-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, O8XwyQ4wN5xONcu3lt+3gVbNXzURPu2FsfgONq3VVfNyzasOZeP4vLg9rgIQJ6xe dAibyHeEpAFr4KxPYtNVpQ== 0000950110-97-001560.txt : 19971117 0000950110-97-001560.hdr.sgml : 19971117 ACCESSION NUMBER: 0000950110-97-001560 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19970930 FILED AS OF DATE: 19971114 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: PRUCO LIFE INSURANCE CO CENTRAL INDEX KEY: 0000777917 STANDARD INDUSTRIAL CLASSIFICATION: UNKNOWN SIC - 0000 [0000] IRS NUMBER: 221944557 STATE OF INCORPORATION: AZ FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 033-37587 FILM NUMBER: 97722208 BUSINESS ADDRESS: STREET 1: 213 WASHINGTON ST STREET 2: 111 DURHAM AVENUE CITY: NEWARK STATE: NJ ZIP: 07102 BUSINESS PHONE: 2018026000 MAIL ADDRESS: STREET 1: 213 WASHINGTON STREET CITY: NEWARK STATE: NJ ZIP: 07102 10-Q 1 FORM 10-Q ================================================================================ UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ---------- FORM 10-Q ---------- (Mark One) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the period ended September 30, 1997 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission file number 33-37587 PRUCO LIFE INSURANCE COMPANY ------------------------------------------------------ (Exact name of Registrant as specified in its charter) Arizona 22-1944557 ------------------------------ ------------------- (State or other jurisdiction, (IRS Employer incorporation or organization) Identification No.) 213 Washington Street, Newark, New Jersey 07102 --------------------------------------------------- (Address of principal executive offices) (Zip Code) (201) 802-3780 ---------------------------------------------------- (Registrant's Telephone Number, including area code) Securities registered pursuant to Section 12(b) of the Act: NONE Securities registered pursuant to Section 12(g) of the Act: NONE Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES X NO --- --- State the aggregate market value of the voting stock held by non-affiliates of the registrant: NONE Indicate the number of shares outstanding of each of the registrant's classes of common stock, as of September 30, 1997. Common stock, par value of $10 per share: 250,000 shares outstanding ================================================================================ PRUCO LIFE INSURANCE COMPANY INDEX TO FINANCIAL STATEMENTS PAGE NO. -------- COVER PAGE 1 INDEX 2 PART I - FINANCIAL STATEMENTS - ----------------------------- ITEM 1. PRUCO LIFE INSURANCE COMPANY CONSOLIDATED FINANCIAL STATEMENTS: STATEMENTS OF FINANCIAL POSITION - SEPTEMBER 30, 1997 (UNAUDITED) AND DECEMBER 31, 1996 3 STATEMENTS OF OPERATIONS (UNAUDITED) - THREE AND NINE MONTHS ENDED SEPTEMBER 30, 1997 AND 1996 4 STATEMENTS OF CHANGES IN EQUITY - NINE MONTHS ENDED SEPTEMBER 30, 1997 (UNAUDITED) AND DECEMBER 31, 1996 5 STATEMENTS OF CASH FLOWS (UNAUDITED) - NINE MONTHS ENDED SEPTEMBER 30, 1997 AND 1996 6 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) 7 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 9 PART II - OTHER INFORMATION - --------------------------- ITEM 1. LEGAL PROCEEDINGS 10 ITEM 2. CHANGE IN SECURITIES 10 ITEM 3. DEFAULTS UPON SENIOR SECURITIES 10 ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS 10 ITEM 5. OTHER INFORMATION 10 ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K 10 SIGNATURE PAGE 12 2 PRUCO LIFE INSURANCE COMPANY AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF FINANCIAL POSITION SEPTEMBER 30, 1997 (UNAUDITED) AND DECEMBER 31, 1996 SEPTEMBER 30, DECEMBER 31, 1997 1996 ------------- ------------ (000'S) ASSETS Fixed maturities Held to maturity $ 317,107 $ 405,731 Available for sale 2,306,363 2,236,817 Equity securities 4,738 3,748 Mortgage loans 25,780 46,915 Policy loans 687,627 639,782 Other long term investments 2,308 4,528 Short term investments 501,599 169,830 ----------- ----------- Total invested assets 3,845,522 3,507,351 ----------- ----------- Cash 84,392 73,766 Deferred policy acquisition costs 599,877 633,159 Accrued investment income 68,000 62,110 Federal income tax receivable -- 7,191 Reinsurance recoverable on unpaid losses 27,014 27,014 Other assets 50,646 29,084 Separate Account assets 7,294,440 5,336,851 ----------- ----------- TOTAL ASSETS $11,969,891 $ 9,676,526 =========== =========== LIABILITIES AND STOCKHOLDER'S EQUITY LIABILITIES Future policy benefits and other policyholders' liabilities $ 591,472 $ 557,351 Policyholders' account balances 2,246,638 2,188,862 Deferred federal