<PAGE>
AS FILED WITH THE SEC ON ____________________. REGISTRATION NO. 33-49994
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
__________________
FORM S-6
POST-EFFECTIVE AMENDMENT NO. 13
FOR REGISTRATION UNDER THE SECURITIES ACT OF 1933
OF SECURITIES OF UNIT INVESTMENT TRUSTS REGISTERED
ON FORM N-8B-2
__________________
PRUCO LIFE PRUVIDER VARIABLE APPRECIABLE ACCOUNT
(Exact Name of Trust)
PRUCO LIFE INSURANCE COMPANY
(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
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
[X] 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
(date)
<PAGE>
CROSS REFERENCE SHEET
(as required by Form N-8B-2)
N-8B-2 ITEM NUMBER LOCATION
- ------------------ --------
1. Cover Page
2. Cover Page
3. Not Applicable
4. Sale of the Contract and Sales Commissions
5. Pruco Life PRUVIDER Variable Appreciable Account
6. Pruco Life PRUVIDER Variable Appreciable Account
7. Not Applicable
8. Not Applicable
9. Litigation
10. Brief Description of the Contract; Short-Term
Cancellation Right or "Free-Look"; Transfers;
How the Contract Fund Changes with Investment
Experience; How a Contract's Death Benefit Will
Vary; Surrender of a Contract; Withdrawal of
Excess Cash Surrender Value; When Proceeds are
Paid; Contract Loans; Lapse and Reinstatement;
Paid-Up Insurance Option; The Fixed-Rate Option;
Voting Rights
11. Brief Description of the Contract; Pruco Life
PRUVIDER Variable Appreciable Account
12. Cover Page; Brief Description of the Contract;
Flexible Portfolios; Sale of the Contract and
Sales Commissions
13. Brief Description of the Contract; Premiums;
Allocation of Premiums; Contract Fees and
Charges; Reduction of Charges for Concurrent
Sales to Several Individuals; Sale of the
Contract and Sales Commissions
14. Brief Description of the Contract; Detailed
Information for Prospective Contract Owners
15. Brief Description of the Contract; Premiums;
Allocation of Premiums; Transfers; General
Information About Pruco Life PRUVIDER Variable
Appreciable Account, and The Fixed Rate Option
16. Brief Description of the Contract; Detailed
Information for Prospective Contract Owners
<PAGE>
N-8B-2 ITEM NUMBER LOCATION
- ------------------ --------
17. Surrender of a Contract; Withdrawal of Excess
Cash Surrender Value; When Proceeds are Paid
18. Pruco Life PRUVIDER Variable Appreciable
Account; How the Contract Fund Changes with
Investment Experience
19. Reports to Contract Owners
20. Not Applicable
21. Contract Loans
22. Not Applicable
23. Not Applicable
24. Other Standard Contract Provisions
25. Brief Description of the Contract
26. Brief Description of the Contract; Contract Fees
and Charges
27. Brief Description of the Contract
28. Brief Description of the Contract; Directors and
Officers of Pruco Life
29. Brief Description of the Contract
30. Not Applicable
31. Not Applicable
32. Not Applicable
33. Not Applicable
34. Not Applicable
35. Brief Description of the Contract
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
<PAGE>
N-8B-2 ITEM NUMBER LOCATION
- ------------------ --------
43. Not Applicable
44. Brief Description of the Contract; How the
Contract Fund Changes with Investment
Experience; How a Contract's Death Benefit Will
Vary
45. Not Applicable
46. Brief Description of the Contract; Pruco Life
PRUVIDER Variable Appreciable Account
47. Pruco Life PRUVIDER Variable Appreciable Account
48. Not Applicable
49. Not Applicable
50. Not Applicable
51. Not Applicable
52. Not Applicable
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 PRUvider Variable Appreciable
Account; Consolidated Financial Statements of
Pruco Life Insurance Company and
Subsidiaries
<PAGE>
PART I
INFORMATION REQUIRED IN PROSPECTUS
<PAGE>
PRUVIDER VARIABLE(SM)
APPRECIABLE LIFE(R) INSURANCE
PROSPECTUS
THE PRUCO LIFE PRUVIDER VARIABLE
APPRECIABLE ACCOUNT
MAY 1, 2000
PRUCO LIFE INSURANCE COMPANY
<PAGE>
PROSPECTUS
MAY 1, 2000
PRUCO LIFE INSURANCE COMPANY
PRUVIDER VARIABLE APPRECIABLE ACCOUNT
PRUVIDER(SM)
VARIABLE APPRECIABLE LIFE(R)
INSURANCE CONTRACT
This prospectus describes an individual variable life insurance contract (the
"Contract") offered by Pruco Life Insurance Company ("Pruco Life", "us", "we",
or "our") under the name PRUVIDER(SM) Variable APPRECIABLE LIFE(R) Insurance.
Pruco Life, a stock life insurance company, is a wholly-owned subsidiary of The
Prudential Insurance Company of America ("Prudential").
AS OF MAY 1, 1999, PRUCO LIFE NO LONGER OFFERED THESE CONTRACTS FOR SALE.
You, the Contract owner, may choose to invest your Contract's premiums and their
earnings in one or more of the following ways:
. Invest in either one or both of two available variable investment options
of the Pruco Life PRUVIDER Variable Appreciable Account (the "Account"),
each of which invests in a corresponding portfolio of The Prudential Series
Fund, Inc. (the "Series Fund"): the CONSERVATIVE BALANCED PORTFOLIO and the
FLEXIBLE MANAGED PORTFOLIO. Pruco Life may add additional variable
investment options in the future.
. Invest in the FIXED-RATE OPTION, which pays a guaranteed interest rate.
Pruco Life will credit interest daily on any portion of the premium payment
that you have allocated to the fixed-rate option at rates periodically
declared by Pruco Life, in its sole discretion. Any such interest rate will
never be less than an effective annual rate of 4%.
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 may add additional 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
213 Washington Street
Newark, New Jersey 07102-2992
Telephone: (800) 778-2255
PRUVIDER is a service mark of Prudential.
APPRECIABLE LIFE is a registered mark of Prudential.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
INTRODUCTION AND SUMMARY........................................................................................................ 1
Brief Description of the Contract.............................................................................................. 1
Charges........................................................................................................................ 1
Premium Payments............................................................................................................... 2
Lapse and Guarantee Against Lapse.............................................................................................. 3
Refund......................................................................................................................... 3
GENERAL INFORMATION ABOUT PRUCO LIFE INSURANCE COMPANY, PRUCO LIFE PRUVIDER VARIABLE APPRECIABLE ACCOUNT, THE VARIABLE
INVESTMENT OPTIONS AVAILABLE UNDER THE CONTRACT, AND THE FIXED-RATE OPTION...................................................... 4
Pruco Life Insurance Company................................................................................................... 4
Pruco Life PRUvider Variable Appreciable Account............................................................................... 4
The Prudential Series Fund, Inc................................................................................................ 5
Voting Rights.................................................................................................................. 5
The Fixed-Rate Option.......................................................................................................... 6
DETAILED INFORMATION FOR CONTRACT OWNERS........................................................................................ 6
Contract Fees and Charges...................................................................................................... 6
Requirements for Issuance of a Contract........................................................................................ 9
Short-Term Cancellation Right or "Free-Look"................................................................................... 9
Reduction of Charges for Concurrent Sales to Several Individuals............................................................... 10
Contract Date.................................................................................................................. 10
Premiums....................................................................................................................... 10
Allocation of Premiums......................................................................................................... 11
Transfers...................................................................................................................... 12
How the Contract Fund Changes with Investment Experience....................................................................... 12
How a Contract's Death Benefit Will Vary....................................................................................... 12
Withdrawal of Excess Cash Surrender Value...................................................................................... 13
Illustrations of Cash Surrender Values, Death Benefits, and Accumulated Premiums............................................... 13
Contract Loans................................................................................................................. 15
Surrender of a Contract........................................................................................................ 15
Lapse and Reinstatement........................................................................................................ 15
Paid-Up Insurance Option....................................................................................................... 16
Reduced Paid-Up Insurance Option............................................................................................... 17
When Proceeds Are Paid......................................................................................................... 17
Living Needs Benefit........................................................................................................... 17
Reports to Contract Owners..................................................................................................... 18
Tax Treatment of Contract Benefits............................................................................................. 18
Riders......................................................................................................................... 20
Legal Considerations Relating to Sex-Distinct Premiums and Benefits............................................................ 20
Other Standard Contract Provisions............................................................................................. 20
Paying Premiums by Payroll Deduction........................................................................................... 21
Sale of the Contract and Sales Commissions..................................................................................... 21
State Regulation............................................................................................................... 21
Experts........................................................................................................................ 21
Litigation and Regulatory Proceedings.......................................................................................... 22
Additional Information......................................................................................................... 22
Financial Statements........................................................................................................... 22
DIRECTORS AND OFFICERS OF PRUCO LIFE............................................................................................ 23
FINANCIAL STATEMENTS OF THE PRUCO LIFE PRUvider VARIABLE APPRECIABLE ACCOUNT.................................................... A1
CONSOLIDATED FINANCIAL STATEMENTS OF PRUCO LIFE INSURANCE COMPANY AND SUBSIDIARIES.............................................. B1
</TABLE>
<PAGE>
INTRODUCTION AND SUMMARY
THIS SUMMARY PROVIDES ONLY AN OVERVIEW OF THE MORE SIGNIFICANT PROVISIONS OF THE
CONTRACT. WE PROVIDE FURTHER DETAIL IN THE SUBSEQUENT SECTIONS OF THIS
PROSPECTUS AND IN THE CONTRACT.
As of May 1, 1999, Pruco Life no longer offered these Contracts for sale.
BRIEF DESCRIPTION OF THE CONTRACT
The Pruco Life PRUVIDER Variable APPRECIABLE LIFE Insurance Contract (the
"Contract") is a form of flexible premium variable life insurance. It was
issued by Pruco Life Insurance Company ("Pruco Life", "us", "we", or "our"). It
is based on a Contract Fund, the value of which changes every business day. The
Contract Fund represents the total amount credited to a specific Contract. On
any date it is equal to the sum of the amounts invested in the variable
investment options and the fixed-rate option, and the principal amount of any
Contract debt plus any interest earned thereon. There is a surrender charge if
you decide to surrender the Contract during the first 10 Contract years.
A broad objective of the Contract is to provide benefits that will increase in
value if favorable investment results are achieved. You choose whether to invest
in one or both variable investment options and/or the fixed-rate option.
Whenever you pay a premium, Pruco Life first deducts certain charges and, except
for amounts allocated to the fixed-rate option, puts the remainder - the "net
premium" - into the Account. The money allocated to each variable investment
option is immediately invested in a corresponding portfolio of The Prudential
Series Fund, Inc. (the "Series Fund"), a series mutual fund for which Prudential
is the investment adviser. The two Series Fund portfolios -- the CONSERVATIVE
BALANCED PORTFOLIO and the FLEXIBLE MANAGED PORTFOLIO -- differ in the amount of
risk associated with them and are described in more detail on page 5.
Variable life insurance contracts are unsuitable as short-term savings vehicles.
Withdrawals and loans may negate any guarantee against lapse (see LAPSE AND
REINSTATEMENT, page 15) and possibly may result in adverse tax consequences.
See TAX TREATMENT OF CONTRACT BENEFITS, page 18.
CHARGES
Pruco Life deducts certain charges from each premium payment and from the
amounts held in the designated variable investment option[s] and the fixed-rate
option. In addition, Pruco Life makes certain additional charges if a Contract
lapses or is surrendered during the first 10 Contract years. All these charges,
which are largely designed to cover insurance costs and risks as well as sales
and administrative expenses, are fully described under CONTRACT FEES AND CHARGES
on page 6. In brief, and subject to that fuller description, the following
diagram outlines the maximum charges which Pruco Life may make:
________________________________________________________________________________
PREMIUM PAYMENT
________________________________________________________________________________
________________________________________________________________________________
. less charge for taxes attributable to premiums
. less $2 processing fee
________________________________________________________________________________
________________________________________________________________________________
INVESTED PREMIUM AMOUNT
. To be invested in one or a combination of:
. The Conservative Balanced Portfolio
. The Flexible Managed Portfolio
. The fixed-rate option
________________________________________________________________________________
1
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DAILY CHARGES
. We deduct management fees and expenses from the Series Fund assets.
The total expenses of each portfolio for the year 1999, expressed as a
percentage of the average assets during the year, are as follows:
Portfolios Conservative Balanced Flexible Managed
Advisory Fee 0.55% 0.60%
Other Expenses 0.02% 0.02%
Total Expenses 0.57% 0.62%
. We deduct a daily mortality and expense risk charge equivalent to an
annual rate of up to 0.9% from the assets of the variable investment
options.
---------------------------------------------------------------------------
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MONTHLY CHARGES
. We deduct a sales charge from the Contract Fund in the amount of 1/2
of 1% of the primary annual premium.
. We reduce the Contract Fund by a guaranteed minimum death benefit risk
charge of not more than $0.01 per $1,000 of the face amount of
insurance.
. We reduce the Contract Fund by an administrative charge of up to $6
per Contract and up to $0.19 per $1,000 of face amount of insurance
(currently, on a non-guaranteed basis, the $0.19 charge is decreased
to $0.09 per $1,000); if the face amount of the Contract is less than
$10,000, there is an additional charge of $0.30 per $1,000 of face
amount.
. We deduct a charge for anticipated mortality. The maximum charge is
based on the non-smoker/smoker 1980 CSO Tables.
. If the Contract includes riders, we deduct rider charges from the
Contract Fund.
. If the rating class of the insured results in an extra charge, we will
deduct that charge from the Contract Fund.
---------------------------------------------------------------------------
---------------------------------------------------------------------------
POSSIBLE ADDITIONAL CHARGES
. During the first 10 years, we will assess a contingent deferred sales
charge if the Contract lapses or is surrendered. During the first five
years, the maximum contingent deferred sales charge is 50% of the
first year's primary annual premium. This charge is both subject to
other important limitations and reduced for Contracts that have been
inforce for more than five years.
. During the first 10 years, we will assess a contingent deferred
administrative charge if the Contract lapses or is surrendered. During
the first five years, this charge equals $5 per $1,000 of face amount.
It begins to decline uniformly after the fifth Contract year so that
it disappears on the 10th Contract anniversary.
. We assess an administrative processing charge of up to $15 for each
withdrawal of excess cash surrender value.
---------------------------------------------------------------------------
Because of the charges listed above, and in particular because of the
significant charges deducted upon early surrender or lapse, you should purchase
a Contract only if you intend to, and have the financial capability to, keep it
for a substantial period.
PREMIUM PAYMENTS
Your Contract sets forth an annual Scheduled Premium, or one that is payable
more frequently, such as monthly. Pruco Life guarantees that, if the Scheduled
Premiums are paid when due (or if missed premiums are paid later, with
interest), the death benefit will be paid upon the death of the insured. Your
Contract will not lapse even if investment experience is so unfavorable that the
Contract Fund value drops to zero.
The amount of the Scheduled Premium depends on the Contract's face amount, the
insured's sex (except where unisex rates apply) and age at issue, the insured's
risk classification, the rate for taxes attributable to premiums, and the
frequency of premium payments selected. Under certain low face amount Contracts
issued on younger insureds,
2
<PAGE>
the payment of the Scheduled Premium may cause the Contract to be classified as
a Modified Endowment Contract. See TAX TREATMENT OF CONTRACT BENEFITS, page 18.
LAPSE AND GUARANTEE AGAINST LAPSE
Pruco Life's PRUVIDER Variable APPRECIABLE LIFE Insurance Contract is a form of
life insurance that provides much of the flexibility of variable universal life,
with two important distinctions:
. Pruco Life guarantees that if the Scheduled Premiums are paid when due, or
within the grace period (or missed premiums are paid later with interest),
the Contract will not lapse and, at least the face amount of insurance will
be paid upon the death of the insured. This is true even if, because of
unfavorable investment experience, the Contract Fund value should drop to
zero.
. If all premiums are not paid when due (or not made up later), the Contract
will still not lapse as long as the Contract Fund is higher than a stated
amount set forth in a table in the Contract. This amount is called the
"Tabular Contract Fund", and it increases each year. In later years it
becomes quite high. The Contract lapses when the Contract Fund falls below
this stated amount, rather than when it drops to zero. This means that,
when a PRUVIDER Variable APPRECIABLE LIFE Contract lapses, it may still
have considerable value, and you may have a substantial incentive to
reinstate it. If you choose not to reinstate, on the other hand, you may
take the cash surrender value under several options.
REFUND
For a limited time, a Contract may be returned for a refund in accordance with
the terms of its "free-look" provision. See SHORT-TERM CANCELLATION RIGHT OR
"FREE-LOOK", page 9.
__________________
THE REPLACEMENT OF LIFE INSURANCE IS GENERALLY NOT IN YOUR BEST INTEREST. IN
MOST CASES, IF YOU REQUIRE ADDITIONAL COVERAGE, THE BENEFITS OF YOUR EXISTING
CONTRACT CAN BE PROTECTED BY PURCHASING ADDITIONAL INSURANCE OR A SUPPLEMENTAL
CONTRACT. IF YOU ARE CONSIDERING REPLACING A CONTRACT, YOU SHOULD COMPARE THE
BENEFITS AND COSTS OF SUPPLEMENTING YOUR EXISTING CONTRACT WITH THE BENEFITS AND
COSTS OF PURCHASING THE CONTRACT DESCRIBED IN THIS PROSPECTUS AND YOU SHOULD
CONSULT A QUALIFIED TAX ADVISER.
THIS PROSPECTUS MAY ONLY BE OFFERED IN JURISDICTIONS IN WHICH THE OFFERING IS
LAWFUL. NO PERSON IS AUTHORIZED TO MAKE ANY REPRESENTATIONS IN CONNECTION WITH
THIS OFFERING OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS AND IN THE
PROSPECTUS AND STATEMENT OF ADDITIONAL INFORMATION FOR THE PRUDENTIAL SERIES
FUND, INC.
3
<PAGE>
GENERAL INFORMATION ABOUT PRUCO LIFE INSURANCE
COMPANY, PRUCO LIFE PRUVIDER
VARIABLE APPRECIABLE ACCOUNT, THE VARIABLE
INVESTMENT OPTIONS AVAILABLE UNDER
THE CONTRACT,
AND THE FIXED-RATE OPTION
PRUCO LIFE INSURANCE COMPANY
Pruco Life Insurance Company ("Pruco Life", "us", "we", or "our") is a stock
insurance company, organized in 1971 under the laws of the State of Arizona. It
is licensed to sell life insurance and annuities in the District of Columbia,
Guam, and in all states except New York.
Pruco Life is a wholly-owned subsidiary of The Prudential 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 PRUVIDER VARIABLE APPRECIABLE ACCOUNT
We have established a separate account, the Pruco Life PRUvider Variable
Appreciable Account (the "Account"), to hold the assets that are associated with
the Contracts. The Account was established on July 10, 1992 under Arizona 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's other assets.
