424B3: Prospectus [Rule 424(b)(3)]
Published on
Filed Pursuant to Rule 424(b)(3)
Registration No. 333-103474
PRUCO LIFE INSURANCE COMPANY
STRATEGIC PARTNERS(SM) FLEXELITE
SUPPLEMENT TO PROSPECTUS DATED MAY 1, 2004
SUPPLEMENT DATED FEBRUARY 28, 2005
This supplement should be retained with the current prospectus for your annuity
contract. If you do not have a current prospectus, please contact us at (888)
PRU-2888.
We are issuing this supplement to describe two new optional insurance benefits
we are adding -- namely the Lifetime Five(SM) Income Benefit and Highest Daily
Value Death Benefit, and several new variable investment options that will be
available to contract owners effective on or about February 28, 2005. The
Lifetime Five Income Benefit is a feature under which the contract owner can
make certain withdrawals and receive certain income payments regardless of
market-based declines in contract value. The Highest Daily Value Death Benefit
is a feature under which the death benefit may be "stepped-up" on a daily basis
to reflect increasing contract value. We use certain defined terms to describe
the benefits, which we set out below.
THE FOLLOWING LINE ITEMS ARE INCLUDED IN THE "ANNUAL ACCOUNT EXPENSES" TABLE IN
THE "SUMMARY OF CONTRACT EXPENSES" SECTION OF THE PROSPECTUS AS FOLLOWS:
* We impose this charge if you choose the Lifetime Five Income Benefit. This
charge is equal to 0.60% of the average daily net assets of the subaccounts,
which is calculated daily.
** We impose this charge if you choose the Highest Daily Value Death Benefit.
The charge for this benefit consists of a charge of 0.50% annually that we
impose in addition to our charge for the base death benefit. Thus, the charge
set forth above for the Highest Daily Value Death Benefit represents the sum of
the charge for the base death benefit and the 0.50% charge.
THE "EXPENSE EXAMPLES" SECTION OF THE PROSPECTUS IS REVISED AS INDICATED BELOW.
PLEASE NOTE THAT, AS INDICATED BELOW, THERE ARE DIFFERENT EXPENSE EXAMPLES FOR
THE DIFFERENT VERSIONS OF STRATEGIC PARTNERS FLEXELITE COVERED BY THIS
SUPPLEMENT.
EXPENSE EXAMPLES
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THESE EXAMPLES ARE INTENDED TO HELP YOU COMPARE THE COST OF INVESTING IN THE
CONTRACT WITH THE COST OF INVESTING IN OTHER VARIABLE ANNUITY CONTRACTS. THESE
COSTS INCLUDE CONTRACT OWNER TRANSACTION EXPENSES, CONTRACT FEES, SEPARATE
ACCOUNT ANNUAL EXPENSES, AND UNDERLYING MUTUAL FUND FEES AND EXPENSES.
THE EXAMPLES ASSUME THAT YOU INVEST $10,000 IN THE CONTRACT FOR THE TIME PERIODS
INDICATED. THE EXAMPLES ALSO ASSUME THAT YOUR INVESTMENT HAS A 5% RETURN EACH
YEAR AND ASSUME THE MAXIMUM FEES AND EXPENSES OF ANY OF THE MUTUAL FUNDS, WHICH
DO NOT REFLECT ANY EXPENSE REIMBURSEMENTS OR WAIVERS. ALTHOUGH YOUR ACTUAL COSTS
MAY BE HIGHER OR LOWER, BASED ON THESE ASSUMPTIONS, YOUR COSTS WOULD BE AS
INDICATED IN THE TABLES THAT FOLLOW.
EXPENSE EXAMPLES FOR SUBSEQUENT VERSION OF STRATEGIC PARTNERS FLEXELITE SOLD
BEGINNING MAY 1, 2003
EXAMPLE 1A: Highest Daily Value Death Benefit; Guaranteed Minimum Income
Benefit, Earnings Appreciator Benefit, Income Appreciator Benefit, Credit
Elections, and You Withdraw All Your Assets
This example assumes that:
- - You invest $10,000 in the Contract;
- - You choose the Highest Daily Value Death Benefit;
- - You choose the Earnings Appreciator Benefit;
- - You choose the Guaranteed Minimum Income Benefit
(for contracts sold beginning January 20, 2004);
- - You choose the Income Appreciator Benefit;
- - You make credit elections prior to your 3(rd) and 6(th) contract
anniversaries;
- - You allocate all of your assets to the variable investment option having the
maximum total operating expenses;
- - The investment has a 5% return each year;
- - The mutual fund's total operating expenses remain the same each year; and
- - You withdraw all your assets at the end of the indicated period.
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EXPENSE EXAMPLES CONTINUED
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EXAMPLE 1b: Highest Daily Value Death Benefit, Guaranteed Minimum Income
Benefit, Earnings Appreciator Benefit, Income Appreciator Benefit, Credit
Elections, and You Do Not Withdraw Your Assets
This example makes exactly the same assumptions as Example 1a except that it
assumes that you do not withdraw any of your assets at the end of the indicated
period.
EXAMPLE 2a: Base Death Benefit and You Withdraw All Your Assets
This example assumes that:
- - You invest $10,000 in the Contract;
- - You choose the Base Death Benefit;
- - You allocate all of your assets to the variable investment option having the
maximum total operating expenses;
- - The investment has a 5% return each year;
- - The mutual fund's total operating expenses remain the same each year;
- - You do not make a credit election; and
- - You withdraw all your assets at the end of the indicated period.
EXAMPLE 2b: Base Death Benefit and You Withdraw All Your Assets
This example makes exactly the same assumptions as Example 2a except that it
assumes that you do not withdraw any of your assets at the end of the indicated
period.
