0001038509srt:AffiliatedEntityMembercik1038509:PrudentialRetirementInsuranceAnnuityCoMember2022-01-012022-06-30

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~March 31,~~June 30, 2022


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Transition Period from to

Commission File Number 333-18053

____________________________________________________________

Pruco Life Insurance Company of New Jersey

(Exact Name of Registrant as Specified in its Charter)


New Jersey						22-2426091
(State or Other Jurisdiction of Incorporation or Organization)						(I.R.S. Employer Identification Number)

213 Washington Street

Newark, NJ 07102

(973) 802-6000

(Address and Telephone Number of Registrant’s Principal Executive Offices)

SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:


Title of Each Class	Trading Symbol(s)	Name of Each Exchange on Which Registered
Not Applicable	Not Applicable	Not Applicable

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 ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of the Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer", "accelerated filer", "smaller reporting company” and "emerging growth company" in Rule 12b-2 of the Exchange Act.


Large Accelerated Filer	☐	Accelerated Filer	☐
Non-accelerated Filer	☒	Smaller Reporting Company	☐
		Emerging Growth Company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of ~~May 13,~~August 11, 2022, 400,000 shares of the registrant’s Common Stock (par value $5) were outstanding. As of such date, Pruco Life Insurance Company, an Arizona corporation, owned all of the registrant’s Common Stock.

Pruco Life Insurance Company of New Jersey meets the conditions set

forth in General Instruction (H) (1) (a) and (b) on Form 10-Q and

is therefore filing this Form 10-Q in the reduced disclosure format.

Table of Contents

TABLE OF CONTENTS


		Page Number
PART I—FINANCIAL INFORMATION

Item 1.	Financial Statements:

	Unaudited Interim Statements of Financial Position as of ~~March 31,~~June 30, 2022 and December 31, 2021	4

	Unaudited Interim Statements of Operations and Comprehensive Income (Loss) for the three and six months ended ~~March 31,~~June 30, 2022 and 2021	5

	Unaudited Interim Statements of Equity for the three and six months ended ~~March 31,~~June 30, 2022 and 2021	6

	Unaudited Interim Statements of Cash Flows for the ~~three~~six months ended ~~March 31,~~June 30, 2022 and 2021	7

	Notes to Unaudited Interim Financial Statements	8

	1. Business and Basis of Presentation	8

	2. Significant Accounting Policies and Pronouncements	9

	3. Investments	12

	4. Derivatives and Hedging	2021

	5. Fair Value of Assets and Liabilities	2526

	6. Reinsurance	3437

	7. Income Taxes	3841

	8. Equity	3841

	9. Related Party Transactions	4043

	10. Commitments and Contingent Liabilities	4246



Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	4548

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	5356

Item 4.	Controls and Procedures	5356

PART II—OTHER INFORMATION		5457

Item 1.	Legal Proceedings	5457

Item 1A.	Risk Factors	5457

Item 6.	Exhibits	5558

SIGNATURES		5659

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FORWARD-LOOKING STATEMENTS

Certain of the statements included in this Quarterly Report on Form 10-Q, constitute forward-looking statements within the meaning of the U.S. Private Securities Litigation Reform Act of 1995. Words such as “expects,” “believes,” “anticipates,” “includes,” “plans,” “assumes,” “estimates,” “projects,” “intends,” “should,” “will,” “shall” or variations of such words are generally part of forward-looking statements. Forward-looking statements are made based on management’s current expectations and beliefs concerning future developments and their potential effects upon Pruco Life Insurance Company of New Jersey and its subsidiary. There can be no assurance that future developments affecting Pruco Life Insurance Company of New Jersey and its subsidiary will be those anticipated by management. These forward-looking statements are not a guarantee of future performance and involve risks and uncertainties, and there are certain important factors that could cause actual results to differ, possibly materially, from expectations or estimates reflected in such forward-looking statements, including, among others: (1) the ongoing impact of the COVID-19 pandemic on the global economy, financial markets and our business, (2) losses on investments or financial contracts due to deterioration in credit quality or value, or counterparty default; (3) losses on insurance products due to mortality experience or policyholder behavior experience that differs significantly from our expectations when we price our products; (4) changes in interest rates and equity prices that may (a) adversely impact the profitability of our products, the value of separate accounts supporting these products or the value of assets we manage, (b) result in losses on derivatives we use to hedge risk or increase collateral posting requirements and (c) limit opportunities to invest at appropriate returns; (5) guarantees within certain of our products which are market sensitive and may decrease our earnings or increase the volatility of our results of operations or financial position; (6) liquidity needs resulting from (a) derivative collateral market exposure, (b) asset/liability mismatches, (c) the lack of available funding in the financial markets or (d) unexpected cash demands due to severe mortality calamity or lapse events; (7) financial or customer losses, or regulatory and legal actions, due to inadequate or failed processes or systems, external events and human error or misconduct such as (a) disruption of our systems and data, (b) an information security breach, (c) a failure to protect the privacy of sensitive data (d) reliance on third parties or (e) labor and employment matters; (8) changes in the regulatory landscape, including related to (a) financial sector regulatory reform, (b) changes in tax laws, (c) fiduciary rules and other standards of care, (d) state insurance laws and developments regarding group-wide supervision, capital and reserves, and (e) privacy and cybersecurity regulation; (9) technological changes which may adversely impact companies in our investment portfolio or cause insurance experience to deviate from our assumptions; (10) ratings downgrades; (11) market conditions that may adversely affect the sales or persistency of our products; (12) competition; and (13) reputational damage. Pruco Life Insurance Company of New Jersey does not intend, and is under no obligation, to update any particular forward-looking statement included in this document. See “Risk Factors” included in the Annual Report on Form 10-K for the year ended December 31, 2021 for discussion of certain risks relating to our business and investment in our securities.

Table of Contents

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements

PRUCO LIFE INSURANCE COMPANY OF NEW JERSEY

Unaudited Interim Statements of Financial Position

~~March 31,~~June 30, 2022 and December 31, 2021 (in thousands, except share amounts)


		March 31, 2022		December 31, 2021			June 30, 2022		December 31, 2021
ASSETS	ASSETS					ASSETS
Fixed maturities available for sale, at fair value (allowance for credit losses: 2022-$1,558; 2021-$1,558) (amortized cost: 2022-$1,793,799; 2021-$1,762,211)		$	1,783,855	$	1,935,598
Fixed maturities, trading, at fair value (amortized cost: 2022-$36,397; 2021-$36,863)		34,198		36,456
Equity securities, at fair value (cost: 2022-$4,651; 2021-$4,660)		5,400		5,937
Fixed maturities available for sale, at fair value (allowance for credit losses: 2022-$891; 2021-$1,558) (amortized cost: 2022-$1,902,341; 2021-$1,762,211)						Fixed maturities available for sale, at fair value (allowance for credit losses: 2022-$891; 2021-$1,558) (amortized cost: 2022-$1,902,341; 2021-$1,762,211)	$	1,707,904	$	1,935,598
Fixed maturities, trading, at fair value (amortized cost: 2022-$35,932; 2021-$36,863)						Fixed maturities, trading, at fair value (amortized cost: 2022-$35,932; 2021-$36,863)	30,804		36,456
Equity securities, at fair value (cost: 2022-$4,640; 2021-$4,660)						Equity securities, at fair value (cost: 2022-$4,640; 2021-$4,660)	4,949		5,937

Policy loans	Policy loans	211,894		210,730		Policy loans	212,158		210,730
Short-term investments	Short-term investments	9,999		9,997		Short-term investments	0		9,997
Commercial mortgage and other loans (net of $231 and $246 allowance for credit losses at March 31, 2022 and December 31, 2021, respectively)		111,787		115,576
Other invested assets (includes $4,348 and $10,027 of assets measured at fair value at March 31, 2022 and December 31, 2021, respectively)		120,069		124,327
Commercial mortgage and other loans (net of $290 and $246 allowance for credit losses at June 30, 2022 and December 31, 2021, respectively)						Commercial mortgage and other loans (net of $290 and $246 allowance for credit losses at June 30, 2022 and December 31, 2021, respectively)	109,708		115,576
Other invested assets (includes $5,192 and $10,027 of assets measured at fair value at June 30, 2022 and December 31, 2021, respectively)						Other invested assets (includes $5,192 and $10,027 of assets measured at fair value at June 30, 2022 and December 31, 2021, respectively)	125,072		124,327
Total investments	Total investments	2,277,202		2,438,621		Total investments	2,190,595		2,438,621
Cash and cash equivalents	Cash and cash equivalents	219,358		136,316		Cash and cash equivalents	138,776		136,316
Deferred policy acquisition costs	Deferred policy acquisition costs	317,785		290,299		Deferred policy acquisition costs	335,125		290,299
Accrued investment income	Accrued investment income	23,475		22,539		Accrued investment income	24,147		22,539
Reinsurance recoverables	Reinsurance recoverables	3,399,644		3,601,212		Reinsurance recoverables	3,321,877		3,601,212
Receivables from parent and affiliates	Receivables from parent and affiliates	19,340		21,438		Receivables from parent and affiliates	9,708		21,438

Income taxes receivable		15,652		5,842
Income tax assets						Income tax assets	54,325		5,842
Other assets	Other assets	17,048		17,581		Other assets	17,395		17,581
Separate account assets	Separate account assets	16,584,145		17,922,367		Separate account assets	14,337,705		17,922,367
TOTAL ASSETS	TOTAL ASSETS	$	22,873,649	$	24,456,215	TOTAL ASSETS	$	20,429,653	$	24,456,215
LIABILITIES AND EQUITY	LIABILITIES AND EQUITY					LIABILITIES AND EQUITY
LIABILITIES	LIABILITIES					LIABILITIES
Policyholders’ account balances	Policyholders’ account balances	$	2,671,683	$	2,608,640	Policyholders’ account balances	$	2,713,753	$	2,608,640
Future policy benefits	Future policy benefits	2,479,227		2,757,941		Future policy benefits	2,380,231		2,757,941

Payables to parent and affiliates	Payables to parent and affiliates	9		2,432		Payables to parent and affiliates	9		2,432
Other liabilities	Other liabilities	175,790		194,123		Other liabilities	135,414		194,123
Separate account liabilities	Separate account liabilities	16,584,145		17,922,367		Separate account liabilities	14,337,705		17,922,367
Total liabilities	Total liabilities	21,910,854		23,485,503		Total liabilities	19,567,112		23,485,503
COMMITMENTS AND CONTINGENT LIABILITIES (See Note 10)	COMMITMENTS AND CONTINGENT LIABILITIES (See Note 10)					COMMITMENTS AND CONTINGENT LIABILITIES (See Note 10)
EQUITY	EQUITY					EQUITY
Common stock ($5 par value; 400,000 shares authorized, issued and outstanding)	Common stock ($5 par value; 400,000 shares authorized, issued and outstanding)	2,000		2,000		Common stock ($5 par value; 400,000 shares authorized, issued and outstanding)	2,000		2,000
Additional paid-in capital	Additional paid-in capital	551,802		450,102		Additional paid-in capital	551,802		450,102
Retained earnings	Retained earnings	409,819		387,957		Retained earnings	436,322		387,957
Accumulated other comprehensive income (loss)	Accumulated other comprehensive income (loss)	(826)		130,653		Accumulated other comprehensive income (loss)	(127,583)		130,653
Total equity	Total equity	962,795		970,712		Total equity	862,541		970,712
TOTAL LIABILITIES AND EQUITY	TOTAL LIABILITIES AND EQUITY	$	22,873,649	$	24,456,215	TOTAL LIABILITIES AND EQUITY	$	20,429,653	$	24,456,215

See Notes to Unaudited Interim Financial Statements

Table of Contents

PRUCO LIFE INSURANCE COMPANY OF NEW JERSEY

Unaudited Interim Statements of Operations and Comprehensive Income (Loss)

Three and Six Months Ended ~~March 31,~~June 30, 2022 and 2021 (in thousands)

Three Months Ended
March 31,
2022 2021
REVENUES
Premiums $ 10,195 $ 7,559
Policy charges and fee income 15,721 28,318
Net investment income 24,369 23,545
Asset administration fees 2,260 2,026
Other income (loss) (1,514) (264)
Realized investment gains (losses), net 16,028 15,832
TOTAL REVENUES 67,059 77,016
BENEFITS AND EXPENSES
Policyholders’ benefits 13,574 18,835
Interest credited to policyholders’ account balances 11,194 10,711
Amortization of deferred policy acquisition costs 6,192 7,123
General, administrative and other expenses 12,381 14,084
TOTAL BENEFITS AND EXPENSES 43,341 50,753
INCOME (LOSS) FROM OPERATIONS BEFORE INCOME TAXES 23,718 26,263
Income tax expense (benefit) 1,856 2,125
NET INCOME (LOSS) $ 21,862 $ 24,138
Other comprehensive income (loss), before tax:
Foreign currency translation adjustments (67) (108)
Net unrealized investment gains (losses) (166,361) (113,561)
Total (166,428) (113,669)
Less: Income tax expense (benefit) related to other comprehensive income (loss) (34,949) (23,871)
Other comprehensive income (loss), net of taxes (131,479) (89,798)
Comprehensive income (loss) $ (109,617) $ (65,660)


	Three Months Ended June 30,				Six Months Ended June 30,
	2022		2021		2022		2021
REVENUES
Premiums	$	8,635	$	7,086	$	18,830	$	14,645
Policy charges and fee income	32,194		22,924		47,915		51,242
Net investment income	24,864		24,898		49,233		48,443
Asset administration fees	2,110		2,140		4,370		4,166
Other income (loss)	(2,628)		686		(4,142)		422
Realized investment gains (losses), net	5,610		(16,444)		21,638		(612)
TOTAL REVENUES	70,785		41,290		137,844		118,306
BENEFITS AND EXPENSES
Policyholders’ benefits	12,487		11,289		26,061		30,124
Interest credited to policyholders’ account balances	11,941		9,298		23,135		20,009
Amortization of deferred policy acquisition costs	13,915		4,151		20,107		11,274
General, administrative and other expenses	10,285		10,524		22,666		24,608
TOTAL BENEFITS AND EXPENSES	48,628		35,262		91,969		86,015
INCOME (LOSS) FROM OPERATIONS BEFORE INCOME TAXES	22,157		6,028		45,875		32,291
Income tax expense (benefit)	(4,346)		164		(2,490)		2,289
NET INCOME (LOSS)	$	26,503	$	5,864	$	48,365	$	30,002
Other comprehensive income (loss), before tax:
Foreign currency translation adjustments	(350)		28		(417)		(80)
Net unrealized investment gains (losses)	(160,103)		62,037		(326,464)		(51,524)
Total	(160,453)		62,065		(326,881)		(51,604)
Less: Income tax expense (benefit) related to other comprehensive income (loss)	(33,696)		13,035		(68,645)		(10,836)
Other comprehensive income (loss), net of taxes	(126,757)		49,030		(258,236)		(40,768)
Comprehensive income (loss)	$	(100,254)	$	54,894	$	(209,871)	$	(10,766)

See Notes to Unaudited Interim Financial Statements

Table of Contents

PRUCO LIFE INSURANCE COMPANY OF NEW JERSEY

Unaudited Interim Statements of Equity

Three and Six Months Ended ~~March 31,~~June 30, 2022 and 2021 (in thousands)


		Common Stock		Additional Paid-in Capital		Retained Earnings		Accumulated Other Comprehensive Income (Loss)		Total Equity			Common Stock		Additional Paid-in Capital		Retained Earnings		Accumulated Other Comprehensive Income (Loss)		Total Equity
Balance, December 31, 2021	Balance, December 31, 2021	$	2,000	$	450,102	$	387,957	$	130,653	$	970,712	Balance, December 31, 2021	$	2,000	$	450,102	$	387,957	$	130,653	$	970,712

Contributed capital	Contributed capital			101,700						101,700		Contributed capital			101,700						101,700

Comprehensive income (loss):	Comprehensive income (loss):											Comprehensive income (loss):
Net income (loss)	Net income (loss)					21,862				21,862		Net income (loss)					21,862				21,862
Other comprehensive income (loss), net of tax	Other comprehensive income (loss), net of tax							(131,479)		(131,479)		Other comprehensive income (loss), net of tax							(131,479)		(131,479)
Total comprehensive income (loss)	Total comprehensive income (loss)									(109,617)		Total comprehensive income (loss)									(109,617)
Balance, March 31, 2022	Balance, March 31, 2022	$	2,000	$	551,802	$	409,819	$	(826)	$	962,795	Balance, March 31, 2022	$	2,000	$	551,802	$	409,819	$	(826)	$	962,795

Contributed capital												Contributed capital			0						0

Comprehensive income (loss):												Comprehensive income (loss):
Net income (loss)												Net income (loss)					26,503				26,503
Other comprehensive income (loss), net of tax												Other comprehensive income (loss), net of tax							(126,757)		(126,757)
Total comprehensive income (loss)												Total comprehensive income (loss)									(100,254)
Balance, June 30, 2022												Balance, June 30, 2022	$	2,000	$	551,802	$	436,322	$	(127,583)	$	862,541

Common Stock Additional Paid-in Capital Retained Earnings Accumulated Other Comprehensive Income (Loss) Total Equity
Balance, December 31, 2020 $ 2,000 $ 348,735 $ 328,450 $ 185,407 $ 864,592
Contributed capital 1,300 1,300
Comprehensive income (loss):
Net income (loss) 24,138 24,138
Other comprehensive income (loss), net of tax (89,798) (89,798)
Total comprehensive income (loss) (65,660)
Balance, March 31, 2021 $ 2,000 $ 350,035 $ 352,588 $ 95,609 $ 800,232


	Common Stock		Additional Paid-in Capital		Retained Earnings		Accumulated Other Comprehensive Income (Loss)		Total Equity
Balance, December 31, 2020	$	2,000	$	348,735	$	328,450	$	185,407	$	864,592

Contributed capital			1,300						1,300


Comprehensive income (loss):
Net income (loss)					24,138				24,138
Other comprehensive income (loss), net of tax							(89,798)		(89,798)
Total comprehensive income (loss)									(65,660)
Balance, March 31, 2021	$	2,000	$	350,035	$	352,588	$	95,609	$	800,232

Contributed capital			0						0


Comprehensive income (loss):
Net income (loss)					5,864				5,864
Other comprehensive income (loss), net of tax							49,030		49,030
Total comprehensive income (loss)									54,894
Balance, June 30, 2021	$	2,000	$	350,035	$	358,452	$	144,639	$	855,126

See Notes to Unaudited Interim Financial Statements

Table of Contents

PRUCO LIFE INSURANCE COMPANY OF NEW JERSEY

Unaudited Interim Statements of Cash Flows

~~Three~~Six Months Ended ~~March 31,~~June 30, 2022 and 2021 (in thousands)


		2022		2021			2022		2021
CASH FLOWS FROM OPERATING ACTIVITIES:	CASH FLOWS FROM OPERATING ACTIVITIES:					CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)	Net income (loss)	$	21,862	$	24,138	Net income (loss)	$	48,365	$	30,002
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:	Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:					Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Policy charges and fee income	Policy charges and fee income	(4,892)		(10,959)		Policy charges and fee income	(15,153)		(13,104)
Interest credited to policyholders’ account balances	Interest credited to policyholders’ account balances	11,194		10,711		Interest credited to policyholders’ account balances	23,135		20,009
Realized investment (gains) losses, net	Realized investment (gains) losses, net	(16,028)		(15,832)		Realized investment (gains) losses, net	(21,638)		612
Amortization and other non-cash items	Amortization and other non-cash items	(4,105)		(4,785)		Amortization and other non-cash items	(6,248)		(12,069)
Change in:	Change in:					Change in:
Future policy benefits	Future policy benefits	(873)		62,561		Future policy benefits	119,345		131,462
Reinsurance recoverables	Reinsurance recoverables	(37,823)		(43,468)		Reinsurance recoverables	(156,229)		(92,096)
Accrued investment income	Accrued investment income	(936)		(430)		Accrued investment income	(1,608)		(906)
Net payables to/receivables from parent and affiliates	Net payables to/receivables from parent and affiliates	(378)		(5,011)		Net payables to/receivables from parent and affiliates	9,224		(6,924)
Deferred policy acquisition costs	Deferred policy acquisition costs	(11,678)		(18,981)		Deferred policy acquisition costs	(12,860)		(34,248)
Income taxes	Income taxes	25,140		2,114		Income taxes	20,162		4,622

Derivatives, net	Derivatives, net	4,574		5,046		Derivatives, net	4,529		11,314
Other, net	Other, net	3,042		14,388		Other, net	(15,254)		7,978
Cash flows from (used in) operating activities	Cash flows from (used in) operating activities	(10,901)		19,492		Cash flows from (used in) operating activities	(4,230)		46,652
CASH FLOWS FROM INVESTING ACTIVITIES:	CASH FLOWS FROM INVESTING ACTIVITIES:					CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from the sale/maturity/prepayment of:	Proceeds from the sale/maturity/prepayment of:					Proceeds from the sale/maturity/prepayment of:
Fixed maturities, available-for-sale	Fixed maturities, available-for-sale	38,502		14,508		Fixed maturities, available-for-sale	59,073		43,789
Fixed maturities, trading	Fixed maturities, trading	325		0		Fixed maturities, trading	653		0
Equity securities	Equity securities	17		0		Equity securities	17		0
Policy loans	Policy loans	7,490		7,377		Policy loans	14,665		14,368
Ceded policy loans	Ceded policy loans	(537)		(742)		Ceded policy loans	(1,003)		(1,151)

Short-term investments						Short-term investments	9,997		0
Commercial mortgage and other loans	Commercial mortgage and other loans	3,636		483		Commercial mortgage and other loans	8,118		6,857
Other invested assets	Other invested assets	1,276		390		Other invested assets	2,928		4,279

Payments for the purchase/origination of:	Payments for the purchase/origination of:					Payments for the purchase/origination of:
Fixed maturities, available-for-sale	Fixed maturities, available-for-sale	(71,758)		(50,946)		Fixed maturities, available-for-sale	(198,984)		(154,593)

Policy loans	Policy loans	(6,694)		(4,537)		Policy loans	(11,792)		(9,337)
Ceded policy loans	Ceded policy loans	579		334		Ceded policy loans	945		955

Commercial mortgage and other loans						Commercial mortgage and other loans	(3,231)		(822)
Other invested assets	Other invested assets	(3,568)		(4,149)		Other invested assets	(7,353)		(8,766)

Notes receivable from parent and affiliates, net	Notes receivable from parent and affiliates, net	(9)		(8)		Notes receivable from parent and affiliates, net	(18)		(17)
Derivatives, net	Derivatives, net	101		(136)		Derivatives, net	337		147
Other, net	Other, net	4,052		(104)		Other, net	4,053		(282)
Cash flows from (used in) investing activities	Cash flows from (used in) investing activities	(26,588)		(37,530)		Cash flows from (used in) investing activities	(121,595)		(104,573)
CASH FLOWS FROM FINANCING ACTIVITIES:	CASH FLOWS FROM FINANCING ACTIVITIES:					CASH FLOWS FROM FINANCING ACTIVITIES:
Policyholders’ account deposits	Policyholders’ account deposits	134,084		108,982		Policyholders’ account deposits	263,524		225,366
Ceded policyholders’ account deposits	Ceded policyholders’ account deposits	(87,398)		(79,213)		Ceded policyholders’ account deposits	(160,200)		(164,719)
Policyholders’ account withdrawals	Policyholders’ account withdrawals	(103,693)		(72,274)		Policyholders’ account withdrawals	(204,490)		(165,954)
Ceded policyholders’ account withdrawals	Ceded policyholders’ account withdrawals	69,281		57,352		Ceded policyholders’ account withdrawals	122,024		124,823

Contributed capital	Contributed capital	100,400		0		Contributed capital	100,400		0

Drafts outstanding	Drafts outstanding	5,441		(542)		Drafts outstanding	4,138		(1,009)
Other, net	Other, net	2,416		6,411		Other, net	2,889		12,765
Cash flows from (used in) financing activities	Cash flows from (used in) financing activities	120,531		20,716		Cash flows from (used in) financing activities	128,285		31,272
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS	NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS	83,042		2,678		NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS	2,460		(26,649)
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR	CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR	136,316		68,527		CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR	136,316		68,527
CASH AND CASH EQUIVALENTS, END OF PERIOD	CASH AND CASH EQUIVALENTS, END OF PERIOD	$	219,358	$	71,205	CASH AND CASH EQUIVALENTS, END OF PERIOD	$	138,776	$	41,878

Significant Non-Cash Transactions

There were no significant non-cash transactions for the ~~three~~six months ended ~~March 31,~~June 30, 2022 and 2021.