Pruco Life is also the legal owner of the assets in the Account. Pruco Life
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 conducts. In addition to these assets, the
Account's assets may include funds contributed by Pruco Life to commence
operation of the Account and may include accumulations of the charges Pruco Life
makes against the Account. From time to time these additional assets will be
transferred to Pruco Life's general account. Before making any such transfer,
Pruco Life will consider any possible adverse impact the transfer might have on
the Account.
The obligations to Contract owners and beneficiaries arising under the Contract
are general corporate obligations of Pruco Life.
There are currently two variable investment options within the Account, one of
which invests in the Conservative Balanced Portfolio and the other of which
invests in the Flexible Managed Portfolio of the Series Fund. We may add
additional variable investment options in the future. The Account's financial
statements begin on page A1.
4
<PAGE>
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-end diversified
management investment company, which sold its shares only to separate accounts
of Pruco Life and Pruco Life Insurance Company of New Jersey, was merged into
the Series Fund. Prior to that date, the Account invested only in shares of
Pruco Life Series Fund, Inc. The Account will purchase and redeem shares from
the Series Fund at net asset value. Shares will be redeemed to the extent
necessary for Pruco Life to provide benefits under the Contracts and to transfer
assets from one variable investment option 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 variable investment
option.
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. Further detail is provided in the prospectus and statement of
additional information for the Series Fund. Prudential and PIC 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 CONTRACT FEES AND CHARGES, page 6.
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.
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 VARIABLE INVESTMENT OPTIONS. THERE IS NO ASSURANCE THAT THE INVESTMENT
OBJECTIVES OF THE SERIES FUND PORTFOLIOS WILL BE MET.
Listed below are the available portfolios of the Series Fund and their
investment objectives:
. 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. This Portfolio is appropriate for
an investor desiring diversification with a relatively lower risk of loss
than that associated with the Flexible Managed Portfolio.
. 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. This Portfolio is appropriate for an investor desiring
diversification, who is willing to accept a relatively high level of loss, in
an effort to achieve greater appreciation.
VOTING RIGHTS
We are the legal owner of the shares in the Series Fund. 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
5
<PAGE>
applicable federal securities laws or regulations, or their current
interpretation, change so as to permit Pruco Life to vote shares of the Series
Fund in its own right, it may elect to do so.
THE FIXED-RATE OPTION
BECAUSE OF EXEMPTIVE AND EXCLUSIONARY PROVISIONS, INTERESTS IN THE FIXED-RATE
OPTION UNDER THE CONTRACT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933 AND THE GENERAL ACCOUNT HAS NOT BEEN REGISTERED AS AN INVESTMENT COMPANY
UNDER THE INVESTMENT COMPANY ACT OF 1940. ACCORDINGLY, INTERESTS IN THE FIXED-
RATE OPTION ARE NOT SUBJECT TO THE PROVISIONS OF THESE ACTS, AND PRUCO LIFE HAS
BEEN ADVISED THAT THE STAFF OF THE SECURITIES AND EXCHANGE COMMISSION HAS NOT
REVIEWED THE DISCLOSURE IN THIS PROSPECTUS RELATING TO THE FIXED-RATE OPTION.
ANY INACCURATE OR MISLEADING DISCLOSURE REGARDING THE FIXED-RATE OPTION MAY,
HOWEVER, BE SUBJECT TO CERTAIN GENERALLY APPLICABLE PROVISIONS OF FEDERAL
SECURITIES LAWS.
You may choose to allocate, either initially or by transfer, all or part of your
Contract Fund to the fixed-rate option. This amount becomes part of Pruco
Life's general account. Pruco Life's general account consists of all assets
owned by Pruco Life other than those in the Account and in other separate
accounts that have been or may be established by Pruco Life. Subject to
applicable law, Pruco Life has sole discretion over the investment of the
general account assets. Contract owners do not share in the investment
experience of those assets. Instead, Pruco Life guarantees that the part of the
Contract Fund allocated to the fixed-rate option will accrue interest daily at
an effective annual rate that Pruco Life declares periodically. This rate may
not be less than an effective annual rate of 4%.
Currently, the following steps are taken for crediting interest rates: declared
interest rates remain in effect from the date money is allocated to the fixed-
rate option until the Monthly date in the same month in the following year (see
Contract Date on page 10); thereafter, a new crediting rate will be declared
each year and will remain in effect for the calendar year. Pruco Life reserves
the right to change this practice. Pruco Life is not obligated to credit
interest at a higher rate than 4%, although we may do so. Different crediting
rates may be declared for different portions of the Contract Fund allocated to
the fixed-rate option. At least annually and on request, you will be advised of
the interest rates that currently apply to your Contract. The term Monthly Date
means the day of each month that is the same as the Contract Date.
Transfers from the fixed-rate option are subject to strict limits. See
Transfers, page 12. The payment of any cash surrender value attributable to the
fixed-rate option may be delayed up to six months. See When Proceeds Are Paid,
page 17.
DETAILED INFORMATION FOR CONTRACT OWNERS
CONTRACT FEES AND CHARGES
This section provides a more detailed description of each charge that is
described briefly in the chart on page 1.
In several instances we use the terms "maximum charge" and "current charge."
The "maximum charge," in each instance, is the highest charge that Pruco Life is
entitled to make under the Contract. The "current charge" is the lower amount
that we are now charging. If circumstances change, we reserve the right to
increase each current charge, up to the maximum charge, without giving any
advance notice.
A Contract owner may add several "riders" to the Contract which provide
additional benefits and are charged for separately. The statement and
description of charges that follows assumes there are no riders to the Contract.
DEDUCTIONS FROM PREMIUMS
(a) Pruco Life deducts a charge for taxes attributable to premiums from each
premium payment. That charge is currently made up of two parts. The first
part is a charge for state and local premium-based taxes which depend on
the state in which you live. The tax rate varies from state to state,
generally ranging from 0.75% to 5% (but in some instances may exceed 5%) of
the premium received by Pruco Life. The amount charged may be more than
Pruco Life actually pays. The second part is a charge for federal income
taxes measured by premiums, equal to 1.25% of the premium. We believe that
this charge is a reasonable estimate of an increase in its federal income
taxes resulting from a 1990 change in the Internal Revenue Code. It is
intended to recover this increased tax. During 1999, 1998, and 1997, we
received a total of approximately $1,341,000, $1,571,427, and $1,668,969,
respectively, in charges for taxes attributable to premiums.
(b) Pruco Life deducts a charge of $2 from each premium payment to cover the
cost of collecting and processing premiums. Thus, if you pay premiums
annually, this charge will be $2 per year. If you pay premiums monthly, the
6
<PAGE>
charge will be $24 per year. If you pay premiums more frequently, for
example under a payroll deduction plan with your employer, the charge may
be more than $24 per year. During 1999, 1998, and 1997, we received a total
of approximately $1,172,000, $1,244,849, and $1,239,689, respectively, in
processing charges.
DEDUCTIONS FROM PORTFOLIOS
Pruco Life deducts an investment advisory fee daily from each portfolio at a
rate, on an annualized basis, of 0.55% for the Conservative Balanced Portfolio
and 0.60% for the Flexible Managed Portfolio.
We pay expenses incurred in conducting the investment operations of the
portfolios (such as investment advisory fees, custodian fees and preparation and
distribution of annual reports) out of the portfolio's income. These expenses
also vary by portfolio. The total expenses of each portfolio for the year 1999,
expressed as a percentage of the average assets during the year, are as follows:
<TABLE>
<CAPTION>
-------------------------------------------------------------------
ADVISORY OTHER TOTAL
PORTFOLIO FEE EXPENSES EXPENSES
-------------------------------------------------------------------
<S> <C> <C> <C>
Conservative Balanced 0.55% 0.02% 0.57%
Flexible Managed 0.60% 0.02% 0.62%
-------------------------------------------------------------------
</TABLE>
DAILY DEDUCTION FROM THE CONTRACT FUND
Each day Pruco Life deducts a charge from the assets of each of the variable
investment options in an amount equivalent to an effective annual rate of up to
0.9%. This charge is intended to compensate us for assuming mortality and
expense risks under the Contract. The mortality risk assumed is that insureds
may live for shorter periods of time than we estimated when we determined what
mortality charge to make. The expense risk assumed is that expenses incurred in
issuing and administering the Contract will be greater than we estimated in
fixing our administrative charges. This charge is not assessed against amounts
allocated to the fixed-rate option. During 1999, 1998, and 1997, we received a
total of approximately $2,176,000, $2,044,132, and $1,776,910, respectively, in
mortality and expense risk charges.
MONTHLY DEDUCTIONS FROM CONTRACT FUND
Pruco Life deducts the following monthly charges proportionately from the dollar
amounts held in each of the chosen investment option[s].
(a) Pruco Life deducts a sales charge, often called a "sales load", to pay part
of the costs of selling the Contracts, including commissions, advertising,
and the printing and distribution of prospectuses and sales literature. The
charge is equal to 0.5% of the "primary annual premium." The primary annual
premium is equal to the Scheduled Premium that would be payable if premiums
were being paid annually, less the two deductions from premiums (taxes
attributable to premiums and the $2 processing charge), and less the $6
part of the monthly deduction described in (c) below, the $0.30 per $1,000
of face amount for Contracts with a face amount of less than $10,000, and
any extra premiums for riders or substandard risks. The sales load is
charged whether the Contract owner is paying premiums annually or more
frequently. It is lower on Contracts issued on insureds over 60 years of
age. To summarize, for most Contracts, this charge is somewhat less than 6%
of the annual Scheduled Premium.
There is a second sales load, which will be charged only if a Contract
lapses or is surrendered before the end of the 10th Contract year. It is
often described as a contingent deferred sales load ("CDSL") and is
described under SURRENDER OR WITHDRAWAL CHARGES, page 8. During 1999, 1998,
and 1997, we received a total of approximately $2,612,000, $3,192,589, and
$3,998,082, respectively, in sales load charges.
(b) Pruco Life deducts a charge of not more than $0.01 per $1000 of face amount
of insurance to compensate for the risk we assume in guaranteeing that, no
matter how unfavorable investment experience may be, the death benefit will
never be less than the guaranteed minimum death benefit, so long as
Scheduled Premiums are paid on or before the due date or during the grace
period. This charge will not be made if the Contract has been continued
inforce pursuant to an option on lapse. During 1999, 1998, and 1997, we
received a total of approximately $153,000, $153,083, and $158,412,
respectively, for this risk charge.
(c) Pruco Life deducts an administrative charge of $6 plus up to $0.19 per
$1,000 of face amount of insurance. Currently, on a non-guaranteed basis,
this charge is reduced from $0.19 to $0.09 per $1,000. The charge is
7
<PAGE>
intended to pay for processing claims, keeping records, and communicating
with Contract owners. If premiums are paid by automatic transfer under the
Pru-Matic Plan, as described on page 10, the current charge is further
reduced to $0.07 per $1,000 of face amount. There is an additional charge
of $0.30 per $1,000 of face amount if the face amount of the Contract is
less than $10,000. This monthly administrative charge will not be made if
the Contract has been continued inforce pursuant to an option on lapse.
During 1999, 1998, and 1997, we received a total of approximately
$8,281,000, $8,434,299, and $8,726,448, respectively, in monthly
administrative charges.
(d) Pruco Life deducts a mortality charge that is intended to be used to pay
death benefits. When an insured dies, the amount payable to the beneficiary
is larger than the Contract Fund and significantly larger if the insured
dies in the early years of a Contract. The mortality charges collected from
all Contract owners enable us to pay the death benefit for the few insureds
who die. We determine the maximum mortality charge by multiplying the "net
amount at risk" under a Contract (the amount by which the Contract's death
benefit, computed as if there were neither riders nor Contract debt,
exceeds the Contract Fund) by a rate based upon the insured's current
attained age and sex (except where unisex rates apply) and the anticipated
mortality for that class of persons. The anticipated mortality is based
upon mortality tables published by The National Association of Insurance
Commissioners called the Non-Smoker/Smoker 1980 CSO Tables. We may
determine that a lesser amount than that called for by these mortality
tables will be adequate for insureds of particular ages and may thus make a
lower mortality charge for such persons. Any lower current mortality
charges are not applicable to Contracts inforce pursuant to an option on
lapse. See LAPSE AND REINSTATEMENT, page 15.
(e) If a rider is added to the basic Contract, or if an insured is in a
substandard risk classification (for example, a person in a hazardous
occupation), we increase the Scheduled Premium and deduct additional
charges monthly.
(f) Pruco Life may deduct a charge to cover federal, state or local taxes
(other than "taxes attributable to premiums" described above) that are
imposed upon the operations of the Account. At present no such taxes are
imposed and no charge is made. We will review the question of a charge to
the Account for company federal income taxes periodically. We may make such
a charge in the future for any federal income taxes that would be
attributable to the Account.
Under current law, Pruco Life may incur state and local taxes (in addition
to premium taxes) in several states. At present, these taxes are not
significant and they are not charged against the Account. If there is a
material change in the applicable state or local tax laws, the imposition
of any such taxes upon Pruco Life that are attributable to the Account may
result in a corresponding charge against the Account.
SURRENDER OR WITHDRAWAL CHARGES
(a) Pruco Life charges an additional contingent deferred sales load (the CDSL)
if a Contract lapses or is surrendered during the first 10 Contract years.
No such charge is applicable to the death benefit, no matter when it may
become payable. The maximum contingent deferred charge is equal to 50% of
the first year's primary annual premium upon Contracts that lapse or are
surrendered during the first five Contract years. That percentage is
reduced uniformly on a daily basis starting from the Contract's fifth
anniversary until it disappears on the 10th anniversary.
The contingent deferred sales load is also further limited at older issue
ages (approximately above age 61) in order to comply with certain
requirements of state law. Specifically, the contingent deferred sales load
for such insureds is no more than $32.50 per $1,000 of face amount.
The sales load is subject to a further important limitation that may,
particularly for Contracts that lapse or are surrendered within the first
five or six years, result in a lower contingent deferred sales load than
that described above. (This limitation might also, under unusual
circumstances, apply to reduce the monthly sales load deductions described
in item (a) under MONTHLY DEDUCTIONS FROM CONTRACT FUND, page 7.)
The limitation is based on a Guideline Annual Premium ("GAP") that is
associated with every Contract. The GAP is a defined amount determined
actuarially in accordance with a regulation of the Securities and Exchange
Commission ("SEC"). Pruco Life will charge a maximum aggregate sales load
(that is, the sum of the monthly sales load deduction and the contingent
deferred sales charge) that will not be more than 30% of the premiums
actually paid until those premiums total one GAP plus no more than 9% of
the next premiums paid until total premiums are equal to five GAPS, plus no
more than 6% of all subsequent premiums. If the sales charges described
above would at any time exceed this maximum amount then, to the extent of
any excess, we will not make the charge.
8
<PAGE>
The amount of this charge can be more easily understood by reference to the
following table which shows the sales loads that would be paid by a 35 year
old man with $20,000 face amount of insurance, both through the monthly
deductions from the Contract Fund described above and upon the surrender of
the Contract. The primary annual premium is $304.20.
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------
CUMULATIVE
CUMULATIVE TOTAL SALES
SALES LOAD LOAD AS
CUMULATIVE DEDUCTED CONTINGENT PERCENTAGE OF
SURRENDER, SCHEDULED FROM DEFERRED TOTAL SCHEDULED
LAST DAY OF PREMIUMS CONTRACT SALES SALES PREMIUMS
YEAR NO. PAID FUND LOAD* LOAD PAID**
-----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1 $ 390.90 $ 18.24 $ 87.22 $105.46 26.98%
2 781.80 36.48 104.16 140.64 17.99%
3 1,172.70 54.72 121.10 175.82 14.99%
4 1,563.60 72.96 138.04 211.00 13.49%
5 1,954.50 91.20 146.55 237.75 12.16%
6 2,345.40 109.44 121.80 231.24 9.86%
7 2,736.30 127.68 91.40 219.08 8.01%
8 3,127.20 145.92 60.80 206.72 6.61%
9 3,518.10 164.16 30.40 194.56 5.53%
10 3,909.00 182.40 0.00 182.40 4.67%
- --------------------------------------------------------------------------------------------------------------
</TABLE>
* The maximum CDSL is $152.20 for years one through five; $121.80 for year
six; $91.40 for year seven; $60.80 for year eight; $30.40 for year nine;
and zero for year 10.
** The percentages shown in the last column will not be appreciably different
for insureds of different ages.
(b) Pruco Life deducts an administrative charge of $5 per $1,000 of face amount
of insurance upon lapse or surrender to cover the cost of processing
applications, conducting medical examinations, determining insurability and
the insured's rating class, and establishing records. However, this charge
is reduced beginning on the Contract's fifth anniversary and declines daily
at a constant rate until it disappears entirely on the 10th Contract
anniversary. We are currently allowing partial surrenders of the Contract,
but we reserve the right to cancel this administrative practice. If the
Contract is partially surrendered during the first 10 years, we deduct a
proportionate amount of the charge from the Contract Fund. During 1999,
1998, and 1997, we received a total of approximately $402,000, $222,698,
and $295,205, respectively, for surrendered or lapsed Contracts. Surrender
of all or part of a Contract may have tax consequences. See TAX TREATMENT
OF CONTRACT BENEFITS, page 18.
TRANSACTION CHARGES
Pruco Life will make an administrative processing charge equal to the lesser of
$15 or 2% of the amount withdrawn in connection with each withdrawal of excess
cash surrender value of a Contract.
REQUIREMENTS FOR ISSUANCE OF A CONTRACT
As of May 1, 1999, Pruco Life no longer offered these Contracts for sale.
Generally, the Contract was issued on insureds below the age of 76. The minimum
initial guaranteed death benefit was $5,000; the maximum you could apply for was
$25,000. Proposed insureds, 21 years of age or less, could apply for a minimum
initial guaranteed death benefit of $10,000. Before issuing any Contract, Pruco
Life 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 charges a higher premium if
an extra mortality risk is involved.
SHORT-TERM CANCELLATION RIGHT OR "FREE-LOOK"
Generally, you may return the Contract for a refund within 10 days after you
receive it. Some states allow a longer period of time during which a Contract
may be returned for a refund. You can request a refund 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. You 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 and
9
<PAGE>
if you exercise your short-term cancellation right, you will receive a refund of
all premium payments made, with no adjustment for investment experience.
REDUCTION OF CHARGES FOR CONCURRENT SALES TO SEVERAL INDIVIDUALS
Pruco Life may have reduced the sales charges and/or other charges on individual
Contracts sold to members of a class of associated individuals, or to a trustee,
employer or other entity representing such a class, where it is expected that
such multiple sales will result in savings of sales or administrative expenses.