income tax payable 138,476 148,960 Federal income tax payable 29,502 -- Payable to affiliate 92,559 49,828 Cash collateral for loaned securities 81,479 -- Other liabilities 81,431 54,440 Separate Account liabilities 7,262,128 5,277,454 ----------- ----------- TOTAL LIABILITIES 10,523,685 8,276,895 ----------- ----------- CONTINGENCIES STOCKHOLDER'S EQUITY Common Stock, $10 par value; 1,000,000 shares, authorized; 250,000 shares, issued and outstanding at September 30, 1997 and December 31, 1996 2,500 2,500 Paid-in-capital 439,582 439,582 Foreign currency translation adjustment (1,376) (1,052) Net unrealized investment gains 14,558 14,104 Retained earnings 990,942 944,497 ----------- ----------- TOTAL STOCKHOLDER'S EQUITY 1,446,206 1,399,631 ----------- ----------- TOTAL LIABILITIES AND STOCKHOLDER'S EQUITY $11,969,891 $ 9,676,526 =========== =========== SEE NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 3 PRUCO LIFE INSURANCE COMPANY AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS THREE AND NINE MONTHS ENDED SEPTEMBER 30, 1997 AND 1996 (UNAUDITED)
NINE MONTHS ENDED THREE MONTHS ENDED SEPTEMBER 30, SEPTEMBER 30, --------------------- ---------------------- 1997 1996 1997 1996 -------- -------- --------- --------- (000'S) REVENUES Premiums $ 38,920 $ 35,318 $ 12,573 $ 11,021 Policy charges and fee income 231,834 229,515 75,193 72,894 Net investment income 193,142 180,756 69,110 58,552 Realized investment gains 13,415 7,252 6,442 2,329 Other income 21,648 15,099 8,816 7,292 --------- --------- --------- --------- TOTAL REVENUES 498,959 467,940 172,134 152,088 --------- --------- --------- --------- BENEFITS AND EXPENSES Policyholders' benefits 132,502 124,415 33,957 41,800 Interest credited to policyholders' account balances 81,104 84,107 28,062 28,588 Other operating costs and expenses 211,348 72,680 112,153 (2,294) --------- --------- --------- --------- TOTAL BENEFITS AND EXPENSES 424,954 281,202 174,172 68,094 --------- --------- --------- --------- INCOME (LOSS) BEFORE INCOME TAX PROVISION 74,005 186,738 (2,038) 83,994 Income tax provision 27,560 65,358 634 29,397 --------- --------- --------- --------- NET INCOME (LOSS) $ 46,445 $ 121,380 $ (2,672) $ 54,597 ========= ========= ========= =========
SEE NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 4 PRUCO LIFE INSURANCE COMPANY AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY SEPTEMBER 30, 1997 (UNAUDITED) AND DECEMBER 31, 1996
FOREIGN NET CURRENCY UNREALIZED TOTAL COMMON PAID-IN- TRANSLATION INVESTMENT RETAINED STOCKHOLDER'S STOCK CAPITAL ADJUSTMENT (LOSSES) GAINS EARNINGS EQUITY ------ -------- ----------- -------------- -------- ------------- (000'S) BALANCE, JANUARY 1, 1996 $2,500 $439,582 $ (570) $32,056 $795,275 $1,268,843 Net income -- -- -- -- 149,222 149,222 Foreign currency translation adjustment -- -- (482) -- -- (482) Change in net unrealized investment (losses) gains during year -- -- -- (17,952) -- (17,952) ------ -------- ------- ------- -------- ---------- BALANCE, DECEMBER 31, 1996 2,500 439,582 (1,052) 14,104 944,497 1,399,631 Net income -- -- -- -- 46,445 46,445 Foreign currency translation adjustment -- -- (324) -- -- (324) Change in net unrealized investment (losses) gains during period -- -- -- 454 -- 454 ------ -------- ------- ------- -------- ---------- BALANCE, SEPTEMBER 30, 1997 $2,500 $439,582 $(1,376) $14,558 $990,942 $1,446,206 ====== ======== ======= ======= ======== ==========
SEE NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 5 PRUCO LIFE INSURANCE COMPANY AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS NINE MONTHS ENDED SEPTEMBER 30, 1997 AND 1996 (UNAUDITED)
NINE MONTHS ENDED SEPTEMBER 30, --------------------------- 1997 1996 -------- ---------- (000'S) CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 46,445 $ 121,380 Adjustments to reconcile net income to net cash from operating activities: Increase in future policy benefits and other policyholders' liabilities 34,121 43,389 General account policy fee income (32,488) (23,933) Interest credited to policyholders' account balances 81,104 84,107 Net decrease (increase) in Separate Accounts 27,085 (28,370) Net realized investment gains (13,415) (7,252) Policy loans (47,845) (51,569) Amortization and other non-cash items (2,630) 38,610 Change in: Accrued investment income (5,890) 138 Deferred policy acquisition costs 33,282 (50,488) Other assets (21,562) (1,627) Payable to affiliate 42,731 5,059 Federal income tax payable / receivable 36,693 22,787 Deferred federal income tax payable (10,484) (10,793) Other