See Notes to Unaudited Interim Financial Statements

7 ��

Table of Contents


PRUCO LIFE INSURANCE COMPANY OF NEW JERSEY
Notes to Unaudited Interim Financial Statements—(Continued)

1. BUSINESS AND BASIS OF PRESENTATION

Pruco Life Insurance Company of New Jersey (the "Company" or "PLNJ") is a wholly-owned subsidiary of Pruco Life Insurance Company (“Pruco Life”), which in turn is a wholly-owned subsidiary of The Prudential Insurance Company of America (“Prudential Insurance”). Prudential Insurance is a direct wholly-owned subsidiary of Prudential Financial, Inc. (“Prudential Financial”). PLNJ is a stock life insurance company organized in 1982 under the laws of the State of New Jersey. It is licensed to sell life insurance and annuities in New Jersey and New York only, and sells such products primarily through affiliated and unaffiliated distributors.

Basis of Presentation

The Unaudited Interim Financial Statements have been prepared in accordance with generally accepted accounting principles in the United States of America (“U.S. GAAP”) on a basis consistent with reporting interim financial information in accordance with instructions to Form 10-Q and Article 10 of Regulation S-X of the Securities and Exchange Commission (“SEC”). Intercompany balances and transactions have been eliminated.

In the opinion of management, all adjustments necessary for a fair statement of the financial position and results of operations have been made. All such adjustments are of a normal, recurring nature. Interim results are not necessarily indicative of the results that may be expected for the full year. These financial statements should be read in conjunction with the Company’s Financial Statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021.

Use of Estimates

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

The most significant estimates include those used in determining deferred policy acquisition costs ("DAC") and related amortization; policyholders' account balances related to the fair value of embedded derivative instruments associated with the index-linked features of certain universal life products; valuation of investments including derivatives, measurement of allowance for credit losses, and the recognition of other-than-temporary impairments; future policy benefits including guarantees; reinsurance recoverables; provision for income taxes and valuation of deferred tax assets; and accruals for contingent liabilities, including estimates for losses in connection with unresolved legal and regulatory matters.

COVID-19

Since the first quarter of 2020, the novel coronavirus (“COVID-19”) has resulted in extreme stress and disruption in the global economy and financial markets. While markets ~~have~~subsequently rebounded, the pandemic has adversely impacted, and may continue to adversely impact, the Company's results of operations, financial condition and cash flows. Due to the highly uncertain nature of these conditions, it is not possible to estimate the ultimate impacts at this time. The risks ~~may~~ have manifested, and may continue to manifest, in the Company's financial statements in the areas of, among others, i) insurance liabilities and related balances: potential changes to assumptions regarding investment returns, mortality and policyholder behavior which are reflected in our insurance liabilities and certain related balances (e.g., DAC, etc.) and; ii) investments: increased risk of loss on our investments due to default or deterioration in credit quality or value. The Company cannot predict what impact the COVID-19 pandemic will ultimately have on its businesses.

Reclassifications

Certain amounts in prior periods have been reclassified to conform to the current period presentation.

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PRUCO LIFE INSURANCE COMPANY OF NEW JERSEY
Notes to Unaudited Interim Financial Statements—(Continued)

Out of Period Adjustment

During the second quarter of 2022, the Company recorded out of period adjustments resulting in an aggregate net charge of $2 million to “Income (loss) from operations before income taxes” for the three months ended June 30, 2022. These adjustments related to reserves for certain universal and variable life products and certain portions of reinsurance activity. Management has evaluated the impact of all out of period adjustments, both individually and in the aggregate, and concluded that they are not material to any current or previously reported quarterly or annual financial statements.

2. SIGNIFICANT ACCOUNTING POLICIES AND PRONOUNCEMENTS

Recent Accounting Pronouncements

Changes to U.S. GAAP are established by the Financial Accounting Standards Board ("FASB") in the form of Accounting Standards Updates ("ASUs") to the FASB Accounting Standards Codification ("ASC"). The Company considers the applicability and impact of all ASUs. ASUs listed below include those that have been adopted during the current fiscal year and/or those that have been issued but not yet adopted as of ~~March 31,~~June 30, 2022, and as of the date of this filing. ASUs not listed below were assessed and determined to be either not applicable or not material.

ASU issued but not yet adopted as of ~~March 31,~~June 30, 2022 — ASU 2018-12

ASU 2018-12, Financial Services - Insurance (Topic 944): Targeted Improvements to the Accounting for Long-Duration Contracts, was issued by the FASB on August 15, 2018, and was amended by ASU 2019-09, Financial Services - Insurance (Topic 944): Effective Date, issued in October 2019, and ASU 2020-11, Financial Services-Insurance (Topic 944): Effective Date and Early Application, issued in November 2020. The Company will adopt ASU 2018-12 effective January 1, 2023 using the modified retrospective transition method where permitted, and apply the guidance as of January 1, 2021 (and record transition adjustments as of January 1, 2021) in the 2023 financial statements.

Outlined below are four key areas of change, although there are other less significant policy changes not noted below.

Table of Contents


PRUCO LIFE INSURANCE COMPANY OF NEW JERSEY
Notes to Unaudited Interim Financial Statements—(Continued)

ASU 2018-12 Amended Topic

Description

Method of adoption

Effect on the financial statements or other significant matters

Cash flow assumptions used to measure the liability for future policy benefits for non-participating traditional and limited-pay insurance products

Requires an entity to review, and if necessary, update the cash flow assumptions used to measure the liability for future policy benefits, for both changes in future assumptions and actual experience, at least annually using a retrospective update method with a cumulative catch-up adjustment recorded in a separate line item in the Statements of Operations.

An entity may choose one of two adoption methods for the liability for future policy benefits: (1) a modified retrospective transition method whereby the entity may choose to apply the amendments to contracts in force as of the beginning of the prior year (if early adoption is elected) or as of the beginning of the earliest period presented on the basis of their existing carrying amounts, adjusted for the removal of any related amounts in Accumulated other comprehensive income (loss) ("AOCI") or (2) a full retrospective transition method.

The Company will adopt this guidance effective January 1, 2023 using the modified retrospective transition method. ~~The impacts~~As a result of ~~electing such~~the modified retrospective transition method, ~~are currently under assessment.~~the Company expects the vast majority of the impact of updating cash flow assumptions as of the transition date to be reflected in the pattern of earnings in subsequent periods.

Discount rate assumption used to measure the liability for future policy benefits for non-participating traditional and limited-pay insurance products

Requires discount rate assumptions to be based on an upper-medium grade fixed income instrument yield, which will be updated each quarter with the impact recorded through OCI. An entity shall maximize the use of relevant observable information and minimize the use of unobservable information in determining the discount rate assumptions.

As noted above, an entity may choose either a modified retrospective transition method or full retrospective transition method for the liability for future policy benefits. Under either method, for balance sheet remeasurement purposes, the liability for future policy benefits will be remeasured using current discount rates as of either the beginning of the prior year (if early adoption is elected) or the beginning of the earliest period presented with the impact recorded as a cumulative effect adjustment to AOCI.

As noted above, the Company will adopt the guidance for the liability for future policy benefits effective January 1, 2023 using the modified retrospective transition method. ~~There will be an adjustment~~The Company expects a decrease to AOCI as a result of remeasuring in force contract liabilities using upper-medium grade fixed income instrument yields as of the adoption date. The adjustment will largely reflect the difference between discount rates locked-in at contract inception versus discount rates ~~at transition.~~as of the adoption date. The magnitude of such adjustment is currently being assessed.

Amortization of DAC and other balances

Requires DAC and other balances, such as unearned revenue reserves and deferred sales inducements, ~~("DSI"),~~ to be amortized on a constant level basis over the expected term of the related contract, independent of expected profitability.

An entity may apply one of two adoption methods: (1) a modified retrospective transition method whereby the entity may choose to apply the amendments to contracts in force as of the beginning of the prior year (if early adoption is elected) or as of the beginning of the earliest period presented on the basis of their existing carrying amounts, adjusted for the removal of any related amounts in AOCI or (2) if an entity chooses a full retrospective transition method for its liability for future policy benefits, as described above, it is required to also use a full retrospective transition method for DAC and other balances.

The Company will adopt this guidance effective January 1, 2023 using the modified retrospective transition method. Under the modified retrospective transition method, the Company ~~would~~does not expect a significant impact to the balance sheet, other than the impact of the removal of any related amounts in AOCI.

Market Risk Benefits ("MRB")

Requires an entity to measure all market risk benefits (e.g., living benefit and death benefit guarantees associated with variable annuities) at fair value, and record MRB assets and liabilities separately on the Statements of Financial Position. Changes in fair value of market risk benefits are recorded in net income, except for the portion of the change in MRB liabilities attributable to changes in an entity’s non-performance risk ("NPR"), which is recognized in OCI.

An entity shall adopt the guidance for market risk benefits using the retrospective transition method which includes a cumulative-effect adjustment on the balance sheet as of either the beginning of prior year (if early adoption is elected) or the beginning of the earliest period presented. An entity shall maximize the use of relevant observable information and minimize the use of unobservable information in determining the balance of the market risk benefits upon adoption.

The Company will adopt this guidance effective January 1, 2023 using the retrospective transition method. Upon adoption, the Company expects a decrease to "Retained earnings" and an offsetting increase to AOCI from reclassifying the cumulative effect of changes in NPR from retained earnings to AOCI. The Company also expects an impact to ~~retained earnings for~~“Retained earnings” related to the difference between the fair value and carrying value of benefits not currently measured at fair value (e.g., guaranteed minimum death benefits on variable annuities) ~~and an impact from reclassifying the cumulative effect of changes in NPR from retained earnings to AOCI.~~. The magnitude of such adjustments is currently being assessed.

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PRUCO LIFE INSURANCE COMPANY OF NEW JERSEY
Notes to Unaudited Interim Financial Statements—(Continued)

Other ASU issued but not yet adopted as of ~~March 31,~~June 30, 2022

Standard

Description

Effective date and method of adoption

Effect on the financial statements or other significant matters

ASU 2022-02,, Financial Instruments – Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosure

This ASU eliminates the accounting guidance for Troubled Debt Restructurings (“TDR”) for creditors and adds enhanced disclosure requirements for certain loan refinancings and restructurings by creditors made to borrowers experiencing financial difficulty. Following adoption of the ASU, all loan refinancings and restructurings are subject to the modification guidance in ASC ~~310-20.This~~310-20. This ASU also amends the guidance on the vintage disclosures to require disclosure of current-period gross write-offs by year of origination.

January 1, 2023 using the prospective method with an option to apply a modified retrospective transition method for the recognition and measurement of TDRs which will include a cumulative effect adjustment on the balance sheet in the period of adoption. Early adoption is permitted beginning January 1, 2022, including adoption in an interim period provided guidance is applied as of the beginning of the year.

The Company does not expect the adoption of the ASU to have a significant impact on the Financial Statements and Notes to the Financial Statements.

Table of Contents


PRUCO LIFE INSURANCE COMPANY OF NEW JERSEY
Notes to Unaudited Interim Financial Statements—(Continued)

3. INVESTMENTS

Fixed Maturity Securities

The following tables set forth the composition of fixed maturity securities (excluding investments classified as trading), as of the dates indicated:


		March 31, 2022											June 30, 2022
		Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Allowance for Credit Losses		Fair Value			Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Allowance for Credit Losses		Fair Value
		(in thousands)											(in thousands)
Fixed maturities, available-for-sale:	Fixed maturities, available-for-sale:											Fixed maturities, available-for-sale:
U.S. Treasury securities and obligations of U.S. government authorities and agencies	U.S. Treasury securities and obligations of U.S. government authorities and agencies	$	12,711	$	346	$	0	$	0	$	13,057	U.S. Treasury securities and obligations of U.S. government authorities and agencies	$	12,650	$	136	$	115	$	0	$	12,671
Obligations of U.S. states and their political subdivisions	Obligations of U.S. states and their political subdivisions	163,305		6,061		27		0		169,339		Obligations of U.S. states and their political subdivisions	165,101		1,155		3,274		0		162,982
Foreign government bonds	Foreign government bonds	87,999		2,862		4,720		0		86,141		Foreign government bonds	87,952		21		14,760		0		73,213

U.S. public corporate securities	U.S. public corporate securities	938,638		33,663		36,060		0		936,241		U.S. public corporate securities	1,037,856		3,647		124,940		0		916,563
U.S. private corporate securities	U.S. private corporate securities	188,198		2,434		1,983		1,558		187,091		U.S. private corporate securities	185,029		210		9,158		891		175,190
Foreign public corporate securities	Foreign public corporate securities	118,619		1,737		7,562		0		112,794		Foreign public corporate securities	132,645		61		22,309		0		110,397
Foreign private corporate securities	Foreign private corporate securities	133,872		589		6,146		0		128,315		Foreign private corporate securities	132,580		0		19,260		0		113,320
Asset-backed securities(1)	Asset-backed securities(1)	17,389		455		45		0		17,799		Asset-backed securities(1)	18,548		307		254		0		18,601
Commercial mortgage-backed securities	Commercial mortgage-backed securities	130,797		1,613		1,853		0		130,557		Commercial mortgage-backed securities	127,874		0		5,183		0		122,691
Residential mortgage-backed securities(2)	Residential mortgage-backed securities(2)	2,271		250		0		0		2,521		Residential mortgage-backed securities(2)	2,106		176		6		0		2,276
Total fixed maturities, available-for-sale	Total fixed maturities, available-for-sale	$	1,793,799	$	50,010	$	58,396	$	1,558	$	1,783,855	Total fixed maturities, available-for-sale	$	1,902,341	$	5,713	$	199,259	$	891	$	1,707,904

(1)Includes credit-tranched securities collateralized by education loans and loan obligations.

(2)Includes publicly-traded agency pass-through securities and collateralized mortgage obligations.


	December 31, 2021
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Allowance for Credit Losses		Fair Value
	(in thousands)
Fixed maturities, available-for-sale:
U.S. Treasury securities and obligations of U.S. government authorities and agencies	$	12,832	$	673	$	0	$	0	$	13,505
Obligations of U.S. states and their political subdivisions	161,812		17,198		0		0		179,010
Foreign government bonds	93,062		8,731		1,002		0		100,791

U.S. public corporate securities	908,129		117,450		2,994		0		1,022,585
U.S. private corporate securities	190,157		13,128		52		1,558		201,675
Foreign public corporate securities	105,346		8,481		644		0		113,183
Foreign private corporate securities	138,753		6,620		2,015		0		143,358
Asset-backed securities(1)	16,685		596		4		0		17,277
Commercial mortgage-backed securities	132,961		8,401		7		0		141,355
Residential mortgage-backed securities(2)	2,474		385		0		0		2,859
Total fixed maturities, available-for-sale	$	1,762,211	$	181,663	$	6,718	$	1,558	$	1,935,598

(1)Includes credit-tranched securities collateralized by education loans and loan obligations.

(2)Includes publicly-traded agency pass-through securities and collateralized mortgage obligations.

Table of Contents


PRUCO LIFE INSURANCE COMPANY OF NEW JERSEY
Notes to Unaudited Interim Financial Statements—(Continued)

The following tables set forth the fair value and gross unrealized losses on available-for-sale fixed maturity securities without an allowance for credit losses aggregated by investment category and length of time that individual fixed maturity securities had been in a continuous unrealized loss position, as of the dates indicated:


		March 31, 2022													June 30, 2022
		Less Than Twelve Months				Twelve Months or More				Total					Less Than Twelve Months				Twelve Months or More				Total
		Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses			Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses
		(in thousands)													(in thousands)
Fixed maturities, available-for-sale:	Fixed maturities, available-for-sale:													Fixed maturities, available-for-sale:
U.S. Treasury securities and obligations of U.S. government authorities and agencies	U.S. Treasury securities and obligations of U.S. government authorities and agencies	$	0	$	0	$	0	$	0	$	0	$	0	U.S. Treasury securities and obligations of U.S. government authorities and agencies	$	2,251	$	115	$	0	$	0	$	2,251	$	115
Obligations of U.S. states and their political subdivisions	Obligations of U.S. states and their political subdivisions	4,941		27		0		0		4,941		27		Obligations of U.S. states and their political subdivisions	106,475		3,274		0		0		106,475		3,274
Foreign government bonds	Foreign government bonds	32,235		2,768		10,618		1,952		42,853		4,720		Foreign government bonds	63,688		10,893		8,909		3,867		72,597		14,760
U.S. public corporate securities	U.S. public corporate securities	356,383		29,898		30,804		6,162		387,187		36,060		U.S. public corporate securities	820,490		114,365		26,354		10,575		846,844		124,940
U.S. private corporate securities	U.S. private corporate securities	71,990		1,927		895		56		72,885		1,983		U.S. private corporate securities	165,893		9,047		786		111		166,679		9,158
Foreign public corporate securities	Foreign public corporate securities	67,209		6,124		8,119		1,438		75,328		7,562		Foreign public corporate securities	102,729		19,625		6,862		2,684		109,591		22,309
Foreign private corporate securities	Foreign private corporate securities	100,581		4,333		11,008		1,813		111,589		6,146		Foreign private corporate securities	98,981		15,749		14,339		3,511		113,320		19,260
Asset-backed securities	Asset-backed securities	6,722		45		0		0		6,722		45		Asset-backed securities	7,730		233		629		21		8,359		254
Commercial mortgage-backed securities	Commercial mortgage-backed securities	84,171		1,853		0		0		84,171		1,853		Commercial mortgage-backed securities	122,690		5,183		0		0		122,690		5,183

Residential mortgage-backed securities														Residential mortgage-backed securities	312		6		0		0		312		6
Total fixed maturities, available-for-sale	Total fixed maturities, available-for-sale	$	724,232	$	46,975	$	61,444	$	11,421	$	785,676	$	58,396	Total fixed maturities, available-for-sale	$	1,491,239	$	178,490	$	57,879	$	20,769	$	1,549,118	$	199,259


	December 31, 2021
	Less Than Twelve Months				Twelve Months or More				Total
	Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses
	(in thousands)
Fixed maturities, available-for-sale:


Foreign government bonds	$	17,306	$	928	$	2,072	$	74	$	19,378	$	1,002
U.S. public corporate securities	72,360		1,255		42,496		1,739		114,856		2,994
U.S. private corporate securities	2,349		27		979		25		3,328		52
Foreign public corporate securities	9,439		192		6,726		452		16,165		644
Foreign private corporate securities	18,912		596		11,402		1,419		30,314		2,015
Asset-backed securities	3,426		4		0		0		3,426		4
Commercial mortgage-backed securities	3,083		7		0		0		3,083		7

Total fixed maturities, available-for-sale	$	126,875	$	3,009	$	63,675	$	3,709	$	190,550	$	6,718

As of ~~March 31,~~June 30, 2022 and December 31, 2021, the gross unrealized losses on fixed maturity available-for-sale securities without an allowance were composed of ~~$55.9~~$192.8 million and $5.3 million, respectively, related to “1” highest quality or “2” high quality securities based on the National Association of Insurance Commissioners (“NAIC”) or equivalent rating and ~~$2.5~~$6.5 million and $1.4 million, respectively, related to other than high or highest quality securities based on NAIC or equivalent rating. As of ~~March 31,~~June 30, 2022, the ~~$11.4~~$20.8 million of gross unrealized losses of twelve months or more were concentrated in the Company’s corporate securities within the consumer non-cyclical, utility and finance sectors. As of December 31, 2021, the $3.7 million of gross unrealized losses of twelve months or more were concentrated in the Company’s corporate securities within the consumer non-cyclical, finance and utility sectors.

Table of Contents


PRUCO LIFE INSURANCE COMPANY OF NEW JERSEY
Notes to Unaudited Interim Financial Statements—(Continued)

In accordance with its policy described in Note 2 to the Financial Statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021, the Company concluded that an adjustment to earnings for credit losses related to these fixed maturity securities was not warranted at ~~March 31,~~June 30, 2022. This conclusion was based on a detailed analysis of the underlying credit and cash flows on each security. Gross unrealized losses are primarily attributable to increases in interest rates, general credit spread widening, foreign currency exchange rate movements and the financial condition or near-term prospects of the issuer. As of ~~March 31,~~June 30, 2022, the Company did not intend to sell these securities, and it was not more likely than not that the Company would be required to sell these securities before the anticipated recovery of the remaining amortized cost basis.

The following table sets forth the amortized cost and fair value of fixed maturities by contractual maturities, as of the date indicated:


		March 31, 2022					June 30, 2022
		Amortized Cost		Fair Value			Amortized Cost		Fair Value
		(in thousands)					(in thousands)
Fixed maturities, available-for-sale:	Fixed maturities, available-for-sale:					Fixed maturities, available-for-sale:
Due in one year or less	Due in one year or less	$	59,619	$	57,221	Due in one year or less	$	58,887	$	55,876
Due after one year through five years	Due after one year through five years	239,089		238,152		Due after one year through five years	234,977		224,094
Due after five years through ten years	Due after five years through ten years	88,704		86,299		Due after five years through ten years	88,446		78,004
Due after ten years	Due after ten years	1,255,930		1,251,306		Due after ten years	1,371,503		1,206,362
Asset-backed securities	Asset-backed securities	17,389		17,799		Asset-backed securities	18,548		18,601
Commercial mortgage-backed securities	Commercial mortgage-backed securities	130,797		130,557		Commercial mortgage-backed securities	127,874		122,691
Residential mortgage-backed securities	Residential mortgage-backed securities	2,271		2,521		Residential mortgage-backed securities	2,106		2,276
Total fixed maturities, available-for-sale	Total fixed maturities, available-for-sale	$	1,793,799	$	1,783,855	Total fixed maturities, available-for-sale	$	1,902,341	$	1,707,904

Actual maturities may differ from contractual maturities because issuers may have the right to call or prepay obligations. Asset-backed, commercial mortgage-backed and residential mortgage-backed securities are shown separately in the table above, as they do not have a single maturity date.

The following table sets forth the sources of fixed maturity proceeds and related investment gains (losses), as well as losses on write-downs and the allowance for credit losses of fixed maturities, for the periods indicated:

Three Months Ended March 31,
2022 2021
(in thousands)
Fixed maturities, available-for-sale:
Proceeds from sales(1) $ 20,241 $ 2,922
Proceeds from maturities/prepayments 18,233 10,086
Gross investment gains from sales and maturities 2 25
Gross investment losses from sales and maturities (1,961) (167)
(Addition to) release of allowance for credit losses 0 0


	Three Months Ended June 30,				Six Months Ended June 30,
	2022		2021		2022		2021
	(in thousands)
Fixed maturities, available-for-sale:
Proceeds from sales(1)	$	8,763	$	9,513	$	29,004	$	12,435
Proceeds from maturities/prepayments	11,887		20,780		30,120		30,866
Gross investment gains from sales and maturities	68		32		70		57
Gross investment losses from sales and maturities	(1,011)		(459)		(2,972)		(626)


(Addition to) release of allowance for credit losses	667		0		667		0

(1)Excludes activity from non-cash related proceeds due to the timing of trade settlements of ~~$0.0~~$(0.1) million and ~~$1.5~~$0.5 million for the ~~three~~six months ended ~~March 31,~~June 30, 2022 and 2021, respectively.