Pruco Life determines both the eligibility for such reduced charges, as well as
the amount of such reductions, by considering the following factors:
(1) the number of individuals;
(2) the total amount of premium payments expected to be received from
these Contracts;
(3) the nature of the association between these individuals, and the
expected persistency of the individual Contracts;
(4) the purpose for which the individual Contracts are purchased and
whether that purpose makes it likely that expenses will be reduced;
and
(5) any other circumstances which Pruco Life believes to be relevant in
determining whether reduced sales or administrative expenses may be
expected.
Some of the reductions in charges for these sales may be contractually
guaranteed; other reductions may be withdrawn or modified by Pruco Life on a
uniform basis. Pruco Life's reductions in charges for these sales will not be
unfairly discriminatory to the interests of any individual Contract owners.
CONTRACT DATE
When the first premium payment is paid with the application for a Contract, the
Contract Date is ordinarily the later of the application date and the medical
examination date. In most cases no medical examination is necessary. If the
first premium was not paid with the application, the Contract Date is ordinarily
the date the first premium was paid and the Contract was delivered. It may have
been advantageous for a Contract owner to have an earlier Contract Date if it
resulted in Pruco Life using a lower issue age in determining the Scheduled
Premium amount. Pruco Life permits a Contract to be back-dated but only to a
date not earlier than six months prior to the date of the application. Pruco
Life requires the payment of all premiums that would have been due had the
application date coincided with the back-dated Contract Date. The death benefit
and cash surrender value under the Contract will be equal to what they would
have been had the Contract been issued on the Contract Date, all Scheduled
Premiums been received on their due dates, and all Contract charges been made.
PREMIUMS
The Contract provides for a Scheduled Premium which, if paid when due or within
a 61 day grace period, ensures that the Contract will not lapse. If you pay
premiums other than on a monthly basis, you will receive a notice that a premium
is due about three weeks before each due date. If you pay premiums monthly, you
will receive a book each year with 12 coupons that will serve as a reminder.
With Pruco Life's consent, you may change the frequency of premium payments.
You may elect to have monthly premiums paid automatically under the "Pru-Matic
Premium Plan" by pre-authorized transfers from a bank checking account. If you
select the Pru-Matic Premium Plan, one of the current monthly charges will be
reduced. See MONTHLY DEDUCTIONS FROM CONTRACT FUND, page 7. Some Contract owners
may also be eligible to have monthly premiums paid by pre-authorized deductions
from an employer's payroll.
The following table shows, for two face amounts, representative preferred and
standard annual premium amounts under Contracts issued on insureds who are not
substandard risks. These premiums do not reflect any additional riders or
supplementary benefits.
10
<PAGE>
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------
$10,000 FACE AMOUNT $20,000 FACE AMOUNT
--------------------------------------------------------------------
PREFERRED STANDARD PREFERRED STANDARD
-----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Male, age 35 $233.70 $274.01 $390.90 $ 471.52
at issue
-----------------------------------------------------------------------------------------------
Female, age 45 $278.04 $308.53 $479.59 $ 540.57
at issue
-----------------------------------------------------------------------------------------------
Male, age 55 $450.96 $562.17 $825.43 $1047.86
at issue
-----------------------------------------------------------------------------------------------
</TABLE>
The following table compares annual and monthly premiums for insureds who are in
the preferred rating class. Note that in these examples the sum of 12 monthly
premiums for a particular Contract is approximately 110% to 116% of the annual
Scheduled Premium for that Contract.
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------
$10,000 FACE AMOUNT $20,000 FACE AMOUNT
-------------------------------------------------------------------
PREFERRED STANDARD PREFERRED STANDARD
-----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Male, age 35 $22.43 $233.70 $36.59 $390.90
at issue
----------------------------------------------------------------------------------------------
Female, age 45 $26.46 $278.04 $44.65 $479.59
at issue
----------------------------------------------------------------------------------------------
Male, age 55 $41.96 $450.96 $75.66 $825.43
at issue
----------------------------------------------------------------------------------------------
</TABLE>
A significant feature of this Contract is that it permits you to pay greater
than Scheduled Premiums. You may make unscheduled premium payments occasionally
or on a periodic basis. If you wish, you may select a higher contemplated
premium than the Scheduled Premium. Pruco Life will then bill you for the chosen
premium. In general, the regular payment of higher premiums will result in
higher cash surrender values and higher death benefits. Conversely, a Scheduled
Premium payment does not need to be made if the Contract Fund is large enough to
enable the charges due under the Contract to be made without causing the
Contract to lapse. See LAPSE AND REINSTATEMENT, page 15. The payment of premiums
in excess of Scheduled Premiums may cause the Contract to become a Modified
Endowment Contract for federal income tax purposes. If this happens, loans and
other distributions which would otherwise not be taxable events may be subject
to federal income taxation. See TAX TREATMENT OF CONTRACT BENEFITS, page 18.
Pruco Life will generally accept any premium payment of at least $25. Pruco Life
reserves the right to limit unscheduled premiums to a total of $5,000 in any
Contract year, and to refuse to accept premiums that would immediately result in
more than a dollar-for-dollar increase in the death benefit. See HOW A
CONTRACT'S DEATH BENEFIT WILL VARY, page 12. The privilege of making large or
additional premium payments offers a way of investing amounts which accumulate
without current income taxation, but again, there are tax consequences if the
Contract becomes a Modified Endowment Contract. See TAX TREATMENT OF CONTRACT
BENEFITS, page 18.
ALLOCATION OF PREMIUMS
Pruco Life deducts a $2 processing charge and the charge for taxes attributable
to premiums from premium payments. Each payment, after the deductions from
premiums, will be invested as of the end of the valuation period when received
at a Home Office in accordance with the allocation you have designated. A
valuation period is the period of time from one determination of the value of
the amount invested in a variable investment option to the next. Such
determinations are made when the net asset values of the portfolios are
calculated, which is generally 4:00 p.m. Eastern time on each day during which
the New York Stock Exchange is open. 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. You may also change the way in which subsequent
premiums are allocated by telephoning a Home Office, provided you are enrolled
to use the Telephone Transfer system. There is no charge for reallocating future
premiums. If any part of the invested portion of a premium is allocated to a
particular investment option, that portion must be at least 10% on the date the
allocation takes effect. All percentage allocations must be in whole numbers.
For example, 33% can be selected but 33 1/3% cannot. Of course, the total
allocation of all selected investment options must equal 100%.
11
<PAGE>
TRANSFERS
If the Contract is not in default, or if the Contract is inforce as variable
reduced paid-up insurance (see LAPSE AND REINSTATEMENT, page 15), you may, up to
four times in each Contract year, transfer amounts from one variable investment
option to the other variable investment option or to the fixed-rate option.
Currently, you may make additional transfers with our consent without charge.
All or a portion of the amount credited to a variable investment option may be
transferred. If you wish to convert your variable Contract to a fixed-benefit
Contract in this manner, you must request a complete transfer of funds to the
fixed-rate option and change your allocation instructions regarding any future
premiums.
Transfers between variable investment options will take effect as of the end of
the valuation period (usually the business day) 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 $1,000 from one variable investment option to the
other, or may be in terms of a percentage reallocation between variable
investment options. 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, if 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, depending on the terms of the assignment. We will use
reasonable procedures, such as asking you for certain personal information
provided on your application for insurance, to confirm that instructions given
by telephone are genuine. Pruco Life will not be held liable for following
telephone instructions that we reasonably believe to be genuine. Pruco Life
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.
Transfers from the fixed-rate option to the variable investment options are
currently permitted once each Contract year and only during the 30-day period
beginning on the Contract anniversary. The maximum amount which may be
transferred out of the fixed-rate option each year is currently the greater of:
(a) 25% of the amount in the fixed-rate option, or (b) $2,000. Such transfer
requests received prior to the Contract anniversary will be effective on the
Contract anniversary. Transfer requests received within the 30-day period
beginning on the Contract anniversary will be effective as of the end of the
valuation period in which a proper transfer request is received at a Home
Office. Pruco Life may change these limits in the future.
HOW THE CONTRACT FUND CHANGES WITH INVESTMENT EXPERIENCE
As explained earlier, after the 10th Contract year, there will no longer be a
surrender charge and, if there is no Contract loan, the cash surrender value
will be equal to the Contract Fund. This section, therefore, also describes how
the cash surrender value of the Contract will change with investment experience.
On the Contract Date, the Contract Fund value is the initial premium less the
deductions from premiums and the first monthly deductions. See CONTRACT FEES
AND CHARGES, page 6. This amount is placed in the variable investment option[s]
you choose and/or the fixed-rate option. Thereafter, the Contract Fund value
changes daily, reflecting increases or decreases in the value of the assets in
the variable investment options, and interest credited on any amounts allocated
to the fixed-rate option. It is also reduced by the daily asset charge for
mortality and expense risks assessed against the variable investment options.
The Contract Fund value also increases to reflect the receipt of additional
premium payments and is decreased by the monthly deductions.
A Contract's cash surrender value on any date will be the Contract Fund value
reduced by the withdrawal charges, if any, and by any Contract debt. Upon
request, Pruco Life will tell you the cash surrender value of your Contract. It
is possible, although highly unlikely, that the cash surrender value of a
Contract could decline to zero because of unfavorable investment performance,
even if you continue to pay Scheduled Premiums when due.
The tables on pages T1 through T4 of this prospectus (immediately following page
14) illustrate what the death benefit and cash surrender values would be for a
representative Contract, assuming uniform hypothetical investment results in the
selected portfolio[s], and also provide information about the aggregate premiums
payable under the Contract.
HOW A CONTRACT'S DEATH BENEFIT WILL VARY
The death benefit will vary with investment experience. The death benefit will
be equal to the face amount of insurance plus the amount, if any, by which the
Contract Fund value exceeds the applicable "Tabular Contract Fund Value" for the
Contract (subject to an exception described below under which the death benefit
is higher). Each Contract contains a table that sets forth the Tabular Contract
Fund Value as of the end of each of the first 20 years of the Contract. Tabular
Contract Fund Values between Contract anniversaries are determined by
interpolation. The
12
<PAGE>
"Tabular Contract Fund Value" for each Contract year is an amount that is
slightly less than the Contract Fund value that would result as of the end of
such year if:
(1) you paid only Scheduled Premiums;
(2) you paid the Scheduled Premiums when due;
(3) your selected investment options earned a net return at a uniform rate
of 4% per year;
(4) we deducted full mortality charges based upon the 1980 CSO Table;
(5) we deducted the maximum sales load and expense charges; and
there was no Contract debt.
The death benefit will equal the face amount if the Contract Fund equals the
Tabular Contract Fund Value. In general, and assuming the optional paid-up
benefit is not in effect (see PAID-UP INSURANCE OPTION on page 16), if, due to
investment results greater than a net return of 4%, or to payment of greater
than Scheduled Premiums, or to smaller than maximum charges, the Contract Fund
value is a given amount greater than the Tabular Contract Fund Value, the death
benefit will be the face amount plus that excess amount. If, due to investment
results less favorable than a net return of 4%, the Contract Fund value is less
than the Tabular Contract Fund Value, the death benefit will not fall below the
initial face amount stated in the Contract. Again, the death benefit will
reflect a deduction for the amount of any Contract debt. See CONTRACT LOANS,
page 15. Any unfavorable investment experience must first be offset by
favorable performance or additional payments that bring the Contract Fund up to
the Tabular level before favorable investment results or additional payments
will increase the death benefit.
The Contract Fund could grow to the point where it is necessary to increase the
death benefit by a greater amount in order to ensure that the Contract will
satisfy the Internal Revenue Code's definition of life insurance. Thus, the
death benefit will always be the greatest of (1) the face amount plus the
Contract Fund minus the Tabular Contract Fund Value; (2) the guaranteed minimum
death benefit; and (3) the Contract Fund times the attained age factor that
applies.
WITHDRAWAL OF EXCESS CASH SURRENDER VALUE
Under certain circumstances, you may withdraw a portion of the Contract's cash
surrender value without surrendering the Contract. The withdrawal amount is
limited by the requirement that the Contract Fund after withdrawal must not be
less than the Tabular Contract Fund Value. (A Table of Tabular Contract Fund
Values is included in the Contract; the Values increase with each year the
Contract remains inforce.) But because the Contract Fund may be made up in part
by an outstanding Contract loan, there is a further limitation that the amount
withdrawn may not be larger than an amount sufficient to reduce the cash
surrender value to zero. The amount withdrawn must be at least $200. You may
make no more than four such withdrawals in each Contract year, and there is an
administrative processing fee for each withdrawal equal to the lesser of $15 and
2% of the amount withdrawn. An amount withdrawn may not be repaid except as a
scheduled or unscheduled premium subject to the applicable charges. Upon
request, Pruco Life will tell you how much you may withdraw. Withdrawal of part
of the cash surrender value may have tax consequences. See TAX TREATMENT OF
CONTRACT BENEFITS, page 18. A temporary need for funds may also be met by
making a loan and you should consult your Pruco Life representative about how
best to meet your needs.
When a withdrawal is made, the cash surrender value and Contract Fund value are
reduced by the amount of the withdrawal, and the death benefit is reduced
accordingly. Neither the face amount of insurance nor the amount of Scheduled
Premiums will be changed due to a withdrawal of excess cash surrender value. No
surrender charges will be assessed for a withdrawal.
Withdrawal of part of the cash surrender value increases the risk that the
Contract Fund may be insufficient to provide Contract benefits. If such a
withdrawal is followed by unfavorable investment experience, the Contract may
lapse even if Scheduled Premiums continue to be paid when due. This is because,
for purposes of determining whether a lapse has occurred, Pruco Life treats
withdrawals as a return of premium.
ILLUSTRATIONS OF CASH SURRENDER 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:
. Contract of a given face amount bought by a 35 year old male, non-smoker,
with no extra risks or substandard ratings, and no extra benefit riders
added to the Contract.
13
<PAGE>
. the Scheduled Premium is paid on each Contract anniversary, the deduction
for taxes attributable to premiums is 3.25% and no loans are taken.
. the Contract Fund has been invested in equal amounts in each of the two
available portfolios of the Series Fund and no portion of the Contract Fund
has been allocated to the fixed-rate option.
The first table (page T1) assumes a Contract with a $5,000 face amount has been
purchased and the second table (page T2) assumes a Contract with a $20,000 face
amount has been purchased. Both assume the current charges will continue for
the indefinite future. The third and fourth tables (pages T3 and T4) are based
upon the same assumptions except it is assumed the maximum contractual charges
have been made from the beginning.
Finally, there are four assumptions, shown separately, about the average
investment performance of the portfolios. The first is that there will be a
uniform 0% gross rate of return with the average value of the Contract Fund
uniformly adversely affected by very unfavorable investment performance. The
other three assumptions are that investment performance will be at a uniform
gross annual rate of 4%, 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%, 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 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 Scheduled Premiums had been invested to earn interest,
after taxes, at 4% compounded annually. The next four columns show the death
benefit payable at the end of each of the years shown for the four different
assumed investment returns. The last four columns show the cash surrender value
payable at the end of each of the years shown for the four different assumed
investment returns. The cash surrender values in the first 10 years reflect the
surrender charges that would be deducted if the Contract were surrendered in
those years.
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 two portfolios of 0.60%,
and the daily deduction from the Contract Fund of 0.90% per year. Thus, based on
the above assumptions, gross investment returns of 0%, 4%, 8% and 12% are the
equivalent of net investment returns of -1.50%, 2.50%, 6.50%, and 10.50%,
respectively. The actual fees and expenses of the portfolios associated with a
particular Contract may be more or less than 0.60% and will depend on which
variable investment options are selected. The death benefits and cash surrender
values shown reflect the deduction of all expenses and charges, including
monthly charges, both from the Series Fund and under the Contract.
If you are considering the purchase of a variable life insurance contract from
another insurance company, you should not rely upon these tables for comparison
purposes. A comparison between two tables, each showing values for a 35 year
old man, may be useful for a 35 year old man but would be inaccurate if made for
insureds of other ages or sex. Your Pruco Life representative can provide you
with a hypothetical illustration for a person of your own age, sex, and rating
class.
14
<PAGE>
ILLUSTRATIONS
-------------
THE PRUVIDER VARIABLE APPRECIABLE LIFE INSURANCE CONTRACT
MALE PREFERRED ISSUE AGE 35
$5,000 GUARANTEED DEATH BENEFIT
$173.70 ANNUAL PREMIUM (1)
USING CURRENT CONTRACTUAL CHARGES
<TABLE>
<CAPTION>
Death Benefit (2) Cash Surrender 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 12% Gross 0% Gross 4% Gross 8% Gross 12% Gross
Year Per Year (-1.50% Net) (2.50% Net) (6.50% Net) (10.50% Net) (-1.50% Net) (2.50% Net) (6.50% Net) (10.50% Net)
------ -------------- ------------ ----------- ----------- ------------ ------------ ----------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 $ 181 $5,003 $5,007 $ 5,011 $ 5,016 $ 0 $ 0 $ 2 $ 6
2 $ 369 $5,002 $5,013 $ 5,025 $ 5,036 $ 48 $ 59 $ 70 $ 82
3 $ 564 $5,000 $5,019 $ 5,040 $ 5,063 $101 $ 121 $ 142 $ 165
4 $ 767 $5,000 $5,024 $ 5,058 $ 5,096 $153 $ 185 $ 219 $ 257
5 $ 978 $5,000 $5,028 $ 5,079 $ 5,136 $204 $ 249 $ 300 $ 357
6 $ 1,198 $5,000 $5,033 $ 5,105 $ 5,187 $268 $ 329 $ 400 $ 483
7 $ 1,427 $5,000 $5,038 $ 5,134 $ 5,248 $331 $ 411 $ 506 $ 620
8 $ 1,665 $5,000 $5,043 $ 5,167 $ 5,319 $392 $ 493 $ 618 $ 770
9 $ 1,912 $5,000 $5,047 $ 5,205 $ 5,404 $452 $ 578 $ 736 $ 935
10 $ 2,169 $5,000 $5,050 $ 5,247 $ 5,502 $511 $ 663 $ 860 $ 1,115
15 $ 3,617 $5,000 $5,057 $ 5,542 $ 6,269 $720 $1,046 $ 1,531 $ 2,257
20 $ 5,379 $5,000 $5,046 $ 6,024 $ 9,106 $881 $1,456 $ 2,433 $ 4,117
25 $ 7,523 $5,000 $5,013 $ 6,972 $13,529 $969 $1,879 $ 3,638 $ 7,058
30 (Age 65) $10,132 $5,000 $5,000 $ 8,731 $19,569 $938 $2,299 $ 5,192 $11,638
35 $13,305 $5,000 $5,000 $10,696 $27,909 $697 $2,689 $ 7,141 $18,633
40 $17,166 $5,000 $5,000 $12,938 $39,541 $ 48 $3,007 $ 9,534 $29,138
45 $21,864 $5,000 $5,000 $15,560 $55,982 $ 0 $3,167 $12,408 $44,644
</TABLE>
(1) If premiums are paid more frequently than annually, the payments would be
$89.46 semi-annually, $46.15 quarterly or $16.90 monthly. The death
benefits and cash surrender 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 surrender value for a contract would be
different from those shown if the actual rates of return averaged 0%, 4%, 8%,
and 12% over a period of years but also fluctuated above or below those averages
for individual contract years. No representations can be made by Pruco Life or
the Series Fund that these hypothetical rates of return can be achieved for any
one year or sustained over any period of time.