liabilities 26,991 (8,370) ----------- ----------- CASH FLOWS FROM OPERATING ACTIVITIES 194,138 133,068 ----------- ----------- CASH FLOWS FROM INVESTING ACTIVITIES: Proceeds from the sale/maturity of: Fixed maturities: Held to maturity 110,865 89,764 Available for sale 2,370,205 3,104,145 Equity securities 8,348 3,498 Mortgage loans 21,932 9,940 Other long term investments 2,285 21 Investment real estate -- 4,829 Payments for the purchase of: Fixed maturities: Held to maturity (21,610) (74,899) Available for sale (2,425,849) (3,110,113) Equity securities (8,158) (4,560) Other long term investments (51) (497) Investment real estate -- (341) Net cash collateral for securities loaned 81,479 -- Net payments for short term investments (332,118) (47,721) ----------- ----------- CASH FLOWS FROM INVESTING ACTIVITIES (192,672) (25,934) ----------- ----------- CASH FLOWS FROM FINANCING ACTIVITIES: Policyholders' account balances: Deposits 1,199,372 329,910 Withdrawals (net of transfers to/from separate accounts) (1,190,212) (420,526) ----------- ----------- CASH FLOWS FROM FINANCING ACTIVITIES 9,160 (90,616) ----------- ----------- Net increase in Cash 10,626 16,518 Cash, beginning of year 73,766 41,435 ----------- ----------- CASH, END OF PERIOD $ 84,392 $ 57,953 =========== ===========
SEE NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 6 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS OF PRUCO LIFE INSURANCE COMPANY AND SUBSIDIARIES SEPTEMBER 30, 1997 (UNAUDITED) 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND PRINCIPLES A. PRINCIPLES OF CONSOLIDATION The accompanying unaudited consolidated financial statements include the accounts of Pruco Life Insurance Company (Pruco Life), a stock life insurance company, and its subsidiaries (collectively, the Company). Pruco Life has two subsidiaries, Pruco Life Insurance Company of New Jersey and The Prudential Life Insurance Company of Arizona. Pruco Life is a wholly-owned subsidiary of The Prudential Insurance Company of America (Prudential), a mutual life insurance company. The Company markets individual life insurance and deferred annuities primarily through Prudential's sales force in the United States, and in Taiwan. All significant intercompany balances and transactions have been eliminated in consolidation. B. BASIS OF PRESENTATION The accompanying unaudited consolidated financial statements of the Company have been prepared in accordance with the instructions to Form 10-Q and do not include all of the other information and disclosures required by generally accepted accounting principles. These statements should be read in conjunction with the consolidated financial statements and notes thereto for the year ended December 31, 1996 included in the Company's Annual Report on Form 10-K for that year. The accompanying consolidated financial statements have not been audited by independent accountants in accordance with generally accepted auditing standards, but in the opinion of management such financial statements include all adjustments, consisting only of normal recurring accruals, necessary to summarize fairly the Company's financial position and results of operations. The results of operations for the nine months ended September 30, 1997 may not be indicative of the results that may be expected for the year ending December 31, 1997. C. INVESTMENTS Fixed Maturities--Securities held to maturity are those that the Company has the positive intent and ability to hold to maturity and are principally reported at amortized cost. Amortized cost is adjusted to estimated fair value for impairments which are deemed to be other than temporary. Where the Company may not have the positive intent to hold fixed maturities until maturity, the securities are classified as "Available for Sale." These securities are reported at market value based principally on their quoted market prices. The associated unrealized gains and losses, net of income taxes and deferred policy acquisition costs, are included as a component of equity or if deemed to be other than temporary, are included as a realized loss. These securities may be sold prior to maturity as part of the Company's asset/liability management strategy in response to changes in interest rates, resultant prepayments risk, and similar factors. Equity Securities consist primarily of common and preferred stocks. Marketable equity securities are reported at market value based principally on their quoted market prices. The associated unrealized gains and losses are included as a component of equity. Short-term