~~For both the three months ended March 31, 2022 and 2021 there was no activity in the allowance for credit losses for available-for-sale securities.~~

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PRUCO LIFE INSURANCE COMPANY OF NEW JERSEY
Notes to Unaudited Interim Financial Statements—(Continued)

The following tables set forth the activity in the allowance for credit losses for fixed maturity securities, as of the dates indicated:


	Three Months Ended June 30, 2022
	U.S. Treasury Securities and Obligations of U.S. States		Foreign Government Bonds		U.S. and Foreign Corporate Securities		Asset-Backed Securities		Commercial Mortgage-Backed Securities		Residential Mortgage-Backed Securities		Total
	(in thousands)
Fixed maturities, available-for-sale:
Balance, beginning of period	$	0	$	0	$	1,558	$	0	$	0	$	0	$	1,558
Addition (reductions) on securities with previous allowance	0		0		(667)		0		0		0		(667)






Balance, end of period	$	0	$	0	$	891	$	0	$	0	$	0	$	891


	Six Months Ended June 30, 2022
	U.S. Treasury Securities and Obligations of U.S. States		Foreign Government Bonds		U.S. and Foreign Corporate Securities		Asset-Backed Securities		Commercial Mortgage-Backed Securities		Residential Mortgage-Backed Securities		Total
	(in thousands)
Fixed maturities, available-for-sale:
Balance, beginning of period	$	0	$	0	$	1,558	$	0	$	0	$	0	$	1,558
Addition (reductions) on securities with previous allowance	0		0		(667)		0		0		0		(667)






Balance, end of period	$	0	$	0	$	891	$	0	$	0	$	0	$	891

For both the three and six months ended June 30, 2022, the net decrease in the allowance for credit losses on available-for-sale securities was primarily related to a net reduction in the transportation sector within corporate securities. For both the three and six months ended June 30, 2021 there was no activity in the allowance for credit losses on available-for-sale securities.

See Note 2 to the Financial Statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021 for additional information about the Company’s methodology for developing our allowance for credit losses.

The Company did not have any fixed maturity securities purchased with credit deterioration, as of both ~~March 31,~~June 30, 2022 and December 31, 2021.

Equity Securities

The net change in unrealized gains (losses) from equity securities still held at period end, recorded within “Other income (loss),” was ~~$(0.5)~~$(0.4) million and $0.1 million during the three months ended June 30, 2022 and 2021, respectively, and $(1.0) million and $(0.2) million during the ~~three~~six months ended ~~March 31,~~June 30, 2022 and 2021, respectively.

Table of Contents


PRUCO LIFE INSURANCE COMPANY OF NEW JERSEY
Notes to Unaudited Interim Financial Statements—(Continued)

Commercial Mortgage and Other Loans

The following table sets forth the composition of “Commercial mortgage and other loans,” as of the dates indicated:

March 31, 2022 December 31, 2021
Amount
(in thousands) % of Total Amount
(in thousands) % of Total
Commercial mortgage and agricultural property loans by property type:
Apartments/Multi-Family $ 42,001 37.5 % $ 42,188 36.4 %
Hospitality 13,544 12.1 13,709 11.8
Industrial 17,293 15.4 17,356 15.0
Office 16,711 14.9 16,880 14.6
Other 7,878 7.0 7,927 6.8
Retail 12,359 11.1 15,511 13.4
Total commercial mortgage loans 109,786 98.0 113,571 98.0
Agricultural property loans 2,232 2.0 2,251 2.0
Total commercial mortgage and agricultural property loans 112,018 100.0 % 115,822 100.0 %
Allowance for credit losses (231) (246)
Total net commercial mortgage and other loans $ 111,787 $ 115,576


	June 30, 2022				December 31, 2021
	Amount (in thousands)		% of Total		Amount (in thousands)		% of Total
Commercial mortgage and agricultural property loans by property type:
Apartments/Multi-Family	$	41,234	37.5	%	$	42,188	36.4	%
Hospitality	13,292		12.1		13,709		11.8
Industrial	17,179		15.6		17,356		15.0
Office	16,068		14.6		16,880		14.6
Other	7,741		7.0		7,927		6.8
Retail	12,281		11.2		15,511		13.4
Total commercial mortgage loans	107,795		98.0		113,571		98.0
Agricultural property loans	2,203		2.0		2,251		2.0
Total commercial mortgage and agricultural property loans	109,998		100.0	%	115,822		100.0	%
Allowance for credit losses	(290)				(246)





Total net commercial mortgage and other loans	$	109,708			$	115,576

As of ~~March 31,~~June 30, 2022, the commercial mortgage and agricultural property loans were secured by properties geographically dispersed throughout the United States (with the largest concentrations in New York (16%), Florida (11%), Texas (10%)) and included loans secured by properties in Europe ~~(8%~~(7%), Mexico (3%), and Australia (2%).

The following ~~table sets~~tables set forth the activity in the allowance for credit losses for commercial mortgage and other loans, as of the dates indicated:
Three Months Ended March 31,
2022 2021
Commercial Mortgage Loans Agricultural Property Loans Total Commercial Mortgage Loans Agricultural Property Loans Total
(in thousands)
Allowance, beginning of period $ 246 $ 0 $ 246 $ 440 $ 0 $ 440
Addition to (release of) allowance for expected losses (16) 1 (15) 26 0 26
Allowance, end of period $ 230 $ 1 $ 231 $ 466 $ 0 $ 466



	Three Months Ended June 30,
	2022				2021
	Commercial Mortgage Loans		Agricultural Property Loans		Total		Commercial Mortgage Loans		Agricultural Property Loans		Total
	(in thousands)







Allowance, beginning of period	$	230	$	1	$	231	$	466	$	0	$	466
Addition to (release of) allowance for expected losses	59		0		59		(116)		0		(116)
Allowance, end of period	$	289	$	1	$	290	$	350	$	0	$	350



	Six Months Ended June 30,
	2022				2021
	Commercial Mortgage Loans		Agricultural Property Loans		Total		Commercial Mortgage Loans		Agricultural Property Loans		Total
	(in thousands)







Allowance, beginning of period	$	246	$	0	$	246	$	440	$	0	$	440

Addition to (release of) allowance for expected losses	43		1		44		(90)		0		(90)
Allowance, end of period	$	289	$	1	$	290	$	350	$	0	$	350

1516

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PRUCO LIFE INSURANCE COMPANY OF NEW JERSEY
Notes to Unaudited Interim Financial Statements—(Continued)

See Note 2 to the Financial Statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021 for additional information about the Company's methodology for developing our allowance and expected losses.

For the three months ended ~~March 31,~~June 30, 2022, the net increase in the allowance for credit losses on commercial mortgage and other loans was primarily related to an increase in the general allowance due to current market conditions. For the three months ended June 30, 2021, the net decrease in the allowance for credit losses on commercial mortgage and other loans was primarily related to ~~net positive~~the improving credit ~~migration.~~ environment.

For the ~~three~~six months ended ~~March 31, 2021,~~June 30, 2022, the net increase in the allowance for credit losses on commercial mortgage and other loans was primarily related to an increase in the general allowance due to current market conditions, partially offset by net ~~negative~~positive migration. For the six months ended June 30, 2021, the net decrease in the allowance for credit ~~migration.~~

losses on commercial mortgage and other loans was primarily related to the improving credit environment.

The following table sets forth key credit quality indicators based upon the recorded investment gross of allowance for credit losses, as of the dates indicated:


		March 31, 2022														June 30, 2022
		Amortized Cost by Origination Year														Amortized Cost by Origination Year
		2022		2021		2020		2019		2018		Prior		Total				2022		2021		2020		2019		2018		Prior		Total
		(in thousands)														(in thousands)
Commercial Mortgage Loans	Commercial Mortgage Loans																Commercial Mortgage Loans
Loan-to-Value Ratio:	Loan-to-Value Ratio:																Loan-to-Value Ratio:
0%-59.99%	0%-59.99%	$	0	$	358	$	0	$	7,250	$	1,422	$	59,131	$	68,161		0%-59.99%	$	0	$	356	$	0	$	7,075	$	1,411	$	54,619	$	63,461
60%-69.99%	60%-69.99%	0		2,063		2,198		24,183		0		6,171		34,615			60%-69.99%	0		2,060		2,198		23,715		0		6,147		34,120
70%-79.99%	70%-79.99%	0		347		0		3,855		0		1,855		6,057			70%-79.99%	0		347		0		3,855		0		5,065		9,267
80% or greater	80% or greater	0		0		0		0		0		953		953			80% or greater	0		0		0		0		0		947		947
Total	Total	$	0	$	2,768	$	2,198	$	35,288	$	1,422	$	68,110	$	109,786		Total	$	0	$	2,763	$	2,198	$	34,645	$	1,411	$	66,778	$	107,795
Debt Service Coverage Ratio:	Debt Service Coverage Ratio:																Debt Service Coverage Ratio:
Greater or Equal to 1.2x	Greater or Equal to 1.2x	$	0	$	2,768	$	2,198	$	29,930	$	1,422	$	44,854	$	81,172		Greater or Equal to 1.2x	$	0	$	2,763	$	2,198	$	29,431	$	1,411	$	40,836	$	76,639
1.0 - 1.2x	1.0 - 1.2x	0		0		0		0		0		10,064		10,064			1.0 - 1.2x	0		0		0		0		0		13,208		13,208
Less than 1.0x	Less than 1.0x	0		0		0		5,358		0		13,192		18,550			Less than 1.0x	0		0		0		5,214		0		12,734		17,948
Total	Total	$	0	$	2,768	$	2,198	$	35,288	$	1,422	$	68,110	$	109,786		Total	$	0	$	2,763	$	2,198	$	34,645	$	1,411	$	66,778	$	107,795
Agricultural Property Loans	Agricultural Property Loans																Agricultural Property Loans
Loan-to-Value Ratio:	Loan-to-Value Ratio:																Loan-to-Value Ratio:
0%-59.99%	0%-59.99%	$	0	$	1,125	$	0	$	0	$	0	$	1,107	$	2,232		0%-59.99%	$	0	$	1,114	$	0	$	0	$	0	$	1,089	$	2,203
60%-69.99%	60%-69.99%	0		0		0		0		0		0		0			60%-69.99%	0		0		0		0		0		0		0
70%-79.99%	70%-79.99%	0		0		0		0		0		0		0			70%-79.99%	0		0		0		0		0		0		0
80% or greater	80% or greater	0		0		0		0		0		0		0			80% or greater	0		0		0		0		0		0		0
Total	Total	$	0	$	1,125	$	0	$	0	$	0	$	1,107	$	2,232		Total	$	0	$	1,114	$	0	$	0	$	0	$	1,089	$	2,203
Debt Service Coverage Ratio:	Debt Service Coverage Ratio:																Debt Service Coverage Ratio:
Greater or Equal to 1.2x	Greater or Equal to 1.2x	$	0	$	1,125	$	0	$	0	$	0	$	1,107	$	2,232		Greater or Equal to 1.2x	$	0	$	1,114	$	0	$	0	$	0	$	1,089	$	2,203
1.0 - 1.2x	1.0 - 1.2x	0		0		0		0		0		0		0			1.0 - 1.2x	0		0		0		0		0		0		0
Less than 1.0x	Less than 1.0x	0		0		0		0		0		0		0			Less than 1.0x	0		0		0		0		0		0		0
Total	Total	$	0	$	1,125	$	0	$	0	$	0	$	1,107	$	2,232		Total	$	0	$	1,114	$	0	$	0	$	0	$	1,089	$	2,203

1617

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PRUCO LIFE INSURANCE COMPANY OF NEW JERSEY
Notes to Unaudited Interim Financial Statements—(Continued)


	December 31, 2021
	Amortized Cost by Origination Year
	2021		2020		2019		2018		2017		Prior		Total
	(in thousands)
Commercial Mortgage Loans
Loan-to-Value Ratio:
0%-59.99%	$	360	$	0	$	7,203	$	1,433	$	8,836	$	50,537	$	68,369
60%-69.99%	2,066		2,198		24,368		0		1,016		8,524		38,172
70%-79.99%	347		0		3,855		0		0		1,870		6,072
80% or greater	0		0		0		0		958		0		958
Total	$	2,773	$	2,198	$	35,426	$	1,433	$	10,810	$	60,931	$	113,571
Debt Service Coverage Ratio:
Greater or Equal to 1.2x	$	2,773	$	2,198	$	30,009	$	1,433	$	5,671	$	42,469	$	84,553
1.0 - 1.2x	0		0		0		0		958		9,186		10,144
Less than 1.0x	0		0		5,417		0		4,181		9,276		18,874
Total	$	2,773	$	2,198	$	35,426	$	1,433	$	10,810	$	60,931	$	113,571
Agricultural Property Loans
Loan-to-Value Ratio:
0%-59.99%	$	1,126	$	0	$	0	$	0	$	0	$	1,125	$	2,251
60%-69.99%	0		0		0		0		0		0		0
70%-79.99%	0		0		0		0		0		0		0
80% or greater	0		0		0		0		0		0		0
Total	$	1,126	$	0	$	0	$	0	$	0	$	1,125	$	2,251
Debt Service Coverage Ratio:
Greater or Equal to 1.2x	$	1,126	$	0	$	0	$	0	$	0	$	1,125	$	2,251
1.0 - 1.2x	0		0		0		0		0		0		0
Less than 1.0x	0		0		0		0		0		0		0
Total	$	1,126	$	0	$	0	$	0	$	0	$	1,125	$	2,251

See Note 2 to the Financial Statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021 for additional information about the Company's commercial mortgage and other loans credit quality monitoring process.

The following tables set forth an aging of past due commercial mortgage and other loans based upon the recorded investment gross of allowance for credit losses, as well as the amount of commercial mortgage and other loans on non-accrual status, as of the dates indicated:


		March 31, 2022													June 30, 2022
		Current		30-59 Days Past Due		60-89 Days Past Due		90 Days or More Past Due(1)		Total Loans		Non-Accrual Status(2)			Current		30-59 Days Past Due		60-89 Days Past Due		90 Days or More Past Due(1)		Total Loans		Non-Accrual Status(2)
		(in thousands)													(in thousands)
Commercial mortgage loans	Commercial mortgage loans	$	109,786	$	0	$	0	$	0	$	109,786	$	0	Commercial mortgage loans	$	107,795	$	0	$	0	$	0	$	107,795	$	0
Agricultural property loans	Agricultural property loans	2,232		0		0		0		2,232		0		Agricultural property loans	2,203		0		0		0		2,203		0

Total	Total	$	112,018	$	0	$	0	$	0	$	112,018	$	0	Total	$	109,998	$	0	$	0	$	0	$	109,998	$	0

(1)As of ~~March 31,~~June 30, 2022, there were no loans in this category accruing interest.

(2)For additional information regarding the Company’s policies for accruing interest on loans, see Note 2 to the Financial Statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021.

1718

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PRUCO LIFE INSURANCE COMPANY OF NEW JERSEY
Notes to Unaudited Interim Financial Statements—(Continued)


	December 31, 2021
	Current		30-59 Days Past Due		60-89 Days Past Due		90 Days or More Past Due(1)		Total Loans		Non-Accrual Status(2)
	(in thousands)
Commercial mortgage loans	$	113,571	$	0	$	0	$	0	$	113,571	$	0
Agricultural property loans	2,251		0		0		0		2,251		0

Total	$	115,822	$	0	$	0	$	0	$	115,822	$	0

(1)As of December 31, 2021, there were no loans in this category accruing interest.

~~The Company did not have any~~For both the three and six months ended June 30, 2022, there were $3.4 million commercial mortgage and other loans ~~purchased with credit deterioration, as of both March 31, 2022~~acquired, other than those through direct origination, and ~~December 31, 2021.~~

there were $3.8 million commercial mortgage and other loans sold. For both the three and six months ended ~~March 31, 2022 and~~June 30, 2021, there were no commercial mortgage and other loans acquired, other than those through direct origination, and there were no commercial mortgage and other loans sold.

The Company did not have any commercial mortgage and other loans purchased with credit deterioration, as of both June 30, 2022 and December 31, 2021.

Other Invested Assets

The following table sets forth the composition of “Other invested assets,” as of the dates indicated:

March 31, 2022 December 31, 2021
(in thousands)
Company’s investment in separate accounts $ 0 $ 4,053
LPs/LLCs:
Equity method:
Private equity 67,729 63,705
Hedge funds 38,987 38,216
Real estate-related 9,005 8,326
Subtotal equity method 115,721 110,247
Fair value:
Private equity 376 400
Hedge funds 67 66
Real estate-related 2,463 2,374
Subtotal fair value 2,906 2,840
Total LPs/LLCs 118,627 113,087
Derivative instruments 1,442 7,187
Total other invested assets $ 120,069 $ 124,327


	June 30, 2022		December 31, 2021
	(in thousands)
Company’s investment in separate accounts	$	0	$	4,053
LPs/LLCs:
Equity method:
Private equity	69,829		63,705
Hedge funds	40,065		38,216
Real estate-related	9,986		8,326
Subtotal equity method	119,880		110,247
Fair value:
Private equity	294		400
Hedge funds	63		66
Real estate-related	2,309		2,374
Subtotal fair value	2,666		2,840
Total LPs/LLCs	122,546		113,087
Derivative instruments	2,526		7,187
Total other invested assets	$	125,072	$	124,327

1819

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PRUCO LIFE INSURANCE COMPANY OF NEW JERSEY
Notes to Unaudited Interim Financial Statements—(Continued)

Accrued Investment Income

The following table sets forth the composition of “Accrued investment income,” as of the dates indicated:


		March 31, 2022		December 31, 2021			June 30, 2022		December 31, 2021
		(in thousands)					(in thousands)
Fixed maturities	Fixed maturities	$	17,280	$	16,561	Fixed maturities	$	18,071	$	16,561
Equity securities	Equity securities	92		1		Equity securities	1		1
Commercial mortgage and other loans	Commercial mortgage and other loans	304		301		Commercial mortgage and other loans	285		301
Policy loans	Policy loans	5,760		5,670		Policy loans	5,665		5,670

Short-term investments and cash equivalents	Short-term investments and cash equivalents	39		6		Short-term investments and cash equivalents	125		6

Total accrued investment income	Total accrued investment income	$	23,475	$	22,539	Total accrued investment income	$	24,147	$	22,539

There were no write-downs on accrued investment income ~~as of~~for both the three months and six months ended ~~March 31,~~months June 30, 2022 and 2021.

Net Investment Income

The following table sets forth “Net investment income” by investment type, for the periods indicated:


		Three Months Ended March 31,					Three Months Ended June 30,				Six Months Ended June 30,
		2022		2021					2022		2021		2022		2021
		(in thousands)				(in thousands)
Fixed maturities, available-for-sale	Fixed maturities, available-for-sale	$	17,125	$	15,966			Fixed maturities, available-for-sale	$	18,882	$	16,624	$	36,007	$	32,590
Fixed maturities, trading	Fixed maturities, trading	274		167				Fixed maturities, trading	265		170		539		337
Equity securities	Equity securities	91		91				Equity securities	91		91		182		182
Commercial mortgage and other loans	Commercial mortgage and other loans	1,082		1,267				Commercial mortgage and other loans	1,061		1,518		2,143		2,785
Policy loans	Policy loans	2,772		2,827				Policy loans	2,799		2,832		5,571		5,659
Other invested assets	Other invested assets	4,000		4,243				Other invested assets	2,462		4,673		6,462		8,916
Short-term investments and cash equivalents	Short-term investments and cash equivalents	60		22				Short-term investments and cash equivalents	292		10		352		32
Gross investment income	Gross investment income	25,404		24,583				Gross investment income	25,852		25,918		51,256		50,501
Less: investment expenses	Less: investment expenses	(1,035)		(1,038)				Less: investment expenses	(988)		(1,020)		(2,023)		(2,058)
Net investment income	Net investment income	$	24,369	$	23,545			Net investment income	$	24,864	$	24,898	$	49,233	$	48,443

Realized Investment Gains (Losses), Net

The following table sets forth “Realized investment gains (losses), net” by investment type, for the periods indicated:


		Three Months Ended March 31,					Three Months Ended June 30,				Six Months Ended June 30,
		2022		2021					2022		2021		2022		2021
		(in thousands)				(in thousands)
Fixed maturities(1)	Fixed maturities(1)	$	(1,959)	$	(142)			Fixed maturities(1)	$	(276)	$	(427)	$	(2,235)	$	(569)

Commercial mortgage and other loans	Commercial mortgage and other loans	15		(26)				Commercial mortgage and other loans	(50)		116		(35)		90
Other invested assets	Other invested assets	(51)		34				Other invested assets	0		137		(51)		171
Derivatives	Derivatives	18,035		15,970				Derivatives	5,953		(16,266)		23,988		(296)

Short term investments and cash equivalents	Short term investments and cash equivalents	(12)		(4)				Short term investments and cash equivalents	(17)		(4)		(29)		(8)
Realized investment gains (losses), net	Realized investment gains (losses), net	$	16,028	$	15,832			Realized investment gains (losses), net	$	5,610	$	(16,444)	$	21,638	$	(612)

(1)Includes fixed maturity securities classified as available-for-sale and excludes fixed maturity securities classified as trading.

1920

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PRUCO LIFE INSURANCE COMPANY OF NEW JERSEY
Notes to Unaudited Interim Financial Statements—(Continued)

Net Unrealized Gains (Losses) on Investments within AOCI

The following table sets forth net unrealized gains (losses) on investments, as of the dates indicated:


		March 31, 2022		December 31, 2021			June 30, 2022		December 31, 2021
		(in thousands)					(in thousands)

Fixed maturity securities, available-for-sale without an allowance	Fixed maturity securities, available-for-sale without an allowance	$	(8,386)	$	174,945	Fixed maturity securities, available-for-sale without an allowance	$	(193,546)	$	174,945
Derivatives designated as cash flow hedges(1)	Derivatives designated as cash flow hedges(1)	6,629		5,407		Derivatives designated as cash flow hedges(1)	15,193		5,407
Affiliated notes	Affiliated notes	131		194		Affiliated notes	93		194
Other investments	Other investments	274		260		Other investments	241		260
Net unrealized gains (losses) on investments	Net unrealized gains (losses) on investments	$	(1,352)	$	180,806	Net unrealized gains (losses) on investments	$	(178,019)	$	180,806

(1)For more information on cash flow hedges, see Note 4.

Repurchase Agreements and Securities Lending

In the normal course of business, the Company sells securities under agreements to repurchase and enters into securities lending transactions. As of both ~~March 31,~~June 30, 2022 and December 31, 2021, the Company had no repurchase agreements.

4. DERIVATIVES AND HEDGING

Types of Derivative Instruments and Derivative Strategies

The Company utilizes various derivative instruments and strategies to manage its risk. Commonly used derivative instruments include, but are not necessarily limited to:

•Interest rate contracts: futures, swaps, options, caps and floors

•Equity contracts: futures, options and total return swaps

•Foreign exchange contracts: futures, options, forwards and swaps

•Credit contracts: single and index reference credit default swaps

Other types of financial contracts that the Company accounts for as derivatives include:

•Embedded derivatives

For detailed information on these contracts and the related strategies, see Note 4 to the Financial Statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021.

2021

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PRUCO LIFE INSURANCE COMPANY OF NEW JERSEY
Notes to Unaudited Interim Financial Statements—(Continued)

Primary Risks Managed by Derivatives

The table below provides a summary of the gross notional amount and fair value of derivative contracts by the primary underlying risks, excluding embedded derivatives and associated reinsurance recoverables. Many derivative instruments contain multiple underlying risks. The fair value amounts below represent the value of derivative contracts prior to taking into account of the netting effects of master netting agreements and cash collateral.