T1
<PAGE>
THE PRUVIDER VARIABLE APPRECIABLE LIFE INSURANCE CONTRACT
MALE PREFERRED ISSUE AGE 35
$20,000 GUARANTEED DEATH BENEFIT
$390.90 ANNUAL PREMIUM (1)
USING CURRENT CONTRACTUAL CHARGES
<TABLE>
<CAPTION>
Death Benefit (2) Cash Surrender Value (2)
------------------------------------------------- -------------------------------------------------
Premiums Assuming Hypothetical Gross (and Net) Assuming Hypothetical Gross (and Net)
End of Accumulated Annual Investment Return of Annual Investment Return of
------------------------------------------------- -------------------------------------------------
Policy at 4% Interest 0% Gross 4% Gross 8% Gross 12% Gross 0% Gross 4% Gross 8% Gross 12% Gross
Year Per Year (-1.50% Net) (2.50% Net) (6.50% Net) (10.50% Net) (-1.50% Net) (2.50% Net) (6.50% Net) (10.50% Net)
------ -------------- ------------ ----------- ----------- ------------ ------------ ----------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 $ 407 $20,012 $20,024 $20,036 $ 20,048 $ 38 $ 50 $ 62 $ 74
2 $ 829 $20,013 $20,046 $20,080 $ 20,115 $ 243 $ 276 $ 310 $ 345
3 $ 1,269 $20,002 $20,065 $20,133 $ 20,204 $ 442 $ 505 $ 573 $ 644
4 $ 1,726 $20,000 $20,082 $20,194 $ 20,317 $ 636 $ 739 $ 852 $ 974
5 $ 2,202 $20,000 $20,095 $20,266 $ 20,456 $ 833 $ 985 $ 1,156 $ 1,347
6 $ 2,697 $20,000 $20,112 $20,356 $ 20,636 $1,083 $ 1,296 $ 1,539 $ 1,819
7 $ 3,211 $20,000 $20,127 $20,460 $ 20,852 $1,335 $ 1,617 $ 1,949 $ 2,341
8 $ 3,746 $20,000 $20,140 $20,578 $ 21,109 $1,581 $ 1,943 $ 2,381 $ 2,912
9 $ 4,302 $20,000 $20,151 $20,713 $ 21,414 $1,823 $ 2,274 $ 2,837 $ 3,537
10 $ 4,881 $20,000 $20,159 $20,865 $ 21,770 $2,059 $ 2,611 $ 3,317 $ 4,222
15 $ 8,140 $20,000 $20,161 $21,943 $ 24,581 $2,898 $ 4,115 $ 5,898 $ 8,536
20 $12,106 $20,000 $20,085 $23,726 $ 34,455 $3,545 $ 5,723 $ 9,364 $ 15,577
25 $16,931 $20,000 $20,000 $26,816 $ 51,232 $3,894 $ 7,379 $13,990 $ 26,728
30 (Age 65) $22,801 $20,000 $20,000 $33,613 $ 74,143 $3,767 $ 9,012 $19,989 $ 44,092
35 $29,942 $20,000 $20,000 $41,212 $105,773 $2,790 $10,484 $27,514 $ 70,618
40 $38,631 $20,000 $20,000 $49,880 $149,893 $ 167 $11,581 $36,757 $110,458
45 $49,203 $20,000 $20,000 $60,014 $212,247 $ 0 $11,848 $47,860 $169,261
</TABLE>
(1) If premiums are paid more frequently than annually, the payments would be
$202.79 semi-annually, $103.98 quarterly -or $36.59 monthly. The death
benefits and cash surrender 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 surrender value for a contract would be
different from those shown if the actual rates of return averaged 0%, 4%, 8%,
and 12% over a period of years but also fluctuated above or below those averages
for individual contract years. No representations can be made by Pruco Life or
the Series Fund that these hypothetical rates of return can be achieved for any
one year or sustained over any period of time.
T2
<PAGE>
THE PRUVIDER VARIABLE APPRECIABLE LIFE INSURANCE CONTRACT
MALE PREFERRED ISSUE AGE 35
$5,000 GUARANTEED DEATH BENEFIT
$173.70 ANNUAL PREMIUM (1)
USING MAXIMUM CONTRACTUAL CHARGES
<TABLE>
<CAPTION>
Death Benefit (2) Cash Surrender 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 12% Gross 0% Gross 4% Gross 8% Gross 12% Gross
Year Per Year (-1.50% Net) (2.50% Net) (6.50% Net) (10.50% Net) (-1.50% Net) (2.50% Net) (6.50% Net) (10.50% Net)
------ -------------- ------------ ----------- ----------- ------------ ------------ ----------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 $ 181 $5,000 $5,000 $ 5,004 $ 5,009 $ 0 $ 0 $ 0 $ 0
2 $ 369 $5,000 $5,000 $ 5,010 $ 5,022 $ 35 $ 45 $ 56 $ 67
3 $ 564 $5,000 $5,000 $ 5,018 $ 5,039 $ 82 $ 100 $ 120 $ 142
4 $ 767 $5,000 $5,000 $ 5,028 $ 5,063 $128 $ 157 $ 189 $ 224
5 $ 978 $5,000 $5,000 $ 5,040 $ 5,093 $172 $ 214 $ 261 $ 314
6 $ 1,198 $5,000 $5,000 $ 5,054 $ 5,129 $228 $ 284 $ 350 $ 425
7 $ 1,427 $5,000 $5,000 $ 5,070 $ 5,174 $283 $ 356 $ 443 $ 546
8 $ 1,665 $5,000 $5,000 $ 5,089 $ 5,227 $336 $ 428 $ 540 $ 678
9 $ 1,912 $5,000 $5,000 $ 5,112 $ 5,291 $388 $ 500 $ 643 $ 822
10 $ 2,169 $5,000 $5,000 $ 5,137 $ 5,365 $438 $ 574 $ 750 $ 978
15 $ 3,617 $5,000 $5,000 $ 5,319 $ 5,952 $602 $ 886 $1,308 $ 1,940
20 $ 5,379 $5,000 $5,000 $ 5,625 $ 7,692 $713 $1,203 $2,034 $ 3,477
25 $ 7,523 $5,000 $5,000 $ 6,105 $11,223 $740 $1,501 $2,970 $ 5,855
30 (Age 65) $10,132 $5,000 $5,000 $ 7,008 $15,903 $633 $1,740 $4,167 $ 9,457
35 $13,305 $5,000 $5,000 $ 8,432 $22,169 $282 $1,847 $5,629 $14,801
40 $17,166 $5,000 $5,000 $ 9,987 $30,626 $ 0 $1,661 $7,359 $22,568
45 $21,864 $5,000 $5,000 $11,714 $42,130 $ 0 $ 749 $9,341 $33,597
</TABLE>
(1) If premiums are paid more frequently than annually, the payments would be
$89.46 semi-annually, $46.15 quarterly or $16.90 monthly. The death
benefits and cash surrender 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 surrender value for a contract would
be different from those shown if the actual rates of return averaged 0%, 4%,
8%, and 12% over a period of years but also fluctuated above or below those
averages for individual contract years. No representations can be made by
Pruco Life or the Series Fund that these hypothetical rates of return can be
achieved for any one year or sustained over any period of time.
T3
<PAGE>
THE PRUVIDER VARIABLE APPRECIABLE LIFE INSURANCE CONTRACT
MALE PREFERRED ISSUE AGE 35
$20,000 GUARANTEED DEATH BENEFIT
$390.90 ANNUAL PREMIUM (1)
USING MAXIMUM CONTRACTUAL CHARGES
<TABLE>
<CAPTION>
Death Benefit (2) Cash Surrender Value (2)
------------------------------------------------- -------------------------------------------------
Premiums Assuming Hypothetical Gross (and Net) Assuming Hypothetical Gross (and Net)
End of Accumulated Annual Investment Return of Annual Investment Return of
------------------------------------------------- -------------------------------------------------
Policy at 4% Interest 0% Gross 4% Gross 8% Gross 12% Gross 0% Gross 4% Gross 8% Gross 12% Gross
Year Per Year (-1.50% Net) (2.50% Net) (6.50% Net) (10.50% Net) (-1.50% Net) (2.50% Net) (6.50% Net) (10.50% Net)
- ------ -------------- ------------ ----------- ----------- ------------ ------------ ----------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 $ 407 $20,000 $20,000 $20,009 $ 20,020 $ 12 $ 24 $ 35 $ 46
2 $ 829 $20,000 $20,000 $20,024 $ 20,057 $ 191 $ 221 $ 253 $ 286
3 $ 1,269 $20,000 $20,000 $20,045 $ 20,111 $ 364 $ 423 $ 485 $ 551
4 $ 1,726 $20,000 $20,000 $20,073 $ 20,186 $ 533 $ 627 $ 731 $ 843
5 $ 2,202 $20,000 $20,000 $20,109 $ 20,283 $ 705 $ 844 $ 1,000 $ 1,174
6 $ 2,697 $20,000 $20,000 $20,154 $ 20,407 $ 924 $1,116 $ 1,337 $ 1,591
7 $ 3,211 $20,000 $20,000 $20,207 $ 20,560 $1,144 $1,398 $ 1,696 $ 2,049
8 $ 3,746 $20,000 $20,000 $20,270 $ 20,745 $1,359 $1,682 $ 2,073 $ 2,548
9 $ 4,302 $20,000 $20,000 $20,344 $ 20,967 $1,568 $1,969 $ 2,468 $ 3,091
10 $ 4,881 $20,000 $20,000 $20,430 $ 21,229 $1,770 $2,258 $ 2,882 $ 3,681
15 $ 8,140 $20,000 $20,000 $21,065 $ 23,339 $2,431 $3,484 $ 5,020 $ 7,293
20 $12,106 $20,000 $20,000 $22,159 $ 28,907 $2,877 $4,719 $ 7,797 $ 13,069
25 $16,931 $20,000 $20,000 $23,906 $ 42,230 $2,989 $5,864 $11,368 $ 22,032
30 (Age 65) $22,801 $20,000 $20,000 $26,798 $ 59,888 $2,559 $6,758 $15,937 $ 35,614
35 $29,942 $20,000 $20,000 $32,287 $ 83,529 $1,145 $7,080 $21,556 $ 55,768
40 $38,631 $20,000 $20,000 $38,281 $115,433 $ 0 $6,147 $28,210 $ 85,064
45 $49,203 $20,000 $20,000 $44,938 $158,832 $ 0 $2,078 $35,837 $126,663
</TABLE>
(1) If premiums are paid more frequently than annually, the payments would be
$202.79 semi-annually, $103.98 quarterly or $36.59 monthly. The death
benefits and cash surrender 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 surrender value for a contract would be
different from those shown if the actual rates of return averaged 0%, 4%, 8%,
and 12% over a period of years but also fluctuated above or below those averages
for individual contract years. No representations can be made by Pruco Life or
the Series Fund that these hypothetical rates of return can be achieved for any
one year or sustained over any period of time.
T4
<PAGE>
CONTRACT LOANS
You may borrow from Pruco Life up to the "loan value" of the Contract, using the
Contract as the only security for the loan. The loan value is equal to (1) 90%
of an amount equal to the portion of the Contract Fund value attributable to the
variable investment options and to any prior loan[s] supported by the variable
investment options, minus the portion of any charges attributable to the
variable investment options that would be payable upon an immediate surrender;
plus (2) 100% of an amount equal to the portion of the Contract Fund value
attributable to the fixed-rate option and to any prior loan[s] supported by the
fixed-rate option, minus the portion of any charges attributable to the fixed-
rate option that would be payable upon an immediate surrender. The minimum
amount that may be borrowed at any one time is $200 unless the proceeds are used
to pay premiums on the Contract.
Interest charged on a loan accrues daily at a fixed effective annual rate of
5.5%. 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 principal amount of the
loan. The Contract debt is the principal amount of all outstanding loans plus
any interest accrued thereon. If at any time the Contract debt exceeds what the
cash surrender value would be if there were no Contract debt, Pruco Life will
notify you of its intent to terminate the Contract in 61 days, within which time
you may repay all or enough of the loan to obtain a positive cash surrender
value and thus keep the Contract inforce for a limited time. 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,
page 18, and LAPSE AND REINSTATEMENT, below.
When a loan is made, an amount equal to the loan proceeds (the "loan amount") is
transferred out of the variable investment options and/or the fixed-rate option,
as applicable. The reduction will normally be made in the same proportions as
the value in each variable investment option and the fixed-rate option bears to
the total value of the Contract. While a loan is outstanding, the amount that
was so transferred will continue to be treated as part of the Contract Fund, but
it will be credited with the assumed rate of return of 4% rather than with the
actual rate of return of the variable investment options or fixed-rate option.
A loan will not affect the amount of the premiums due. Should the death benefit
become payable while a loan is outstanding, or should the Contract be
surrendered, any Contract debt will be deducted from the death benefit or the
cash surrender value.
A loan will have an effect on a Contract's cash surrender value and may have an
effect on the death benefit, even if the loan is fully repaid, because the
investment results of the selected options will apply only to the amount
remaining invested under those 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, values under the
Contract will not increase as rapidly as they would have if no loan had been
made. If investment results are below that rate, Contract values will be higher
than they would have been had no loan been made. A loan that is repaid will not
have any effect upon the guaranteed minimum death benefit.
Loans from Modified Endowment Contracts may be treated for tax purposes as
distributions of income. See TAX TREATMENT OF CONTRACT BENEFITS, page 18.
SURRENDER OF A CONTRACT
You may surrender a Contract, in whole or in part, for its cash surrender value
while the insured is living. To surrender a Contract, in whole or in part, you
must deliver or mail it, together with a written request in a form that meets
Pruco Life's needs, to a Home Office. The cash surrender value of a surrendered
or partially surrendered Contract (taking into account the deferred sales and
administrative charges, if any) will be determined as of the end of the
valuation period in which such a request is received in a Home Office.
Surrender of all or part of a Contract may have tax consequences. See TAX
TREATMENT OF CONTRACT BENEFITS, page 18.
LAPSE AND REINSTATEMENT
As explained earlier, if Scheduled Premiums are paid on or before each due date,
or within the grace period after each due date, and there are no withdrawals or
outstanding loans, a Contract will remain inforce even if the investment results
of that Contract's variable investment option[s] have been so unfavorable that
the Contract Fund has decreased to zero.
In addition, even if a Scheduled Premium is not paid, the Contract will remain
inforce as long as the Contract Fund on any Monthly Date is equal to or greater
than the Tabular Contract Fund Value on the following Monthly Date. (A Table of
Tabular Contract Fund Values is included in the Contract; the values increase
with each year the Contract remains
15
<PAGE>
inforce.) This could occur because of such factors as favorable investment
experience, deduction of current rather than maximum charges, or the previous
payment of greater than Scheduled Premiums.
However, if a Scheduled Premium is not paid, and the Contract Fund is
insufficient to keep the Contract inforce, the Contract will go into default.
Should this happen, Pruco Life will send the Contract owner a notice of default
setting forth the payment necessary to keep the Contract inforce on a premium
paying basis. This payment must be received at a Home Office within the 61 day
grace period after the notice of default is mailed or the Contract will lapse.
A Contract that lapses with an outstanding Contract loan may have tax
consequences. See TAX TREATMENT OF CONTRACT BENEFITS, page 18.
A Contract that has lapsed may be reinstated within five years after the date of
default unless the Contract has been surrendered for its cash surrender value.
To reinstate a lapsed Contract, Pruco Life requires renewed evidence of
insurability, and submission of certain payments due under the Contract.
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 prior to the
end of the 61 day grace period. You may also choose one of the three forms of
insurance described below for which no further premiums are payable.
FIXED EXTENDED TERM INSURANCE. The amount of insurance that would have been
paid on the date of default will continue for a stated period of time. You will
be told in writing how long that will be. The insurance amount will not change.
There will be a diminishing cash surrender value but no loan value. Extended
term insurance is not available to insureds in high risk classifications or
under Contracts issued in connection with tax-qualified pension plans.
FIXED REDUCED PAID-UP INSURANCE. This insurance continues for the lifetime of
the insured but at an insurance amount that is generally lower than that
provided by fixed extended term insurance. It will decrease only if you take a
Contract loan. Upon request, we will tell you what the amount of insurance will
be. Fixed paid-up insurance has a cash surrender value and a loan value. It is
possible for this Contract to be classified as a Modified Endowment Contract if
this option is exercised. See TAX TREATMENT OF CONTRACT BENEFITS, page 18.
VARIABLE REDUCED PAID-UP INSURANCE. This is similar to fixed paid-up insurance
and will initially be in the same amount. The Contract Fund will continue to
vary to reflect the experience of the variable investment options and/or the
fixed-rate option. There will be a new guaranteed minimum death benefit. Loans
will be available subject to the same rules that apply to premium-paying
Contracts.
Variable reduced paid-up insurance is the automatic option provided upon lapse
only if the amount of variable reduced paid-up insurance is at least as great as
the amount of fixed extended term insurance which would have been provided upon
lapse. In addition, variable reduced paid-up insurance will be available only
if the insured is not in one of the high risk rating classes for which Pruco
Life does not offer fixed extended term insurance. It is possible for this
Contract to be classified as a Modified Endowment Contract if this option is
exercised. See TAX TREATMENT OF CONTRACT BENEFITS, page 18.
WHAT HAPPENS IF NO REQUEST IS MADE? Except in the two situations that follow,
if no request is made, the "automatic option" will be fixed extended term
insurance. If fixed extended term insurance is not available to the insured,
then fixed reduced paid-up insurance will be provided. However, if variable
reduced paid-up insurance is available and the amount is at least as great as
the amount of fixed extended term insurance, then the automatic option will be
variable reduced paid-up insurance. This could occur if the Contract lapses and
there is a Contract debt outstanding.
PAID-UP INSURANCE OPTION
In certain circumstances you may elect to stop paying premiums and to have
guaranteed insurance coverage for the lifetime of the insured. This benefit is
available only if the following conditions are met: (1) the Contract is not in
default; (2) Pruco Life is not paying premiums in accordance with any payment of
premium benefit that may be included in the Contract; and (3) the Contract Fund
is sufficiently large so that the calculated guaranteed paid-up insurance amount
is at least equal to the face amount of insurance plus the excess, if any, of
the Contract Fund over the Tabular Contract Fund. The amount of guaranteed
paid-up insurance coverage may be greater. It will be equal to the difference
between the Contract Fund and the present value of future monthly charges from
the Contract Fund (other than charges for anticipated mortality costs and for
payment of premium riders) multiplied by the attained age factor. This option
will generally be available only when the Contract has been inforce for many
years and the Contract Fund has grown because of favorable investment experience
or the payment of unscheduled premiums or both. Once the paid-up insurance
option is exercised, the actual death benefit is equal to the greater of the
guaranteed paid-up insurance amount and the Contract Fund multiplied by the
attained age factor.