investments are fixed maturities that mature within one year, and are reported at estimated fair value. Securities lending--The Company has instituted a securities lending program during the third quarter of 1997, whereby large blocks of securities are loaned to third parties, primarily brokerage firms. As of September 30, 1997, the estimated fair values of loaned securities were $80.6 million. Company policy and statutory regulations both require a minimum of 102% of the fair value of the domestic loaned securities to be separately maintained as collateral for the loans. Cash collateral received is invested in short-term investments and is recorded in Cash collateral for loaned securities in the amount of $81.5 million at September 30, 1997. Non-cash collateral is not reflected in the consolidated financial statements. 7 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS OF PRUCO LIFE INSURANCE COMPANY AND SUBSIDIARIES SEPTEMBER 30, 1997 (UNAUDITED) The following reconciles the Net unrealized investment gains recorded in Stockholder's equity at September 30, 1997 and December 31, 1996. SEPT. 30, 1997 DEC. 31, 1996 -------------- ------------- (000's) Fixed maturities Available for sale: Fair Value $2,306,363 $2,236,817 Amortized cost 2,272,749 2,210,150 ---------- ---------- Unrealized investment gains 33,614 26,667 Equity securities: Fair value 4,738 3,748 Cost 4,510 3,626 ---------- ---------- Unrealized investment gains 228 122 Related adjustments: Deferred policy acquisition costs (16,128) (7,893) Policyholders' account balances 2,654 1,237 Deferred federal income tax liability (5,810) (6,029) ---------- ---------- (19,284) (12,685) ---------- ---------- Net unrealized investment gains $ 14,558 $ 14,104 ========== ========== D. RECLASSIFICATIONS To facilitate comparisons with the current year, certain amounts in the prior years have been reclassified. 2. CONTINGENCIES Several actions have been brought against the Company on behalf of those persons who purchased life insurance policies and are based on complaints about sales practices engaged in by Prudential, the Company and agents appointed by Prudential and the Company. Prudential has agreed to indemnify the Company for any and all losses resulting from such litigation. 8 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. Pruco Life Insurance Company consists of Pruco Life Insurance Company and its subsidiaries (collectively, the Company). Pruco Life Insurance Company is a wholly owned subsidiary of The Prudential Insurance Company of America (Prudential). The Company markets individual life insurance and annuities primarily through Prudential's sales force in the United States and in Taiwan. The company had $12.0 billion in assets at September 30, 1997, $7.3 billion of which were held in Separate Accounts under variable life insurance policies and variable annuity contracts. The remaining assets were held in the general account for investment primarily in bonds, short-term investments and policy loans. The Company's assets were $12.0 billion at September 30, 1997 compared to $9.7 billion at December 31, 1996. For the period ended September 30, 1997, net income amounted to $46.4 million, a decrease of $75.0 million compared to the $121.4 million earned in the same period in 1996. 1. RESULTS OF OPERATIONS (a) 1997 versus 1996 Premiums increased by $3.6 million for the period ended September 30, 1997, from $35.3 million in 1996 to $38.9 million. This change is primarily due to increased sales related to traditional life insurance products in our Taiwan branch which continued to expand its business throughout 1997. Net investment income increased $12.3 million from $180.8 million for the period ended September 30, 1996 to $193.1 million for the same period in 1997. This increase is primarily due to overall growth of the investment portfolio as a result of additional cash flows from operating activities along with a reduction in expenses. Realized investment gains increased by $6.2 million from $7.2 million for the period ended September 30, 1996 to $13.4 million for the same period in 1997. This increase is primarily driven by the sale of fixed maturities as a result of normal investing activities during a period of declining interest rates. Other income increased $6.5 million for the period ended September 30, 1997 from the same period in 1996. This increase is due to increased advisory fees attributable to growth of Separate Account products and the introduction of Discovery Select. Policyholders' benefits increased $8.1 million