EXPENSE EXAMPLES FOR ORIGINAL VERSION OF STRATEGIC PARTNERS FLEXELITE
EXAMPLE 3a: Greater of roll-up and step-up GMDB; Earnings Appreciator Benefit;
Credit Elections and You Withdraw All Your Assets
This example assumes that:
- - You invest $10,000 in the Contract;
- - You choose the Greater of roll-up and step-up GMDB;
- - You choose the Earnings Appreciator Benefit;
- - You make credit elections prior to your 3(rd) and 6(th) contract
anniversaries;
- - You allocate all of your assets to the variable investment option having the
maximum total operating expenses;
- - The investment has a 5% return each year;
- - The mutual fund's total operating expenses remain the same each year; and
- - You withdraw all your assets at the end of the indicated period.
EXAMPLE 3b: Greater of roll-up and Step-up GMDB; Earnings Appreciator Benefit;
Credit Elections; and You Do Not Withdraw Your Assets
This example makes exactly the same assumptions as Example 3a except that it
assumes that you do not withdraw any of your assets at the end of the indicated
period.
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EXPENSE EXAMPLES CONTINUED
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EXAMPLE 4a: Base Death Benefit and You Withdraw All Your Assets
This example assumes that:
- - You invest $10,000 in the Contract;
- - You choose the Base Death Benefit;
- - You allocate all of your assets to the variable investment option having the
maximum total operating expenses;
- - The investment has a 5% return each year;
- - The mutual fund's total operating expenses remain the same each year;
- - You do not make a credit election; and
- - You withdraw all your assets at the end of the indicated period.
EXAMPLE 4b: Base Death Benefit and You Do Not Withdraw Your Assets
This example makes exactly the same assumptions as Example 4a except that it
assumes that you do not withdraw any of your assets at the end of the indicated
period.
NOTES FOR EXPENSE EXAMPLES:
- -----------------------------------
THESE EXAMPLES SHOULD NOT BE
CONSIDERED A REPRESENTATION OF PAST
OR FUTURE EXPENSES. ACTUAL EXPENSES
MAY BE GREATER OR LESS THAN THOSE
SHOWN.
Note that withdrawal charges (which
are reflected in Examples 1a, 2a,
3a, and 4a) are assessed in
connection with some annuity
options, but not others.
The values shown in the 10 year
column are the same for the
examples with withdrawal charges
and the examples without withdrawal
charges. This is because, if 3 or
more years have elapsed since your
last credit election before your
6(th) contract anniversary no
withdrawal charges apply.
The examples use an average
contract maintenance charge, which
we calculated based on our estimate
of the total contract fees we
expected to collect in 2004. Based
on these estimates, the contract
maintenance charge is included as
an annual charge of 0.034% of
contract value. Your actual fees
will vary based on the amount of
your contract and your specific
allocation among the investment
options.
Premium taxes are not reflected in
the examples. We deduct a charge to
approximate premium taxes that may
be imposed on us in your state.
This charge is generally deducted
from the amount applied to an
annuity payout option.
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EXPENSE EXAMPLES CONTINUED
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THE FOLLOWING IS ADDED AS A NEW SECTION 5 ENTITLED "WHAT IS THE GUARANTEED
WITHDRAWAL BENEFIT AVAILABLE UNDER THE CONTRACT?" THE SECTIONS THAT FOLLOW
SECTION 5 IN THE PROSPECTUS ARE NOW RE-NUMBERED ACCORDINGLY.
LIFETIME FIVE INCOME BENEFIT
The Lifetime Five Income Benefit ("Lifetime Five") is an optional feature that
guarantees your ability to withdraw amounts equal to a percentage of an initial
principal value (called the "Protected Withdrawal Value"), regardless of the
impact of market performance on your contract value, subject to our rules
regarding the timing and amount of withdrawals. There are two options -- one is
designed to provide an annual withdrawal amount for life (the "Life Income
Benefit") and the other is designed to provide a greater annual withdrawal
amount (than the first option) as long as there is Protected Withdrawal Value
(adjusted as described below) (the "Withdrawal Benefit"). If there is no
Protected Withdrawal Value, the Withdrawal Benefit will be zero. You do not
choose between these two options; each option will continue to be available as
long as the annuity has a contract value and Lifetime Five is in effect. Certain
benefits under Lifetime Five may remain in effect even if the contract value is
zero. The option may be appropriate if you intend to make periodic withdrawals
from your contract and wish to ensure that market performance will not affect
your ability to receive annual payments. You are not required to make
withdrawals -- the guarantees are not lost if you withdraw less than the maximum
allowable amount each year. Lifetime Five is only being offered in those
jurisdictions where we have received regulatory approval and will be offered
subsequently in other jurisdictions when we receive regulatory approval in those
jurisdictions. Certain terms and conditions may differ between jurisdictions
once approved.
Lifetime Five is subject to certain restrictions described below.
- - Lifetime Five can only be elected once each contract year, and only where the
annuitant and the contract owner are the same person or, if the contract
owner is an entity, where there is only one annuitant.
- - The annuitant must be at least 45 years old when Lifetime Five is elected.
- - Lifetime Five is not available if you elect the Guaranteed Minimum Income
Benefit or Income Appreciator Benefit.
- - As long as Lifetime Five is in effect, you must allocate your contract value
to one or more of the following asset allocation portfolios of the Prudential
Series Fund: SP Balanced Asset Allocation Portfolio, SP Conservative Asset
Allocation Portfolio, and SP Growth Asset Allocation Portfolio. We reserve
the right to require you to allocate your contract value to different
portfolios than those mentioned immediately above, as a condition of
acquiring and/or maintaining this benefit, as more fully described in your
contract.