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Upon request, Pruco Life will tell you the amount needed to pay up the Contract
and to guarantee the paid-up insurance amount as long as a payment equal to or
greater than this amount is received within two weeks of the date it was quoted.
There is no guarantee if the payment is received within the two week period and
is less than the quoted amount or if the payment is received outside the two
week period. In that case, Pruco Life will add the payment to the Contract Fund
and recalculate the guaranteed paid-up insurance amount. If the guaranteed
paid-up insurance amount is equal to or greater than the face amount, the paid-
up request will be processed. If the guaranteed paid-up insurance amount
calculated is below the face amount, you will be notified that the amount is
insufficient to process the request. In some cases, the quoted amount, if paid,
would increase the death benefit by more than it increases the Contract Fund.
In these situations, underwriting might be required to accept the premium
payment and to process the paid-up request. Pruco Life reserves the right to
change this procedure in the future. After the first Contract year, you must
make a proper written request for the Contract to become fully paid-up and send
the Contract to a Home Office to be endorsed. It is possible for this Contract
to be classified as a Modified Endowment Contract if this option is exercised.
See TAX TREATMENT OF CONTRACT BENEFITS, page 18. A Contract in effect under a
paid-up insurance option will have cash surrender and loan values.
REDUCED PAID-UP INSURANCE OPTION
Like the paid-up insurance option, reduced paid-up insurance provides the
insured with lifetime insurance coverage without the payment of additional
premiums. However, reduced paid-up insurance provides insurance coverage which
is generally lower than the death benefit of the Contract. Reduced paid-up
insurance is based upon a Contract's current net cash value and can be requested
at any time. This option is available only when the Contract is not in default
and Pruco Life is not paying any premiums in accordance with any payment of
premium benefit that may be included in the Contract. In order to receive
reduced paid-up insurance, a Contract owner must make a proper written request,
and Pruco Life may request that the owner send the Contract to a Home Office to
be endorsed. It is possible for this Contract to be classified as a Modified
Endowment Contract if this option is exercised. See TAX TREATMENT OF CONTRACT
BENEFITS, page 18.
WHEN PROCEEDS ARE PAID
Pruco Life will generally pay any death benefit, cash surrender value, loan
proceeds or withdrawal within seven days after all the documents required for
such payment are received at a Home Office. Other than the death benefit, which
is determined as of the date of death, the amount will be determined as of the
end of the valuation period in which the necessary documents are received at a
Home Office. Pruco Life may delay payment of proceeds from the variable
investment options and the variable portion of the death benefit due under the
Contract if the sale or valuation of the Account's assets is not reasonably
practicable because the New York Stock Exchange is closed for other than a
regular holiday or weekend, trading is restricted by the SEC, or the SEC
declares that an emergency exists.
With respect to the amount of any cash surrender value allocated to the fixed-
rate option, and with respect to a Contract inforce as fixed reduced paid-up
insurance or as extended term insurance, Pruco Life expects to pay the cash
surrender value promptly upon request. However, Pruco Life has the right to
delay payment of such cash surrender value for up to six months (or a shorter
period if required by applicable law). Pruco Life will pay interest of at least
3% a year if it delays such a payment for more than 30 days (or a shorter period
if required by applicable law).
LIVING NEEDS BENEFIT
You may elect to add the LIVING NEEDS BENEFIT(SM) to your Contract at issue. The
benefit may vary by state. It can generally be added only when the aggregate
face amounts of the insured's eligible contracts equal $50,000 or more. 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.
Subject to state regulatory approval, 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. A Pruco Life representative
should be consulted as to whether additional options may be available.
TERMINAL ILLNESS OPTION. This option is available if the insured is diagnosed
as terminally ill with a life expectancy of six months or less. When you
provide satisfactory evidence, Pruco Life will provide an accelerated payment of
the portion of the death benefit you select 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
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.
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NURSING HOME OPTION. This option is available after the insured has been
confined to an eligible nursing home for six months or more. When you provide
satisfactory evidence, including certification by a licensed physician, that the
insured is expected to remain in the nursing home until death, Pruco Life will
provide an accelerated payment of the portion of the death benefit you select 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 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 can furnish details about the amount of LIVING NEEDS BENEFIT that is
available to an eligible Contract owner, 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.
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 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 may limit the number of such requests or impose a
reasonable charge if such requests are made too frequently.
You will also receive, usually at the end of February, an annual report of the
operations of the Series Fund. That report will list the investments held in
both portfolios and include audited financial statements for the Series Fund. A
semi-annual report with similar unaudited information will be sent to you,
usually at the end of August.
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 statement of additional information 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:
. You will not be taxed on the growth of the funds in the Contract,
unless you receive a distribution from the Contract.
. The Contract's death benefit will be income tax free to your
beneficiary.
Although we believe the Contract should qualify as "life insurance" for federal
tax purposes, there are some uncertainties, particularly because the Secretary
of the Treasury has not yet issued permanent regulations that bear on this
question. Accordingly, we have reserved the right to make changes - which will
be applied uniformly to all
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Contract owners after advance written notice -- that we deem necessary to ensure
that the Contract will continue to 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.
. 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.
. Generally, you will be taxed on a withdrawal to the extent the amount
you receive exceeds the premiums you paid for the Contract less the
untaxed portion of any prior withdrawals. However, under some limited
circumstances, in the first 15 Contract years, all or a portion of a
withdrawal may be taxed if the Contract Fund exceeds the total
premiums paid less the untaxed portions of any prior withdrawals, even
if total withdrawals do not exceed total premiums paid.
. 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.
. Loans you take against the Contract are ordinarily treated as debt and
are not considered distributions subject to tax.
MODIFIED ENDOWMENT CONTRACTS.
. The rules change if the Contract is classified as a Modified Endowment
Contract. The Contract could be classified as a Modified Endowment
Contract if premiums substantially in excess of Scheduled Premiums are
paid or a decrease in the face amount of insurance is made (or a rider
removed). The addition of a rider or an increase in the face amount of
insurance may also cause the Contract to be classified as a Modified
Endowment Contract even though the Contract owner pays only Scheduled
Premiums or even less than the Scheduled Premiums. You should first
consult a qualified tax adviser and your Pruco Life representative if
you are contemplating any of these steps.
. 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 Contract Fund before surrender charges 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.
. Any taxable income on pre-death distributions (including full
surrenders) is subject to a penalty of 10 percent 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.
. 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 CONSEQUENCES. 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.
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Deductions for interest paid or accrued on Contract debt or on other loans that
are incurred or continued to purchase or carry the Contract may be denied. Your
individual situation or that of your beneficiary will determine the federal
estate taxes and the state and local estate, inheritance and other taxes due if
you or the insured dies.
BUSINESS-OWNED LIFE INSURANCE. If a business, rather than an individual, is the
owner of the Contract, there are some additional rules. Business Contract
owners generally cannot deduct premium payments. Business Contract owners
generally cannot take tax deductions for interest on Contract debt paid or
accrued after October 13, 1995. An exception permits the deduction of interest
on policy loans on Contracts for up to 20 key persons. The interest deduction
for Contract debt on these loans is limited to a prescribed interest rate and a
maximum aggregate loan amount of $50,000 per key insured person. The corporate
alternative minimum tax also applies to business-owned life insurance. This is
an indirect tax on additions to the Contract Fund or death benefits received
under business-owned life insurance policies.
RIDERS
Contract owners may be able to obtain additional fixed benefits which may
increase the Scheduled Premium. If they do cause an increase in the Scheduled
Premium, they will be charged for by making monthly deductions from the Contract
Fund. These optional insurance benefits will be described in what is known as a
"rider" to the Contract. Charges for the riders will be deducted from the
Contract Fund on each Monthly date.
One rider pays an additional amount if the insured dies in an accident. Another
waives certain premiums if the insured is disabled within the meaning of the
provision (or, in the case of a Contract issued on an insured under the age of
15, if the applicant dies or becomes disabled within the meaning of the
provision). Others pay an additional amount if the insured dies within a stated
number of years after issue; similar benefits may be available if the insured's
spouse or child should die. The amounts of these benefits are fully guaranteed
at issue; they do not depend on the performance of the Account, although they
will no longer be available if the Contract lapses. Certain restrictions may
apply; they are clearly described in the applicable rider.
Any Pruco Life representative authorized to sell the Contract can explain these
extra benefits further. Samples of the provisions are available from Pruco Life
upon written request.
LEGAL CONSIDERATIONS RELATING TO SEX-DISTINCT PREMIUMS AND BENEFITS
The Contract generally uses 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 a blended unisex rate, whether the insured is male or female.
In addition, Pruco Life may have offered the Contract with unisex mortality
rates to employers and employee organizations.
OTHER STANDARD 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 an employee benefit plan or program without Pruco Life's consent.
Pruco Life 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'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 will
adjust the death benefits payable and any amount to be paid, as required by law,
to reflect the correct age and sex. Any such death benefit will be based on what
the most recent deductions from the Contract Fund would have provided at the
correct age and sex.
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SETTLEMENT OPTIONS. The Contract grants to most owners, or to the beneficiary,
a variety of optional ways of receiving Contract proceeds, other than in a lump
sum. Any Pruco Life representative authorized to sell this Contract can explain
these options upon request.
SUICIDE EXCLUSION. Generally, if the insured, whether sane or insane, dies by
suicide within two years from the Contract Date, the Contract will end and Pruco
Life will return the premiums paid, less any Contract debt, and less any
withdrawals.
PAYING PREMIUMS BY PAYROLL DEDUCTION
In addition to the annual, semi-annual, quarterly and monthly premium payment
modes, a payroll budget method of paying premiums may also be available under
certain Contracts. The employer generally deducts the necessary amounts from
employee paychecks and sends premium payments to Pruco Life monthly. Any Pruco
Life representative authorized to sell this Contract can provide further details
concerning the payroll budget method of paying premiums.
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 have been paid on a different
basis than described below.
Where the insured is less than 60 years of age, the representative generally
receives a commission of: (1) no more than 50% of the Scheduled Premiums for the
first year: (2) no more than 6% of the Scheduled Premiums for the second through
10th years; and (3) no more than 2% of the Scheduled Premiums thereafter. For
insureds over 59 years of age, the commission is lower. The representative may
be required to return all or part of the first year commission if the Contract
is not continued through the second year. Representatives with less than three
years of service may be paid on a different basis.
Sales expenses in any year are not equal to the deduction for sales load in that
year. Pruco Life expects to recover its total sales expenses over the periods
the Contracts are in effect. To the extent that the sales charges are
insufficient to cover total sales expenses, the sales expenses will be recovered
from Pruco Life's surplus, which may include amounts derived from the mortality
and expense risk charge and the guaranteed minimum death benefit risk charge
described under item (d) under MONTHLY DEDUCTIONS FROM CONTRACT FUND, page 7 and
DAILY DEDUCTION FROM THE CONTRACT FUND, page 7.
STATE REGULATION
Pruco Life is subject to regulation and supervision by the Department of
Insurance of the State of Arizona, which periodically examines its operations
and financial condition. It is also subject to the insurance laws and
regulations of all jurisdictions in which it is authorized to do business.
Pruco Life is required to submit annual statements of its operations, including
financial statements, to the insurance departments of the various jurisdictions
in which it does business to determine solvency and compliance with local
insurance laws and regulations.
In addition to the annual statements referred to above, Pruco Life is required
to file with Arizona and other jurisdictions a separate statement with respect
to the operations of all its variable contract accounts, in a form promulgated
by the National Association of Insurance Commissioners.
EXPERTS
The consolidated financial statements of Pruco Life and its subsidiaries 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.
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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 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, 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 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 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 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 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. Its address and
telephone number are on the inside front cover of this prospectus.
FINANCIAL STATEMENTS
The financial statements of the Account should be distinguished from the
consolidated financial statements of Pruco Life and its subsidiaries, which
should be considered only as bearing upon the ability of Pruco Life to meet its
obligations under the Contracts.
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DIRECTORS AND OFFICERS OF PRUCO LIFE
DIRECTORS OF PRUCO LIFE
The directors and major officers of Pruco Life, listed with their principal
occupations during the past five years, are shown below.
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.
KIYOFUMI SAKAGUCHI, DIRECTOR - President and CEO, Prudential International
Insurance Group since 1995.
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.
HIROSHI NAKAJIMA, SENIOR VICE PRESIDENT - President and CEO, Pruco Life
Insurance Company Taiwan Branch since 1997; prior to 1997: Senior Managing
DIRECTOR, Prudential Life Insurance Co., Ltd.
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 is 213
Washington Street, Newark, New Jersey 07102-2992.
Pruco Life directors and officers are elected annually.
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FINANCIAL STATEMENTS OF
PRUCO LIFE PRUvider VARIABLE APPRECIABLE ACCOUNT
STATEMENTS OF NET ASSETS
December 31, 1999
<TABLE>
<CAPTION>
SUBACCOUNTS
---------------------------------
FLEXIBLE CONSERVATIVE
MANAGED BALANCED
PORTFOLIO PORTFOLIO
------------- -------------
<S> <C> <C>
ASSETS
Investment in The Prudential Series Fund, Inc.
Portfolios, at net asset value [Note 3] ......... $ 131,734,430 $ 115,806,804
Receivable from (Payable to)
Pruco Life Insurance Company [Note 2] ........... 16,898 (7,042)
------------- -------------
Net Assets ........................................ $ 131,751,328 $ 115,799,762
============= =============
NET ASSETS, representing:
Equity of contract owners [Note 4] ................ $ 131,751,328 $ 115,799,762
============= =============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS ON PAGES A4 THROUGH A6
A1
<PAGE>
FINANCIAL STATEMENTS OF
PRUCO LIFE PRUvider VARIABLE APPRECIABLE ACCOUNT
STATEMENTS OF OPERATIONS
For the years ended December 31, 1999, 1998 and 1997
<TABLE>
<CAPTION>
SUBACCOUNTS
-----------------------------------------------------------------------------------
FLEXIBLE CONSERVATIVE
MANAGED BALANCED
PORTFOLIO PORTFOLIO
---------------------------------------- ----------------------------------------
1999 1998 1997 1999 1998 1997
----------- ------------ ------------ ----------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
INVESTMENT INCOME
Dividend income ........................... $ 5,746 $ 3,885,455 $ 3,045,029 $ 4,686,219 $ 4,692,358 $ 4,605,400
----------- ------------ ------------ ----------- ------------ ------------
EXPENSES
Charges to contract owners for
assuming mortality risk and
expense risk [Note 5A] .................. 1,146,450 1,056,568 890,696 1,029,569 987,564 886,214
----------- ------------ ------------ ----------- ------------ ------------
NET INVESTMENT INCOME (LOSS) ................ (1,140,704) 2,828,887 2,154,333 3,656,650 3,704,794 3,719,186
----------- ------------ ------------ ----------- ------------ ------------
NET REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS
Capital gains distributions received ...... 1,457,859 12,475,065 16,205,801 652,825 6,729,009 11,137,278
Realized gain (loss) on shares redeemed ... (66,480) 27,544 130,940 36,328 64,871 212,244
Net change in unrealized gain (loss)
on investments .......................... 8,242,235 (5,044,498) (3,235,860) 2,098,174 658,618 (3,623,420)
----------- ------------ ------------ ----------- ------------ ------------
NET GAIN ON INVESTMENTS ..................... 9,633,614 7,458,111 13,100,881 2,787,327 7,452,498 7,726,102
----------- ------------ ------------ ----------- ------------ ------------
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS ................. $ 8,492,910 $ 10,286,998 $ 15,255,214 $ 6,443,977 $ 11,157,292 $ 11,445,288
=========== ============ ============ =========== ============ ============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS ON PAGES A4 THROUGH A6
A2
<PAGE>
FINANCIAL STATEMENTS OF
PRUCO LIFE PRUvider VARIABLE APPRECIABLE ACCOUNT
STATEMENTS OF CHANGES IN NET ASSETS
For the years ended December 31, 1999, 1998 and 1997
<TABLE>
<CAPTION>
SUBACCOUNTS
-------------------------------------------------------------------------------------
FLEXIBLE MANAGED PORTFOLIO CONSERVATIVE BALANCED PORTFOLIO
----------------------------------------- -----------------------------------------
1999 1998 1997 1999 1998 1997
------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
OPERATIONS
Net investment income (loss) .......... $ (1,140,704) $ 2,828,887 $ 2,154,333 $ 3,656,650 $ 3,704,794 $ 3,719,186
Capital gains distributions received .. 1,457,859 12,475,065 16,205,801 652,825 6,729,009 11,137,278
Realized gain (loss) on shares
redeemed ............................ (66,480) 27,544 130,940 36,328 64,871 212,244
Net change in unrealized gain (loss)
on investments ...................... 8,242,235 (5,044,498) (3,235,860) 2,098,174 658,618 (3,623,420)
------------ ------------ ------------ ------------ ------------ ------------
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS ............. 8,492,910 10,286,998 15,255,214 6,443,977 11,157,292 11,445,288
------------ ------------ ------------ ------------ ------------ ------------
PREMIUM PAYMENTS
AND OTHER OPERATING TRANSFERS
Contract Owner Net Payments ........... 18,841,195 25,870,745 26,737,492 10,739,958 17,110,194 19,001,987
Policy Loans .......................... (1,336,799) (1,252,962) (912,970) (912,018) (799,965) (704,562)
Policy Loan Repayments and Interest ... 652,283 542,622 390,085 509,275 440,486 350,979
Surrenders, Withdrawals and Death
Benefits ............................ (6,709,712) (6,436,168) (6,402,537) (6,151,943) (5,513,621) (6,555,299)
Net Transfers From (To) Other
Subaccounts or Fixed Rate Option ..... 236,659 489,890 567,479 (166,752) (443,976) (476,329)
Administrative and Other Charges ...... (13,060,243) (13,737,022) (13,773,623) (9,849,649) (10,626,237) (11,188,850)
------------ ------------ ------------ ------------ ------------ ------------
NET INCREASE (DECREASE) IN NET
ASSETS RESULTING FROM PREMIUM
PAYMENTS AND OTHER OPERATING
TRANSFERS ............................. (1,376,617) 5,477,105 6,605,926 (5,831,129) 166,881 427,926
------------ ------------ ------------ ------------ ------------ ------------
NET INCREASE (DECREASE) IN NET
ASSETS RETAINED IN THE ACCOUNT
[Note 7] .............................. 0 2,274 (328,229) 0 4,262 (322,721)
------------ ------------ ------------ ------------ ------------ ------------
TOTAL INCREASE IN NET ASSETS ............ 7,116,293 15,766,377 21,532,911 612,848 11,328,435 11,550,493
NET ASSETS
Beginning of year ..................... 124,635,035 108,868,658 87,335,747 115,186,914 103,858,479 92,307,986
------------ ------------ ------------ ------------ ------------ ------------
End of year ........................... $131,751,328 $124,635,035 $108,868,658 $115,799,762 $115,186,914 $103,858,479
============ ============ ============ ============ ============ ============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS ON PAGES A4 THROUGH A6
A3
<PAGE>
NOTES TO FINANCIAL STATEMENTS OF
PRUCO LIFE PRUvider VARIABLE APPRECIABLE ACCOUNT
DECEMBER 31, 1999
NOTE 1: GENERAL
Pruco Life PRUvider Variable Appreciable Account (the "Account") was
established on July 10, 1992 under Arizona law as a separate investment
account of Pruco Life Insurance Company ("Pruco Life") which is a
wholly-owned subsidiary of The Prudential Insurance Company of America
("Prudential"). The assets of the Account are segregated from Pruco
Life's other assets.
