<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 September 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 November 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 - September 30,
1995 (Unaudited) and December 31, 1994 3
Statements of Operations (Unaudited) - Periods
Ended September 30, 1995 and 1994 4
Statements of Cash Flows (Unaudited) - Periods
Ended September 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)
SEPTEMBER 30, DECEMBER 31,
1995 1994
-------------- -------------
($000'S)
<S> <C> <C>
ASSETS
Fixed maturities (market value $2,574,369
and $2,596,172). . . . . . . . . . . . . . $2,517,026 $2,647,315
Equity securities (cost $6,897 and $5,434) 7,004 3,326
Mortgage loans. . . . . . . . . . . . . . . . 64,845 71,919
Investment real estate. . . . . . . . . . . . 4,079 7,189
Policy loans. . . . . . . . . . . . . . . . . 550,444 493,862
Other long-term investments . . . . . . . . . 4,477 4,044
Short-term investments. . . . . . . . . . . . 209,043 191,455
----------- -----------
Total Investments. . . . . . . . . . . . . 3,356,918 3,419,110
Cash. . . . . . . . . . . . . . . . . . . . . 37,139 27,780
Accrued investment income . . . . . . . . . . 58,282 59,382
Premiums due and deferred . . . . . . . . . . 18,760 16,821
Receivable from affiliates. . . . . . . . . . 9,101 7,517
Federal income taxes - from affiliate . . . - 23,306
Other assets 12,523 25,102
Assets held in Separate Accounts. . . . . . . 4,148,723 3,511,784
----------- -----------
TOTAL ASSETS . . . . . . . . . . . . . . . . . . $7,641,446 $7,090,802
----------- -----------
----------- -----------
LIABILITIES AND STOCKHOLDER'S EQUITY
LIABILITIES:
Policy liabilities and insurance reserves:
Future policy benefits and claims. . . . . $2,596,828 $2,767,552
Other policy claims and benefits payable 14,953 15,184
Interest maintenance reserve (IMR) . . . . 23,870 21,802
Payable to affiliates . . . . . . . . . . . . 38,786 30,257
Federal income taxes - to affiliate. . . . . 4,945 -
Other liabilities . . . . . . . . . . . . . . 82,187 131,695
Asset valuation reserve (AVR) . . . . . . . . 34,441 23,690
Liabilities related to Separate Accounts 4,065,099 3,424,535
----------- -----------
TOTAL LIABILITIES. . . . . . . . . . . . . . . . 6,861,109 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. . . . . . . . . . . . . . 338,255 234,005
----------- -----------
TOTAL STOCKHOLDER'S EQUITY . . . . . . . . . . . 780,337 676,087
----------- -----------
TOTAL LIABILITIES AND STOCKHOLDER'S EQUITY $7,641,446 $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>
NINE MONTHS ENDED THREE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
1995 1994 1995 1994
------ ------ ------ ------
($000'S) ($000'S)
<S> <C> <C> <C> <C>
REVENUE
Premiums and annuity considerations . . . $431,428 $ 462,152 $157,336 $163,365
Net investment income . . . . . . . . . . 188,646 184,743 62,977 62,774
Net realized investment gains/(losses). . 3,470 (6,420) 4,661 1,035
Other income. . . . . . . . . . . . . . . 32,100 9,231 4,797 4,122
--------- ---------- --------- ---------
TOTAL REVENUE. . . . . . . . . . . . . . . . 655,644 649,706 229,771 231,296
--------- ---------- --------- ---------
BENEFITS AND EXPENSES
Current and future benefits and claims. . 385,932 414,897 133,706 146,273
Commission expenses . . . . . . . . . . . 19,160 23,299 6,651 8,195
General, administrative and other
expenses. . . . . . . . . . . . . . . . 87,898 78,034 28,699 24,941
--------- ---------- --------- ---------
TOTAL BENEFITS AND EXPENSES. . . . . . . . . 492,990 516,230 169,056 179,409
--------- ---------- --------- ---------
Income before provision
in lieu of federal income tax . . . . . 162,654 133,476 60,715 51,887
Provision in lieu of federal
income tax. . . . . . . . . . . . . . . 54,142 50,337 21,226 20,509
--------- ---------- --------- ---------
NET INCOME . . . . . . . . . . . . . . . . . $108,512 $83,139 $ 39,489 $ 31,378
--------- ---------- --------- ---------
--------- ---------- --------- ---------
</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>
NINE MONTHS ENDED
SEPTEMBER 30,
1995 1994
------ ------
($000'S)
<S> <C> <C>
CASH FLOW FROM OPERATING ACTIVITIES
Net income. . . . . . . . . . . . . . . . . $108,512 $83,139
Adjustments to reconcile net income
to net cash from operations:. . . . . . . (232,588) (152,388)
----------- ------------
CASH FLOW FROM OPERATING ACTIVITIES. . . . . . (124,076) (69,249)
----------- ------------
CASH FLOW FROM INVESTING ACTIVITIES
Proceeds from the sale/maturity of:
Fixed maturities. . . . . . . . . . . . . 1,521,429 2,219,498
Equity securities . . . . . . . . . . . . 4,236 52
Mortgage loans . . . . . . . . . . . . . 7,104 4,709
Other long-term investments . . . . . . . 193 1,226
Investment in Real Estate . . . . . . . . 2,925 5,621
Payments for the purchase of:
Fixed maturities . . . . . . . . . . . . (1,380,346) (2,064,231)
Equity securities . . . . . . . . . . . . (3,947) (433)
Other long-term investments . . . . . . . (626) (307)
Net payments of short-term
investments . . . . . . . . . . . . . . (17,533) (78,663)
----------- ------------
CASH FLOW FROM INVESTING ACTIVITIES. . . . . . 133,435 87,472
----------- ------------
Net increase in Cash . . . . . .. . . . . . 9,359 18,223
Cash, beginning of period . . . . . . . . . 27,780 671
----------- ------------
CASH, END OF PERIOD . . . . . . . . . . . . . $ 37,139 $ 18,894
----------- ------------
----------- ------------
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid in lieu of income taxes.. . . . . $ 29,896 $ 43,062
----------- ------------
----------- ------------
</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 SEPTEMBER 30, 1995 AND 1994 (UNAUDITED)
1. GENERAL
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 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 nine months ended
September 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 nine months ended September 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.