PROTECTED WITHDRAWAL VALUE
The Protected Withdrawal Value is initially used to determine the amount of each
initial annual payment under the Life Income Benefit and the Withdrawal Benefit.
The initial Protected Withdrawal Value is determined as of the date you make
your first withdrawal under the contract following your election of Lifetime
Five. The initial Protected Withdrawal Value is equal to the greater of (A) the
contract value on the date you elect Lifetime Five, plus any additional purchase
payments each growing at 5% per year from the date of your election, or
application of the purchase payment to your contract, as applicable, until the
date of your first withdrawal or the 10th anniversary of the benefit effective
date, if earlier), (B) the contract value as of the date of the first withdrawal
from your contract, prior to the withdrawal, and (C) the highest contract value
on each contract anniversary prior to the first withdrawal or on the first 10
contract anniversaries if earlier than the date of your first withdrawal after
the benefit effective date. Each value is increased by the amount of any
subsequent purchase payments.
- - If you elect Lifetime Five at the time you purchase your contract, the
contract value will be your initial purchase payment.
- - For existing contract owners who are electing the Lifetime Five Benefit, the
contract value on the date of the contract owner's election of Lifetime Five
will be used to determine the initial Protected Withdrawal Value.
- - If you make additional purchase payments after your first withdrawal, the
Protected Withdrawal Value will be increased by the amount of each additional
purchase payment.
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You may elect to step-up your Protected Withdrawal Value if, due to positive
market performance, your contract value is greater than the Protected Withdrawal
Value. You are eligible to step-up the Protected Withdrawal Value on or after
the 5th anniversary of the first withdrawal under Lifetime Five. The Protected
Withdrawal Value can be stepped up again on or after the 5th anniversary
following the preceding step-up. If you elect to step-up the Protected
Withdrawal Value, and on the date you elect to step-up, the charges under
Lifetime Five have changed for new purchasers, you may be subject to the new
charge going forward.
Upon election of the step-up, we increase the Protected Withdrawal Value to be
equal to the then current contract value. For example, assume your initial
Protected Withdrawal Value was $100,000 and you have made cumulative withdrawals
of $40,000, reducing the Protected Withdrawal Value to $60,000. On the date you
are eligible to step-up the Protected Withdrawal Value, your contract value is
equal to $75,000. You could elect to step-up the Protected Withdrawal Value to
$75,000 on the date you are eligible. If your current Annual Income Amount and
Annual Withdrawal Amount (as described below) are less than they would be if we
did not reflect the step-up in Protected Withdrawal Value, then we will increase
these amounts to reflect the step-up as described below.
The Protected Withdrawal Value is reduced each time a withdrawal is made on a
"dollar-for-dollar" basis up to 7% per contract year of the Protected Withdrawal
Value and on the greater of a "dollar-for-dollar" basis or a pro rata basis for
withdrawals in a contract year in excess of that amount until the Protected
Withdrawal Value is reduced to zero. At that point, the Annual Withdrawal Amount
will be zero until such time (if any) as the contract reflects a Protected
Withdrawal Value (for example, due to a step-up or additional purchase payments
being made into the contract).
ANNUAL INCOME AMOUNT UNDER THE LIFE INCOME BENEFIT
The initial Annual Income Amount is equal to 5% of the initial Protected
Withdrawal Value. Under Lifetime Five, if your cumulative withdrawals in a
contract year are less than or equal to the Annual Income Amount, they will not
reduce your Annual Income Amount in subsequent contract years. If your
cumulative withdrawals are in excess of the Annual Income Amount ("Excess
Income"), your Annual Income Amount in subsequent years will be reduced (except
with regard to required minimum distributions) by the result of the ratio of the
Excess Income to the contract value immediately prior to such withdrawal (see
examples of this calculation below). Reductions include the actual amount of the
withdrawal, including any withdrawal charges that may apply. A withdrawal can be
considered Excess Income under the Life Income Benefit even though it does not
exceed the Annual Withdrawal Amount under the Withdrawal Benefit. When you elect
a step-up, your Annual Income Amount increases to equal 5% of your contract
value after the step-up if such amount is greater than your Annual Income
Amount. Your Annual Income Amount also increases if you make additional purchase
payments. The amount of the increase is equal to 5% of any additional purchase
payments. Any increase will be added to your Annual Income Amount beginning on
the day that the step-up is effective or the purchase payment is made. A
determination of whether you have exceeded your Annual Income Amount is made at
the time of each withdrawal; therefore, a subsequent increase in the Annual
Income Amount will not offset the effect of a withdrawal that exceeded the
Annual Income Amount at the time the withdrawal was made.
ANNUAL WITHDRAWAL AMOUNT UNDER THE WITHDRAWAL BENEFIT
The initial Annual Withdrawal Amount is equal to 7% of the initial Protected
Withdrawal Value. Under Lifetime Five, if your cumulative withdrawals each
contract year are less than or equal to the Annual Withdrawal Amount, your
Protected Withdrawal Value will be reduced on a "dollar-for-dollar" basis. If
your cumulative withdrawals are in excess of the Annual Withdrawal Amount
("Excess Withdrawal"), your Annual Withdrawal Amount will be reduced (except
with regard to required minimum distributions) by the result of the ratio of the
Excess Withdrawal to the contract value immediately prior to such withdrawal
(see the examples of this calculation below). Reductions include the actual
amount of the withdrawal, including any withdrawal charges that may apply. When
you elect a step-up, your Annual Withdrawal Amount increases to equal 7% of your
contract value after the step-up if such amount is greater than your Annual
Withdrawal Amount. Your Annual Withdrawal Amount also increases if you make
additional purchase payments. The amount of the increase is equal to 7% of any
additional purchase payments. A determination of whether you have exceeded your
Annual Withdrawal Amount is made at the time of each
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withdrawal; therefore, a subsequent increase in the Annual Withdrawal Amount
will not offset the effect of a withdrawal that exceeded the Annual Withdrawal
Amount at the time the withdrawal was made.