		March 31, 2022						December 31, 2021							June 30, 2022						December 31, 2021
Primary Underlying Risk/Instrument Type	Primary Underlying Risk/Instrument Type			Fair Value						Fair Value				Primary Underlying Risk/Instrument Type			Fair Value						Fair Value
		Gross Notional		Assets		Liabilities		Gross Notional		Assets		Liabilities			Gross Notional		Assets		Liabilities		Gross Notional		Assets		Liabilities
		(in thousands)													(in thousands)
Derivatives Designated as Hedge Accounting Instruments:	Derivatives Designated as Hedge Accounting Instruments:													Derivatives Designated as Hedge Accounting Instruments:
Currency/Interest Rate	Currency/Interest Rate													Currency/Interest Rate
Foreign Currency Swaps	Foreign Currency Swaps	$	124,465	$	5,674	$	(186)	$	124,950	$	4,416	$	(291)	Foreign Currency Swaps	$	123,220	$	15,011	$	0	$	124,950	$	4,416	$	(291)
Total Derivatives Designated as Hedge Accounting Instruments:	Total Derivatives Designated as Hedge Accounting Instruments:	$	124,465	$	5,674	$	(186)	$	124,950	$	4,416	$	(291)	Total Derivatives Designated as Hedge Accounting Instruments:	$	123,220	$	15,011	$	0	$	124,950	$	4,416	$	(291)
Derivatives Not Qualifying as Hedge Accounting Instruments:	Derivatives Not Qualifying as Hedge Accounting Instruments:													Derivatives Not Qualifying as Hedge Accounting Instruments:
Interest Rate	Interest Rate													Interest Rate
Interest Rate Swaps	Interest Rate Swaps	$	30,200	$	1,255	$	0	$	30,200	$	2,757	$	0	Interest Rate Swaps	$	30,200	$	579	$	0	$	30,200	$	2,757	$	0
Credit	Credit													Credit
Credit Default Swaps	Credit Default Swaps	0		0		0		0		0		0		Credit Default Swaps	0		0		0		0		0		0
Currency/Interest Rate	Currency/Interest Rate													Currency/Interest Rate
Foreign Currency Swaps	Foreign Currency Swaps	35,204		2,760		(510)		35,204		2,685		(637)		Foreign Currency Swaps	35,204		5,029		0		35,204		2,685		(637)
Foreign Currency	Foreign Currency													Foreign Currency
Foreign Currency Forwards	Foreign Currency Forwards	7,176		86		(3)		4,667		66		(9)		Foreign Currency Forwards	8,144		310		(6)		4,667		66		(9)
Equity	Equity													Equity
Equity Options	Equity Options	500,175		1,948		(9,581)		488,850		18,761		(20,561)		Equity Options	506,450		0		(18,397)		488,850		18,761		(20,561)
Total Derivatives Not Qualifying as Hedge Accounting Instruments:	Total Derivatives Not Qualifying as Hedge Accounting Instruments:	$	572,755	$	6,049	$	(10,094)	$	558,921	$	24,269	$	(21,207)	Total Derivatives Not Qualifying as Hedge Accounting Instruments:	$	579,998	$	5,918	$	(18,403)	$	558,921	$	24,269	$	(21,207)
Total Derivatives(1)(2)	Total Derivatives(1)(2)	$	697,220	$	11,723	$	(10,280)	$	683,871	$	28,685	$	(21,498)	Total Derivatives(1)(2)	$	703,218	$	20,929	$	(18,403)	$	683,871	$	28,685	$	(21,498)

(1)Excludes embedded derivatives and associated reinsurance recoverables which contain multiple underlying risks. The fair value of these embedded derivatives was a net liability of ~~$633~~$514 million and $822 million as of ~~March 31,~~June 30, 2022 and December 31, 2021, respectively included in “Future policy benefits” and ~~$131~~$113 million and $153 million as of ~~March 31,~~June 30, 2022 and December 31, 2021, respectively included in “Policyholders’ account balances". The fair value of the related reinsurance, included in "Reinsurance recoverables" or "Other liabilities" was an asset of ~~$633~~$514 million and $822 million as of ~~March 31,~~June 30, 2022 and December 31, 2021, respectively.

(2)Recorded in "Other invested assets" and "Payables to parent and affiliates" on the Unaudited Interim Statements of Financial Position.

2122

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PRUCO LIFE INSURANCE COMPANY OF NEW JERSEY
Notes to Unaudited Interim Financial Statements—(Continued)

Offsetting Assets and Liabilities

The following table presents recognized derivative instruments (excluding embedded derivatives and associated reinsurance recoverables), and repurchase and reverse repurchase agreements that are offset in the Unaudited Interim Statements of Financial Position, and/or are subject to an enforceable master netting arrangement or similar agreement, irrespective of whether they are offset in the Unaudited Interim Statements of Financial Position.


		March 31, 2022											June 30, 2022
		Gross Amounts of Recognized Financial Instruments		Gross Amounts Offset in the Statements of Financial Position		Net Amounts Presented in the Statements of Financial Position		Financial Instruments/ Collateral(1)		Net Amount			Gross Amounts of Recognized Financial Instruments		Gross Amounts Offset in the Statements of Financial Position		Net Amounts Presented in the Statements of Financial Position		Financial Instruments/ Collateral(1)		Net Amount
		(in thousands)											(in thousands)
Offsetting of Financial Assets:	Offsetting of Financial Assets:											Offsetting of Financial Assets:
Derivatives	Derivatives	$	11,723	$	(10,280)	$	1,443	$	(1,443)	$	0	Derivatives	$	20,929	$	(18,403)	$	2,526	$	(2,526)	$	0
Securities purchased under agreements to resell	Securities purchased under agreements to resell	0		0		0		0		0		Securities purchased under agreements to resell	0		0		0		0		0
Total Assets	Total Assets	$	11,723	$	(10,280)	$	1,443	$	(1,443)	$	0	Total Assets	$	20,929	$	(18,403)	$	2,526	$	(2,526)	$	0
Offsetting of Financial Liabilities:	Offsetting of Financial Liabilities:											Offsetting of Financial Liabilities:
Derivatives	Derivatives	$	10,280	$	(10,280)	$	0	$	0	$	0	Derivatives	$	18,403	$	(18,403)	$	0	$	0	$	0
Securities sold under agreements to repurchase	Securities sold under agreements to repurchase	0		0		0		0		0		Securities sold under agreements to repurchase	0		0		0		0		0
Total Liabilities	Total Liabilities	$	10,280	$	(10,280)	$	0	$	0	$	0	Total Liabilities	$	18,403	$	(18,403)	$	0	$	0	$	0


	December 31, 2021
	Gross Amounts of Recognized Financial Instruments		Gross Amounts Offset in the Statements of Financial Position		Net Amounts Presented in the Statements of Financial Position		Financial Instruments/ Collateral(1)		Net Amount
	(in thousands)
Offsetting of Financial Assets:
Derivatives	$	28,685	$	(21,498)	$	7,187	$	(7,187)	$	0
Securities purchased under agreements to resell	0		0		0		0		0
Total Assets	$	28,685	$	(21,498)	$	7,187	$	(7,187)	$	0
Offsetting of Financial Liabilities:
Derivatives	$	21,498	$	(21,498)	$	0	$	0	$	0
Securities sold under agreements to repurchase	0		0		0		0		0
Total Liabilities	$	21,498	$	(21,498)	$	0	$	0	$	0

(1)Amounts exclude the excess of collateral received/pledged from/to the counterparty.

For information regarding the rights of offset associated with the derivative assets and liabilities in the table above see “Credit Risk” below and Note 9. For securities purchased under agreements to resell and securities sold under agreements to repurchase, the Company monitors the value of the securities and maintains collateral, as appropriate, to protect against credit exposure. Where the Company has entered into repurchase and resale agreements with the same counterparty, in the event of default, the Company would generally be permitted to exercise rights of offset. For additional information on the Company’s accounting policy for securities repurchase and resale agreements, see Note 2 to the Financial Statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021.

2223

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PRUCO LIFE INSURANCE COMPANY OF NEW JERSEY
Notes to Unaudited Interim Financial Statements—(Continued)

Cash Flow Hedges

The primary derivative instruments used by the Company in its cash flow hedge accounting relationships are currency swaps. These instruments are only designated for hedge accounting in instances where the appropriate criteria are met. The Company does not use futures, options, credit or equity derivatives in any of its cash flow hedge accounting relationships.

The following tables provide the financial statement classification and impact of derivatives used in qualifying and non-qualifying hedge relationships, excluding the offset of the hedged item in an effective hedge relationship.


		Three Months Ended March 31, 2022									Three Months Ended June 30, 2022
		Realized Investment Gains (Losses)		Net Investment Income		Other Income		Change in AOCI			Realized Investment Gains (Losses)		Net Investment Income		Other Income		Change in AOCI
		(in thousands)									(in thousands)
Derivatives Designated as Hedge Accounting Instruments:	Derivatives Designated as Hedge Accounting Instruments:									Derivatives Designated as Hedge Accounting Instruments:
Cash flow hedges	Cash flow hedges									Cash flow hedges
Currency/Interest Rate	Currency/Interest Rate	$	31	$	451	$	188	$	1,222	Currency/Interest Rate	$	92	$	467	$	856	$	8,564
Total cash flow hedges	Total cash flow hedges	31		451		188		1,222		Total cash flow hedges	92		467		856		8,564
Derivatives Not Qualifying as Hedge Accounting Instruments:	Derivatives Not Qualifying as Hedge Accounting Instruments:									Derivatives Not Qualifying as Hedge Accounting Instruments:
Interest Rate	Interest Rate	(1,201)		0		0		0		Interest Rate	(561)		0		0		0
Currency	Currency	115		0		0		0		Currency	373		0		0		0
Currency/Interest Rate	Currency/Interest Rate	290		0		8		0		Currency/Interest Rate	2,846		0		40		0
Credit	Credit	0		0		0		0		Credit	0		0		0		0
Equity	Equity	(1,526)		0		0		0		Equity	(10,040)		0		0		0
Embedded Derivatives	Embedded Derivatives	20,326		0		0		0		Embedded Derivatives	13,243		0		0		0
Total Derivatives Not Qualifying as Hedge Accounting Instruments:	Total Derivatives Not Qualifying as Hedge Accounting Instruments:	18,004		0		8		0		Total Derivatives Not Qualifying as Hedge Accounting Instruments:	5,861		0		40		0
Total	Total	$	18,035	$	451	$	196	$	1,222	Total	$	5,953	$	467	$	896	$	8,564


	Six Months Ended June 30, 2022
	Realized Investment Gains (Losses)		Net Investment Income		Other Income		Change in AOCI
	(in thousands)
Derivatives Designated as Hedge Accounting Instruments:
Cash flow hedges
Currency/Interest Rate	$	123	$	918	$	1,044	$	9,786
Total cash flow hedges	123		918		1,044		9,786
Derivatives Not Qualifying as Hedge Accounting Instruments:
Interest Rate	(1,762)		0		0		0
Currency	488		0		0		0
Currency/Interest Rate	3,136		0		48		0
Credit	0		0		0		0
Equity	(11,566)		0		0		0
Embedded Derivatives	33,569		0		0		0
Total Derivatives Not Qualifying as Hedge Accounting Instruments:	23,865		0		48		0
Total	$	23,988	$	918	$	1,092	$	9,786

2324

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PRUCO LIFE INSURANCE COMPANY OF NEW JERSEY
Notes to Unaudited Interim Financial Statements—(Continued)

Three Months Ended March 31, 2021
Realized
Investment
Gains (Losses) Net
Investment
Income Other Income Change in AOCI
(in thousands)
Derivatives Designated as Hedge Accounting Instruments:
Cash flow hedges
Currency/Interest Rate $ (8) $ 401 $ 159 $ 1,545
Total cash flow hedges (8) 401 159 1,545
Derivatives Not Qualifying as Hedge Accounting Instruments:
Interest Rate (827) 0 0 0
Currency 111 0 0 0
Currency/Interest Rate 3 0 (6) 0
Credit (3) 0 0 0
Equity 1,965 0 0 0
Embedded Derivatives 14,729 0 0 0
Total Derivatives Not Qualifying as Hedge Accounting Instruments: 15,978 0 (6) 0
Total $ 15,970 $ 401 $ 153 $ 1,545


	Three Months Ended June 30, 2021
	Realized Investment Gains (Losses)		Net Investment Income		Other Income		Change in AOCI
	(in thousands)
Derivatives Designated as Hedge Accounting Instruments:
Cash flow hedges
Currency/Interest Rate	$	45	$	375	$	(125)	$	2,145
Total cash flow hedges	45		375		(125)		2,145
Derivatives Not Qualifying as Hedge Accounting Instruments:
Interest Rate	315		0		0		0
Currency	(16)		0		0		0
Currency/Interest Rate	637		0		(1)		0
Credit	0		0		0		0
Equity	2,484		0		0		0
Embedded Derivatives	(19,731)		0		0		0
Total Derivatives Not Qualifying as Hedge Accounting Instruments:	(16,311)		0		(1)		0
Total	$	(16,266)	$	375	$	(126)	$	2,145


	Six Months Ended June 30, 2021
	Realized Investment Gains (Losses)		Net Investment Income		Other Income		Change in AOCI
	(in thousands)
Derivatives Designated as Hedge Accounting Instruments:
Cash flow hedges
Currency/Interest Rate	$	37	$	776	$	33	$	3,689
Total cash flow hedges	37		776		33		3,689
Derivatives Not Qualifying as Hedge Accounting Instruments:
Interest Rate	(512)		0		0		0
Currency	95		0		0		0
Currency/Interest Rate	640		0		(6)		0
Credit	(4)		0		0		0
Equity	4,449		0		0		0
Embedded Derivatives	(5,001)		0		0		0
Total Derivatives Not Qualifying as Hedge Accounting Instruments:	(333)		0		(6)		0
Total	$	(296)	$	776	$	27	$	3,689

Table of Contents


PRUCO LIFE INSURANCE COMPANY OF NEW JERSEY
Notes to Unaudited Interim Financial Statements—(Continued)

Presented below is a rollforward of current period cash flow hedges in AOCI before taxes:


	(in thousands)
Balance, December 31, 2021	$	5,407
Amount recorded in AOCI


Currency/Interest Rate	~~1,892~~11,871
Total amount recorded in AOCI	~~1,892~~11,871
Amount reclassified from AOCI to income


Currency/Interest Rate	~~(670)~~(2,085)
Total amount reclassified from AOCI to income	~~(670)~~(2,085)
Balance, ~~March 31,~~June 30, 2022	$	~~6,629~~15,193

The changes in fair value of cash flow hedges are deferred in AOCI and are included in "Net unrealized investment gains (losses)" in the Unaudited Interim Statements of Operations and Comprehensive Income (Loss); these amounts are then reclassified to earnings when the hedged item affects earnings. Using ~~March 31,~~June 30, 2022 values, it is estimated that a pre-tax gain of ~~$1.7~~$1.9 million is expected to be reclassified from AOCI to earnings during the subsequent twelve months ending ~~March 31,~~June 30, 2023.

The exposures the Company is hedging with these qualifying cash flow hedges include the variability of the payment or receipt of interest or foreign currency amounts on existing financial instruments.

There were no material amounts reclassified from AOCI into earnings relating to instances in which the Company discontinued cash flow hedge accounting because the forecasted transaction did not occur by the anticipated date or within the additional time period permitted by the authoritative guidance for the accounting for derivatives and hedging.

~~Table of Contents~~


~~PRUCO LIFE INSURANCE COMPANY OF NEW JERSEY~~
~~Notes to Unaudited Interim Financial Statements—(Continued)~~

Credit Derivatives

The Company has no exposure from credit derivative positions where it has written or purchased credit protection as of ~~March 31,~~June 30, 2022 and December 31, 2021.

Counterparty Credit Risk

The Company is exposed to credit-related losses in the event of non-performance by counterparties to financial derivative transactions with a positive fair value. The Company manages credit risk by entering into derivative transactions with regulated derivatives exchanges for exchange traded derivatives and its affiliate, Prudential Global Funding LLC (“PGF”), related to its over-the-counter ("OTC") derivatives. PGF, in turn, manages its credit risk by: (i) entering into derivative transactions with highly rated major international financial institutions and other creditworthy counterparties governed by master netting agreement, as applicable; (ii) trading through central clearing and OTC parties; (iii) obtaining collateral, such as cash and securities, when appropriate; and (iv) setting limits on single-party credit exposures which are subject to periodic management review.

Substantially all of the Company’s derivative agreements have zero thresholds which require daily full collateralization by the party in a liability position.

5. FAIR VALUE OF ASSETS AND LIABILITIES

Fair Value Measurement – Fair value represents the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The authoritative fair value guidance establishes a framework for measuring fair value that includes a hierarchy used to classify the inputs used in measuring fair value. The level in the fair value hierarchy within which the fair value measurement falls is determined based on the lowest level input that is significant to the fair value measurement. The levels of the fair value hierarchy are as follows:

Level 1 - Fair value is based on unadjusted quoted prices in active markets that are accessible to the Company for identical assets or liabilities.

Table of Contents


PRUCO LIFE INSURANCE COMPANY OF NEW JERSEY
Notes to Unaudited Interim Financial Statements—(Continued)

Level 2 - Fair value is based on significant inputs, other than quoted prices included in Level 1, that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the asset or liability through corroboration with observable market data. Level 2 inputs include quoted market prices in active markets for similar assets and liabilities, quoted market prices in markets that are not active for identical or similar assets or liabilities, and other market observable inputs.

Level 3 - Fair value is based on at least one significant unobservable input for the asset or liability. The assets and liabilities in this category may require significant judgment or estimation in determining the fair value.

For a discussion of the Company's valuation methodologies for assets and liabilities measured at fair value and the fair value hierarchy, see Note 5 to the Financial Statements included in the Company's Annual Report on Form 10-K for the year ended December 31, 2021.

~~Table of Contents~~


~~PRUCO LIFE INSURANCE COMPANY OF NEW JERSEY~~
~~Notes to Unaudited Interim Financial Statements—(Continued)~~

Assets and Liabilities by Hierarchy Level – The tables below present the balances of assets and liabilities reported at fair value on a recurring basis, as of the dates indicated.


		March 31, 2022											June 30, 2022
		Level 1		Level 2		Level 3		Netting(1)		Total			Level 1		Level 2		Level 3		Netting(1)		Total
		(in thousands)											(in thousands)
Fixed maturities, available-for-sale:	Fixed maturities, available-for-sale:											Fixed maturities, available-for-sale:
U.S. Treasury securities and obligations of U.S. government authorities and agencies	U.S. Treasury securities and obligations of U.S. government authorities and agencies	$	0	$	13,057	$	0	$		$	13,057	U.S. Treasury securities and obligations of U.S. government authorities and agencies	$	0	$	12,671	$	0	$		$	12,671
Obligations of U.S. states and their political subdivisions	Obligations of U.S. states and their political subdivisions	0		169,339		0				169,339		Obligations of U.S. states and their political subdivisions	0		162,982		0				162,982
Foreign government bonds	Foreign government bonds	0		86,141		0				86,141		Foreign government bonds	0		73,213		0				73,213
U.S. corporate public securities	U.S. corporate public securities	0		936,241		0				936,241		U.S. corporate public securities	0		916,563		0				916,563
U.S. corporate private securities	U.S. corporate private securities	0		184,487		2,604				187,091		U.S. corporate private securities	0		171,919		3,271				175,190
Foreign corporate public securities	Foreign corporate public securities	0		112,794		0				112,794		Foreign corporate public securities	0		110,397		0				110,397
Foreign corporate private securities	Foreign corporate private securities	0		110,096		18,219				128,315		Foreign corporate private securities	0		113,320		0				113,320
Asset-backed securities(2)	Asset-backed securities(2)	0		17,799		0				17,799		Asset-backed securities(2)	0		18,281		320				18,601
Commercial mortgage-backed securities	Commercial mortgage-backed securities	0		106,160		24,397				130,557		Commercial mortgage-backed securities	0		100,841		21,850				122,691
Residential mortgage-backed securities	Residential mortgage-backed securities	0		2,521		0				2,521		Residential mortgage-backed securities	0		2,276		0				2,276
Subtotal	Subtotal	0		1,738,635		45,220				1,783,855		Subtotal	0		1,682,463		25,441				1,707,904
Fixed maturities, trading	Fixed maturities, trading	0		34,198		0				34,198		Fixed maturities, trading	0		30,804		0				30,804
Equity securities	Equity securities	0		102		5,298				5,400		Equity securities	0		96		4,853				4,949
Short-term investments	Short-term investments	9,999		0		0				9,999		Short-term investments	0		0		0				0
Cash equivalents	Cash equivalents	0		212,172		0				212,172		Cash equivalents	0		132,581		0				132,581
Other invested assets(3)	Other invested assets(3)	0		11,723		0		(10,280)		1,443		Other invested assets(3)	0		20,929		0		(18,403)		2,526
Reinsurance recoverables	Reinsurance recoverables	0		0		633,060				633,060		Reinsurance recoverables	0		0		514,181				514,181
Receivables from parent and affiliates	Receivables from parent and affiliates	0		734		0				734		Receivables from parent and affiliates	0		705		0				705
Subtotal excluding separate account assets	Subtotal excluding separate account assets	9,999		1,997,564		683,578		(10,280)		2,680,861		Subtotal excluding separate account assets	0		1,867,578		544,475		(18,403)		2,393,650
Separate account assets(4)(5)	Separate account assets(4)(5)	0		14,500,461		0				14,500,461		Separate account assets(4)(5)	0		12,456,236		0				12,456,236
Total assets	Total assets	$	9,999	$	16,498,025	$	683,578	$	(10,280)	$	17,181,322	Total assets	$	0	$	14,323,814	$	544,475	$	(18,403)	$	14,849,886
Future policy benefits(6)	Future policy benefits(6)	$	0	$	0	$	633,060	$		$	633,060	Future policy benefits(6)	$	0	$	0	$	514,181	$		$	514,181
Policyholders' account balances	Policyholders' account balances	0		0		130,930				130,930		Policyholders' account balances	0		0		112,672				112,672
Payables to parent and affiliates	Payables to parent and affiliates	0		10,280		0		(10,280)		0		Payables to parent and affiliates	0		18,403		0		(18,403)		0
Total liabilities	Total liabilities	$	0	$	10,280	$	763,990	$	(10,280)	$	763,990	Total liabilities	$	0	$	18,403	$	626,853	$	(18,403)	$	626,853

2627

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PRUCO LIFE INSURANCE COMPANY OF NEW JERSEY
Notes to Unaudited Interim Financial Statements—(Continued)


	December 31, 2021
	Level 1		Level 2		Level 3		Netting(1)		Total
	(in thousands)
Fixed maturities, available-for-sale:
U.S. Treasury securities and obligations of U.S. government authorities and agencies	$	0	$	13,505	$	0	$		$	13,505
Obligations of U.S. states and their political subdivisions	0		179,010		0				179,010
Foreign government bonds	0		100,791		0				100,791
U.S. corporate public securities	0		1,022,585		0				1,022,585
U.S. corporate private securities	0		199,070		2,605				201,675
Foreign corporate public securities	0		113,183		0				113,183
Foreign corporate private securities	0		121,644		21,714				143,358
Asset-backed securities(2)	0		17,277		0				17,277
Commercial mortgage-backed securities	0		114,081		27,274				141,355
Residential mortgage-backed securities	0		2,859		0				2,859
Subtotal	0		1,884,005		51,593				1,935,598
Fixed maturities, trading	0		36,456		0				36,456
Equity securities	0		125		5,812				5,937
Short-term investments	9,997		0		0				9,997
Cash equivalents	0		128,719		0				128,719
Other invested assets(3)	0		28,685		0		(21,498)		7,187
Reinsurance recoverables	0		0		821,596				821,596
Receivables from parent and affiliates	0		788		0				788
Subtotal excluding separate account assets	9,997		2,078,778		879,001		(21,498)		2,946,278
Separate account assets(4)(5)	0		15,731,959		0				15,731,959
Total assets	$	9,997	$	17,810,737	$	879,001	$	(21,498)	$	18,678,237
Future policy benefits(6)	$	0	$	0	$	821,596	$		$	821,596
Policyholders' account balances	0		0		153,127				153,127
Payables to parent and affiliates	0		21,498		0		(21,498)		0
Total liabilities	$	0	$	21,498	$	974,723	$	(21,498)	$	974,723

(1)“Netting” amounts represent cash collateral of $0 million as of both ~~March 31,~~June 30, 2022 and December 31, 2021.

(2)Includes credit-tranched securities collateralized by syndicated bank loans, sub-prime mortgages, auto loans, credit cards, education loans and other asset types.