2. RELATED PARTY
Several actions have been brought against the Company on behalf of those
persons who purchased life insurance policies based on complaints about sales
practices engaged in by The Prudential, the Company and agents appointed by
The Prudential and the Company. The Prudential has agreed to indemnify the
Company for any and all losses resulting from such litigation.
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 $7.6 billion in assets at
September 30, 1995, $4.1 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 NINE MONTHS ENDED SEPTEMBER 30, 1995,
COMPARED WITH THE NINE MONTHS ENDED SEPTEMBER 30, 1994 AND THREE MONTHS ENDED
SEPTEMBER 30, 1995 COMPARED WITH THREE MONTHS ENDED SEPTEMBER 30, 1994)
Net income for the nine month period ended September 30, 1995 was $109 million.
This represents a $25 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 $462 million for the nine
months ended September 30, 1994 to $431 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 gains/(losses) improved from $178
million for the nine month period ended September 30, 1994 to $192 million for
the same period ending September 30, 1995. This improvement was due to capital
gains of $3 million for the nine months ended September 30, 1995 compared to
capital losses of $ 6 million for the nine months ended September 30, 1994. In
addition, income generated by mortgage and policy loans increased from the same
period in 1994.
Other income increased $23 million for the nine months ended September 30, 1995
over the nine months ended September 30, 1994. This increase was primarily due
to a reclass of the special provision for non-guaranteed policyholder credits
from a miscellaneous expense reserve to insurance reserves. In addition, the
company share of separate account activity improved from a loss of $3 million
for the nine months ended September 30, 1994 to a gain of $6 million for the
nine months ended September 30, 1995.
Current and future benefits and claims decreased $29 million for the nine months
ended September 30, 1995, from the same period in 1994 due to a decline in
premiums.
Total expenses for the nine month period ended September 30, 1995 increased by
$6 million from the same period in 1994. General, administrative, and other
expenses for the period ended September 30, 1995, increased $10 million when
compared to the same period in 1994, largely due to increased costs being
allocated by The Prudential. Offsetting this increase was a decrease in
commission expenses of $4 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 $4 million for the nine
months ended September from the same period in 1994. This increase relates to
the increase to income before provision in lieu of federal income taxes.
Net income for the three months ended September 30, 1995 was $39 million. This
represents an $8 million increase over the same period in 1994, most of which is
attributable to improved investment results and a decrease in current and future
benefits and claims.
7
<PAGE>
Premiums and annuity considerations decreased $6 million for the three months
ended September 30, 1995 from the three months ended September 30, 1994
primarily due to the decline in first year premiums for certain life insurance
products.
Net investment income and realized investment gains improved from $64 million
for the three months ended September 30, 1994 to $68 million for the three
months ended September 30, 1995. This improvement was primarily due to the
increase in capital gains.
Total benefits and expenses decreased $10 million for the three months ended
September 30, 1995 from the same period in 1994. This relates to the decline in
premiums.
2. INVESTMENTS
MORTGAGE LOANS. The balance of mortgage loans at September 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 September 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 third 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.
10. Not applicable.
11. Not applicable.
9
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15. Not applicable.
18. None.
19. Not applicable.
22. Not applicable.
23. None.
24. Not applicable.
27. Exhibit 27, Financial Data Schedule, appended to this form in
accordance with EDGAR instructions.
99. None
10
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
. . . . . . . . . . . . . PRUCO LIFE INSURANCE COMPANY
(Registrant)
Signature Title Date
- --------- ----- ----
/s/ Esther H. Milnes President and Director November 15, 1995
- --------------------------
Esther H. Milnes
/s/ Stephen P. Tooley Vice President November 15, 1995
- -------------------------- and Comptroller
Stephen P. Tooley
11
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 7
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-START> JAN-01-1995
<PERIOD-END> SEP-30-1995
<DEBT-HELD-FOR-SALE> 0
<DEBT-CARRYING-VALUE> 2,517,026
<DEBT-MARKET-VALUE> 2,574,369
<EQUITIES> 7,004
<MORTGAGE> 64,845
<REAL-ESTATE> 4,079
<TOTAL-INVEST> 3,356,918
<CASH> 37,139
<RECOVER-REINSURE> 245
<DEFERRED-ACQUISITION> 0
<TOTAL-ASSETS> 7,641,446
<POLICY-LOSSES> 0
<UNEARNED-PREMIUMS> 0
<POLICY-OTHER> 14,953
<POLICY-HOLDER-FUNDS> 3,260
<NOTES-PAYABLE> 0
<COMMON> 2,500
0
0
<OTHER-SE> 777,837
<TOTAL-LIABILITY-AND-EQUITY> 7,641,446
431,428
<INVESTMENT-INCOME> 188,646
<INVESTMENT-GAINS> 3,470
<OTHER-INCOME> 32,100
<BENEFITS> 385,932
<UNDERWRITING-AMORTIZATION> 19,160
<UNDERWRITING-OTHER> 87,898
<INCOME-PRETAX> 162,654
<INCOME-TAX> 54,142
<INCOME-CONTINUING> 108,512
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 108,512
<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>