The Account is registered under the Investment Company Act of 1940, as
amended, as a unit investment trust. There are two 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.
NOTE 2: SIGNIFICANT ACCOUNTING POLICIES
The accompanying financial statements are prepared in conformity with
accounting principles generally accepted in the United States ("GAAP").
The preparation of the financial statements in conformity with GAAP
requires management to make estimates and assumptions that affect the
reported amounts and disclosures. Actual results could differ from those
estimates.
Investments--The investments in shares of the Series Fund are stated at
-----------
the net asset value of the respective portfolio.
Security Transactions--Realized gains and losses on security
---------------------
transactions are reported on an average cost basis. Purchase and sale
transactions are recorded as of the trade date of the security being
purchased or sold.
Distributions Received--Dividend and capital gain distributions received
----------------------
are reinvested in additional shares of the Series Fund and are recorded
on the ex-dividend date.
Receivable from (Payable to) Pruco Life Insurance Company--At times,
---------------------------------------------------------
Pruco Life 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. The receivable and or payable does not have an
effect on the contract owner's account or the related unit value.
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 PruVider
Variable Appreciable Life subaccounts of the Account and the aggregate
cost of investments in such shares at December 31, 1999 were as follows:
PORTFOLIOS
----------------------------
FLEXIBLE CONSERVATIVE
MANAGED BALANCED
------------ ------------
Number of shares (rounded): 7,467,938 7,539,505
Net asset value per share: $ 17.64 $ 15.36
Cost: $128,974,943 $114,130,944
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
----------------------------
FLEXIBLE CONSERVATIVE
MANAGED BALANCED
PORTFOLIO PORTFOLIO
------------ ------------
Contract Owner Units Outstanding
(rounded) ..................... 37,646,679 39,809,054
Unit Value ...................... $ 3.49968 $ 2.90888
------------ ------------
TOTAL CONTRACT OWNER EQUITY ..... $131,751,328 $115,799,762
============ ============
A4
<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 0.90% 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.
B. Deferred Sales Charge
Subsequent to a contract owner redemption, a deferred sales charge
is imposed upon surrenders of certain variable life insurance
contracts to compensate Pruco Life for sales and other marketing
expenses. The amount of any sales charge will depend on the number
of years that have elapsed since the contract was issued. No sales
charge will be imposed after the tenth year of the contract. No
sales charge will be imposed on death benefits.
C. Partial Withdrawal Charge
A charge is imposed by Pruco Life on partial withdrawals of the
cash surrender value. A charge equal to the lesser of $15 or 2%
will be made in connection with each partial withdrawal of the cash
surrender value of a contract.
D. 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)
transaction costs which are deducted from each premium payment to
cover premium collection and processing costs; (2) state premium
taxes; (3) sales charges which are deducted in order to compensate
Pruco Life for the cost of selling the contract. Contracts are also
subject to monthly charges for the costs of administering the
contract and to compensate Pruco Life for the guaranteed minimum
death benefit risk .
NOTE 6: TAXES
Pruco Life 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.
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 to (from) the Account.
Effective October 13, 1998 Pruco Life no longer maintains a position in
the account. Previously, Pruco Life maintained a position in the Account
for liquidity purposes including unit purchases and redemptions, fund
share transactions and expense processing.
A5
<PAGE>
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
-----------------------------------------------------------------------------------------
FLEXIBLE CONSERVATIVE
MANAGED BALANCED
PORTFOLIO PORTFOLIO
----------------------------------------- ------------------------------------------
1999 1998 1997 1999 1998 1997
---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Contract Owner
Contributions: 5,954,495 8,645,893 9,998,784 4,094,968 6,780,289 8,324,436
Contract Owner
Redemptions: (6,348,982) (6,905,049) (7,621,395) (6,162,167) (6,713,503) (8,122,804)
</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:
PORTFOLIOS
--------------------------------
FLEXIBLE CONSERVATIVE
MANAGED BALANCED
----------- ------------
Purchases ............ $ 3,392,271 $ 1,238,740
Sales ................ $(5,932,235) $(8,092,397)
A6
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Contract Owners of the
Pruco Life PRUvider Variable Appreciable Account
and the Board of Directors of
Pruco Life Insurance Company
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 (Flexible Managed
Portfolio and Conservative Balanced Portfolio) of the Pruco Life PRUvider
Variable Appreciable 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'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
A7
<PAGE>
Pruco Life Insurance Company and Subsidiaries
Consolidated 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: $3,084,057; $2,998,362 $2,763,926
1998: $2,738,654)
Held to maturity, at amortized cost (fair value, 1999: $377,822; 1998: 388,990 410,558
$421,845)
Equity securities - available for sale, at fair value (cost, 1999: $3,238; 4,532 2,847
1998: $2,951)
Mortgage loans on real estate 10,509 17,354
Policy loans 792,352 766,917
Short-term investments 207,219 240,727
Other long-term investments 77,769 42,050
----------------- -----------------
Total investments 4,479,733 4,244,379
Cash 76,396 89,679
Deferred policy acquisition costs 1,062,785 861,713
Accrued investment income 68,917 61,114
Receivables from affiliate 23,329 -
Other assets 48,228 65,145
Separate Account assets 16,032,449 11,490,751
----------------- -----------------
TOTAL ASSETS $21,791,837 $16,812,781
================= =================
LIABILITIES AND STOCKHOLDER'S EQUITY
Liabilities
Policyholders' account balances $3,116,261 $2,702,011
Future policy benefits and other policyholder liabilities 635,978 528,779
Cash collateral for loaned securities 87,336 73,336
Securities sold under agreement to repurchase 21,151 49,708
Income taxes payable 145,600 193,358
Payables to affiliate - 66,568
Other liabilities 83,243 55,038
Separate Account liabilities 16,032,449 11,490,751
----------------- -----------------
Total liabilities 20,122,018 15,159,549
----------------- -----------------
Contingencies (See Footnote 12)
Stockholder's Equity
Common stock, $10 par value;
1,000,000 shares, authorized;
250,000 shares, issued and outstanding 2,500 2,500
Paid-in-capital 439,582 439,582
Retained earnings 1,258,428 1,202,833
Accumulated other comprehensive (loss) income
Net unrealized investment (losses) gains (28,364) 9,902
Foreign currency translation adjustments (2,327) (1,585)
----------------- -----------------
Accumulated other comprehensive (loss) income (30,691) 8,317
----------------- -----------------
Total stockholder's equity 1,669,819 1,653,232
----------------- -----------------
TOTAL LIABILITIES AND
STOCKHOLDER'S EQUITY $ 21,791,837 $16,812,781
================= =================
</TABLE>
See Notes to Consolidated Financial Statements
B1
<PAGE>
Pruco Life Insurance Company and Subsidiaries
Consolidated 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 $ 98,976 $ 82,139 $ 69,614
Policy charges and fee income 414,425 350,569 332,132
Net investment income 276,821 261,430 259,634
Realized investment (losses) gains, net (32,545) 44,841 10,974
Asset management fees 60,392 40,200 33,310
Other income 1,397 1,067 491
-------------- --------------- ---------------
Total revenues 819,466 780,246 706,155
-------------- --------------- ---------------
BENEFITS AND EXPENSES
Policyholders' benefits 205,042 193,739 199,537
Interest credited to policyholders' account balances 136,852 118,992 110,815
General, administrative and other expenses 392,041 231,320 227,561
-------------- --------------- ---------------
Total benefits and expenses 733,935 544,051 537,913
-------------- --------------- ---------------
Income from operations before income taxes 85,531 236,195 168,242
-------------- --------------- ---------------
Income tax provision 29,936 84,233 61,868
-------------- --------------- ---------------
NET INCOME 55,595 151,962 106,374
-------------- --------------- ---------------
Other comprehensive (loss) income, net of tax:
Unrealized gains (losses) on securities, net of
reclassification adjustment (38,266) (7,227) 3,025
Foreign currency translation adjustments (742) 2,980 (2,863)
-------------- --------------- ---------------
Other comprehensive (loss) income (39,008) (4,247) 162
-------------- --------------- ---------------
TOTAL COMPREHENSIVE INCOME $ 16,587 $147,715 $106,536
============== =============== ===============
</TABLE>
See Notes to Consolidated Financial Statements
B2
<PAGE>
Pruco Life Insurance Company and Subsidiaries
Consolidated 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 $ 2,500 $ 439,582 $944,497 $12,402 $1,398,981
Net income - - 106,374 - 106,374
Change in foreign currency - - - (2,863) (2,863)
translation adjustments,
net of taxes
Change in net unrealized
investment gains, net of - - - 3,025 3,025
reclassification
adjustment and taxes
------------- ------------ ---------------- ---------------- -------------------
Balance, December 31, 1997 2,500 439,582 1,050,871 12,564 1,505,517
Net income - - 151,962 - 151,962
Change in foreign currency
translation adjustments, - - - 2,980 2,980
net of taxes
Change in net unrealized
investment losses, net of - - - (7,227) (7,227)
reclassification
adjustment and taxes
------------- ------------ ---------------- ---------------- -------------------
Balance, December 31, 1998 2,500 439,582 1,202,833 8,317 1,653,232
Net income - - 55,595 - 55,595
Change in foreign currency
translation adjustments, - - - (742) (742)
net of taxes
Change in net unrealized
investment losses, net of - - - (38,266) (38,266)
reclassification
adjustment and taxes
------------- ------------ ---------------- ---------------- -------------------
Balance, December 31, 1999 $ 2,500 $ 439,582 $ 1,258,428 $ (30,691) $1,669,819
============= ============================= ================ ===================
</TABLE>
See Notes to Consolidated Financial Statements
B3
<PAGE>
Pruco Life Insurance Company and Subsidiaries
Consolidated 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 $ 55,595 $ 151,962 $ 106,374
Adjustments to reconcile net income to net cash (used in)
provided by operating activities:
Policy charges and fee income (83,961) (29,827) (40,783)
Interest credited to policyholders' account balances 136,852 118,992 110,815
Realized investment (gains) losses, net 32,545 (44,841) (10,974)
Amortization and other non-cash items 75,037 19,655 (26,405)
Change in:
Future policy benefits and other policyholders'
liabilities 107,199 61,095 34,907
Accrued investment income (7,803) 5,886 (4,890)
Payable to affiliate (89,897) (3,807) 20,547
Policy loans (25,435) (62,962) (64,173)
Deferred policy acquisition costs (201,072) (206,471) (22,083)
Income taxes payable (47,758) (16,828) 68,417
Other, net 45,122 (43,675) 34,577
----------------- ------------------- ---------------
Cash Flows (Used In) From Operating Activities (3,576) (50,821) 206,329
----------------- ------------------- ---------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from the sale/maturity of:
Fixed maturities:
Available for sale 3,076,848 5,429,396 2,828,665
Held to maturity 45,841 74,767 138,626
Equity securities 5,209 4,101 6,939
Mortgage loans on real estate 6,845 5,433 24,925
Other long-term investments 385 33,428 (10,618)
Payments for the purchase of:
Fixed maturities:
Available for sale (3,452,289) (5,617,208) (3,141,785)
Held to maturity (24,170) (145,919) (70,532)
Equity securities (5,110) (2,274) (4,594)
Other long-term investments (39,094) (409) (51)
Cash collateral for loaned securities, net 14,000 (70,085) 143,421
Securities sold under agreement to repurchase, net (28,557) 49,708 --
Short-term investments, net 33,580 75,771 (147,030)
----------------- ------------------- ---------------
Cash Flows Used In Investing Activities (366,512) (163,291) (232,034)
----------------- ------------------- ---------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Policyholders' account balances:
Deposits 3,448,370 3,098,764 2,099,600
Withdrawals (3,091,565) (2,866,331) (2,076,303)
----------------- ------------------- ---------------
Cash Flows From (Used in) Financing Activities 356,805 232,433 23,297
----------------- ------------------- ---------------
Net increase (decrease) in Cash (13,283) 18,321 (2,408)
Cash, beginning of year 89,679 71,358 73,766
----------------- ------------------- ---------------
CASH, END OF PERIOD $ 76,396 $ 89,679 $ 71,358
================= =================== ===============
SUPPLEMENTAL CASH FLOW INFORMATION
Income taxes paid (received) $ 55,144 $ 99,810 $ (7,904)
================= =================== ===============
</TABLE>
See Notes to Consolidated Financial Statements
B4
<PAGE>
Pruco Life Insurance Company and Subsidiaries
Notes to Consolidated Financial Statements
- --------------------------------------------------------------------------------
1. BUSINESS
Pruco Life Insurance Company ("the Company") is a stock life insurance company,
organized in 1971 under the laws of the state of Arizona. The Company is
licensed to sell individual life insurance, variable life insurance, variable
annuities, fixed annuities, and a group annuity program ("the Contracts") in the
District of Columbia, Guam and in all states and territories except New York. In
addition, the Company markets individual life insurance through its branch
office in Taiwan. The Company has two wholly owned subsidiaries, Pruco Life
Insurance Company of New Jersey ("PLNJ") and The Prudential Life Insurance
Company of Arizona ("PLICA"). PLNJ 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, fixed annuities, and
variable annuities only in the states of New Jersey and New York. PLICA is a
stock life insurance company organized in 1988 under the laws of the state of
Arizona. PLICA had no new business sales in 1997, 1998 or 1999 and at this time
will not be issuing new business.
The Company 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 and review and approval by two-thirds of the qualified
policyholders who vote on the plan, review and approved 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 intends to make additional capital contributions to the Company, as
needed, to enable it to comply with its reserve requirements and fund expenses
in connection with its business. Generally, Prudential is under no obligation to
make such contributions and its assets do not back the benefits payable under
the Contracts.
The Company is engaged in a business that is highly competitive because of the
large number of stock and mutual life insurance companies and other entities
engaged in marketing insurance products, and individual and group annuities.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The consolidated 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 14. Due to these relationships,
it is possible that the terms of these transactions are not the same as those
that would result from transactions among wholly unrelated parties. All
significant intercompany transactions and balances have been eliminated in
consolidation.
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. Fixed maturities that the Company has both the intent and ability to
hold to maturity are stated at amortized cost and classified as "held to
maturity". The amortized cost of fixed maturities is written down to estimated
fair value if a decline in value is considered to be other than temporary.
Unrealized gains and losses on fixed maturities "available for sale", including
the effect on deferred policy acquisition costs and 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."
B5
<PAGE>
Pruco Life Insurance Company and Subsidiaries
Notes to Consolidated Financial Statements
- --------------------------------------------------------------------------------
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Equity securities, available for sale, comprised of common and non-redeemable
preferred stock, are carried at estimated fair value. The associated unrealized
gains and losses, net of income tax, the effects on deferred policy acquisition
costs and on policyholders' account balances that would result from the
realization of unrealized gains and losses, are included in a separate component
of equity, "Accumulated other comprehensive income."
Mortgage loans on real estate are stated primarily at unpaid principal balances,
net of unamortized discounts and an allowance for losses. The allowance for
losses includes a loan specific reserve for impaired loans and a portfolio
reserve for incurred but not specifically identified losses. Impaired loans
include those loans for which a probability exists that all amounts due
according to the contractual terms of the loan agreement will not be collected.
Impaired loans are measured at the present value of expected future cash flows
discounted at the loan's effective interest rate, or at the fair value of the
collateral if the loan is collateral dependent. Interest received on impaired
loans, including loans that were previously modified in a troubled debt
restructuring, is either applied against the principal or reported as revenue,
according to management's judgment as to the collectibility of principal.
Management discontinues accruing interest on impaired loans after the loans are
90 days delinquent as to principal or interest, or earlier when management has
serious doubts about collectibility. When a loan is recognized as impaired, any
accrued but uncollectible interest is reversed against interest income of the
current period. Generally, a loan is restored to accrual status only after all
delinquent interest and principal are brought current and, in the case of loans
where the payment of interest has been interrupted for a substantial period, a
regular payment performance has been established. The portfolio reserve for
incurred but not specifically identified losses considers the Company's past
loan loss experience, the current credit composition of the portfolio,
historical credit migration, property type diversification, default and loss
severity statistics and other relevant factors.
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, are carried at amortized cost,
which approximates fair value.
Other long-term investments represent the Company's investments in joint
ventures and partnerships in which the Company does not have control. These
investments are recorded using the equity method of accounting, reduced for
other than temporary declines in value. The Company's investment in the Separate
Accounts are included on this line.
Realized investment gains, net are computed using the specific identification
method. Costs of fixed maturity and equity securities are adjusted for
impairments considered to be other than temporary.
Cash
Cash includes cash on hand, amounts due from banks, and money market
instruments.
Deferred Policy Acquisition Costs
The costs which vary with and that are related primarily to the production of
new insurance business are deferred to the extent that they are deemed
recoverable from future profits. Such costs include certain commissions, costs
of policy issuance and underwriting, and certain variable field office expenses.
Deferred policy acquisition costs are subject to recoverability testing at the
time of policy issue and loss recognition testing at the end of each accounting
period. Deferred policy acquisition costs are adjusted for the impact of
unrealized gains or losses on investments as if these gains or losses had been
realized, with corresponding credits or charges included in "Accumulated other
comprehensive income".
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.
B6
<PAGE>
Pruco Life Insurance Company and Subsidiaries
Notes to Consolidated Financial Statements
- --------------------------------------------------------------------------------
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
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 consolidated 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".
Separate Accounts represent funds for which investment income and investment
gains and losses accrue directly to, and investment risk is borne by, the
policyholders, with the exception of the Pruco Life Modified Guaranteed Annuity
Account. The Pruco Life Modified Guaranteed Annuity Account is a non-unitized
Separate Account, which funds the Modified Guaranteed Annuity Contract and the
Market Value Adjustment Annuity Contract. Owners of the Pruco Life Modified
Guaranteed Annuity and the Market Value Adjustment Annuity Contracts do not
participate in the investment gain or loss from assets relating to such
accounts. Such gain or loss is borne, in total, by the Company.
Insurance Revenue and Expense Recognition
Premiums from insurance policies are generally recognized when due. Benefits are
recorded as an expense when they are incurred. For traditional life insurance
contracts, a liability for future policy benefits is recorded using the net
level premium method. For individual annuities in payout status, a liability for
future policy benefits is recorded for the present value of expected future
payments based on historical experience.