Lifetime Five does not affect your ability to make withdrawals under your
contract or limit your ability to request withdrawals that exceed the Annual
Income Amount and the Annual Withdrawal Amount. You are not required to withdraw
all or any portion of the Annual Withdrawal Amount or Annual Income Amount in
each contract year.
- - If, cumulatively, you withdraw an amount less than the Annual Withdrawal
Amount under the Withdrawal Benefit in any contract year, you cannot
carry-over the unused portion of the Annual Withdrawal Amount to subsequent
contract years.
- - If, cumulatively, you withdraw an amount less than the Annual Income Amount
under the Life Income Benefit in any contract year, you cannot carry-over the
unused portion of the Annual Income Amount to subsequent contract years.
However, because the Protected Withdrawal Value is only reduced by the actual
amount of withdrawals you make under these circumstances, any unused Annual
Withdrawal Amount or Annual Income Amount may extend the period of time until
the remaining Protected Withdrawal Value is reduced to zero.
The following examples of dollar-for-dollar and proportional reductions and the
step-up of the Protected Withdrawal Value, Annual Withdrawal Amount and Annual
Income Amount assume: 1.) the contract date and the effective date of Lifetime
Five are February 1, 2005; 2.) an initial purchase payment of $250,000; 3.) the
contract value on February 1, 2006 is equal to $265,000; 4.) the first
withdrawal occurs on March 1, 2006 when the contract value is equal to $263,000;
and 5.) the contract value on March 1, 2011 is equal to $240,000.
The initial Protected Withdrawal Value is calculated as the greatest of (a), (b)
and (c):
(a) Purchase payment accumulated at 5% per year from February 1, 2005 until
March 1, 2006 (393 days) = $250,000 * 1.05(393/365) = $263,484.33
(b) Contract value on March 1, 2006 (the date of the first withdrawal) =
$263,000
(c) Contract value on February 1, 2006 (the first contract anniversary) =
$265,000
Therefore, the initial Protected Withdrawal Value is equal to $265,000. The
Annual Withdrawal Amount is equal to $18,550 under the Withdrawal Benefit (7% of
$265,000). The Annual Income Amount is equal to $13,250 under the Life Income
Benefit (5% of $265,000).
EXAMPLE 1. DOLLAR-FOR-DOLLAR REDUCTION
If $10,000 was withdrawn (less than both the Annual Income Amount and the Annual
Withdrawal Amount) on March 1, 2006, then the following values would result:
- Remaining Annual Withdrawal Amount for current contract year = $18,550 -
$10,000 = $8,550
- Annual Withdrawal Amount for future contract years remains at $18,550
- Remaining Annual Income Amount for current contract year = $13,250 -
$10,000 = $3,250
- Annual Income Amount for future contract years remains at $13,250
- Protected Withdrawal Value is reduced by $10,000 from $265,000 to
$255,000
EXAMPLE 2. DOLLAR-FOR-DOLLAR AND PROPORTIONAL REDUCTIONS
a) If $15,000 was withdrawn (more than the Annual Income Amount but less than
the Annual Withdrawal Amount) on March 1, 2006, then the following values
would result:
- Remaining Annual Withdrawal Amount for current contract year = $18,550 -
$15,000 = $3,550
- Annual Withdrawal Amount for future contract years remains at $18,550
- Remaining Annual Income Amount for current contract year = $0
- Excess of withdrawal over the Annual Income Amount ($15,000 - $13,250 =
$1,750) reduces Annual Income Amount for future contract years.
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- Reduction to Annual Income Amount = Excess Income/contract value before
Excess Income * Annual Income Amount = $1,750/($263,000 - $13,250) *
$13,250 = $93
- Annual Income Amount for future contract years = $13,250 - $93 = $13,157
- Protected Withdrawal Value is reduced by $15,000 from $265,000 to
$250,000
b) If $25,000 was withdrawn (more than both the Annual Income Amount and the
Annual Withdrawal Amount) on March 1, 2006, then the following values would
result:
- Remaining Annual Withdrawal Amount for current contract year = $0
- Excess of withdrawal over the Annual Withdrawal Amount ($25,000 - $18,550
= $6,450) reduces Annual Withdrawal Amount for future contract years.
- Reduction to Annual Withdrawal Amount = Excess Withdrawal/contract value
before Excess Withdrawal * Annual Withdrawal Amount = $6,450/($263,000 -
$18,550) * $18,550 = $489
- Annual Withdrawal Amount for future contract years = $18,550 - $489 =
$18,061
- Remaining Annual Income Amount for current contract year = $0
- Excess of withdrawal over the Annual Income Amount ($25,000 - $13,250 =
$11,750) reduces Annual Income Amount for future contract years.
- Reduction to Annual Income Amount = Excess Income/contract value before
Excess Income * Annual Income Amount = $11,750/($263,000 - $13,250) *
$13,250 = $623
- Annual Income Amount for future contract years = $13,250 - $623 = $12,627
- Protected Withdrawal Value is first reduced by the Annual Withdrawal
Amount ($18,550) from $265,000 to $246,450. It is further reduced by the
greater of a dollar-for-dollar reduction or a proportional reduction.