(3)Other invested assets excluded from the fair value hierarchy include certain hedge funds, private equity funds and other funds for which fair value is measured at net asset value ("NAV") per share (or its equivalent) as a practical expedient. As of ~~March 31,~~June 30, 2022 and December 31, 2021, the fair values of such investments ~~was $2.9~~were $2.7 million and $2.8 million, respectively.

(4)Separate account assets included in the fair value hierarchy exclude investments in entities that calculate NAV per share (or its equivalent) as a practical expedient. Such investments excluded from the fair value hierarchy include investments in real estate, hedge funds and a corporate owned life insurance fund, for which fair value is measured at NAV per share (or its equivalent). At ~~March 31,~~June 30, 2022 and December 31, 2021, the fair value of such investments was ~~$2,084~~$1,881 million and $2,190 million, respectively.

(5)Separate account assets represent segregated funds that are invested for certain customers. 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. Separate account liabilities are not included in the above table as they are reported at contract value and not fair value in the Company's Unaudited Interim Statements of Financial Position.

(6)As of ~~March 31,~~June 30, 2022, the net embedded derivative liability position of ~~$633~~$514 million includes ~~$63~~$70 million of embedded derivatives in an asset position and ~~$696~~$584 million of embedded derivatives in a liability position. As of December 31, 2021, the net embedded derivative liability position of $822 million includes $62 million of embedded derivatives in an asset position and $884 million of embedded derivatives in a liability position.

2728

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PRUCO LIFE INSURANCE COMPANY OF NEW JERSEY
Notes to Unaudited Interim Financial Statements—(Continued)

Quantitative Information Regarding Internally Priced Level 3 Assets and Liabilities – The tables below present quantitative information on significant internally-priced Level 3 assets and liabilities.


		March 31, 2022												June 30, 2022
		Fair Value		Valuation Techniques	Unobservable Inputs	Minimum		Maximum		Weighted Average		Impact of Increase in Input on Fair Value(1)		Fair Value		Valuation Techniques	Unobservable Inputs	Minimum		Maximum		Weighted Average		Impact of Increase in Input on Fair Value(1)
		(in thousands)												(in thousands)
Assets:	Assets:												Assets:
Corporate securities(2)	Corporate securities(2)	$	20,823	Discounted cash flow	Discount rate	3.06	%	3.28	%	3.17	%	Decrease	Corporate securities(2)	$	3,271	Discounted cash flow	Discount rate	12.77	%	12.77	%	12.77	%	Decrease
				Liquidation	Liquidation value	62.58%		62.58%		62.58%		Increase
Reinsurance recoverables	Reinsurance recoverables	$	633,060	Fair values are determined using the same unobservable inputs as future policy benefits.									Reinsurance recoverables	$	514,181	Fair values are determined using the same unobservable inputs as future policy benefits.
Liabilities:	Liabilities:												Liabilities:
Future policy benefits(3)	Future policy benefits(3)	$	633,060	Discounted cash flow	Lapse rate(5)	1	%	20	%			Decrease	Future policy benefits(3)	$	514,181	Discounted cash flow	Lapse rate(5)	1	%	20	%			Decrease
					Spread over LIBOR(6)	0.20	%	1.52	%			Decrease					Spread over SOFR(6)	0.51	%	2.14	%			Decrease
					Utilization rate(7)	39	%	96	%			Increase					Utilization rate(7)	38	%	95	%			Increase
					Withdrawal rate	See table footnote (8) below.											Withdrawal rate	See table footnote (8) below.
					Mortality rate (9)	0	%	15	%			Decrease					Mortality rate (9)	0	%	15	%			Decrease
					Equity volatility curve	18	%	26	%			Increase					Equity volatility curve	18	%	28	%			Increase
Policyholders' account balances(4)	Policyholders' account balances(4)	$	130,930	Discounted cash flow	Lapse rate(5)	1	%	6	%			Decrease	Policyholders' account balances(4)	$	112,672	Discounted cash flow	Lapse rate(5)	1	%	6	%			Decrease
					Spread over LIBOR(6)	0.20	%	1.52	%			Decrease					Spread over SOFR(6)	0.51	%	2.14	%			Decrease

					Mortality rate (9)	0	%	23	%			Decrease					Mortality rate (9)	0	%	23	%			Decrease
					Equity volatility curve	14	%	29	%			Increase					Equity volatility curve	20	%	33	%			Increase

2829

Table of Contents


PRUCO LIFE INSURANCE COMPANY OF NEW JERSEY
Notes to Unaudited Interim Financial Statements—(Continued)


	December 31, 2021
	Fair Value		Valuation Techniques	Unobservable Inputs	Minimum		Maximum		Weighted Average		Impact of Increase in Input on Fair Value(1)
	(in thousands)
Assets:
Corporate securities(2)	$	24,319	Discounted cash flow	Discount rate	2.41	%	3.99	%	2.62	%	Decrease
			Liquidation	Liquidation value	62.58%		62.58%		62.58%		Increase
Reinsurance recoverables	$	821,596	Fair values are determined using the same unobservable inputs as future policy benefits.
Liabilities:
Future policy benefits(3)	$	821,596	Discounted cash flow	Lapse rate(5)	1	%	20	%			Decrease
				Spread over LIBOR(6)	0.03	%	1.13	%			Decrease
				Utilization rate(7)	39	%	96	%			Increase
				Withdrawal rate	See table footnote(8) below.
				Mortality rate(9)	0	%	15	%			Decrease
				Equity volatility curve	16	%	25	%			Increase
Policyholders' account balances(4)	$	153,127	Discounted cash flow	Lapse rate(5)	1	%	6	%			Decrease
				Spread over LIBOR(6)	0.03	%	1.13	%			Decrease
				Mortality rate (9)	0	%	23	%			Decrease
				Equity volatility curve	12	%	27	%			Increase

2930

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PRUCO LIFE INSURANCE COMPANY OF NEW JERSEY
Notes to Unaudited Interim Financial Statements—(Continued)

(1)Conversely, the impact of a decrease in input would have the opposite impact on fair value as that presented in the table.

(2)Includes assets classified as fixed maturities available-for-sale.

(3)Future policy benefits primarily represent general account liabilities for the living benefit features of the Company’s variable annuity contracts which are accounted for as embedded derivatives. Since the valuation methodology for these liabilities uses a range of inputs that vary at the contract level over the cash flow projection period, presenting a range, rather than weighted average, is a more meaningful representation of the unobservable inputs used in the valuation.

(4)Policyholders’ account balances primarily represent general account liabilities for the index-linked interest credited on certain of the Company’s life products that are accounted for as embedded derivatives. Since the valuation methodology for these liabilities uses a range of inputs that vary at the contract level over the cash flow projection period, presenting a range, rather than weighted average, is a more meaningful representation of the unobservable inputs used in the valuation.

(5)Lapse rates for contracts with living benefit guarantees are adjusted at the contract level based on the in-the-moneyness of the living benefit and reflect other factors, such as the applicability of any surrender charges. Lapse rates are reduced when contracts are more in-the-money. Lapse rates for contracts with index-linked crediting guarantees may be adjusted at the contract level based on the applicability of any surrender charges, product type, and market related factors such as interest rates. Lapse rates are also generally assumed to be lower for the period where surrender charges apply. For any given contract, lapse rates vary throughout the period over which cash flows are projected for the purposes of valuing these embedded derivatives.

(6)The spread over the Secured Overnight Financing Rate (“SOFR”) swap curve and the London Inter-Bank Offered Rate ~~("LIBOR"~~(“LIBOR”) swap curve represents the premium added to the proxy for the risk-free rate ~~(LIBOR)~~(SOFR or LIBOR, as applicable) to reflect the ~~Company's~~Company’s estimates of rates that a market participant would use to value the living benefits in both the accumulation and payout phases and index-linked interest crediting ~~guarantees.~~guarantees as of June 30, 2022 and December 31, 2021, respectively. This spread includes an estimate of NPR, which is the risk that the obligation will not be fulfilled by the Company. NPR is primarily estimated by utilizing the credit spreads associated with issuing funding agreements, adjusted for any illiquidity risk premium. In order to reflect the financial strength ratings of the Company, credit spreads associated with funding agreements, as opposed to credit spread associated with debt, are utilized in developing this estimate because funding agreements, living benefit guarantees, and index-linked interest crediting guarantees are insurance liabilities and are therefore senior to debt.

(7)The utilization rate assumption estimates the percentage of contracts that will utilize the benefit during the contract duration and begin lifetime withdrawals at various time intervals from contract inception. The remaining contractholders are assumed to either begin lifetime withdrawals immediately or never utilize the benefit. Utilization assumptions may vary by product type, tax status and age. The impact of changes in these assumptions is highly dependent on the product type, the age of the contractholder at the time of the sale, and the timing of the first lifetime income withdrawal. Range reflects the utilization rate for the vast majority of business with living benefits.

(8)The withdrawal rate assumption estimates the magnitude of annual contractholder withdrawals relative to the maximum allowable amount under the contract. These assumptions vary based on the age of the contractholder, the tax status of the contract and the duration since the contractholder began lifetime withdrawals. As of ~~March 31,~~June 30, 2022 and December 31, 2021, the minimum withdrawal rate assumption is 77% and 76%, respectively. As of June 30, 2022 and December 31, 2021, and the maximum withdrawal rate assumption may be greater than 100%. The fair value of the liability will generally increase the closer the withdrawal rate is to 100% and decrease as the withdrawal rate moves further away from 100%.

(9)The range reflects the mortality rates for the vast majority of business with living benefits and other contracts, with policyholders ranging from 45 to 90 years old. While the majority of living benefits have a minimum age requirement, certain other contracts do not have an age restriction. This results in contractholders with mortality rates approaching 0% for certain benefits. Mortality rates may vary by product, age and duration. A mortality improvement assumption is also incorporated into the overall mortality table.

Interrelationships Between Unobservable Inputs – In addition to the sensitivities of fair value measurements to changes in each unobservable input in isolation, as reflected in the table above, interrelationships between these inputs may also exist, such that a change in one unobservable input may give rise to a change in another, or multiple, inputs. Examples of such interrelationships for significant internally-priced Level 3 assets and liabilities are as follows:

Corporate Securities - The rate used to discount future cash flows reflects current risk-free rates plus credit and liquidity spread requirements that market participants would use to value an asset. The discount rate may be influenced by many factors, including market cycles, expectations of default, collateral, term, and asset complexity. Each of these factors can influence discount rates, either in isolation, or in response to other factors. During weaker economic cycles, as the expectations of default increases, credit spreads widen, which results in a decrease in fair value.

Future Policy Benefits – The Company expects efficient benefit utilization and withdrawal rates to generally be correlated with lapse rates. However, behavior is highly dependent on the facts and circumstances surrounding the individual contractholder, such as their liquidity needs or tax situation, which could drive lapse behavior independent of other contractholder behavior assumptions. To the extent more efficient contractholder behavior results in greater in-the-moneyness at the contract level, lapse rates may decline for those contracts. Similarly, to the extent that increases in equity volatility are correlated with overall declines in the capital markets, lapse rates may decline as contracts become more in-the-money.

Changes in Level 3 Assets and Liabilities – The following tables describe changes in fair values of Level 3 assets and liabilities as of the dates indicated, as well as the portion of gains or losses included in income attributable to unrealized gains or losses related to those assets and liabilities still held at the end of their respective periods. When a determination is made to classify assets and liabilities within Level 3, the determination is based on significance of the unobservable inputs in the overall fair value measurement. All transfers are based on changes in the observability of the valuation inputs, including the availability of pricing service information that the Company can validate. Transfers into Level 3 are generally the result of unobservable inputs utilized within valuation methodologies and the use of indicative broker quotes for assets that were previously valued using observable inputs. Transfers out of Level 3 are generally due to the use of observable inputs in valuation methodologies as well as the availability of pricing service information for certain assets that the Company can validate.

~~Table of Contents~~


~~PRUCO LIFE INSURANCE COMPANY OF NEW JERSEY~~
~~Notes to Unaudited Interim Financial Statements—(Continued)~~

Three Months Ended March 31, 2022
Fair Value, beginning of period Total realized and unrealized gains (losses)(1) Purchases Sales Issuances Settlements Other Transfers into Level 3 Transfers out of Level 3 Fair Value, end of period Unrealized gains (losses) for assets still held(2)
(in thousands)
Fixed maturities, available-for-sale:
Corporate securities(3) $ 24,319 $ (2,864) $ 0 $ 0 $ 0 $ (632) $ 0 $ 0 $ 0 $ 20,823 $ (2,821)
Structured securities(4) 27,274 (2,795) 0 0 0 (82) 0 0 0 24,397 (2,796)
Other assets:
Equity securities 5,812 (514) 0 0 0 0 0 0 0 5,298 (514)
Reinsurance recoverables 821,596 (214,894) 26,358 0 0 0 0 0 0 633,060 (207,732)
Liabilities:
Future policy benefits (821,596) 214,894 0 0 (26,358) 0 0 0 0 (633,060) 207,732
Policyholders' account balances(5) (153,127) 19,553 0 0 0 2,644 0 0 0 (130,930) 21,607

Three Months Ended March 31, 2022
Total realized and unrealized gains (losses) Unrealized gains (losses) for assets still held(2)
Realized investment gains (losses), net(1) Other income (loss) Included in other comprehensive income (loss) Net investment income Realized investment gains (losses), net Other income (loss) Included in other comprehensive income (loss)
(in thousands)
Fixed maturities, available-for-sale $ 0 $ 0 $ (5,661) $ 2 $ 0 $ 0 $ (5,617)
Other assets:
Equity securities 0 (514) 0 0 0 (514) 0
Reinsurance recoverables (214,894) 0 0 0 (207,732) 0 0
Liabilities:
Future policy benefits 214,894 0 0 0 207,732 0 0
Policyholders' account balances 19,553 0 0 0 21,607 0 0

Table of Contents


PRUCO LIFE INSURANCE COMPANY OF NEW JERSEY
Notes to Unaudited Interim Financial Statements—(Continued)


		Three Months Ended March 31, 2021																							Three Months Ended June 30, 2022
		Fair Value, beginning of period		Total realized and unrealized gains (losses)(1)		Purchases		Sales		Issuances		Settlements		Other		Transfers into Level 3		Transfers out of Level 3		Fair Value, end of period		Unrealized gains (losses) for assets still held(2)			Fair Value, beginning of period		Total realized and unrealized gains (losses)(1)		Purchases		Sales		Issuances		Settlements		Other		Transfers into Level 3		Transfers out of Level 3		Fair Value, end of period		Unrealized gains (losses) for assets still held(2)
		(in thousands)																							(in thousands)
Fixed maturities, available-for-sale:	Fixed maturities, available-for-sale:																							Fixed maturities, available-for-sale:

Corporate securities(3)	Corporate securities(3)	$	24,045	$	(1,714)	$	0	$	0	$	0	$	0	$	0	$	0	$	0	$	22,331	$	(1,713)	Corporate securities(3)	$	20,823	$	667	$	0	$	0	$	0	$	0	$	0	$	0	$	(18,219)	$	3,271	$	667
Structured securities(4)	Structured securities(4)	0		0		0		0		0		0		0		0		0		0		0		Structured securities(4)	24,397		(2,429)		320		0		0		(118)		0		0		0		22,170		(2,419)
Other assets:	Other assets:																							Other assets:

Equity securities	Equity securities	6,095		(238)		0		0		0		0		0		0		0		5,857		(238)		Equity securities	5,298		(445)		0		0		0		0		0		0		0		4,853		(445)

Reinsurance recoverables	Reinsurance recoverables	1,195,469		(562,720)		27,784		0		0		0		0		0		0		660,533		(551,773)		Reinsurance recoverables	633,060		(144,058)		25,179		0		0		0		0		0		0		514,181		(139,247)

Liabilities:	Liabilities:																							Liabilities:
Future policy benefits	Future policy benefits	(1,195,469)		562,720		0		0		(27,784)		0		0		0		0		(660,533)		551,773		Future policy benefits	(633,060)		144,058		0		0		(25,179)		0		0		0		0		(514,181)		139,247
Policyholders' account balances(5)	Policyholders' account balances(5)	(153,937)		14,042		0		0		0		3,122		0		0		0		(136,773)		16,277		Policyholders' account balances(5)	(130,930)		12,604		0		0		0		5,654		0		0		0		(112,672)		11,430


	Three Months Ended June 30, 2022
	Total realized and unrealized gains (losses)								Unrealized gains (losses) for assets still held(2)
	Realized investment gains (losses), net(1)		Other income (loss)		Included in other comprehensive income (loss)		Net investment income			Realized investment gains (losses), net		Other income (loss)		Included in other comprehensive income (loss)
	(in thousands)
Fixed maturities, available-for-sale	$	667	$	0	$	(2,418)	$	(11)		$	667	$	0	$	(2,419)
Other assets:

Equity securities	0		(445)		0		0			0		(445)		0



Reinsurance recoverables	(144,058)		0		0		0			(139,247)		0		0

Liabilities:
Future policy benefits	144,058		0		0		0			139,247		0		0
Policyholders' account balances	12,604		0		0		0			11,430		0		0

Three Months Ended March 31, 2021
Total realized and unrealized gains (losses) Unrealized gains (losses) for assets still held(2)
Realized investment gains (losses), net(1) Other income (loss) Included in other comprehensive income (loss) Net investment income Realized investment gains (losses), net Other income (loss) Included in other comprehensive income (loss)
(in thousands)
Fixed maturities, available-for-sale $ 0 $ 0 $ (1,714) $ 0 $ 0 $ 0 $ (1,713)
Other assets:
Equity securities 0 (238) 0 0 0 (238) 0
Reinsurance recoverables (562,720) 0 0 0 (551,773) 0 0
Liabilities:
Future policy benefits 562,720 0 0 0 551,773 0 0
Policyholders' account balances 14,042 0 0 0 16,277 0 0

Table of Contents


PRUCO LIFE INSURANCE COMPANY OF NEW JERSEY
Notes to Unaudited Interim Financial Statements—(Continued)


	Six Months Ended June 30, 2022
	Fair Value, beginning of period		Total realized and unrealized gains (losses)(1)		Purchases		Sales		Issuances		Settlements		Other		Transfers into Level 3		Transfers out of Level 3		Fair Value, end of period		Unrealized gains (losses) for assets still held(2)
	(in thousands)
Fixed maturities, available-for-sale:


Corporate securities(3)	$	24,319	$	(2,197)	$	0	$	0	$	0	$	(632)	$	0	$	0	$	(18,219)	$	3,271	$	(2,154)
Structured securities(4)	27,274		(5,224)		320		0		0		(200)		0		0		0		22,170		(5,215)
Other assets:

Equity securities	5,812		(959)		0		0		0		0		0		0		0		4,853		(959)



Reinsurance recoverables	821,596		(358,952)		51,537		0		0		0		0		0		0		514,181		(345,127)

Liabilities:
Future policy benefits	(821,596)		358,952		0		0		(51,537)		0		0		0		0		(514,181)		345,127
Policyholders' account balances(5)	(153,127)		32,157		0		0		0		8,298		0		0		0		(112,672)		33,037


	Six Months Ended June 30, 2022
	Total realized and unrealized gains (losses)								Unrealized gains (losses) for assets still held(2)
	Realized investment gains (losses), net(1)		Other income (loss)		Included in other comprehensive income (loss)		Net investment income			Realized investment gains (losses), net		Other income (loss)		Included in other comprehensive income (loss)
	(in thousands)
Fixed maturities, available-for-sale	$	667	$	0	$	(8,079)	$	(9)		$	667	$	0	$	(8,036)
Other assets:

Equity securities	0		(959)		0		0			0		(959)		0



Reinsurance recoverables	(358,952)		0		0		0			(345,127)		0		0

Liabilities:
Future policy benefits	358,952		0		0		0			345,127		0		0
Policyholders' account balances	32,157		0		0		0			33,037		0		0

Table of Contents


PRUCO LIFE INSURANCE COMPANY OF NEW JERSEY
Notes to Unaudited Interim Financial Statements—(Continued)


	Three Months Ended June 30, 2021
	Fair Value, beginning of period	Total realized and unrealized gains (losses)(1)	Purchases	Sales	Issuances	Settlements	Other	Transfers into Level 3	Transfers out of Level 3	Fair Value, end of period	Unrealized gains (losses) for assets still held(2)
	(in thousands)
Fixed maturities, available-for-sale:


Corporate securities(3)	22,331	449	0	0	0	(37)	0	0	0	22,743	449
Structured securities	0	0	0	0	0	0	0	0	0	0	0
Other assets:

Equity securities	5,857	47	0	0	0	0	0	0	0	5,904	47



Reinsurance recoverables	660,533	145,996	27,678	0	0	0	0	0	0	834,207	154,090

Liabilities:
Future policy benefits	(660,533)	(145,996)	0	0	(27,678)	0	0	0	0	(834,207)	(154,090)
Policyholders' account balances(5)	(136,773)	(19,713)	0	0	0	4,337	0	0	0	(152,149)	(17,642)


	Three Months Ended June 30, 2021
	Total realized and unrealized gains (losses)								Unrealized gains (losses) for assets still held(2)
	Realized investment gains (losses), net(1)		Other income (loss)		Included in other comprehensive income (loss)		Net investment income			Realized investment gains (losses), net		Other income (loss)		Included in other comprehensive income (loss)
	(in thousands)
Fixed maturities, available-for-sale	$	0	$	0	$	449	$	0		$	0	$	0	$	449
Other assets:

Equity securities	0		47		0		0			0		47		0



Reinsurance recoverables	145,996		0		0		0			154,090		0		0

Liabilities:
Future policy benefits	(145,996)		0		0		0			(154,090)		0		0
Policyholders' account balances	(19,713)		0		0		0			(17,642)		0		0

Table of Contents


PRUCO LIFE INSURANCE COMPANY OF NEW JERSEY
Notes to Unaudited Interim Financial Statements—(Continued)


	Six Months Ended June 30, 2021
	Fair Value, beginning of period		Total realized and unrealized gains (losses)(1)		Purchases		Sales		Issuances		Settlements		Other		Transfers into Level 3		Transfers out of Level 3		Fair Value, end of period		Unrealized gains (losses) for assets still held(2)
	(in thousands)
Fixed maturities, available-for-sale:


Corporate securities(3)	$	24,045	$	(1,265)	$	0	$	0	$	0	$	(37)	$	0	$	0	$	0	$	22,743	$	(1,264)
Structured securities	0		0		0		0		0		0		0		0		0		0		0
Other assets:

Equity securities	6,095		(191)		0		0		0		0		0		0		0		5,904		(191)



Reinsurance recoverables	1,195,469		(416,724)		55,462		0		0		0		0		0		0		834,207		(390,243)

Liabilities:
Future policy benefits	(1,195,469)		416,724		0		0		(55,462)		0		0		0		0		(834,207)		390,243
Policyholders' account balances(5)	(153,937)		(5,671)		0		0		0		7,459		0		0		0		(152,149)		(1,365)


	Six Months Ended June 30, 2021
	Total realized and unrealized gains (losses)								Unrealized gains (losses) for assets still held(2)
	Realized investment gains (losses), net(1)		Other income (loss)		Included in other comprehensive income (loss)		Net investment income			Realized investment gains (losses), net		Other income (loss)		Included in other comprehensive income (loss)
	(in thousands)
Fixed maturities, available-for-sale	$	0	$	0	$	(1,265)	$	0		$	0	$	0	$	(1,264)
Other assets:

Equity securities	0		(191)		0		0			0		(191)		0



Reinsurance recoverables	(416,724)		0		0		0			(390,243)		0		0

Liabilities:
Future policy benefits	416,724		0		0		0			390,243		0		0
Policyholders' account balances	(5,671)		0		0		0			(1,365)		0		0

(1)Realized investment gains (losses) on future policy benefits and reinsurance recoverables primarily represent the change in the fair value of the Company's living benefit guarantees on certain of its variable annuity contracts.

(2)Unrealized gains or losses related to assets still held at the end of the period do not include amortization or accretion of premiums and discounts.