for the period ended September 30, 1997 to $132.5 million, as compared to $124.4 million in 1996. This increase is attributable to increased mortality costs associated with the aging book of business. Other operating costs and expenses increased $138.7 million for the period ended September 30, 1997 compared to the same period for 1996. The increase relects factors including the refinement of estimated gross profit margins used to amortize deferred policy acquisition costs (DAC). Favorable mortality experience and reduction in cost of insurance charges contributed to a change in net amortization. Favorable sales in 1997 were a partial offset. The net change in amortization of DAC was $25.3 million and $(30.1) million in 1997 and 1996, respectively. Also, increased operating costs resulted from higher sales activity of Discovery Select and Discovery Preferred annuity products, and technological advancements made in annuity processing, customer service, and product development. 2. LIQUIDITY For an insurance company, cash needs, for the purpose of paying current benefits, making policy loans, and paying expenses, are met primarily from premiums and investment income. Benefits and expenses incurred in the nine months ended September 30, 1997, and 1996 were $425.0 million, and $281.2 million, respectively. Cash flows are anticipated to be sufficient to meet the Company's liquidity needs for the foreseeable future. 3. CAPITAL RESOURCES The primary components of the Company's total assets of $12.0 billion at September 30, 1997 are as follows (as a percentage of total assets): fixed income securities 21.9%, separate account assets (fixed income and equity securities) 60.9%, policy loans 5.7%, and other assets 11.5%. 9 PART II ITEM 1 LEGAL PROCEEDING - ----------------------- Pruco Life Insurance Company is not involved in any litigation that is expected to have a material effect. ITEM 2 CHANGES IN SECURITIES - ---------------------------- Not Applicable ITEM 3 DEFAULTS UPON SENIOR SECURITIES - -------------------------------------- Not Applicable ITEM 4 SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS - ---------------------------------------------------------- Not Applicable ITEM 5 OTHER INFORMATION - ------------------------ Not Applicable ITEM 6 EXHIBITS AND REPORTS ON FORM 8-K - --------------------------------------- (a) (1) and (2) financial Statements of registrant and subsidiaries are listed on pages 3-6 hereof and are filed as part of this Report. (a) (3) Exhibits -------- Regulation S-K -------------- 2. Not Applicable 3. Documents Incorporated by Reference (i) The Articles of Incorporation of Pruco Life, as amended October 19, 1993, are incorporated herein by reference to Form S-6, Registration No. 333-07451, filed July 2, 1996 on behalf of the Pruco Life Variable Appreciable Account; (ii) Bylaws of Pruco Life, as amended May 6, 1997 are incorporated herein by reference to Form 10-Q, Registration No. 33-37587, filed August 15, 1997 on behalf of Pruco Life Insurance Company. 4. Exhibits Modified Guaranteed Annuity Contract, incorporated by reference to Registrant's Form S-1 Registration Statement, Registration No. 33-37587, filed November 2, 1990. Market-Value Adjustment Annuity Contract, incorporated by reference to Registrant's Form S-1 Registration Statement, Registration No. 33-61143, filed November 17, 1995. 10. None. 11. Not Applicable. 15. Not Applicable. 10 18. None. 19. Not Applicable. 20. Not Applicable. 22. None. 23. None. 24. Not Applicable. 25. Not Applicable. 27. Exhibit 27, Financial Data Schedule appended to this form in accordance with EDGAR instructions. 99. None 11 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf of the undersigned, thereunto duly authorized. PRUCO LIFE INSURANCE COMPANY (Registrant)
SIGNATURE TITLE DATE - --------- ----- ---- /s/ ESTHER H. MILNES - ------------------------------- President and Director November 14, 1997 Esther H. Milnes /s/ LINDA S. DOUGHERTY - ------------------------------- Vice President and Comptroller November 14, 1997 Linda S. Dougherty and Chief Accounting Officer
12 EX-27 2 FINANCIAL DATA SCHEDULE
7 FINANCIAL DATA SCHEDULE Article 7 of Regulation S-X Pruco Life Insurance Company 1,000 9-MOS DEC-31-1997 JAN-01-1997 SEP-30-1997 2,306,363 317,107 327,215 4,738 25,780 0 3,845,522 84,392 27,014 599,877 11,969,891 2,246,638 0 591,472 0 0 0 0 2,500 1,443,056 11,969,891 38,920 193,142 13,415 21,648 213,606 96,662 114,686 74,005 27,560 46,445 0 0 0 46,445 0 0 0 0 0 0 0 0 0
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