- Dollar-for-dollar reduction = $25,000 - $18,550 = $6,450
- Proportional reduction = Excess Withdrawal/contract value before Excess
Withdrawal * Protected Withdrawal Value = $6,450/($263,000 - $18,550) *
$246,450 = $6,503
- Protected Withdrawal Value = $246,450 - max [$6,450, $6,503] = $239,947
EXAMPLE 3. STEP-UP OF THE PROTECTED WITHDRAWAL VALUE
If the Annual Income Amount ($13,250) is withdrawn each year starting on March
1, 2006 for a period of 5 years, the Protected Withdrawal Value on March 1, 2011
would be reduced to $198,750 [$265,000 - ($13,250 * 5)]. If a step-up is elected
on March 1, 2011, then the following values would result:
- Protected Withdrawal Value = contract value on March 1, 2011 = $240,000
- Annual Income Amount is equal to the greater of the current Annual Income
Amount or 5% of the stepped up Protected Withdrawal Value. Current Annual
Income Amount is $13,250. 5% of the stepped-up Protected Withdrawal Value
is 5% of $240,000, which is $12,000. Therefore, the Annual Income Amount
remains $13,250.
- Annual Withdrawal Amount is equal to the greater of the current Annual
Withdrawal Amount or 7% of the stepped up Protected Withdrawal Value.
Current Annual Withdrawal Amount is $18,550. 7% of the stepped-up
Protected Withdrawal Value is 7% of $240,000, which is $16,800.
Therefore, the Annual Withdrawal Amount remains $18,550.
BENEFITS UNDER LIFETIME FIVE
- If your contract value is equal to zero, and the cumulative withdrawals
in the current contract year are greater than the Annual Withdrawal
Amount, Lifetime Five will terminate. To the extent that your contract
value was reduced to zero as a result of cumulative withdrawals that are
equal to or less than the Annual Income Amount and amounts are still
payable under both the Life Income Benefit and the Withdrawal Benefit,
you will be given the choice of receiving the payments under the Life
Income Benefit or under the Withdrawal Benefit. Once you make this
election we will make an additional payment for that contract year equal
to either the remaining Annual Income Amount or Annual Withdrawal Amount
for the contract year, if any, depending on the option you choose. In
subsequent contract years we make payments that equal either the Annual
Income Amount or the Annual Withdrawal Amount as described in this
supplement. You will not
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be able to change the option after your election and no further purchase
payments will be accepted under your contract. If you do not make an
election, we will pay you annually under the Life Income Benefit. To the
extent that cumulative withdrawals in the current contract year that
reduced your contract value to zero are more than the Annual Income
Amount but less than or equal to the Annual Withdrawal Amount and amounts
are still payable under the Withdrawal Benefit, you will receive the
payments under the Withdrawal Benefit. In the year of a withdrawal that
reduced your contract value to zero, we will make an additional payment
to equal any remaining Annual Withdrawal Amount and make payments equal
to the Annual Withdrawal Amount in each subsequent year (until the
Protected Withdrawal Value is depleted). Once your contract value equals
zero no further purchase payments will be accepted under your contract.
- If annuity payments are to begin under the terms of your contract or if
you decide to begin receiving annuity payments and there is any Annual
Income Amount due in subsequent contract years or any remaining Protected
Withdrawal Value, you can elect to either:
1. apply your contract value to any annuity option available;
2. request that, as of the date annuity payments are to begin, we make
annuity payments each year equal to the Annual Income Amount. We make
such annuity payments until the annuitant's death; or
3. request that, as of the date annuity payments are to begin, we pay
out any remaining Protected Withdrawal Value as annuity payments.
Each year such annuity payments will equal the Annual Withdrawal
Amount or the remaining Protected Withdrawal Value if less. We make
such annuity payments until the earlier of the annuitant's death or
the date the Protected Withdrawal Value is depleted.
We must receive your request in a form acceptable to us at the Prudential
Annuity Service Center.
- In the absence of an election when mandatory annuity payments are to
begin, we will make annual annuity payments as a single life fixed
annuity with five payments certain using the greater of the annuity rates
then currently available or the annuity rates guaranteed in your
contract. The amount that will be applied to provide such annuity
payments will be the greater of:
1. the present value of future Annual Income Amount payments. Such
present value will be calculated using the greater of the single life
fixed annuity rates then currently available or the single life fixed
annuity rates guaranteed in your contract; and
2. the contract value.
If no withdrawal was ever taken, we will determine a Protected Withdrawal Value
and calculate an Annual Income Amount and an Annual Withdrawal Amount as if you
made your first withdrawal on the date the annuity payments are to begin.
OTHER IMPORTANT CONSIDERATIONS
- - Withdrawals under Lifetime Five are subject to all of the terms and
conditions of the contract, including any withdrawal charges.
- - Withdrawals made while Lifetime Five is in effect will be treated, for tax
purposes, in the same way as any other withdrawals under the contract.
Lifetime Five does not directly affect the contract value or surrender value,
but any withdrawal will decrease the contract value by the amount of the
withdrawal (plus any applicable withdrawal charges). If you surrender your
contract, you will receive the current contract value, not the Protected
Withdrawal Value.
- - You can make withdrawals from your contract while your contract value is
greater than zero without purchasing Lifetime Five. Lifetime Five provides a
guarantee that if your contract value declines due to market performance, you
will be able to receive your Protected Withdrawal Value or Annual Income
Amount in the form of periodic benefit payments.