(3)Includes U.S. corporate ~~public, U.S. corporate~~ private and foreign corporate private securities.

(4)Includes asset backed and commercial mortgage-backed securities.

(5)Issuances and settlements for Policyholders' account balances are presented net in the rollforward.

3235

Table of Contents


PRUCO LIFE INSURANCE COMPANY OF NEW JERSEY
Notes to Unaudited Interim Financial Statements—(Continued)

Fair Value of Financial Instruments

The table below presents the carrying amount and fair value by fair value hierarchy level of certain financial instruments that are not reported at fair value. The financial instruments presented below are reported at carrying value on the Company’s Unaudited Interim Statements of Financial Position. In some cases, as described below, the carrying amount equals or approximates fair value.


		March 31, 2022											June 30, 2022
		Fair Value								Carrying Amount(1)			Fair Value								Carrying Amount(1)
		Level 1		Level 2		Level 3		Total		Total			Level 1		Level 2		Level 3		Total		Total
		(in thousands)											(in thousands)
Assets:	Assets:											Assets:

Commercial mortgage and other loans	Commercial mortgage and other loans	$	0	$	0	$	111,974	$	111,974	$	111,787	Commercial mortgage and other loans	$	0	$	0	$	106,058	$	106,058	$	109,708
Policy loans	Policy loans	0		0		211,894		211,894		211,894		Policy loans	0		0		212,158		212,158		212,158

Cash and cash equivalents	Cash and cash equivalents	7,186		0		0		7,186		7,186		Cash and cash equivalents	6,195		0		0		6,195		6,195
Accrued investment income	Accrued investment income	0		23,475		0		23,475		23,475		Accrued investment income	0		24,147		0		24,147		24,147
Reinsurance recoverables	Reinsurance recoverables	0		0		27,530		27,530		28,317		Reinsurance recoverables	0		0		26,248		26,248		27,935
Receivables from parent and affiliates	Receivables from parent and affiliates	0		18,606		0		18,606		18,606		Receivables from parent and affiliates	0		9,003		0		9,003		9,003
Other assets	Other assets	0		3,708		0		3,708		3,708		Other assets	0		4,429		0		4,429		4,429
Total assets	Total assets	$	7,186	$	45,789	$	351,398	$	404,373	$	404,973	Total assets	$	6,195	$	37,579	$	344,464	$	388,238	$	393,575
Liabilities:	Liabilities:											Liabilities:
Policyholders’ account balances - investment contracts	Policyholders’ account balances - investment contracts	$	0	$	199,185	$	39,174	$	238,359	$	239,146	Policyholders’ account balances - investment contracts	$	0	$	191,843	$	38,180	$	230,023	$	231,710

Payables to parent and affiliates	Payables to parent and affiliates	0		9		0		9		9		Payables to parent and affiliates	0		9		0		9		9
Other liabilities	Other liabilities	0		56,254		0		56,254		56,254		Other liabilities	0		48,016		0		48,016		48,016
Total liabilities	Total liabilities	$	0	$	255,448	$	39,174	$	294,622	$	295,409	Total liabilities	$	0	$	239,868	$	38,180	$	278,048	$	279,735


	December 31, 2021
	Fair Value								Carrying Amount(1)
	Level 1		Level 2		Level 3		Total		Total
	(in thousands)
Assets:

Commercial mortgage and other loans	$	0	$	0	$	121,594	$	121,594	$	115,576
Policy loans	0		0		210,730		210,730		210,730


Cash and cash equivalents	7,597		0		0		7,597		7,597
Accrued investment income	0		22,539		0		22,539		22,539
Reinsurance recoverables	0		0		29,931		29,931		28,883
Receivables from parent and affiliates	0		20,650		0		20,650		20,650
Other assets	0		3,013		0		3,013		3,013
Total assets	$	7,597	$	46,202	$	362,255	$	416,054	$	408,988
Liabilities:
Policyholders’ account balances - investment contracts	$	0	$	201,955	$	41,939	$	243,894	$	242,846






Payables to parent and affiliates	0		2,432		0		2,432		2,432
Other liabilities	0		49,130		0		49,130		49,130
Total liabilities	$	0	$	253,517	$	41,939	$	295,456	$	294,408

3336

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PRUCO LIFE INSURANCE COMPANY OF NEW JERSEY
Notes to Unaudited Interim Financial Statements—(Continued)

(1)Carrying values presented herein differ from those in the Company’s Unaudited Interim Statements of Financial Position because certain items within the respective financial statement captions are not considered financial instruments or out of scope under authoritative guidance relating to disclosures of the fair value of financial instruments.

6. REINSURANCE

The Company participates in reinsurance with its affiliates Prudential Arizona Reinsurance Captive Company (“PARCC”), Prudential Arizona Reinsurance Term Company (“PAR Term”), Prudential Arizona Reinsurance Universal Company (“PAR U”), Prudential Term Reinsurance Company (“Term Re”) and Dryden Arizona Reinsurance Term Company (“DART”), its parent companies, Pruco Life and Prudential Insurance, as well as third parties. The reinsurance agreements provide risk diversification and additional capacity for future growth, limit the maximum net loss potential, manage statutory capital, and facilitate the Company's capital market hedging program. Life reinsurance is accomplished through various plans of reinsurance, primarily yearly renewable term and coinsurance. Reinsurance ceded arrangements do not discharge the Company as the primary insurer. 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 Company believes a material reinsurance liability resulting from such inability of reinsurers to meet their obligations is unlikely.

Reserves related to reinsured long-duration contracts are accounted for using assumptions consistent with those used to account for the underlying contracts. Amounts recoverable from reinsurers for long-duration reinsurance arrangements are estimated in a manner consistent with the claim liabilities and policy benefits associated with the reinsured policies. Reinsurance policy charges and fee income ceded for universal life and variable annuity products are accounted for as a reduction of policy charges and fee income. Reinsurance premiums ceded for term insurance products are accounted for as a reduction of premiums.

Realized investment gains and losses include the impact of reinsurance agreements, particularly reinsurance agreements involving living benefit guarantees. The Company has entered into a reinsurance agreement to transfer the risk related to living benefit guarantees on variable annuities to Prudential Insurance. These reinsurance agreements are derivatives and have been accounted for in the same manner as embedded derivatives and the changes in the fair value of these derivatives are recognized through “Realized investment gains (losses), net”. See Note 4 for additional information related to the accounting for embedded derivatives.

Reinsurance amounts included in the Company’s Unaudited Interim Statements of Financial Position as of ~~March 31,~~June 30, 2022 and December 31, 2021 were as follows:


		March 31, 2022		December 31, 2021			June 30, 2022		December 31, 2021
		(in thousands)					(in thousands)
Reinsurance recoverables	Reinsurance recoverables	$	3,399,644	$	3,601,212	Reinsurance recoverables	$	3,321,877	$	3,601,212
Policy loans	Policy loans	(22,227)		(22,028)		Policy loans	(22,283)		(22,028)
Deferred policy acquisition costs	Deferred policy acquisition costs	(652,000)		(634,661)		Deferred policy acquisition costs	(661,161)		(634,661)
Deferred sales inducements	Deferred sales inducements	(34,616)		(37,905)		Deferred sales inducements	(34,354)		(37,905)
Other assets	Other assets	11,722		12,941		Other assets	11,082		12,941
Other liabilities	Other liabilities	116,726		140,248		Other liabilities	82,808		140,248

3437

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PRUCO LIFE INSURANCE COMPANY OF NEW JERSEY
Notes to Unaudited Interim Financial Statements—(Continued)

Reinsurance recoverables by counterparty are broken out below:


		March 31, 2022		December 31, 2021			June 30, 2022		December 31, 2021
		(in thousands)					(in thousands)
Prudential Insurance	Prudential Insurance	$	1,135,742	$	1,344,251	Prudential Insurance	$	996,884	$	1,344,251
PAR U	PAR U	1,233,956		1,213,038		PAR U	1,284,355		1,213,038
PARCC	PARCC	401,989		415,266		PARCC	397,068		415,266
PAR Term	PAR Term	250,132		248,387		PAR Term	253,714		248,387
Term Re	Term Re	263,675		256,283		Term Re	273,895		256,283
DART	DART	78,949		77,995		DART	83,364		77,995
Pruco Life	Pruco Life	31,170		40,804		Pruco Life	29,868		40,804
Unaffiliated	Unaffiliated	4,031		5,188		Unaffiliated	2,729		5,188
Total reinsurance recoverables	Total reinsurance recoverables	$	3,399,644	$	3,601,212	Total reinsurance recoverables	$	3,321,877	$	3,601,212

3538

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PRUCO LIFE INSURANCE COMPANY OF NEW JERSEY
Notes to Unaudited Interim Financial Statements—(Continued)

Reinsurance amounts, included in the Company’s Unaudited Interim Statements of Operations and Comprehensive Income (Loss) for the three and six months ended ~~March 31,~~June 30, were as follows:


		Three months ended March 31,			Three Months Ended June 30,						Six Months Ended June 30,
			2022			2021			2022		2021		2022		2021
			(in thousands)						(in thousands)
Premiums:	Premiums:							Premiums:
Direct	Direct		$	63,437		$	64,350	Direct	$	61,930	$	64,457	$	125,367	$	128,807

Ceded	Ceded		(53,242)			(56,791)		Ceded	(53,295)		(57,371)		(106,537)		(114,162)
Net premiums	Net premiums		10,195			7,559		Net premiums	8,635		7,086		18,830		14,645
Policy charges and fee income:	Policy charges and fee income:							Policy charges and fee income:
Direct	Direct		100,498			107,538		Direct	101,561		99,420		202,059		206,958

Ceded(1)	Ceded(1)		(84,777)			(79,220)		Ceded(1)	(69,367)		(76,496)		(154,144)		(155,716)
Net policy charges and fee income	Net policy charges and fee income		15,721			28,318		Net policy charges and fee income	32,194		22,924		47,915		51,242
Net investment income:	Net investment income:							Net investment income:
Direct	Direct		24,563			23,753		Direct	25,068		25,101		49,631		48,854

Ceded	Ceded		(194)			(208)		Ceded	(204)		(203)		(398)		(411)
Net investment income	Net investment income		24,369			23,545		Net investment income	24,864		24,898		49,233		48,443
Asset administration fees:	Asset administration fees:							Asset administration fees:
Direct	Direct		10,502			10,806		Direct	9,581		11,134		20,083		21,940

Ceded	Ceded		(8,242)			(8,780)		Ceded	(7,471)		(8,994)		(15,713)		(17,774)
Net asset administration fees	Net asset administration fees		2,260			2,026		Net asset administration fees	2,110		2,140		4,370		4,166

Realized investment gains (losses), net:	Realized investment gains (losses), net:							Realized investment gains (losses), net:
Direct	Direct		230,121			577,847		Direct	149,061		(162,428)		379,182		415,419

Ceded	Ceded		(214,093)			(562,015)		Ceded	(143,451)		145,984		(357,544)		(416,031)
Realized investment gains (losses), net	Realized investment gains (losses), net		16,028			15,832		Realized investment gains (losses), net	5,610		(16,444)		21,638		(612)
Policyholders’ benefits (including change in reserves):	Policyholders’ benefits (including change in reserves):							Policyholders’ benefits (including change in reserves):
Direct	Direct		100,495			110,163		Direct	171,279		107,782		271,774		217,945

Ceded(2)	Ceded(2)		(86,921)			(91,328)		Ceded(2)	(158,792)		(96,493)		(245,713)		(187,821)
Net policyholders’ benefits (including change in reserves)	Net policyholders’ benefits (including change in reserves)		13,574			18,835		Net policyholders’ benefits (including change in reserves)	12,487		11,289		26,061		30,124
Interest credited to policyholders’ account balances:	Interest credited to policyholders’ account balances:							Interest credited to policyholders’ account balances:
Direct	Direct		24,446			21,312		Direct	21,341		15,148		45,787		36,460

Ceded	Ceded		(13,252)			(10,601)		Ceded	(9,400)		(5,850)		(22,652)		(16,451)
Net interest credited to policyholders’ account balances	Net interest credited to policyholders’ account balances		11,194			10,711		Net interest credited to policyholders’ account balances	11,941		9,298		23,135		20,009
Reinsurance expense allowances and general and administrative expenses, net of capitalization and amortization	Reinsurance expense allowances and general and administrative expenses, net of capitalization and amortization		(45,246)			(36,429)		Reinsurance expense allowances and general and administrative expenses, net of capitalization and amortization	(36,829)		(36,633)		(82,075)		(73,062)

(1)Includes ~~$(1)~~$(2) million and $0.0 million of unaffiliated activity for the three months ended ~~March 31,~~June 30, 2022 and 2021, respectively, and $(3) million and $0.0 million for the six months ended June 30, 2022 and 2021, respectively.

(2)Includes ~~$(0.1)~~$0.0 million and ~~$(1)~~$1 million of unaffiliated activity for the three months ended ~~March 31,~~June 30, 2022 and 2021, respectively, and $(0.1) million and $0.1 million for the six months ended June 30, 2022 and 2021, respectively.

The gross and net amounts of life insurance face amount in force as of ~~March 31,~~June 30, 2022 and 2021 were as follows:

2022 2021
(in thousands)
Direct gross life insurance face amount in force $ 155,729,264 $ 154,519,117
Reinsurance ceded (141,264,004) (139,942,682)
Net life insurance face amount in force $ 14,465,260 $ 14,576,435


	2022		2021
	(in thousands)
Direct gross life insurance face amount in force	$	154,946,946	$	155,482,024
Reinsurance ceded	(141,076,514)		(140,507,672)
Net life insurance face amount in force	$	13,870,432	$	14,974,352

3639

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PRUCO LIFE INSURANCE COMPANY OF NEW JERSEY
Notes to Unaudited Interim Financial Statements—(Continued)

Information regarding significant affiliated reinsurance agreements is described below.

Prudential Insurance

The Company has a yearly renewable term reinsurance agreement with Prudential Insurance and reinsures the majority of all mortality risks not otherwise reinsured. Effective July 1, 2017, this agreement was terminated for certain new business, primarily Universal Life business, and such business was reinsured to Pruco Life under a yearly renewable term reinsurance agreement. As of January 1, 2020, the remaining portions of new business (specifically Term policies) ceased being reinsured by the Company to Prudential Insurance, and a separate yearly renewable term reinsurance agreement was established with Pruco Life for Term policies. Effective April 1, 2016, the Company entered into a reinsurance agreement with Prudential Insurance to reinsure its variable annuity base contracts, along with the living benefit guarantees. As of December 31, 2020, the Company discontinued the sales of traditional variable annuities with guaranteed living benefit riders. This discontinuation has no impact on the reinsurance agreement between Prudential Insurance and the Company.

PAR U

Effective July 1, 2012, the Company reinsures an amount equal to 95% of all risks associated with Universal Protector policies having no-lapse guarantees as well as certain of its universal policies, with effective dates through December 31, 2019, excluding those policies that are subject to principle-based reserving.

PARCC

The Company reinsures 90% of the risks under its term life insurance policies with effective dates prior to January 1, 2010 through an automatic coinsurance agreement with PARCC.

PAR Term

The Company reinsures 95% of the risks under its term life insurance policies, with effective dates January 1, 2010 through December 31, 2013, through an automatic coinsurance agreement with PAR Term.

Term Re

The Company reinsures 95% of the risks under its term life insurance policies with effective dates on or after January 1, 2014 through December 31, 2017, through an automatic coinsurance agreement with Term Re.

Pruco Life

Effective July 1, 2017, the Company entered into a yearly renewable term reinsurance agreement with Pruco Life for new business, primarily covering Universal Life policies. Effective January 1, 2020, the Company entered in a similar yearly renewable term reinsurance agreement with Pruco Life for new business relating to Term policies. Under these agreements the majority of all mortality risk is ceded to Pruco Life. The Company also reinsures certain Corporate Owned Life Insurance (“COLI”) policies with Pruco Life. Through March 31, 2016, the Company reinsured Prudential Defined Income ("PDI") living benefit guarantees with Pruco Life. Effective April 1, 2016, the Company recaptured PDI living benefit guarantees from Pruco Life and reinsured them, together with the related variable annuity base contracts, with Prudential Insurance.

DART

Effective January 1, 2018, the Company entered into an automatic coinsurance agreement with DART to reinsure an amount equal to 95% of the risks associated with its term life insurance policies with effective dates on or after January 1, 2018 through December 31, 2019, excluding those policies that are subject to principle-based reserving.

3740

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PRUCO LIFE INSURANCE COMPANY OF NEW JERSEY
Notes to Unaudited Interim Financial Statements—(Continued)

7. INCOME TAXES

The Company uses a full year projected effective tax rate approach to calculate year-to-date taxes.In determining the full year projected tax rate, the Company considers the realizability of deferred tax assets, including those associated with unrealized investment losses, and has determined based upon the weight of available evidence that no valuation allowance is necessary related to unrealized investment losses. In addition, certain items impacting total income tax expense are recorded in the periods in which they occur. The projected effective tax rate is the ratio of projected “Income tax expense (benefit)” divided by projected “Income (loss) from operations before income taxes". The interim period tax expense (or benefit) is the difference between the year-to-date income tax provision and the amounts reported for the previous interim periods of the fiscal year.

The Company's income tax provision amounted to an income tax ~~expense~~benefit of ~~$1.9~~$(2.5) million, or ~~7.83%~~(5.43)% of income (loss) from operations before income taxes in the first ~~three~~six months of 2022, compared to ~~$2.1~~an income tax expense of $2.3 million, or ~~8.09%~~7.09%, in the first ~~three~~six months of 2021. The Company’s current and prior effective tax rates differed from the U.S. statutory tax rate of 21% primarily due to non-taxable investment income and tax credits.

8. EQUITY

Accumulated Other Comprehensive Income (Loss)

AOCI represents the cumulative OCI items that are reported separate from net income and detailed on the Unaudited Interim Statements of Operations and Comprehensive Income (Loss). The balance of and changes in each component of AOCI as of and for the ~~three~~six months ended ~~March 31,~~June 30, 2022 and 2021, are as follows:


		Accumulated Other Comprehensive Income (Loss)							Accumulated Other Comprehensive Income (Loss)
		Foreign Currency Translation Adjustment		Net Unrealized Investment Gains (Losses)(1)		Total Accumulated Other Comprehensive Income (Loss)			Foreign Currency Translation Adjustment		Net Unrealized Investment Gains (Losses)(1)		Total Accumulated Other Comprehensive Income (Loss)
		(in thousands)							(in thousands)
Balance, December 31, 2021	Balance, December 31, 2021	$	(988)	$	131,641	$	130,653	Balance, December 31, 2021	$	(988)	$	131,641	$	130,653
Change in OCI before reclassifications	Change in OCI before reclassifications	(67)		(167,650)		(167,717)		Change in OCI before reclassifications	(417)		(326,614)		(327,031)
Amounts reclassified from AOCI	Amounts reclassified from AOCI	0		1,289		1,289		Amounts reclassified from AOCI	0		150		150
Income tax benefit (expense)	Income tax benefit (expense)	15		34,934		34,949		Income tax benefit (expense)	97		68,548		68,645
Balance, March 31, 2022		$	(1,040)	$	214	$	(826)
Balance, June 30, 2022								Balance, June 30, 2022	$	(1,308)	$	(126,275)	$	(127,583)


		Accumulated Other Comprehensive Income (Loss)							Accumulated Other Comprehensive Income (Loss)
		Foreign Currency Translation Adjustment		Net Unrealized Investment Gains (Losses)(1)		Total Accumulated Other Comprehensive Income (Loss)			Foreign Currency Translation Adjustment		Net Unrealized Investment Gains (Losses)(1)		Total Accumulated Other Comprehensive Income (Loss)
		(in thousands)							(in thousands)
Balance, December 31, 2020	Balance, December 31, 2020	$	(783)	$	186,190	$	185,407	Balance, December 31, 2020	$	(783)	$	186,190	$	185,407
Change in OCI before reclassifications	Change in OCI before reclassifications	(108)		(113,151)		(113,259)		Change in OCI before reclassifications	(80)		(51,247)		(51,327)
Amounts reclassified from AOCI	Amounts reclassified from AOCI	0		(410)		(410)		Amounts reclassified from AOCI	0		(277)		(277)
Income tax benefit (expense)	Income tax benefit (expense)	23		23,848		23,871		Income tax benefit (expense)	17		10,819		10,836
Balance, March 31, 2021		$	(868)	$	96,477	$	95,609
Balance, June 30, 2021								Balance, June 30, 2021	$	(846)	$	145,485	$	144,639

(1)Includes cash flow hedges of $7$15 million and $5 million as of ~~March 31,~~June 30, 2022 and December 31, 2021, respectively, and ~~$(1)~~$1 million and $(3) million as of ~~March 31,~~June 30, 2021 and December 31, 2020, respectively.

3841

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PRUCO LIFE INSURANCE COMPANY OF NEW JERSEY
Notes to Unaudited Interim Financial Statements—(Continued)

Reclassifications out of Accumulated Other Comprehensive Income (Loss)


		Three Months Ended March 31,				Three Months Ended June 30,		Six Months Ended June 30,
		2022		2021				2022		2021		2022		2021
		(in thousands)				(in thousands)
Amounts reclassified from AOCI (1)(2):	Amounts reclassified from AOCI (1)(2):						Amounts reclassified from AOCI (1)(2):
Net unrealized investment gains (losses):	Net unrealized investment gains (losses):						Net unrealized investment gains (losses):
Cash flow hedges - Currency/ Interest rate(3)	Cash flow hedges - Currency/ Interest rate(3)	$	670	$	552		Cash flow hedges - Currency/ Interest rate(3)	$	1,415	$	294	$	2,085	$	846
Net unrealized investment gains (losses) on available-for-sale securities	Net unrealized investment gains (losses) on available-for-sale securities	(1,959)		(142)			Net unrealized investment gains (losses) on available-for-sale securities	(275)		(427)		(2,235)		(569)
Total net unrealized investment gains (losses)(4)	Total net unrealized investment gains (losses)(4)	(1,289)		410			Total net unrealized investment gains (losses)(4)	1,140		(133)		(150)		277
Total reclassifications for the period	Total reclassifications for the period	$	(1,289)	$	410		Total reclassifications for the period	$	1,140	$	(133)	$	(150)	$	277

(1)All amounts are shown before tax.

(2)Positive amounts indicate gains/benefits reclassified out of AOCI. Negative amounts indicate losses/costs reclassified out of AOCI.

(3)See Note 4 for additional information on cash flow hedges.

(4)See table below for additional information on unrealized investment gains (losses), including the impact on DAC and other costs, future policy benefits, policyholders’ account balances and other liabilities.

Net Unrealized Investment Gains (Losses)

Net unrealized investment gains (losses) on available-for-sale fixed maturity securities and certain other invested assets and other assets are included in the Company’s Unaudited Interim Statements of Financial Position as a component of AOCI. Changes in these amounts include reclassification adjustments to exclude from OCI those items that are included as part of “Net income” for a period that had been part of OCI in earlier periods. There are no amounts related to net unrealized investment gains (losses) on available-for-sale fixed maturity securities on which an allowance for credit losses has been recognized as of ~~March 31,~~June 30, 2022. The amounts for the periods indicated below represent all other net unrealized investment gains (losses):

All Other Net Unrealized Investment Gains (Losses) in AOCI


		Net Unrealized Gains (Losses) on Investments(1)		DAC and Other Costs(2)		Future Policy Benefits, Policyholders' Account Balances and Other Liabilities(3)		Income Tax Benefit (Expense)		Accumulated Other Comprehensive Income (Loss) Related To Net Unrealized Investment Gains (Losses)			Net Unrealized Gains (Losses) on Investments(1)		DAC and Other Costs(2)		Future Policy Benefits, Policyholders' Account Balances and Other Liabilities(3)		Income Tax Benefit (Expense)		Accumulated Other Comprehensive Income (Loss) Related To Net Unrealized Investment Gains (Losses)

Balance, December 31, 2021	Balance, December 31, 2021	$	180,806	$	26,048	$	(40,221)	$	(34,992)	$	131,641	Balance, December 31, 2021	$	180,806	$	26,048	$	(40,221)	$	(34,992)	$	131,641
Net investment gains (losses) on investments arising during the period	Net investment gains (losses) on investments arising during the period	(183,447)		0		0		38,522		(144,925)		Net investment gains (losses) on investments arising during the period	(358,975)		0		0		75,374		(283,601)
Reclassification adjustment for (gains) losses included in net income	Reclassification adjustment for (gains) losses included in net income	1,289		0		0		(271)		1,018		Reclassification adjustment for (gains) losses included in net income	150		0		0		(31)		119

Impact of net unrealized investment (gains) losses	Impact of net unrealized investment (gains) losses	0		(12,272)		28,069		(3,317)		12,480		Impact of net unrealized investment (gains) losses	0		(56,803)		89,164		(6,795)		25,566
Balance, March 31, 2022		$	(1,352)	$	13,776	$	(12,152)	$	(58)	$	214
Balance, June 30, 2022												Balance, June 30, 2022	$	(178,019)	$	(30,755)	$	48,943	$	33,556	$	(126,275)

(1)Includes cash flow hedges. See Note 4 for information on cash flow hedges.