Premiums from non-participating group annuities with life contingencies are
generally recognized when due. For single premium immediate annuities, premiums
are recognized when due with any excess profit deferred and recognized in a
constant relationship to insurance in-force or, for annuities, the amount of
expected future benefit payments.
B7
<PAGE>
Pruco Life Insurance Company and Subsidiaries
Notes to Consolidated Financial Statements
- --------------------------------------------------------------------------------
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Amounts received as payment for interest-sensitive life, individual annuities
and guaranteed investment contracts are reported as deposits to "Policyholders'
account balances". Revenues from these contracts reflected as "Policy charges
and fee income" consist primarily of fees assessed during the period against the
policyholders' account balances for mortality charges, policy administration
charges and surrender charges. In addition, interest earned from the investment
of these account balances is reflected in "Net investment income". Benefits and
expenses for these products include claims in excess of related account
balances, expenses of contract administration, interest credited and
amortization of deferred policy acquisition costs.
Foreign Currency Translation Adjustments
Assets and liabilities of the Taiwan branch are translated to U.S. dollars at
the exchange rate in effect at the end of the period. Revenues, benefits and
other expenses are translated at the average rate prevailing during the period.
Cumulative translation adjustments arising from the use of differing exchange
rates from period to period are charged or credited directly to "Other
comprehensive income". The cumulative effect of changes in foreign exchange
rates are included in "Accumulated other comprehensive income".
Asset Management Fees
The Company receives asset management fee income from policyholder account
balances invested in The Prudential Series Fund ("PSF"), which are a portfolio
of mutual fund investments related to the Company's Separate Account products.
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
include futures, currency swaps and options contracts 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 or foreign currency exchange 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 Consolidated 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 Consolidated Statements of Cash Flows.
Income Taxes
The Company and its subsidiaries are members of the consolidated federal income
tax return of Prudential and files separate company state and local tax returns.
Pursuant to the tax allocation arrangement with Prudential, 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.
B8
<PAGE>
Pruco Life Insurance Company and Subsidiaries
Notes to Consolidated 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.
B9
<PAGE>
Pruco Life Insurance Company and Subsidiaries
Notes to Consolidated Financial Statements
- --------------------------------------------------------------------------------
3. INVESTMENTS
Fixed Maturities and Equity Securities:
The following tables provide additional information relating to fixed maturities
and equity securities as of December 31,:
<TABLE>
<CAPTION>
1999
--------------------------------------------------------------
Gross Gross
Amortized Unrealized Unrealized Estimated
Cost Gains Losses Fair 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 $ 113,172 $ 2 $ 2,052 $ 111,122
Foreign government bonds 92,725 1,718 1,455 92,988
Corporate securities 2,876,602 8,013 92,075 2,792,540
Mortgage-backed securities 1,558 157 3 1,712
---------- ---------- ---------- ----------
Total fixed maturities available for sale $3,084,057 $ 9,890 $ 95,585 $2,998,362
========== ========== ========== ==========
Fixed maturities held to maturity
Corporate securities $ 388,990 $ 1,832 $ 13,000 $ 377,822
---------- ---------- ---------- ----------
Total fixed maturities held to maturity $ 388,990 $ 1,832 $ 13,000 $ 377,822
========== ========== ========== ==========
Equity securities available for sale $ 3,238 $ 1,373 $ 79 $ 4,532
========== ========== ========== ==========
</TABLE>
<TABLE>
<CAPTION>
1998
----------------------------------------------------------------
Gross Gross
Amortized Unrealized Unrealized Estimated
Cost Gains Losses Fair Value
---------- ---------- ---------- ----------
(In Thousands)
<S> <C> <C> <C> <C>
Fixed maturities available for sale
U.S. Treasury securities and obligations of
U.S government corporation and agencies $ 110,294 $ 864 $ 319 $ 110,839
Foreign government bonds 87,112 2,003 696 88,419
Corporate securities 2,540,498 30,160 6,896 2,563,762
Mortgage-backed securities 750 156 -- 906
---------- ---------- ---------- ----------
Total fixed maturities available for sale $2,738,654 $ 33,183 $ 7,911 $2,763,926
========== ========== ========== ==========
Fixed maturities held to maturity
Corporate securities $ 410,558 $ 11,287 $ -- $ 421,845
---------- ---------- ---------- ----------
Total fixed maturities held to maturity $ 410,558 $ 11,287 $ -- $ 421,845
========== ========== ========== ==========
Equity securities available for sale $ 2,951 $ 168 $ 272 $ 2,847
========== ========== ========== ==========
</TABLE>
B10
<PAGE>
Pruco Life Insurance Company and Subsidiaries
Notes to Consolidated 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 $ 178,298 $ 175,638 $ 18,369 $ 18,296
Due after one year through five 1,144,552 1,118,150 178,893 178,624
years
Due after five years through ten 1,326,637 1,283,515 175,549 165,341
years
Due after ten years 433,012 419,347 16,179 15,561
Mortgage-backed securities 1,558 1,712 - -
---------------- ------------------- ----------------- ------------------
Total $3,084,057 $2,998,362 $ 388,990 $ 377,822
================ =================== ================= ==================
</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 $2,950.4 million, $5,327.3 million, and $2,796.3 million,
respectively. Gross gains of $13.1 million, $46.3 million, and $18.6 million and
gross losses of $31.1 million, $14.1 million, and $7.9 million were realized on
those sales during 1999, 1998, and 1997, respectively. During the years ended
December 31, 1999, 1998, and 1997, there were no securities classified as held
to maturity that were sold.
Proceeds from the maturity of fixed maturities available for sale during 1999,
1998, and 1997 were $126.5 million, $102.1 million, and $32.4 million,
respectively
Writedowns for impairments of fixed maturities which were deemed to be other
than temporary were $11.2 million, $2.8 million and $0.1 million for the years
1999, 1998 and 1997, respectively.
Mortgage Loans on Real Estate
The Company's mortgage loans were collateralized by the following property types
at December 31, 1999 and 1998.
<TABLE>
<CAPTION>
1999 1998
---------------------------- ---------------------------
(In Thousands)
<S> <C> <C> <C> <C> <C>
Retail stores $ 6,518 62.0% $ 7,356 42.4%
Apartment complexes - - 5,988 34.5%
Industrial buildings 3,991 38.0% 4,010 23.1%
---------------------------- ---------------------------
Net carrying value $10,509 100.0% $17,354 100.0%
============================ ===========================
</TABLE>
The largest concentration of mortgage loans are in the states of Washington
(51%), New Jersey (38%), and North Dakota (11%).
Special Deposits and Restricted Assets
Fixed maturities of $8.2 million and $8.6 million at December 31, 1999 and 1998,
respectively, were on deposit with governmental authorities or trustees as
required by certain insurance laws. Equity securities restricted as to sale were
$.3 million and $2.5 million at December 31, 1999 and 1998, respectively.
B11
<PAGE>
Pruco Life Insurance Company and Subsidiaries
Notes to Consolidated Financial Statements
- --------------------------------------------------------------------------------
3. INVESTMENTS (continued)
Other Long-Term Investments
The Company's "Other long-term investments" of $77.8 million and $42.0 million
as of December 31, 1999 and 1998, respectively, are comprised of joint ventures,
limited partnerships, and the Company's investment in the Separate Accounts.
Joint ventures, limited partnerships and other totaled $32.8 million and $1.0
million at December 31, 1999 and 1998, respectively. The Company's share of net
income from the joint ventures was $0.3 million, $0.1 million and $2.2 million
for the years ended December 31, 1999, 1998 and 1997, respectively, and is
reported in "Net investment income." The Company's investment in the Separate
Accounts was $45.0 million and $41.0 million at December 31, 1999 and 1998,
respectively.
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 - available for sale $188,236 $179,184 $ 161,140
Fixed maturities - held to maturity 29,245 26,128 26,936
Equity securities - 14 76
Mortgage loans on real estate 2,825 1,818 2,585
Policy loans 42,422 40,928 37,398
Short-term investments 19,208 23,110 22,011
Other 4,432 6,886 14,920
---------------- ----------------- -----------------
Gross investment income 286,368 278,068 265,066
Less: investment expenses (9,547) (16,638) (5,432)
---------------- ----------------- -----------------
Net investment income $276,821 $261,430 $ 259,634
================ ================= =================
</TABLE>
Realized investment gains (losses), net including charges for other than
temporary reductions in value, for the years ended December 31, were from the
following sources:
<TABLE>
<CAPTION>
1999 1998 1997
---------------- ----------------- -----------------
(In Thousands)
<S> <C> <C> <C>
Fixed maturities - available for sale $ (29,192) $29,330 $9,039
Fixed maturities - held to maturity 102 487 821
Equity securities 392 3,489 8
Mortgage loans on real estate - - 797
Derivative instruments (1,557) 12,414 -
Other (2,290) (879) 309
---------------- ----------------- -----------------
Realized investment (losses) gains, net $ (32,545) $44,841 $10,974
================ ================= =================
</TABLE>
B12
<PAGE>
Pruco Life Insurance Company and Subsidiaries
Notes to Consolidated Financial Statements
- --------------------------------------------------------------------------------
Net Unrealized Investment Gains (Losses)
Net unrealized investment gains (losses) on securities available for sale are
included in the Consolidated Statements of Financial Position as a component of
"Accumulated other comprehensive income". Changes in these amounts include
reclassification 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
investments costs Balances benefit gains(losses)
--------- --------- --------- --------- ---------
(In Thousands)
<S> <C> <C> <C> <C> <C>
Balance, January 1, 1997 $ 26,930 $ (7,893) $ 2,451 $ (7,384) $ 14,104
Net investment gains (losses) on
investments arising during the period 21,338 -- -- (7,445) 13,893
Reclassifications adjustment for
gains included in net income (10,277) -- -- 3,585 (6,692)
Impact of net unrealized investment
gains on deferred policy acquisition
costs -- (8,412) -- 2,944 (5,468)
Impact of net unrealized investment
gains on policyholders' account
balances -- -- 1,292 -- 1,292
--------- --------- --------- --------- ---------
Balance, December 31, 1997 37,991 (16,305) 3,743 (8,300) 17,129
Net investment gains (losses) on
investments arising during the period 22,801 -- -- (7,588) 15,213
Reclassifications adjustment for
gains included in net income (35,623) -- -- 11,855 (23,768)
Impact of net unrealized investment
gains on deferred policy acquisition
costs -- 3,190 -- (1,048) 2,142
Impact of net unrealized investment
gains on policyholders' account
balances -- -- (1,063) 249 (814)
--------- --------- --------- --------- ---------
Balance, December 31, 1998 25,169 (13,115) 2,680 (4,832) 9,902
Net investment gains (losses) on
investments arising during the period (138,268) -- -- 47,785 (90,483)
Reclassifications adjustment for
gains included in net income 28,698 -- -- (9,970) 18,728
Impact of net unrealized investment
gains on deferred policy acquisition -- 53,407 -- (16,283) 37,124
costs
Impact of net unrealized investment
gains on policyholders' account -- -- (5,712) 2,077 (3,635)
balances
--------- --------- --------- --------- ---------
Balance, December 31, 1999 $ (84,401) $ 40,292 $ (3,032) $ 18,777 $ (28,364)
========= ========= ========= ========= =========
</TABLE>
B13
<PAGE>
Pruco Life Insurance Company and Subsidiaries
Notes to Consolidated Financial Statements
- --------------------------------------------------------------------------------
4. DEFERRED POLICY ACQUISITION COSTS
The balances of and changes in deferred policy acquisition costs for the year
ended December 31, 1999, are as follows:
<TABLE>
<CAPTION>
1999
-----------------
(In Thousands)
<S> <C>
Balance, beginning of year $ 861,713
Capitalization on commissions, sales and issue expenses 242,373
Amortization (96,451)
Change in unrealized investment gains 53,407
Foreign currency translation 1,743
-----------------
Balance, end of year $1,062,785
=================
</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 $ 587,162 $ 500,429
Annuities 48,816 28,350
------------------- -------------------
$ 635,978 $ 528,779
=================== ===================
</TABLE>
Life insurance liabilities include reserves for death 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 - Domestic Generally rates guaranteed 2.5% to 7.5% Net level premium based
in calculating cash on the non-forfeiture interest
surrender values rate
Life insurance - International Generally rates guaranteed 2.5% to 7.5% Net level premium based
in calculating cash on the expected investment
surrender values return
Individual immediate annuities 1983 Individual Annuity 3.5% to 11.0% Present value of
Mortality Table with expected future payment
certain modifications based on historical
experience
</TABLE>
B14
<PAGE>
Pruco Life Insurance Company and Subsidiaries
Notes to Consolidated Financial Statements
- --------------------------------------------------------------------------------
5. POLICYHOLDERS' LIABILITIES (continued)
Policyholders' account balances at December 31, are as follows:
<TABLE>
<CAPTION>
1999 1998
------------------- -------------------
(In Thousands)
<S> <C> <C>
Interest-sensitive life contracts $1,383,795 $1,392,649
Individual annuities 1,147,722 1,077,996
Guaranteed investment contracts 584,744 231,366
------------------- -------------------
$3,116,261 $2,702,011
=================== ===================
</TABLE>
Policyholders' account balances for interest-sensitive life, individual
annuities, and guaranteed investment contracts are equal to policy account
values plus unearned premiums. The policy account values represent an
accumulation of gross premium payments plus credited interest less withdrawals,
expenses and mortality charges.
Certain contract provisions that determine the policyholder account balances are
as follows:
<TABLE>
<CAPTION>
Product Interest Rate Withdrawal / Surrender Charges
- --------------------------------- ------------------------------------ ------------------------------------
<S> <C> <C>
Interest sensitive life 4.0% to 6.5 % Various up to 10 years
Individual annuities 3.0% to 5.6% 0% to 8% for up to 8 years
Guaranteed investment contracts 5.02% to 7.32% Subject to market value withdrawal
provisions for any funds withdrawn
other than for benefit responsive
and contractual payments
</TABLE>
6. REINSURANCE
The Company participates in reinsurance, with Prudential and other companies, in
order to provide greater diversification of business, provide additional
capacity for future growth and limit the maximum net loss potential arising from
large risks. Reinsurance ceded arrangements do not discharge the Company or the
insurance subsidiaries as the primary insurer, except for cases involving a
novation. Ceded balances would represent a liability 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.
B15
<PAGE>
Pruco Life Insurance Company and Subsidiaries
Notes to Consolidated Financial Statements
- --------------------------------------------------------------------------------
6. REINSURANCE (continued)
Reinsurance amounts included in the Consolidated Statements of Operations for
the year ended December 31 are below.
<TABLE>
<CAPTION>
1999 1998 1997
---------------- ---------------- ----------------
(In Thousands)
<S> <C> <C> <C>
Reinsurance premiums assumed 1,778 1,395 1,369
Reinsurance premiums ceded - affiliated (6,882) (6,532) (686)
Reinsurance premiums ceded - unaffiliated (1,744) (2,819) (3,038)
================ ================ ================
Policyholders' benefits ceded $4,228 $4,044 $3,912
================ ================ ================
</TABLE>
Reinsurance recoverables, included in "Other assets" in the Company's
Consolidated 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 $ 6,653 $ 4,155
Life insurance - unaffiliated 2,625 2,326
Other reinsurance - affiliated 15,600 21,650
------------------- -----------------
$24,878 $28,131
=================== =================
</TABLE>
7. EMPLOYEE BENEFIT PLANS
Pension and Other Postretirement Plans
The Company has a non-contributory defined benefit pension plan which covers
substantially all of its Taiwanese employees. This plan was established as of
September 30, 1998 and the projected benefit obligation and related expenses at
December 31, 1999 were not material to the Consolidated Statements of Financial
Position or results of operations for the years presented. All other employee
benefit costs are allocated to the Company by Prudential in accordance with the
service agreement described in Footnote 14.
B16
<PAGE>
Pruco Life Insurance Company and Subsidiaries
Notes to Consolidated Financial Statements
- --------------------------------------------------------------------------------
8. 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. $ (14,093) $67,272 $71,989
State and local 378 2,496 1,337
Foreign 15 - -
---------------- ----------------- -----------------
Total (13,700) 69,768 73,326
---------------- ----------------- -----------------
Deferred tax expense (benefit):
U.S. 42,320 14,059 (11,458)
State and local 1,316 406 -
---------------- ----------------- -----------------
Total 43,636 14,465 (11,458)
---------------- ----------------- -----------------
Total income tax expense $29,936 $84,233 $61,868
================ ================= =================
</TABLE>
The 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 $29,936 $82,668 $58,885
State and local income taxes 1,101 1,886 869
Dividends received deduction (1,010) (199) -
Other (91) (122) 2,114
---------------- ----------------- -----------------
Total income tax expense $29,936 $84,233 $61,868
================ ================= =================
</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 $ 93,949 $ 93,564
Net unrealized (gains) losses on
securities 31,132 (9,061)
Other 2,502 -
------------------ -------------------
Deferred tax assets 127,583 84,503
------------------ -------------------
Deferred tax liabilities
Deferred acquisition costs 299,683 224,179
Net investment gains 110 3,180
Other - 5,978
------------------ -------------------
Deferred tax liabilities 299,793 233,337
------------------ -------------------
Net deferred tax liability $172,210 $148,834
================== ===================
</TABLE>
B17
<PAGE>
Pruco Life Insurance Company and Subsidiaries
Notes to Consolidated Financial Statements
- --------------------------------------------------------------------------------
8. INCOME TAXES (continued)
Management believes that based on its historical pattern of taxable income, the
Company and its subsidiaries 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 and its subsidiaries had no federal or state
operating loss carryforwards for tax purposes.
The Internal Revenue Service (the "Service") has completed all examinations of
the consolidated federal income tax returns through 1992. The Service has begun
their examination of the years 1993 through 1995.
9. 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 Arizona Department of Insurance and 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 (loss) income $ (82,291) $ (33,097) $ 12,778
Adjustments to reconcile to net income on a GAAP basis:
Statutory income of subsidiaries 20,221 18,953 18,553
Amortization and capitalization of deferred
acquisition costs 145,921 202,375 38,003
Deferred premium 639 2,625 1,144
Insurance revenue and expenses 45,915 (24,942) 26,517
Income taxes (43,644) (21,805) 11,956
Valuation of investments (24,908) 20,077 506
Asset management fees (13,503) - -
Other, net 7,245 (12,224) (3,083)
---------------- ---------------- ----------------
GAAP net income $ 55,595 $151,962 $106,374
================ ================ ================
1999 1998
----------------- -----------------
(In Thousands)
Statutory surplus $889,186 $931,164
Adjustments to reconcile to equity on a GAAP basis:
Valuation of investments (38,258) 117,254
Deferred acquisition costs 1,062,785 861,713
Deferred premium (16,539) (15,625)
Insurance liabilities (54,927) (133,811)
Income taxes (150,957) (123,343)
Asset management fees (13,503) -
Other, net (7,968) 15,880
----------------- -----------------
GAAP stockholder's equity $1,669,819 $1,653,232
================= =================
</TABLE>
B18
<PAGE>
Pruco Life Insurance Company and Subsidiaries
Notes to Consolidated Financial Statements
- --------------------------------------------------------------------------------
10. 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 estimated fair values (for all other
financial instruments presented in the table, the carrying value approximates
estimated fair value).