- - You must allocate your contract value to one or more of the following asset
allocation portfolios of the Prudential Series Fund: SP Balanced Asset
Allocation Portfolio, SP Conservative Asset Allocation Portfolio, and SP
Growth
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Asset Allocation Portfolio. We reserve the right to require you to allocate
your contract value to different portfolios than those mentioned immediately
above, as a condition of acquiring and/or maintaining this benefit, as more
fully described in your contract.
ELECTION OF LIFETIME FIVE
With respect to the subsequent version of Strategic Partners FlexElite sold
beginning May 1, 2003, Lifetime Five can be elected at the time you purchase
your contract, or after the contract date. With respect to the original version
of Strategic Partners FlexElite, Lifetime Five can be elected only after the
contract date. Elections of Lifetime Five are subject to our eligibility rules
and restrictions. The contract owner's contract value as of the date of election
will be used as the basis to calculate the initial Protected Withdrawal Value,
the initial Annual Withdrawal Amount, and the initial Annual Income Amount.
TERMINATION OF LIFETIME FIVE
Lifetime Five terminates automatically when your Protected Withdrawal Value and
Annual Income Amount reaches zero. You may terminate Lifetime Five at any time
by notifying us. If you terminate Lifetime Five, any guarantee provided by the
benefit will terminate as of the date the termination is effective.
Lifetime Five terminates:
- upon your surrender of the contract,
- upon the death of the annuitant (but your surviving spouse may elect a
new Lifetime Five benefit if your spouse elects the spousal continuance
option and your spouse would then be eligible to elect the benefit as if
he/she were a new purchaser),
- upon a change in ownership of the contract that changes the tax
identification number of the contract owner, or
- upon your election to begin receiving annuity payments.
The charge for Lifetime Five will no longer be deducted from your contract value
upon termination.
ADDITIONAL TAX CONSIDERATIONS FOR QUALIFIED CONTRACTS
If you purchase an annuity contract as an investment vehicle for "qualified"
investments, including an IRA, the minimum distribution rules under the Code
require that you begin receiving periodic amounts from your annuity contract
beginning after age 70 1/2. The amount required under the Code may exceed the
Annual Withdrawal Amount and the Annual Income Amount, which will cause us to
increase the Annual Income Amount and the Annual Withdrawal Amount in any
contract year that required minimum distributions due from your contract that
are greater than such amounts. Any such payments will reduce your Protected
Withdrawal Value. In addition, the amount and duration of payments under the
contract payment and death benefit provisions may be adjusted so that the
payments do not trigger any penalty or excise taxes due to tax considerations
such as minimum distribution requirements.
IN SECTION 4 OF THE PROSPECTUS, THE FOLLOWING IS ADDED AS A NEW SECTION UNDER
"CALCULATION OF THE DEATH BENEFIT":
HIGHEST DAILY VALUE DEATH BENEFIT
The Highest Daily Value Death Benefit ("HDV") is a feature under which the death
benefit may be "stepped-up" on a daily basis to reflect increasing contract
value. HDV is currently being offered in those jurisdictions where we have
received regulatory approval, but is not being offered within the original
version of Strategic Partners FlexElite. Certain terms and conditions may differ
between jurisdictions once approved. The HDV is not available if you elect the
Guaranteed Minimum Death Benefit. Currently, HDV can only be elected at the time
you purchase your contract. Please note that you may not terminate the HDV death
benefit once elected. Moreover, because this benefit may not be terminated once
elected, you must, as detailed below, keep your contract value allocated to one
of the specified asset allocation portfolios of the Prudential Series Fund.
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IF THE CONTRACT HAS ONE CONTRACT OWNER, the contract owner must be age 79 or
less at the time the HDV is elected. If the contract has joint owners, the older
owner must be age 79 or less. If there are joint owners, death of the owner
refers to the first to die of the joint owners. If the contract is owned by an
entity, the annuitant must be age 79 or less, and death of the contract owner
refers to the death of the annuitant.
If you elect this benefit, you must allocate your contract value to one or more
of the following asset allocation portfolios of the Prudential Series Fund: SP
Balanced Asset Allocation Portfolio, SP Conservative Asset Allocation Portfolio,
and SP Growth Asset Allocation Portfolio. We reserve the right to require you to
allocate your contract value to different portfolios than those mentioned
immediately above, as a condition of acquiring and/or maintaining this benefit,
as more fully described in your contract.
The HDV death benefit depends on whether death occurs before or after the Death
Benefit Target Date.
IF THE CONTRACT OWNER DIES BEFORE THE DEATH BENEFIT TARGET DATE, THE DEATH
BENEFIT EQUALS THE GREATER OF:
- the base death benefit described in Section 4 of the prospectus; and
- the HDV as of the contract owner's date of death.
IF THE CONTRACT OWNER DIES ON OR AFTER THE DEATH BENEFIT TARGET DATE, THE
DEATH BENEFIT EQUALS THE GREATER OF:
- the base death benefit described in Section 4 of the prospectus; and
- the HDV on the Death Benefit Target Date plus the sum of all purchase
payments less the sum of all proportional withdrawals since the Death
Benefit Target Date.
The amount determined by this calculation is increased by any purchase payments
received after the contract owner's date of death and decreased by any
proportional withdrawals since such date.
KEY TERMS USED WITH THE HIGHEST DAILY VALUE DEATH BENEFIT:
Death Benefit Target Date -- is the later of the contract anniversary on or
after the 80th birthday of the current contract owner, the older of either joint
owner or the annuitant, if entity owned, or five years after the contract date.
Highest Daily Value -- equals the highest of all previous "Daily Values" less
proportional withdrawals since such date and plus any purchase payments since
such date.
Daily Value -- is the contract value as of the end of each business day. The
Daily Value on the contract date is equal to your purchase payment.