(2)"Other costs" primarily includes reinsurance recoverables and deferred reinsurance losses.

(3)"Other liabilities" primarily includes reinsurance payables.

3942

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PRUCO LIFE INSURANCE COMPANY OF NEW JERSEY
Notes to Unaudited Interim Financial Statements—(Continued)

9. RELATED PARTY TRANSACTIONS

The Company has extensive transactions and relationships with Prudential Insurance and other affiliates. Although we seek to ensure that these transactions and relationships are fair and reasonable, it is possible that the terms of these transactions are not the same as those that would result from transactions among unrelated parties.

Expense Charges and Allocations

The majority of the Company’s expenses are allocations or charges from Prudential Insurance or other affiliates. These expenses can be grouped into general and administrative expenses and agency distribution expenses.

The Company’s general and administrative expenses are charged to the Company using allocation methodologies based on business production processes. Management believes that the methodology is reasonable and reflects costs incurred by Prudential Insurance to process transactions on behalf of the Company. The Company operates under service and lease agreements whereby services of officers and employees, supplies, use of equipment and office space are provided by Prudential Insurance. The Company reviews its allocation methodology periodically which it may adjust accordingly. General and administrative expenses include allocations of stock compensation expenses related to a stock-based awards program and a deferred compensation program issued by Prudential Financial. The expense charged to the Company for the stock-based awards program was $0.0 million for both the three months ended ~~March 31,~~June 30, 2022 and 2021, and $0.0 million for both the six months ended June 30, 2022 and 2021. The expense charged to the Company for the deferred compensation program was ~~$0.3~~$0.0 million and ~~$0.2~~$0.1 million for the three months ended ~~March 31,~~June 30, 2022 and 2021, ~~respectively.~~respectively, and $0.3 million for both the six months ended June 30, 2022 and 2021.

The Company is charged for its share of employee benefit expenses. These expenses include costs for funded and non-funded, non-contributory defined benefit pension plans. Some of these benefits are based on final earnings and length of service while others are based on an account balance, which takes into consideration age, service and earnings during a career. The Company’s share of net expense for the pension plans was $0.4 million and $0.3 million for ~~both~~ the three months ended ~~March 31,~~June 30, 2022 and ~~2021.~~2021, respectively, and $0.7 million and $0.6 million for the six months ended June 30, 2022 and 2021, respectively.

The Company is also charged for its share of the costs associated with welfare plans issued by Prudential Insurance. These expenses include costs related to medical, dental, life insurance and disability. The Company's share of net expense for the welfare plans was ~~$0.3~~$0.4 million and ~~$0.4~~$0.3 million for the three months ended ~~March 31,~~June 30, 2022 and 2021, ~~respectively.~~respectively, and $0.7 million for both the six months ended June 30, 2022 and 2021.

Prudential Insurance sponsors voluntary savings plans for its employee 401(k) plans. The plans provide for salary reduction contributions by employees and matching contributions by the Company of up to 4% of annual salary. The Company’s expense for its share of the voluntary savings plan was $0.2 million and $0.1 million for ~~both~~ the three months ended ~~March 31,~~June 30, 2022 and ~~2021.~~2021, respectively, and $0.3 million and $0.2 million for the six months ended June 30, 2022 and 2021, respectively.

The Company is charged distribution expenses from Prudential Insurance’s agency network for both its domestic life and annuity products through a transfer pricing agreement, which is intended to reflect a market-based pricing arrangement.

The Company pays commissions and certain other fees to Prudential Annuities Distributors, Inc. (“PAD”) in consideration for PAD’s marketing and underwriting of the Company’s annuity products. Commissions and fees are paid by PAD to broker-dealers who sell the Company’s annuity products. Commissions and fees paid by the Company to PAD were ~~$12~~$6 million and $9 million for the three months ended ~~March 31,~~June 30, 2022 and 2021, respectively, and $17 million and $18 million for the six months ended June 30, 2022 and 2021, respectively.

The Company is charged for its share of corporate expenses incurred by Prudential Financial to benefit its businesses, such as advertising, executive oversight, external affairs and philanthropic activity. The Company’s share of corporate expenses was $2 million for both the three months ended ~~March 31,~~June 30, 2022 and 2021 and $4 million for both the six months ended June 30, 2022 and 2021.

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PRUCO LIFE INSURANCE COMPANY OF NEW JERSEY
Notes to Unaudited Interim Financial Statements—(Continued)

Corporate-Owned Life Insurance

The Company has sold 3 Corporate-Owned Life Insurance ("COLI") policies to Prudential Insurance and 1 to Prudential Financial. The cash surrender value included in separate accounts for these COLI policies was ~~$3,303~~$2,896 million at ~~March 31,~~June 30, 2022 and $3,465 million at December 31, 2021. Fees related to these COLI policies were $7 million for both the three months ended ~~March 31,~~June 30, 2022 and 2021 and $14 million for both the six months ended June 30, 2022 and 2021. The Company retains 10% of the mortality risk associated with these COLI policies up to $0.1 million per individual policy.

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~~PRUCO LIFE INSURANCE COMPANY OF NEW JERSEY~~
~~Notes to Unaudited Interim Financial Statements—(Continued)~~

Affiliated Investment Management Expenses

In accordance with an agreement with PGIM, Inc. (“PGIM”), the Company pays investment management expenses to PGIM who acts as investment manager to certain Company general account and separate account assets. Investment management expenses paid to PGIM related to this agreement were $0.6 million and $0.7 million for ~~both~~ the three months ended ~~March 31,~~June 30, 2022 and ~~2021.~~2021, respectively, and $1.3 million and $1.4 million for the six months ended June 30, 2022 and 2021, respectively. These expenses are recorded as “Net investment income” in the Company's Unaudited Interim Statements of Operations and Comprehensive Income (Loss).

Derivative Trades

In its ordinary course of business, the Company enters into OTC derivative contracts with an affiliate, PGF. For these OTC derivative contracts, PGF has a substantially equal and offsetting position with an external counterparty. See Note 4 for additional information.

Joint Ventures

The Company has made investments in joint ventures with certain subsidiaries of Prudential Financial. "Other invested assets" includes $50 million and $48 million as of ~~both March 31,~~June 30, 2022 and December 31, ~~2021.~~2021, respectively. "Net investment income" related to the ventures includes gains of ~~$0.5~~$0.7 million ~~and $0.8 million~~ for both the three months ended ~~March 31,~~June 30, 2022 and 2021, and gains of $1.2 million and $1.5 million for the six months ended June 30, 2022 and 2021, respectively.

Affiliated Asset Administration Fee Income

The Company has a revenue sharing agreement with AST Investment Services, Inc. ("ASTISI") and PGIM Investments LLC ("PGIM Investments") whereby the Company receives fee income based on policyholders' separate account balances invested in the Advanced Series Trust. Income received from ASTISI and PGIM Investments related to this agreement was $8 million and $9 million for the three months ended ~~March 31,~~June 30, 2022 and 2021, respectively, and $16 million and $18 million for the six months ended June 30, 2022 and 2021, respectively. These revenues are recorded as “Asset administration fees” in the Company's Unaudited Interim Statements of Operations and Comprehensive Income (Loss).

The Company has a revenue sharing agreement with PGIM Investments, whereby the Company receives fee income based on policyholders' separate account balances invested in The Prudential Series Fund. Income received from PGIM Investments related to this agreement was $2 million for both the three months ended ~~March 31,~~June 30, 2022 and 2021, respectively, and $4 million for both the six months ended June 30, 2022 and 2021. These revenues are recorded as “Asset administration fees” in the Company’s Unaudited Interim Statements of Operations and Comprehensive Income (Loss).

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PRUCO LIFE INSURANCE COMPANY OF NEW JERSEY
Notes to Unaudited Interim Financial Statements—(Continued)

Affiliated Notes Receivable

Affiliated notes receivable included in “Receivables from parent and affiliates” at ~~March 31,~~June 30, 2022 and December 31, 2021 were as follows:


		Maturity Date		Interest Rates				March 31, 2022		December 31, 2021			Maturity Date		Interest Rates				June 30, 2022		December 31, 2021
								(in thousands)											(in thousands)

U.S. dollar fixed rate notes	U.S. dollar fixed rate notes		2027	0.00%	-	14.85	%	$	734	$	788	U.S. dollar fixed rate notes		2027	0.00%	-	14.85	%	$	705	$	788
Total long-term notes receivable - affiliated(1)	Total long-term notes receivable - affiliated(1)							$	734	$	788	Total long-term notes receivable - affiliated(1)							$	705	$	788

(1) All long-term notes receivable may be called for prepayment prior to the respective maturity dates under specified circumstances.

The affiliated notes receivable shown above are classified as available-for-sale securities and other trading assets carried at fair value. The Company monitors the internal and external credit ratings of these loans and loan performance. The Company also considers any guarantees made by Prudential Insurance for loans due from affiliates.

There was no accrued interest receivable related to these loans as of ~~March 31,~~June 30, 2022 and December 31, 2021, respectively. Revenues related to these loans were $0.0 million for both the three months ended ~~March 31,~~June 30, 2022 and 2021, and $0.0 million for both the six months ended June 30, 2022 and 2021, and are included in “Other income (loss)”.

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~~PRUCO LIFE INSURANCE COMPANY OF NEW JERSEY~~
~~Notes to Unaudited Interim Financial Statements—(Continued)~~

Affiliated Asset Transfers

The Company participates in affiliated asset trades with parent and sister companies. Book and market value differences for trades with a parent and sister are recognized within "Additional paid-in capital" (“APIC”) and "Realized investment gains (losses), net", respectively. The table below shows affiliated asset trades for the ~~three~~six months ended ~~March 31,~~June 30, 2022 and for the year ended December 31, 2021.


Affiliate	Date	Transaction	Security Type	Fair Value		Book Value		APIC, Net of Tax Increase/(Decrease)		Realized Investment Gain (Loss)
				(in thousands)

Prudential Insurance	September 2021	Purchase	Fixed Maturities	$	10,810	$	10,520	$	(229)	$	0
Prudential Insurance	September 2021	Sale	Fixed Maturities	$	7,356	$	6,477	$	695	$	0
Prudential Retirement Insurance & Annuity Co	September 2021	Purchase	Fixed Maturities	$	19,724	$	19,724	$	0	$	0
Prudential Retirement Insurance & Annuity Co	September 2021	Sale	Fixed Maturities	$	22,557	$	22,038	$	0	$	519
Prudential Insurance	September 2021	Purchase	Derivatives	$	715	$	213	$	(396)	$	0
Prudential Retirement Insurance & Annuity Co	September 2021	Purchase	Derivatives	$	21	$	21	$	0	$	0
Prudential Retirement Insurance & Annuity Co	September 2021	Sale	Derivatives	$	816	$	233	$	0	$	583

Debt Agreements

The Company is authorized to borrow funds up to $200 million from affiliates to meet its capital and other funding needs. As of ~~March 31,~~June 30, 2022 and December 31, 2021, there was no debt outstanding.

The total interest expense to the Company related to loans payable to affiliates was $0.0 million for both the three months ended ~~March 31,~~June 30, 2022 and 2021, and $0.0 million for both the six months ended June 30, 2022 and 2021.

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PRUCO LIFE INSURANCE COMPANY OF NEW JERSEY
Notes to Unaudited Interim Financial Statements—(Continued)

Contributed Capital and Dividends

The Company received capital contributions of $102 million from Pruco Life through ~~March~~June 2022. In March 2021 and December 2021, the Company received a capital contribution from Pruco Life in the amount of $1 million and $100 million, respectively.

Through ~~March~~June 2022 and December 2021, the Company did not pay any dividends to Pruco Life.

Reinsurance with Affiliates

As discussed in Note 6, the Company participates in reinsurance transactions with certain affiliates.

10. COMMITMENTS AND CONTINGENT LIABILITIES

Commitments

The Company has made commitments to fund commercial mortgage loans. As of ~~March 31,~~June 30, 2022 and December 31, 2021, the outstanding balance on these commitments were $1 million and $1 million respectively. These amounts do not include unfunded commitments that are not unconditionally cancellable. For related credit exposure, there was no allowance for credit losses as of either ~~March 31,~~June 30, 2022 or December 31, 2021. For the three and six months ended ~~March 31,~~June 30, 2022, and 2021, there was no change in allowance for credit losses. The Company has made commitments to purchase or fund investments, mostly private fixed maturities. As of ~~March 31,~~June 30, 2022 and December 31, 2021, ~~$57~~$54 million and $61 million, respectively, of these commitments were outstanding. The amounts include unfunded commitments that are not unconditionally cancellable. There were no related charges for credit losses for ~~both~~either the three or six months ended ~~March 31,~~June 30, 2022 or 2021.

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~~PRUCO LIFE INSURANCE COMPANY OF NEW JERSEY~~
~~Notes to Unaudited Interim Financial Statements—(Continued)~~

Contingent Liabilities

On an ongoing basis, the Company and its regulators review its operations including, but not limited to, sales and other customer interface procedures and practices, and procedures for meeting obligations to its customers and other parties. These reviews may result in the modification or enhancement of processes or the imposition of other action plans, including concerning management oversight, sales and other customer interface procedures and practices, and the timing or computation of payments to customers and other parties. In certain cases, if appropriate, the Company may offer customers or other parties remediation and may incur charges, including the cost of such remediation, administrative costs and regulatory fines.

The Company is subject to the laws and regulations of states and other jurisdictions concerning the identification, reporting and escheatment of unclaimed or abandoned funds, and is subject to audit and examination for compliance with these requirements.

It is possible that the results of operations or the cash flows of the Company in a particular quarterly or annual period could be materially affected as a result of payments in connection with the matters discussed above or other matters depending, in part, upon the results of operations or cash flows for such period. Management believes, however, that ultimate payments in connection with these matters, after consideration of applicable reserves and rights to indemnification, should not have a material adverse effect on the Company’s financial position.

Litigation and Regulatory Matters

The Company is subject to legal and regulatory actions in the ordinary course of its business. Pending legal and regulatory actions include proceedings specific to the Company and proceedings generally applicable to business practices in the industry in which it operates. The Company is subject to class action lawsuits and other litigation involving a variety of issues and allegations involving sales practices, claims payments and procedures, premium charges, policy servicing and breach of fiduciary duty to customers. The Company is also subject to litigation arising out of its general business activities, such as its investments, contracts, leases and labor and employment relationships, including claims of discrimination and harassment, and could be exposed to claims or litigation concerning certain business or process patents. In addition, the Company, along with other participants in the businesses in which it engages, may be subject from time to time to investigations, examinations and inquiries, in some cases industry-wide, concerning issues or matters upon which such regulators have determined to focus. In some of the Company’s pending legal and regulatory actions, parties are seeking large and/or indeterminate amounts, including punitive or exemplary damages. The outcome of litigation or a regulatory matter, and the amount or range of potential loss at any particular time, is often inherently uncertain.

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PRUCO LIFE INSURANCE COMPANY OF NEW JERSEY
Notes to Unaudited Interim Financial Statements—(Continued)

The Company establishes accruals for litigation and regulatory matters when it is probable that a loss has been incurred and the amount of that loss can be reasonably estimated. For litigation and regulatory matters where a loss may be reasonably possible, but not probable, or is probable but not reasonably estimable, no accrual is established, but the matter, if material, is disclosed. The Company estimates that as of ~~March 31,~~June 30, 2022, the aggregate range of reasonably possible losses in excess of accruals established for those litigation and regulatory matters for which such an estimate currently can be made is less than $10 million. This estimate is not an indication of expected loss, if any, or the Company's maximum possible loss exposure on such matters. The Company reviews relevant information with respect to its litigation and regulatory matters on a quarterly and annual basis and updates its accruals, disclosures and estimates of reasonably possible loss based on such reviews.

The following discussion of litigation and regulatory matters provides an update of those matters discussed in Note 14 to the Company's Financial Statements included in the Company's Annual Report on Form 10-K for the year ended December 31, 2021, and should be read in conjunction with the complete descriptions provided in the Form 10-K.

There are no material developments in previously reported matters disclosed as of December 31, 2021.

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~~PRUCO LIFE INSURANCE COMPANY OF NEW JERSEY~~
~~Notes to Unaudited Interim Financial Statements—(Continued)~~

Summary

The Company’s litigation and regulatory matters are subject to many uncertainties, and given their complexity and scope, their outcome cannot be predicted. It is possible that the Company’s results of operations or cash flows in a particular quarterly or annual period could be materially affected by an ultimate unfavorable resolution of pending litigation and regulatory matters depending, in part, upon the results of operations or cash flows for such period. In light of the unpredictability of the Company’s litigation and regulatory matters, it is also possible that in certain cases an ultimate unfavorable resolution of one or more pending litigation or regulatory matters could have a material adverse effect on the Company’s financial statements. Management believes, however, that, based on information currently known to it, the ultimate outcome of all pending litigation and regulatory matters, after consideration of applicable reserves and rights to indemnification, is not likely to have a material adverse effect on the Company’s financial statements.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) addresses the financial condition of Pruco Life Insurance Company of New Jersey, or the “Company,” as of ~~March 31,~~June 30, 2022, compared with December 31, 2021, and its results of operations for the three and six months ended ~~March 31,~~June 30, 2022 and 2021. You should read the following analysis of our financial condition and results of operations in conjunction with the MD&A, the “Risk Factors” section, and the audited Financial Statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021, as well as the statements under “Forward-Looking Statements”, and the Unaudited Interim Financial Statements included elsewhere in this Quarterly Report on Form 10-Q.

Overview

The Company is licensed to sell variable annuities, universal life insurance, variable life insurance and term life insurance in New Jersey and New York. The Company only sells such products in New York primarily through affiliated and unaffiliated distributors. As of December 31, 2020, the Company discontinued the sales of traditional variable annuities with guaranteed living benefit riders.

Annually during the second quarter of each year, we perform a comprehensive review of actuarial assumptions. As part of this review, we may update these assumptions and make refinements to our models based upon emerging experience, future expectations and other data, including any observable market data. For additional information, see “Accounting Policies & Pronouncements—Application of Critical Accounting Estimates” below as well as the Company’s Annual Report on Form 10-K for the year ended December 31, 2021.

COVID-19

Since the first quarter of 2020, the COVID-19 pandemic has caused extreme stress and disruption in the global economy and financial markets and elevated mortality and morbidity for the global population. The COVID-19 pandemic impacted our results of operations in the current period and is expected to impact our results of operations in future periods. The Company has taken several measures to manage the impacts of this crisis. The actual and expected impacts of these events and other items are included in the following update:

•Outlook. ~~We expect~~ COVID-19 ~~to continue to~~may contribute ~~in the near term~~ to elevated levels of mortality, resulting in increased life insurance claims.

•Results of Operations. See “Results of Operations” for a discussion of results for the second quarter and the first ~~quarter~~six months of 2022.

•Risk Factors. The COVID-19 pandemic has adversely impacted our results of operations, financial position, investment portfolio, new business opportunities and operations, and these impacts are expected to continue. For additional information on the risks to our business posed by the COVID-19 pandemic, see “Risk Factors” included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021.

•Business Continuity. Throughout the COVID-19 pandemic, we have been executing Prudential Financial Inc.'s ("Prudential Financial") and our business continuity protocols to ensure employees are safe and able to serve our customers. This included effectively transitioning the vast majority of employees to remote work arrangements. In March 2022, Prudential Financial's offices were reopened to employees and we expect that most of the workforce will adopt a hybrid arrangement for the foreseeable future.

We believe we can sustain long-term hybrid or fully remote work arrangements while ensuring that critical business operations are sustained. In addition, we are managing COVID-19 related impacts on third-party provided services, and do not anticipate significant interruption in critical operations.

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Impact of a Low Interest Rate Environment

As a financial services company, market interest rates are a key driver of our results of operations and financial condition. Changes in interest rates can affect our results of operations and/or our financial condition in several ways, including favorable or adverse impacts to:

•investment-related activity, including: investment income returns, net interest margins, net investment spread results, new money rates, mortgage loan prepayments and bond redemptions;

•hedging costs and other risk mitigation activities;

•insurance reserve levels, amortization of deferred policy acquisition costs (“DAC”) and market experience true-ups;

•customer account values, including their impact on fee income;

•product offerings, design features, crediting rates and sales mix; and

•policyholder behavior, including surrender or withdrawal activity.

For more information on interest rate risks, see “Risk Factors—Market Risk” included in our Annual Report on Form 10-K for the year ended December 31, 2021.

Revenues and Expenses

The Company earns revenues principally from insurance premiums, mortality and expense fees, asset administration fees from insurance and investment products, and from net investment income on the investment of general account and other funds. The Company receives premiums primarily from the sale of individual life insurance and annuity products. The Company earns mortality and expense fees, and asset administration fees, primarily from the sale and servicing of universal life insurance and separate account products including variable life insurance and variable annuities. The Company’s operating expenses principally consist of insurance benefits provided and reserves established for anticipated future insurance benefits, general business expenses, reinsurance premiums, commissions and other costs of selling and servicing the various products sold and interest credited on general account liabilities.

Accounting Policies & Pronouncements

Application of Critical Accounting Estimates

The preparation of financial statements in conformity with U.S. GAAP requires the application of accounting policies that often involve a significant degree of judgment. Management, on an ongoing basis, reviews estimates and assumptions used in the preparation of financial statements. If management determines that modifications in assumptions and estimates are appropriate given current facts and circumstances, the Company’s results of operations and financial position as reported in the Unaudited Interim Financial Statements could change significantly.

Management believes the accounting policies relating to the following areas are most dependent on the application of estimates and assumptions and require management’s most difficult, subjective, or complex judgments:

•DAC and other costs, including deferred sales inducements (“DSI”);

•Policyholder liabilities;

•Valuation of investments, including derivatives, measurement of allowance for credit losses, and recognition of other-than-temporary impairments;

•Reinsurance recoverables;

•Taxes on income; and

•Reserves for contingencies, including reserves for losses in connection with unresolved legal matters.

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Market Performance - Equity and Interest Rate Assumptions

DAC and other costs associated with the variable and universal life policies and the variable and fixed annuity contracts are generally amortized over the expected lives of these policies in proportion to total gross profits. Total gross profits include both actual gross profits and estimates of gross profits for future periods. The quarterly adjustments for market performance reflect the impact of changes to our estimate of total gross profits to reflect actual fund performance and market conditions. A significant portion of gross profits for our variable annuity contracts and, to a lesser degree, our variable life contracts are dependent upon the total rate of return on assets held in separate account investment options. This rate of return influences the fees we earn on variable annuity and variable life contracts, costs we incur associated with the guaranteed minimum death and guaranteed minimum income benefit features related to our variable annuity contracts and expected claims to be paid on variable life contracts, as well as other sources of profit. Returns that are higher than our expectations for a given period produce higher than expected account balances, which increase the future fees we expect to earn on variable annuity and variable life contracts and decrease the future costs we expect to incur associated with the guaranteed minimum death and guaranteed minimum income benefit features related to our variable annuity contracts and expected claims to be paid on variable life contracts. The opposite occurs when returns are lower than our expectations. The changes in future expected gross profits are used to recognize a cumulative adjustment to all prior periods’ amortization.

