Stephen P. Tooley
--------------------- Vice President and Comptroller August 15, 1995
Stephen P. Tooley
11
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 7
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FORM 10-Q
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000777917
<NAME> PRUCO LIFE INS. COMPANY
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> JUN-30-1995
<DEBT-HELD-FOR-SALE> 0
<DEBT-CARRYING-VALUE> 2,573,605
<DEBT-MARKET-VALUE> 2,635,977
<EQUITIES> 8,067
<MORTGAGE> 65,142
<REAL-ESTATE> 4,120
<TOTAL-INVEST> 3,382,241
<CASH> 34,519
<RECOVER-REINSURE> 391
<DEFERRED-ACQUISITION> 0
<TOTAL-ASSETS> 7,428,301
<POLICY-LOSSES> 0
<UNEARNED-PREMIUMS> 0
<POLICY-OTHER> 13,662
<POLICY-HOLDER-FUNDS> 2,675
<NOTES-PAYABLE> 0
<COMMON> 2,500
0
0
<OTHER-SE> 739,963
<TOTAL-LIABILITY-AND-EQUITY> 7,428,301
274,092
<INVESTMENT-INCOME> 125,669
<INVESTMENT-GAINS> (1,191)
<OTHER-INCOME> 27,303
<BENEFITS> 252,226
<UNDERWRITING-AMORTIZATION> 12,509
<UNDERWRITING-OTHER> 59,199
<INCOME-PRETAX> 101,939
<INCOME-TAX> 32,916
<INCOME-CONTINUING> 69,023
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 69,023
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
<RESERVE-OPEN> 0
<PROVISION-CURRENT> 0
<PROVISION-PRIOR> 0
<PAYMENTS-CURRENT> 0
<PAYMENTS-PRIOR> 0
<RESERVE-CLOSE> 0
<CUMULATIVE-DEFICIENCY> 0
</TABLE>