Proportional Withdrawals -- are determined by calculating the percentage of your
contract value that each prior withdrawal represented when withdrawn.
Proportional withdrawals result in a reduction to the Highest Daily Value by
reducing such value in the same proportion as the contract value was reduced by
the withdrawal as of the date the withdrawal occurred. For example, if your
Highest Daily Value is $125,000 and you subsequently withdraw $10,000 at a time
when your contract value is equal to $100,000 (a 10% reduction), when
calculating the optional death benefit we will reduce your Highest Daily Value
($125,000) by 10% or $12,500.
CALCULATION OF HIGHEST DAILY VALUE DEATH BENEFIT
EXAMPLES OF HIGHEST DAILY VALUE DEATH BENEFIT CALCULATION
The following are examples of how the HDV death benefit is calculated. Each
example assumes an initial purchase payment of $50,000. Each example assumes
that there is one contract owner who is age 70 on the contract date.
EXAMPLE WITH MARKET INCREASE AND DEATH BEFORE DEATH BENEFIT TARGET DATE
Assume that the contact owner's contract value has generally been increasing due
to positive market performance and that no withdrawals have been made. On the
date we receive due proof of death, the contract value is $75,000; however, the
Highest Daily Value was $90,000. Assume as well that the contract owner has died
before the Death Benefit Target Date. The death benefit is equal to the greater
of HDV or the base death benefit. The
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death benefit would be the Highest Daily Value ($90,000) because it is greater
than the amount that would have been payable under the base death benefit
($75,000).
EXAMPLE WITH WITHDRAWALS
Assume that the contract value has been increasing due to positive market
performance and the contract owner made a withdrawal of $15,000 in contract year
7 when the contract value was $75,000. On the date we receive due proof of
death, the contract value is $80,000; however, the Highest Daily Value ($90,000)
was attained during the fifth contract year. Assume as well that the contract
owner has died before the Death Benefit Target Date. The Death Benefit is equal
to the greater of the Highest Daily Value (proportionally reduced by the
subsequent withdrawal) or the base death benefit.
Highest Daily Value = $90,000 - [$90,000 * $15,000/$75,000]
= $90,000 - $18,000
= $72,000
Base Death Benefit = max [$80,000, $50,000 - ($50,000 * $15,000/$75,000)]
= max [$80,000, $40,000]
= $80,000
The death benefit therefore is $80,000.
EXAMPLE WITH DEATH AFTER DEATH BENEFIT TARGET DATE
Assume that the contract owner's contract value has generally been increasing
due to positive market performance and that no withdrawals had been made prior
to the Death Benefit Target Date. Further assume that the contract owner dies
after the Death Benefit Target Date, when the contract value is $75,000. The
Highest Daily Value on the Death Benefit Target Date was $80,000; however,
following the Death Benefit Target Date, the contract owner made a purchase
payment of $15,000 and later had taken a withdrawal of $5,000 when the contract
value was $70,000. The death benefit is equal to the greater of the Highest
Daily Value on the Death Benefit Target Date plus purchase payments minus
proportional withdrawals after the Death Benefit Target Date or the base death
benefit.
Highest Daily Value = $80,000 + $15,000 - [($80,000 + $15,000) * $5,000/$70,000]
= $80,000 + $15,000 - $6,786
= $88,214
Base Death Benefit = max [$75,000, ($50,000 + $15,000) - I($50,000 + $15,000) *
$5,000/$70,000J]
= max [$75,000, $60,357]
= $75,000
The death benefit therefore is $88,214.
FUND-RELATED DISCLOSURE
We are adding 31 variable investment options to each version of Strategic
Partners FlexElite discussed in this supplement. Among all the underlying funds
within the annuity, the fund with the highest total operating expenses as of
December 31, 2003 is the Prudential Series Fund -- SP Technology Portfolio, with
total annual expenses of 2.56%.
Here is a fee table that sets out the fees of the new underlying funds that will
be available.
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1 As noted above, shares of the Portfolios generally are purchased through
variable insurance products. Some of the Portfolios and/or their investment
advisers and/or distributors have entered into arrangements with us as the
issuer of the contract under which they compensate us for providing ongoing
services in lieu of the Trust providing such services. Amounts paid under
these arrangements are included under "Other Expenses."
2 The Portfolios' total actual annual operating expenses for the year ended
December 31, 2003 were less than the amount shown in the table due to fee
waivers, reimbursement of expenses and expense offset arrangements. These
waivers, reimbursements, and offset arrangements are voluntary and may be
terminated by American Skandia Investment Services, Inc. and Prudential
Investments LLC at any time. After accounting for the waivers, reimbursements
and offset arrangements, the Portfolios' actual annual operating expenses
were:
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Effective May 1, 2004, the Investment Managers have voluntarily agreed to
waive a portion of their fee equal to .05% of the average daily net assets of
the AST Hotchkis & Wiley Large-Cap Value Portfolio. If such waiver had been
in place at year-end, the Portfolio's actual annual operating expenses would
have been 0.93%.
3 Effective February 23, 2004, J.P. Morgan Investment Management, Inc. became
Subadviser of the Portfolio. Prior to February 23, 2004, Strong Capital
Management, Inc. served as Subadviser of the Portfolio, then named "AST
Strong International Equity."
4 Effective November 22, 2004, JP Morgan Investment Management, Inc., Lee
Munder Investments, Ltd., and Integrity Asset Management, became subadvisers
of the Portfolio. Prior to November 22, 2004, GAMCO Investors, Inc. served as
subadviser of the Portfolio, then named "AST Gabelli Small-Cap Value".