Furthermore, the calculation of the estimated liability for future policy benefits related to certain insurance products includes an estimate of associated revenues and expenses that are dependent on both historical market performance as well as estimates of market performance in the future. Similar to DAC and other costs described above, these liabilities are subject to quarterly adjustments for experience including market performance, in addition to annual adjustments resulting from our annual reviews of assumptions.

The weighted average rate of return assumptions used in developing estimated market returns consider many factors specific to each product type, including asset durations, asset allocations and other factors. With regard to equity market assumptions, the near-term future rate of return assumption used in evaluating DAC, other costs and liabilities for future policy benefits for certain of our products, primarily our domestic variable annuity and variable life insurance products, is generally updated each quarter and is derived using a reversion to the mean approach, a common industry practice. Under this approach, we consider historical equity returns and adjust projected equity returns over an initial future period of five years (the “near-term”) so that equity returns converge to the long-term expected rate of return. If the near-term projected future rate of return is greater than our near-term maximum future rate of return of 15.0%, we use our maximum future rate of return. If the near-term projected future rate of return is lower than our near-term minimum future rate of return of 0%, we use our minimum future rate of return. As of ~~March 31,~~June 30, 2022, our variable annuities and variable life insurance businesses assume an 8.0% long-term equity expected rate of return and a ~~0.9%~~6.4% near-term mean reversion equity expected rate of return.

With regard to interest rate assumptions used in evaluating DAC, DSI and liabilities for future policy benefits for certain of our products, we generally update the long-term and near-term future rates used to project fixed income returns annually and quarterly, respectively. As a result of our ~~2021~~2022 annual reviews and update of assumptions and other refinements, we kept our long-term expectation of the 10-year U.S. Treasury rate unchanged and continue to grade to a rate of 3.25% over ten years. As part of our quarterly market experience updates, we update our near-term projections of interest rates to reflect changes in current rates.

In accordance with our established practice, we will update actuarial assumptions during the second quarter of 2022. We have a comprehensive process that will include, among other things, the review of long-term interest rates, inflation, COVID-19 mortality experience, and industry studies, including evaluating industry data as to its applicability to the Company’s experience. We have recently obtained industry data that reflects experience that is more adverse than the assumptions we currently use in our individual life business. We are evaluating the applicability of this information to our block of business and the extent to which it would cause an increase in reserves and corresponding decline in earnings within our individual life business. The overall process to update assumptions is ongoing and the outcome across our businesses is uncertain.

For further discussion of impacts that could result from changes in certain key assumptions, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Accounting Policies and Pronouncements—Application of Critical Accounting Estimates” in our Annual Report on Form 10-K for the year ended December 31, 2021.

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Future Adoption of New Accounting Pronouncements

ASU 2018-12, Financial Services - Insurance (Topic 944): Targeted Improvements to the Accounting for Long-Duration Contracts, was issued by the Financial Accounting Standards Board (“FASB”) on August 15, 2018, and was amended by ASU 2019-09, Financial Services - Insurance (Topic 944): Effective Date, issued in October 2019, and ASU 2020-11, Financial Services-Insurance (Topic 944): Effective Date and Early Application, issued in November 2020. The Company will adopt ASU 2018-12 effective January 1, 2023 using the modified retrospective transition method where permitted, and apply the guidance as of January 1, 2021 (and record transition adjustments as of January 1, 2021) in the 2023 financial statements.

ASU 2018-12 will impact, at least to some extent, the accounting and disclosure requirements for all long-duration insurance and investment contracts issued by the Company. The Company expects the standard to have a significant financial impact on the Financial Statements and will significantly ~~enhance~~increase disclosures. In addition to the significant impacts to the balance sheet upon adoption, the Company also expects an impact to the pattern of earnings emergence following the transition date. See Note 2 to the Unaudited Interim Financial Statements for a more detailed discussion of ASU 2018-12, as well as other accounting pronouncements issued but not yet adopted and newly adopted accounting pronouncements.

Changes in Financial Position

Total assets decreased ~~$1.6~~$4.1 billion from $24.5 billion at December 31, 2021 to ~~$22.9~~$20.4 billion at ~~March 31,~~June 30, 2022. Significant components were:

•Separate account assets decreased ~~$1.3~~$3.6 billion primarily driven by unfavorable equity market performance and net outflows; and

•Reinsurance recoverables decreased ~~$0.2~~$0.3 billion primarily related to the variable annuity reinsured living benefit liabilities resulting from a decrease in future expected benefit payments from rising interest rates.

Total liabilities decreased ~~$1.6~~$3.9 billion from $23.5 billion at December 31, 2021 to ~~$21.9~~$19.6 billion at ~~March 31,~~June 30, 2022. Significant components were:

•Separate account liabilities decreased ~~$1.3~~$3.6 billion, corresponding to the decrease in Separate account assets, as discussed above; and

•Future policy benefits decreased ~~$0.3~~$0.4 billion primarily driven by a decrease in reserves related to our variable annuity living benefit liabilities, as discussed above.

Total equity decreased $8$108 million from $971 million at December 31, 2021 to ~~$963~~$863 million at ~~March 31,~~June 30, 2022 primarily driven by unrealized losses on ~~fixed maturity~~fair value investments driven mostly by ~~rising~~higher interest rates reflected in Accumulated other comprehensive income (loss), partially offset by ~~$101~~$102 million in capital contributions and net income of ~~$22~~$48 million.

Results of Operations

Income (loss) from Operations before Income Taxes

~~Three~~Six Months Comparison

Income (loss) from operations before income taxes ~~decreased $2~~increased $14 million from income of ~~$26~~$32 million for the ~~three~~six months ended ~~March 31,~~June 30, 2021 to income of ~~$24~~$46 million for the ~~three~~six months ended ~~March 31,~~June 30, 2022.

• The impact from our annual reviews and update of assumptions and other refinement was relatively flat at a net loss of ~~Lower Policy charges~~$1 million. Excluding the comparative impact of our annual reviews and ~~fee~~update of assumptions and other refinements, income (loss) from operations increased $15 million primarily driven ~~by an increase in unearned revenue reserve capitalization due to growth from retained business;~~by:

~~partially offset by~~

•Higher ~~Premiums~~Realized investment gains (losses), net from ~~growth in term policies retained by the Company.~~gains on indexed universal life ("IUL") embedded derivatives due to rising interest rates.

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~~Revenues, Benefits and Expenses~~

Three Months Comparison

~~Revenues decreased $9~~Income (loss) from operations before income taxes increased $16 million from ~~$77~~income of $6 million for the three months ended ~~March 31,~~June 30, 2021 to ~~$68~~income of $22 million for the three months ended ~~March 31, 2022~~June 30, 2022. The impact from our annual reviews and update of assumptions and other refinement was a net loss of $1 million, as mentioned above. Excluding the comparative impact of our annual reviews and update of assumptions and other refinements, income (loss) from operations increased $17 million primarily driven by:

•Higher Realized investment gains (losses), net from gains on IUL embedded derivatives due to rising interest rates.

Revenues, Benefits and Expenses

Six Months Comparison

Revenues increased $20 million from $118 million for the six months ended June 30, 2021 to $138 million for the six months ended June 30, 2022. This includes a favorable comparative increase of $13 million from our annual reviews and update of assumptions and other refinements, as mentioned above. Excluding the comparative impact of our annual reviews and update of assumptions and other refinements, revenues increased $7 million primarily driven by:

•Higher Realized investment gains (losses), net from gains on IUL embedded derivatives due to rising interest rates;

Partially offset by:

•Lower Policy charges and fee income driven by ~~an increase in unearned revenue reserve capitalization due to growth from retained business and~~ a change in presentation of ceded yearly renewable term ("YRT") premiums, offset in benefits and expenses ~~below;~~below.

~~partially offset by~~

•~~Higher Premiums from growth in term policies retained by the Company.~~

Benefits and expenses ~~decreased $7~~increased $6 million from ~~$51~~$86 million for the ~~three~~six months ended ~~March 31,~~June 30, 2021 to ~~$44~~$92 million for the ~~three~~six months ended ~~March 31,~~June 30, 2022. This includes an unfavorable comparative increase of $14 million from our annual reviews and update of assumptions and other refinements, as mentioned above. Excluding the comparative impact of our annual reviews and update of assumptions and other refinements, benefits and expenses decreased $8 million primarily driven by:

•Lower Policyholders' benefits due to a change in presentation of ceded YRT premiums.

Three Months Comparison

Revenues increased $30 million from $41 million for the three months ended June 30, 2021 to $71 million for the three months ended June 30, 2022. This includes a favorable comparative increase of $13 million from our annual reviews and update of assumptions and other refinements. Excluding the comparative impact of our annual reviews and update of assumptions and other refinements, revenues increase $17 million primarily driven by:

•Higher Realized investment gains (losses), net from gains on IUL embedded derivatives due to rising interest rates;

Partially offset by:

•Lower Policy charges and fee income driven by a change in presentation of ceded YRT premiums,~~, offsetting the impacts mentioned above to Revenues.~~ offset in benefits and expenses below.

~~Risks~~Benefits and ~~Risk Mitigants~~expenses decreased $14 million from $35 million for the three months ended June 30, 2021 to$49 million for the three months ended June 30, 2022. This includes an unfavorable comparative increase of $14 million from our annual reviews and update of assumptions and other refinements, as mentioned above. Excluding the comparative impact of our annual reviews and update of assumptions and other refinements, benefits and expenses were relatively flat primarily driven by:

•Lower Policyholders' benefits due to a change in presentation of ceded YRT premiums;

Mostly offset by:

•Higher Interest credited to policyholder account balances due to an increase in crediting rates.

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Variable Annuity Risks and Risk Mitigants:

The primary risk exposures of our variable annuity contracts relate to actual deviations from, or changes to, the assumptions used in the original pricing of these products, including capital markets assumptions such as equity market returns, interest rates and market volatility, along with actuarial assumptions such as contractholder mortality, the timing and amount of annuitization and withdrawals, and contract lapses. For these risk exposures, achievement of our expected returns is subject to the risk that actual experience will differ from the assumptions used in the original pricing of these products. Prudential Financial manages our exposure to certain risks driven by fluctuations in capital markets primarily through a combination of Product Design Features and an Asset Liability Management Strategy ("ALM"), as discussed below. Sales of traditional variable annuities with guaranteed living benefit riders were discontinued as of December 31, 2020.

Product Design Features:

A portion of the variable annuity contracts that we offered include an asset transfer feature. This feature is implemented at the contract level, and transfers assets between certain variable investment sub-accounts selected by the annuity contractholder and, depending on the benefit feature, a fixed-rate account in the general account or a bond fund sub-account within the separate account. The objective of the asset transfer feature is to reduce our exposure to equity market risk and market volatility. The asset transfer feature associated with highest daily living benefit products uses a designated bond fund sub-account within the separate account. The transfers are based on a static mathematical formula used with the particular benefit which considers a number of factors, including, but not limited to, the impact of investment performance on the contractholder’s total account value. Other product design features we utilize include, among others, asset allocation restrictions, minimum issuance age requirements and certain limitations on the amount of contractholder purchase payments, as well as a required minimum allocation to our general account for certain of our products.

We continue to introduce products that diversify our risk profile and have incorporated provisions in product design allowing frequent revisions of key pricing elements for certain of our products. In addition, there is diversity in our fee arrangements, as certain fees are primarily based on the benefit guarantee amount, the contractholder account value and/or premiums, which helps preserve certain revenue streams when market fluctuations cause account values to decline.

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Asset Liability Management Strategy (including fixed income instruments and derivatives):

We employ an ALM strategy that utilizes a combination of both traditional fixed income instruments and derivatives to meet expected liabilities associated with our variable annuity living benefit guarantees. The economic liability we manage with this ALM strategy consists of expected living benefit claims under less severe market conditions, which are managed using fixed income instruments, derivatives, or a combination thereof, and potential living benefit claims resulting from more severe market conditions, which are hedged using derivative instruments. For our Prudential Defined Income variable annuity, we utilize fixed income instruments to meet expected liabilities. For the portion of our ALM strategy executed with derivatives, we enter into a range of exchange-traded and over-the-counter equity, interest rate and credit derivatives, including, but not limited to: equity and treasury futures; total return, credit default and interest rate swaps; and options including equity options, swaptions, and floors and caps. The intent of this strategy is to more efficiently manage the capital and liquidity associated with these products while continuing to mitigate fluctuations in net income due to movements in capital markets. To achieve this, we periodically review and recalibrate the ALM strategy by optimizing the mix of derivatives and fixed income instruments to achieve expected outcomes.

Income Taxes

For information regarding income taxes, see Note 7 to the Unaudited Interim Financial Statements.

Liquidity and Capital Resources

Overview

Liquidity refers to the ability to generate sufficient cash resources to meet the payment obligations of the Company. Capital refers to the long-term financial resources available to support the operations of our business, fund business growth, and provide a cushion to withstand adverse circumstances. Our ability to generate and maintain sufficient liquidity and capital depends on the profitability of our business, general economic conditions, our ability to borrow from affiliates and our access to the capital markets through affiliates as described herein.

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Effective and prudent liquidity and capital management is a priority across the organization. Management monitors the liquidity of the Company on a daily basis and projects borrowing and capital needs over a multi-year time horizon. We use a Risk Appetite Framework ("RAF") to ensure that all risks taken by the Company ~~aligns~~align with our capacity and willingness to take those risks. The RAF provides a dynamic assessment of capital and liquidity stress impacts, including scenarios similar to, and more severe than, those occurring due to COVID-19, and is intended to ensure that sufficient resources are available to absorb those impacts. We believe that our capital and liquidity resources are sufficient to satisfy the capital and liquidity requirements of the Company.

Our businesses are subject to comprehensive regulation and supervision by domestic and international regulators. These regulations currently include requirements (many of which are the subject of ongoing rule-making) relating to capital, leverage, liquidity, stress-testing, overall risk management, credit exposure reporting and credit concentration. For information on these regulatory initiatives and their potential impact on us, see “Business—Regulation" and “Risk Factors” included in our Annual Report of Form 10-K for the year ended December 31, 2021.

Capital

We manage the Company to regulatory capital levels consistent with our "AA" ratings targets. We utilize the risk-based capital (“RBC”) ratio as a primary measure of capital adequacy. RBC is calculated based on statutory financial statements and risk formulas consistent with the practices of the National Association of Insurance Commissioners ("NAIC"). RBC considers, among other things, risks related to the type and quality of the invested assets, insurance-related risks associated with an insurer’s products and liabilities, interest rate risks and general business risks. RBC ratio calculations are intended to assist insurance regulators in measuring an insurer’s solvency and ability to pay future claims. The reporting of RBC measures is not intended for the purpose of ranking any insurance company or for use in connection with any marketing, advertising or promotional activities, but is available to the public. The Company’s capital levels substantially exceed the minimum level required by applicable insurance regulations. Our regulatory capital levels may be affected in the future by changes to the applicable regulations, proposals for which are currently under consideration by both domestic and international insurance regulators.

The regulatory capital level of the Company can be materially impacted by interest rate and equity market fluctuations, changes in the values of derivatives, the level of impairments recorded, and credit quality migration of the investment portfolio, among other items. In addition, the reinsurance of business or the recapture of business subject to reinsurance arrangements due to defaults by, or credit quality migration affecting, the reinsurers or for other reasons could negatively impact regulatory capital levels. The Company’s regulatory capital level is also affected by statutory accounting rules, which are subject to change by each applicable insurance regulator.

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Captive Reinsurance Companies:

See “Management’s Discussion and Analysis of Financial Condition and Results of Operations-Liquidity and Capital Resources-Capital-Affiliated Captive Reinsurance Companies” included in our Annual Report on Form 10-K for the year ended December 31, 2021, for a discussion of our use of captive reinsurance companies.

Liquidity

Our liquidity is managed to ensure stable, reliable and cost-effective sources of cash flows to meet all of our obligations. Liquidity is provided by a variety of sources, as described more fully below, including portfolios of liquid assets. Our investment portfolios are integral to the overall liquidity of the Company. We use a projection process for cash flows from operations to ensure sufficient liquidity to meet projected cash outflows, including claims. The impact of Prudential Funding, LLC’s, ~~("Prudential Funding"),~~ a wholly-owned subsidiary of Prudential Insurance, financing capacity on liquidity is considered in the internal liquidity measures of the Company.

Liquidity is measured against internally-developed benchmarks that take into account the characteristics of both the asset portfolio and the liabilities that they support. We consider attributes of the various categories of liquid assets (for example, type of asset and credit quality) in calculating internal liquidity measures to evaluate our liquidity under various stress scenarios, including company-specific and market-wide events. We continue to believe that cash generated by ongoing operations and the liquidity profile of our assets provide sufficient liquidity under reasonably foreseeable stress scenarios.

The principal sources of the Company’s liquidity are premiums and certain annuity considerations, investment and fee income, investment maturities, sales of investments and internal borrowings. The principal uses of that liquidity include benefits, claims, and payments to policyholders and contractholders in connection with surrenders, withdrawals and net policy loan activity. Other uses of liquidity include commissions, general and administrative expenses, purchases of investments, the payment of dividends and returns of capital to the parent company, hedging and reinsurance activity and payments in connection with financing activities.

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In managing liquidity, we consider the risk of policyholder and contractholder withdrawals of funds earlier than our assumptions when selecting assets to support these contractual obligations. We use surrender charges and other contract provisions to mitigate the extent, timing and profitability impact of withdrawals of funds by customers.

Liquid Assets

Liquid assets include cash and cash equivalents, short-term investments, U.S. Treasury fixed maturities, and fixed maturities that are not designated as held-to-maturity and public equity securities. As of ~~March 31,~~June 30, 2022 and December 31, 2021, the Company had liquid assets of ~~$2,053~~$1,882 million and $2,124 million, respectively. The portion of liquid assets comprised of cash and cash equivalents was ~~$229~~$139 million and $146 million as of ~~March 31,~~June 30, 2022 and December 31, 2021, respectively. As of ~~March 31,~~June 30, 2022, ~~$1,721.6~~$1,650 million, or 97%, of the fixed maturity investments in the Company's general account portfolios, were rated high or highest quality based on NAIC or equivalent rating.

Term and Universal Life Reserve Financing

The Company uses affiliated captive reinsurance subsidiaries to finance the portion of the statutory reserves required to be held under Regulation XXX and Guideline AXXX that is considered to be non-economic. The financing arrangements involve the reinsurance of term and universal life business to our affiliated captive reinsurers and the issuance of surplus notes by those affiliated captives that are treated as capital for statutory purposes. These surplus notes are subordinated to policyholder obligations, and the payment of principal and interest on the surplus notes can only be made with prior insurance regulatory approval.

As of ~~March 31,~~June 30, 2022, the affiliated captive reinsurance companies have entered into agreements with external counterparties providing for the issuance of up to an aggregate of $14,600 million of surplus notes by our affiliated captive reinsurers in return for the receipt of credit-linked notes (“Credit-Linked Note Structures”), of which $12,821 million of surplus notes was outstanding, compared to an aggregate issuance capacity of $14,600 million, of which $12,721 million was outstanding as of December 31, 2021. Under the agreements, the affiliated captive receives in exchange for the surplus notes one or more credit-linked notes issued by a special-purpose affiliate of the Company with an aggregate principal amount equal to the surplus notes outstanding. The affiliated captive holds the credit-linked notes as assets supporting Regulation XXX or Guideline AXXX non-economic reserves, as applicable. For more information on our Credit-Linked Note Structures, see “Management’s Discussion and Analysis of Financial Condition and Results of Operation—Liquidity and Capital Resources—Financing Activities” in the Annual Report on Form 10-K for the year ended December 31, 2021.

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As of ~~March 31,~~June 30, 2022, our affiliated captive reinsurance companies had outstanding an aggregate of $3,025 million of debt issued for the purpose of financing Regulation XXX and Guideline AXXX non-economic reserves, of which approximately $1,125 million relates to Regulation XXX reserves and approximately $1,900 million relates to Guideline AXXX reserves. In addition, as of ~~March 31,~~June 30, 2022, for purposes of financing Guideline AXXX reserves, one of our affiliated captives had approximately $3,982 million of surplus notes outstanding that were issued to affiliates.

The Company has introduced updated versions of its individual life products in conjunction with the requirement to adopt principle-based reserving by January 1, 2020. These updated products are currently priced to support the principle-based statutory reserve level without the need for reserve financing.

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PRUCO LIFE INSURANCE COMPANY OF NEW JERSEY
Notes to Unaudited Interim Financial Statements—(Continued)

Item 3. Quantitative and Qualitative Disclosures About Market Risk

Market risk is the risk of fluctuations in the value of financial instruments as a result of absolute or relative changes in interest rates, foreign currency exchange rates, equity prices or commodity prices. To varying degrees, our products and services, and the investment activities supporting them, generate exposure to market risk. The market risk incurred, and our strategies for managing this risk, vary by product. As of ~~March 31,~~June 30, 2022, there have been no material changes in our ~~economic~~ exposure to market risk from December 31, 2021, a description of which may be found in our Annual Report on Form 10-K, for the year ended December 31, 2021, Item 7A, “Quantitative and Qualitative Disclosures about Market Risk,” filed with the Securities and Exchange Commission. See Item 1A, “Risk Factors” included in the Annual Report on Form 10-K for the year ended December 31, 2021, for a discussion of how difficult conditions in the financial markets and the economy generally may materially adversely affect our business and results of our operations.

Item 4. Controls and Procedures

In order to ensure that the information we must disclose in our filings with the SEC is recorded, processed, summarized, and reported on a timely basis, the Company’s management, including our Chief Executive Officer and Chief Financial Officer, have reviewed and evaluated the effectiveness of our disclosure controls and procedures, as defined in Securities Exchange Act of 1934, as amended (“Exchange Act”) Rule 15d-15(e), as of ~~March 31,~~June 30, 2022. Based on such evaluation, the Chief Executive Officer and Chief Financial Officer have concluded that, as of ~~March 31,~~June 30, 2022, our disclosure controls and procedures were effective. No change in our internal control over financial reporting, as defined in Exchange Act Rule 15d-15(f), occurred during the quarter ended ~~March 31,~~June 30, 2022, that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

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PART II—OTHER INFORMATION

Item 1. Legal Proceedings

See Note 10 to the Unaudited Interim Financial Statements under “—Litigation and Regulatory Matters” for a description of certain pending litigation and regulatory matters affecting us, and certain risks to our business presented by such matters, which is incorporated herein by reference.

Item 1A. Risk Factors

You should carefully consider the risks described under “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2021. These risks could materially affect our business, results of operations or financial condition or cause our actual results to differ materially from those expected or those expressed in any forward-looking statements made by, or on behalf of, the Company. These risks are not exclusive, and additional risks to which we are subject include, but are not limited to, the factors mentioned under “Forward-Looking Statements” and the risks of our businesses described elsewhere in this Quarterly Report on Form 10-Q.

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Item 6. Exhibits


EXHIBIT INDEX

31.1 Section 302 Certification of the Chief Executive Officer

31.2 Section 302 Certification of the Chief Financial Officer

32.1 Section 906 Certification of the Chief Executive Officer

32.2 Section 906 Certification of the Chief Financial Officer

101.INS - XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.

101.SCH - XBRL Taxonomy Extension Schema Document.

101.CAL - XBRL Taxonomy Extension Calculation Linkbase Document

101.LAB - XBRL Taxonomy Extension Label Linkbase Document

101.PRE - XBRL Taxonomy Extension Presentation Linkbase Document

101.DEF - XBRL Taxonomy Extension Definition Linkbase Document

104.Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


			Pruco Life Insurance Company of New Jersey

			By:						/s/ Robert E. Boyle
			Name:						Robert E. Boyle
									Vice President and Chief Financial Officer
									(Authorized Signatory and Principal Financial Officer)

Date: ~~May 13,~~August 11, 2022

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