Fixed maturities and Equity securities
Estimated fair values for fixed maturities and equity securities, other than
private placement securities, are based on quoted market prices or estimates
from independent pricing services. Fair values for private placement securities
are estimated using a discounted cash flow model which considers the current
market spreads between the U.S. Treasury yield curve and corporate bond yield
curve, adjusted for the type of issue, its current credit quality and its
remaining average life. The estimated fair value of certain non-performing
private placement securities is based on amounts estimated by management.
Mortgage loans on real estate
The estimated fair value of the mortgage loan portfolio is primarily based upon
the present value of the scheduled future cash flows discounted at the
appropriate U.S. Treasury rate, adjusted for the current market spread for a
similar quality mortgage.
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
For guaranteed investment contracts, estimated fair values are derived by using
discounted projected cash flows based on interest rates being offered for
similar contracts, with maturities consistent with those remaining for the
contracts being valued. Estimated fair values for individual deferred annuities
are derived 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 $2,998,362 $2,998,362 $2,763,926 $2,763,926
Fixed maturities: Held to maturity 388,990 377,822 410,558 421,845
Equity securities 4,532 4,532 2,847 2,847
Mortgage loans on real estate 10,509 11,550 17,354 19,465
Policy loans 792,352 761,232 766,917 806,099
Short-term investments 207,219 207,219 240,727 240,727
Cash 76,396 76,396 89,679 89,679
Separate Account assets 16,032,449 16,032,449 11,490,751 11,490,751
Derivatives 38 38 - -
Financial Liabilities:
Investment contracts $1,282,964 $1,277,317 $ 835,034 $ 839,105
Cash collateral for loaned securities 87,336 87,336 73,336 73,336
Securities sold under repurchase
agreements 21,151 21,151 49,708 49,708
Separate Account liabilities 16,032,449 16,032,449 11,490,751 11,490,751
Derivatives 5,012 5,243 1,723 2,374
</TABLE>
B19
<PAGE>
Pruco Life Insurance Company and Subsidiaries
Notes to Consolidated Financial Statements
- --------------------------------------------------------------------------------
11. DERIVATIVE AND OFF-BALANCE SHEET CREDIT-RELATED INSTRUMENTS
Futures & Options
The Company uses exchange-traded Treasury futures and options to reduce market
risk from changes in interest rates and to manage the duration of assets and the
duration of liabilities supported by those assets. The Company enters into
exchange-traded futures and options with regulated futures commissions merchants
who are members of a trading exchange. The fair value of futures and options 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.
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 value of
futures contracts was $122.1 million and $40.8 million at December 31, 1999 and
1998, respectively. The fair value of futures contracts was $(2.0) million at
December 31, 1999 and immaterial at December 31, 1998.
When the Company anticipates a significant decline in the stock market which
will correspondingly affect its diversified portfolio, it may purchase put index
options where the basket of securities in the index is appropriate to provide a
hedge against a decrease in the value of the equity portfolio or a portion
thereof. This strategy effects an orderly sale of hedged securities. When the
Company has large cash flows which it has allocated for investment in equity
securities, it may purchase call index options as a temporary hedge against an
increase in the price of the securities it intends to purchase. This hedge
permits such investment transactions to be executed with the least possible
adverse market impact.
Option premium paid or received is reported as an asset or liability and
amortized into income over the life of the option. If options meet the criteria
for hedge accounting, changes in their fair value are deferred and recognized as
an adjustment to the hedged item. Deferred gains or losses from the hedges for
interest-bearing financial instruments are recognized as an adjustment to
interest income or expense of the hedged item. If the options do not meet the
criteria for hedge accounting, they are fair valued, with changes in fair value
reported in current period earnings. The fair value of options was immaterial at
December 31, 1999 and 1998.
Currency Derivatives
The Company uses currency swaps to reduce market risk from changes in currency
values of investments denominated in foreign currencies that the Company either
holds or intends to acquire and to manage the currency exposures arising from
mismatches between such foreign currencies and the US Dollar.
Under currency swaps, the Company agrees with other parties to exchange, at
specified intervals, the difference between one currency and another at a
forward exchange rate and calculated by reference to an agreed principal amount.
Generally, the principal amount of each currency is exchanged at the beginning
and termination of the currency swap by each party. These transactions are
entered into pursuant to master agreements that provide for a single net payment
to be made by one counterparty for payments made in the same currency at each
due date.
If currency swaps are effective as hedges of foreign currency translation and
transaction exposures, gains or losses are recorded in "Accumulated Other
Comprehensive Income". If currency swaps do not meet hedge accounting criteria,
gains or losses from those derivatives are recognized in current period
earnings.
The notional value and fair value of the currency swaps $31.0 million and $(3.2)
million and $40.5 million and $(2.3) million, respectively, at December 31, 1999
and 1998.
B20
<PAGE>
Pruco Life Insurance Company and Subsidiaries
Notes to Consolidated Financial Statements
- --------------------------------------------------------------------------------
11. DERIVATIVE AND OFF-BALANCE SHEET CREDIT-RELATED INSTRUMENTS (continued)
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 are with
investment grade counterparties. As of December 31, 1999, 80% of notional
consisted of interest rate derivatives, and 20% of notional consisted of foreign
currency derivatives.
12. 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.
13. DIVIDENDS
The Company is subject to Arizona law which limits the amount of dividends that
insurance companies can pay to stockholders. The maximum dividend which may be
paid in any twelve month period without notification or approval is limited to
the lesser of 10% of statutory surplus as of December 31 of the preceding year
or the net gain from operations of the preceding calendar year. Cash dividends
may only be paid out of surplus derived from realized net profits. Based on
these limitations and the Company's surplus position at December 31, 1999, the
Company would not be permitted a non-extraordinary dividend distribution in
2000.
14. RELATED PARTY TRANSACTIONS
Service Agreements
Prudential and the Company operate under service and lease agreements whereby
services of officers and employees (except for those agents employed directly by
the Company in Taiwan), 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 $317.4 million, $269.9 million and $139.5 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 deferred
policy acquisition costs ("DAC").
The Company receives asset management fee income from policyholder account
balances invested in the Prudential Series Fund ("PSF"). These amounts are shown
as asset management fees on the statement of operations. The Company also
collects these fees on behalf of Prudential. The amounts due to Prudential
related to PSF fees were $0.1 million and $22.6 million at December 31, 1999 and
December 31, 1998, respectively.
B21
<PAGE>
Pruco Life Insurance Company and Subsidiaries
Notes to Consolidated Financial Statements
- --------------------------------------------------------------------------------
14. 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 $25.9 million, which is shown in general, administrative and other
expenses.
The Company has sold three Corporate Owned Life Insurance ("COLI") policies to
Prudential. The cash surrender value included in Separate Accounts was $725.3
million and $362.3 million at December 31, 1999, and 1998, respectively. The
fees received in 1999 related to the COLI policies were $4.0 million.
Reinsurance
The Company currently has three reinsurance agreements in place with Prudential
(the reinsurer). Specifically a reinsurance Group Annuity Contract, whereby the
reinsurer, in consideration for a single premium payment by the Company,
provides reinsurance equal to 100% of all payments due under the contract, and
two yearly renewable term agreements 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 of up
to $500 million 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.
B22
<PAGE>
Report of Independent Accountants
To the Board of Directors and Stockholder of
Pruco Life Insurance Company
In our opinion, the accompanying consolidated statements of financial
position and the related consolidated 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 (a
wholly-owned subsidiary of the Prudential Insurance Company of America) and
its subsidiaries at December 31, 1999 and 1998, and the results of their
operations and their 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
B23
<PAGE>
PRUVIDER(SM)
VARIABLE APPRECIABLE LIFE(R)
INSURANCE
PRUvider(SM) Variable Appreciable
Life(R) was issued by Pruco Life
Insurance Company, 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. PRUvider is a service
markof Prudential. Appreciable Life is
a registered mark of Prudential.
[LOGO] PRUDENTIAL
Pruco Life Insurance Company
213 Washington Street, Newark, NJ 07102-2992
Telephone 800 778-2255
<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 ("Pruco Life") represents that the fees and charges
deducted under the PRUvider Variable Appreciable Life Insurance Contracts
registered by this registration statement, in the aggregate, are reasonable in
relation to the services rendered, the expenses to be incurred, and the risks
assumed by the depositor.
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.
Arizona, being the state of organization of Pruco Life, permits entities
organized under its jurisdiction to indemnify directors and officers with
certain limitations. The relevant provisions of Arizona law permitting
indemnification can be found in Section 10-850 et seq. of the Arizona Statutes
Annotated. The text of Pruco Life's By-law, Article VIII, which relates to
indemnification of officers and directors, is incorporated by reference to
Exhibit 3(ii) to its Form 10-Q, SEC File No. 33-37587, filed August 15, 1997.
Insofar as indemnification for liabilities arising under the Securities Act of
1933 (the "Act") may be permitted to directors, officers and controlling persons
of the Registrant pursuant to the foregoing provisions or otherwise, the
Registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a director, officer or controlling person of the Registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
II-1
<PAGE>
CONTENTS OF REGISTRATION STATEMENT
This Registration Statement comprises the following papers and documents:
- -------------------------------------------------------------------------
The facing sheet.
Cross-reference to items required by Form N-8B-2.
The prospectus consisting of 61 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 Davis, FSA, MAAA
The following exhibits:
- -----------------------
1. The following exhibits correspond to those required by paragraph A of the
instructions as to exhibits in Form N-8B-2:
A. (1) Resolution of Board of Directors of Pruco Life Insurance
Company establishing the Pruco Life PRUvider Variable
Appreciable Account. (Note 6)
(2) Not Applicable.
(3) Distributing Contracts:
(a) Distribution Agreement between Pruco Securities
Corporation and Pruco Life Insurance Company. (Note 6)
(b) Proposed form of Agreement between Pruco Securities
Corporation and independent brokers with respect to the
Sale of the Contracts. (Note 6)
(c) Schedules of Sales Commissions. (Note 6)
(4) Not Applicable.
(5) PRUvider Variable Appreciable Life Insurance Contract. (Note 6)
(6) (a) Articles of Incorporation of Pruco Life Insurance Company,
as amended October 19, 1993. (Note 2)
(b) By-laws of Pruco Life Insurance Company, as amended May 6,
1997. (Note 7)
(7) Not Applicable.
(8) Not Applicable.
(9) Not Applicable.
(10) (a) Application Form. (Note 2)
(b) Supplement to the Application for PRUvider Variable
Appreciable Life Insurance Contract. (Note 6)
(11) Form of Notice of Withdrawal Right. (Note 6)
(12) Memorandum describing Pruco Life Insurance Company's issuance,
transfer, and redemption procedures for the Contracts pursuant
to Rule 6e-3(T)(b)(12)(iii) and method of computing cash
adjustment upon exercise of right to exchange for fixed-benefit
insurance pursuant to Rule 6e-3(T)(b)(13)(v)(B). (Note 9)
(13) Available Contract Riders.
(a) Rider for Insured's Payment of Premium Benefit. (Note 6)
(b) Rider for Applicant's Payment of Premium Benefit. (Note 6)
(c) Rider for Insured's Accidental Death and Dismemberment
Benefit. (Note 6)
(d) Rider for Option to Purchase Additional Insurance on Life
of Insured. (Note 6)
(e) Rider for Level Term Insurance Benefit on Dependent
Children. (Note 6)
(f) Rider for Level Term Insurance Benefit on Dependent
Children-from Term Conversions. (Note 6)
II-2
<PAGE>
(g) Rider for Level Term Insurance Benefit on Dependent
Children--from Term Conversions or Attained Age Change.
(Note 6)
(h) Living Needs Benefit Rider
(i) for use in Florida. (Note 2)
(ii) for use in all approved jurisdictions except
Florida. (Note 2)
(i) Rider for Term Insurance Benefit on Life of Insured--
Decreasing Amount. (Note 6)
(j) Rider for Term Insurance Benefit on Life of Insured
Spouse--Decreasing Amount. (Note 6)
(k) Endorsement altering the Assignment provision ORD
89224--94-P. (Note 6)
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. Indemnification Agreement. (Note 6)
8. Powers of Attorney.
(a) William M. Bethke, Ira J. Kleinman, Esther H. Milnes, I. Edward Price
(Note 5)
(b) Kiyofumi Sakaguchi (Note 6)
(c) James J. Avery, Jr. (Note 8)
(d) Dennis G. Sullivan (Note 3)
(e) David R. Odenath, Jr. (Note 10)
(Note 1) Filed herewith.
(Note 2) Incorporated by reference to Form S-6, Registration No. 333-07451,
filed July 2, 1996 on behalf of the Pruco Life Variable Appreciable
Account.
(Note 3) Incorporated by reference to Post-Effective Amendment No. 6 to Form
S-1, Registration No. 33-86780, filed April 16, 1999 on behalf of the
Pruco Life Variable Contract Real Property Account.
(Note 4) Incorporated by reference to Post-Effective Amendment No. 7 to this
Registration Statement, filed April 25, 1996.
(Note 5) Incorporated by reference to Form 10-K, Registration No. 33-08698,
filed March 31, 1997 on behalf of the Pruco Life Variable Contract
Real Property Account.
(Note 6) Incorporated by reference to Post-Effective Amendment No. 8 to this
Registration Statement, filed April 28, 1997.
(Note 7) Incorporated by reference to Form 10-Q, Registration No. 33-37587,
filed August 15, 1997, on behalf of the Pruco Life Insurance Company.
(Note 8) Incorporated by reference to Post-Effective Amendment No. 2 to Form
S-6, Registration No. 333-07451, filed June 25, 1997 on behalf of the
Pruco Life Variable Appreciable Account.
(Note 9) Incorporated by reference to Post-Effective Amendment No. 11 to this
Registration Statement, filed April 27, 1999.
(Note 10) Incorporated by reference to Post-Effective Amendment No. 7 for Form
S-1, Registration No. 33-86780, filed April 12, 2000 on behalf of the
Pruco Life Variable Contract Real Property Account.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant, the
Pruco Life PRUvider Variable Appreciable 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 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 24th day of April, 2000.
(Seal) PRUCO LIFE PRUVIDER VARIABLE APPRECIABLE ACCOUNT
(Registrant)
By: PRUCO LIFE INSURANCE COMPANY
(Depositor)
Attest: /s/ Thomas C. Castano By: /s/ Esther H. Milnes
------------------------------- -----------------------------
Thomas C. Castano Esther H. Milnes
Assistant Secretary President
Pursuant to the requirements of the Securities Act of 1933, this Post-Effective
Amendment No. 13 to the Registration Statement has been signed below by the
following persons in the capacities indicated on this 24th day of April,
2000.
SIGNATURE AND TITLE
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/s/ *
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Esther Milnes
President and Director
/s/ *
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Dennis G. Sullivan
Vice President and Chief Accounting Officer
/s/ * *By: /s/ Thomas C. Castano
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James J. Avery, Jr. Thomas C. Castano
Director (Attorney-in-Fact)
/s/ *
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William M. Bethke
Director
/s/ *
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Ira J. Kleinman
Director
/s/ *
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David R. Odenath, Jr.
Director
/s/ *
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I. Edward Price
Director
/s/ *
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Kiyofumi Sakaguchi
Director
II-4
<PAGE>
EXHIBIT INDEX
Consent of PricewaterhouseCoopers LLP, independent accountants Page II-5
3. Opinion and Consent of Clifford E. Kirsch, Esq. as to the Page II-7
legality of the securities being registered.
6. Opinion and Consent of Nancy D. Davis, FSA, MAAA, as to Page II-8
actuarial matters pertaining to the securities being registered.
II-5
<PAGE>
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in the Prospectus constituting part of this Post-
Effective Amendment No. 13 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 PRUvider Variable Appreciable 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
consolidated financial statements of Pruco Life Insurance Company and its
subsidiaries, 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
<PAGE>
EXHIBIT 3
April 10, 2000
Pruco Life Insurance Company
213 Washington Street
Newark, New Jersey 07102-2992
Gentlemen:
In my capacity as Chief Legal Officer of Pruco Life Insurance Company ("Pruco
Life"), I have reviewed the establishment of the Pruco Life PRUvider Variable
Appreciable Account (the "Account") on July 10, 1992 by the Executive Committee
of the Board of Directors of Pruco Life as a separate account for assets
applicable to certain variable life insurance contracts, pursuant to the
provisions of Section 20-651 of the Arizona Insurance Code. I was responsible
for oversight of the preparation and review of the Registration Statement on
Form S-6, as amended, filed by Pruco Life with the Securities and Exchange
Commission (Registration No. 33-49994) under the Securities Act of 1933 for the
registration of certain variable appreciable life insurance contracts issued
with respect to the Account.
I am of the following opinion:
(1) Pruco Life was duly organized under the laws of Arizona and is a
validly existing corporation.
(2) The Account has been duly created and is validly existing as a
separate account pursuant to the aforesaid provisions of Arizona law.
(3) The portion of the assets held in the Account equal to the reserve and
other liabilities for variable benefits under the variable life
insurance contracts is not chargeable with liabilities arising out of
any other business Pruco Life may conduct.
(4) The variable life insurance contracts are legal and binding
obligations of Pruco Life in accordance with their terms.
In arriving at the foregoing opinion, I have made such examination of law and
examined such records and other documents as I judged to be necessary or
appropriate.
I hereby consent to the filing of this opinion as an exhibit to the Registration
Statement.
Very truly yours,
/s/
- ----------------------------------
Clifford E. Kirsch
<PAGE>
EXHIBIT 6
April 10, 2000
Pruco Life Insurance Company
213 Washington Street
Newark, New Jersey 07102-2992
To Pruco Life Insurance Company:
This opinion is furnished in connection with the registration by Pruco Life
Insurance Company of variable life insurance contracts (the "Contracts") under
the Securities Act of 1933. The prospectus included in Post-Effective Amendment
No. 13 to Registration Statement No. 33-49994 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 surrender values and death benefits
included in the section of the prospectus entitled
"Illustrations", 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 issued on a male age 35
than to prospective purchasers of Contracts on males of other
ages or on females.
(2) The deduction in an amount equal to 1.25% of each premium is a
reasonable charge in relation to the additional income tax burden
imposed upon Pruco Life and its parent company, The Prudential
Insurance Company of America, as the result of the enactment of
Section 848 of the Internal Revenue Code. In reaching that
conclusion a number of factors were taken into account that, in
my opinion, were appropriate and which resulted in a projected
after-tax rate of return that is a reasonable rate to use in
discounting the tax benefit of the deductions allowed in Section
848 in taxable years subsequent to the year in which the premiums
are received.
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/
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Nancy D. Davis, FSA, MAAA
Vice President and Actuary
The Prudential Insurance Company of America