5 Effective May 1, 2004, Hotchkis and Wiley Capital Management LLC became
Subadviser of the Portfolio. Prior to May 1, 2004, INVESCO Funds Group, Inc.
served as Subadviser of the Portfolio, then named "AST INVESCO Capital
Income."
6 The DeAM Global Asset Allocation Portfolio invests primarily in shares of
other AST Portfolios (the "Underlying Portfolios"). (a) The only management
fee directly paid by the Portfolio is a 0.10% fee paid to American Skandia
Investment Services, Inc. and Prudential Investments LLC. The management fee
shown in the chart for the Portfolio is (i) that 0.10% management fee paid by
the Portfolio plus (ii) an estimate of the management fees paid by the
Underlying Portfolios, which are borne indirectly by investors in the
Portfolio. The estimate was calculated based on the percentage of the
Portfolio invested in each Underlying Portfolio as of December 31, 2003 using
the management fee rates shown in the chart above. (b) The expense
information shown in the chart for the Portfolio reflects (i) the expenses of
the Portfolio itself plus (ii) an estimate of the expenses paid by the
Underlying Portfolios, which are borne indirectly by investors in the
Portfolio. The estimate was calculated based on the percentage of the
Portfolio invested in each Underlying Portfolio as of December 31, 2003 using
the expense rates for the Underlying Portfolios shown in the above chart.
7 Effective May 1, 2004, Goldman Sachs Asset Management, L.P. became Subadviser
of the Portfolio. Prior to May 1, 2004, Federated Investment Counseling
served as Subadviser of the Portfolio, then named "AST Federated High Yield."
IN SECTION 2 OF THE PROSPECTUS, THE FOLLOWING PARAGRAPH IS ADDED AFTER THE THIRD
PARAGRAPH UNDER THE SECTION ENTITLED "VARIABLE INVESTMENT OPTIONS"
"The Portfolios of the American Skandia Trust are co-managed by PI and
American Skandia Investment Services, Incorporated, also under a
manager-of-managers approach. American Skandia Investment Services,
Incorporated is an indirect, wholly-owned subsidiary of Prudential
Financial, Inc."
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IN SECTION 2 OF THE PROSPECTUS, WE ADD THE FOLLOWING BRIEF DESCRIPTIONS OF THE
NEW VARIABLE INVESTMENT OPTIONS:
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17
18
19
20
21
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APPENDIX B OF THE PROSPECTUS IS REVISED IN ITS ENTIRETY TO SUBSTITUTE THE
FOLLOWING ILLUSTRATIONS.
APPENDIX B:
HYPOTHETICAL ILLUSTRATIONS
The illustrations set out in the following tables depict hypothetical values
based on the following salient assumptions:
We assume that (i) the contract was issued to a male who was 60 years old
on the contract date, (ii) he made a single purchase payment of $100,000 on the
contract date, and (iii) he took no withdrawals during the time period
illustrated.
To calculate the contract values illustrated on the following pages, we
start with certain hypothetical rates of return (i.e., gross rates of return
equal to 0%, 6%, and 10% annually). The hypothetical rates of return are first
reduced by the arithmetic average of the fees of all the mutual fund portfolios
available under this annuity. To compute that arithmetic average, we added the
investment management fees, other expenses, and any 12b-1 fees of each
portfolio, and then divided that sum by the total number of portfolios. In other
words, we assumed hypothetically that contract values are allocated equally
among the variable investment options. If you allocated contract value unequally
among the variable investment options, that would affect the amount of portfolio
fees that you bear indirectly, and thereby would influence the values under the
annuity contract. Based on the fees of the underlying portfolios as of December
31, 2003 (not giving effect to the expense reimbursements or fee waivers that
are described in the prospectus fee table, and for certain portfolios reflecting
expense adjustments), the arithmetic average fees for all the portfolios
available under this annuity was 1.14%. If we did take expense reimbursements
and fee waivers into account here, that would have lowered the arithmetic
average, and thereby increased the illustrated values. The hypothetical gross
rates of return are next reduced by the insurance and administrative charges
that are deducted on a daily basis. Finally, the contract value is reduced by
the annual contract maintenance charge.
The hypothetical gross rates of return of 0%, 6%, and 10% annually, when
reduced by the arithmetic average portfolio fees and the insurance and
administrative charge, correspond to net annual rates of return of -2.73%,
3.10%, and 6.99% annually. These net rates of return do not reflect the contract
maintenance charge or the charges for optional benefits. If those charges were
reflected in the above-referenced net returns, then the net returns would be
lower.
The values that you actually realize under a contract will be different
from what is depicted here if any of the assumptions we make here differ from
your circumstances. We will provide you with a personalized illustration upon
request.
Please see your prospectus for the meaning of the terms used here and for a
description of how the various illustrated features operate.
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STRATEGIC PARTNERS FLEXELITE
$100,000 Single contribution and no withdrawals
Male, issue age 60
Values are in dollars
Benefits:
Base Death Benefit
No Credit Election
10% Assumed Rate of Return
6% Assumed Rate of Return
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0% Assumed Rate of Return
EXPLANATION OF HEADINGS
PURCHASE PAYMENTS -- The amount of money you pay us to purchase the contract.
CONTRACT VALUE -- The projected total value of the contract at the end of the
period indicated, after all fees other than withdrawal charges have been
deducted.
SURRENDER VALUE -- The projected cash value of the contract at the end of the
period indicated. This includes the effect of withdrawal charges.
BASE DEATH BENEFIT VALUE -- The greater of the contract value as of the date we
receive due proof of death, or the total invested purchase payments,
proportionally reduced by withdrawals. See prospectus for more complete
information.
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