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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 ~~September 30, 2022~~March 31, 2023


☐			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 ~~November 10, 2022,~~May 11, 2023, 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 ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021~~2022	4

	Unaudited Interim Statements of Operations and Comprehensive Income (Loss) for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2023 and 2022 ~~and 2021~~	5

	Unaudited Interim Statements of Equity for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2023 and 2022 ~~and 2021~~	6

	Unaudited Interim Statements of Cash Flows for the ~~nine~~three months ended ~~September 30,~~March 31, 2023 and 2022 ~~and 2021~~	87

	Notes to Unaudited Interim Financial Statements	109

	1. Business and Basis of Presentation	109

	2. Significant Accounting Policies and Pronouncements	1116

	3. Investments	1425

	4. Derivatives and Hedging	2434

	5. Fair Value of Assets and Liabilities	2939

	6. Deferred Policy Acquisition Cost and Deferred Reinsurance	4049

	7. ~~Income Taxes~~Separate Accounts	4450

	8. ~~Equity~~Liability for Future Policy Benefits	4452

	9. ~~Related Party Transactions~~Policyholders' Account Balances	4658

	10. Market Risk Benefits	62

	11. Reinsurance	63

	12. Income Taxes	67

	13. Equity	67

	14. Related Party Transactions	69

	15. Commitments and Contingent Liabilities	4972



Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	5174

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	5984

Item 4.	Controls and Procedures	5985

PART II—OTHER INFORMATION		6086

Item 1.	Legal Proceedings	6086

Item 1A.	Risk Factors	6086

Item 6.	Exhibits	6187

SIGNATURES		6288

Table of Contents

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~~rapidly rising interest rates and equity market declines and their impact on our liquidity, capital positions, cash flows, results of ~~the COVID-19 pandemic on the global economy,~~operations and financial ~~markets and our business,~~position, (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.~~damage; and (14) risks related to COVID-19 could reemerge. 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~~2022 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

~~September 30, 2022~~March 31, 2023 and December 31, ~~2021~~2022 (in thousands, except share amounts)

September 30, 2022 December 31, 2021
ASSETS
Fixed maturities available for sale, at fair value (allowance for credit losses: 2022-$506; 2021-$1,558) (amortized cost: 2022-$1,932,900; 2021-$1,762,211) $ 1,607,879 $ 1,935,598
Fixed maturities, trading, at fair value (amortized cost: 2022-$28,025; 2021-$36,863) 22,887 36,456
Equity securities, at fair value (cost: 2022-$4,640; 2021-$4,660) 4,602 5,937
Policy loans 212,059 210,730
Short-term investments 0 9,997
Commercial mortgage and other loans (net of $276 and $246 allowance for credit losses at September 30, 2022 and December 31, 2021, respectively) 100,040 115,576
Other invested assets (includes $9,539 and $10,027 of assets measured at fair value at September 30, 2022 and December 31, 2021, respectively) 131,690 124,327
Total investments 2,079,157 2,438,621
Cash and cash equivalents 248,636 136,316
Deferred policy acquisition costs 359,985 290,299
Accrued investment income 25,574 22,539
Reinsurance recoverables 3,236,519 3,601,212
Receivables from parent and affiliates 8,753 21,438
Income tax assets 76,203 5,842
Other assets 15,879 17,581
Separate account assets 13,449,472 17,922,367
TOTAL ASSETS $ 19,500,178 $ 24,456,215
LIABILITIES AND EQUITY
LIABILITIES
Policyholders’ account balances $ 2,747,985 $ 2,608,640
Future policy benefits 2,293,431 2,757,941
Payables to parent and affiliates 1,649 2,432
Other liabilities 130,772 194,123
Separate account liabilities 13,449,472 17,922,367
Total liabilities 18,623,309 23,485,503
COMMITMENTS AND CONTINGENT LIABILITIES (See Note 10)
EQUITY
Common stock ($5 par value; 400,000 shares authorized, issued and outstanding) 2,000 2,000
Additional paid-in capital 650,412 450,102
Retained earnings 442,480 387,957
Accumulated other comprehensive income (loss) (218,023) 130,653
Total equity 876,869 970,712
TOTAL LIABILITIES AND EQUITY $ 19,500,178 $ 24,456,215


	March 31, 2023		December 31, 2022
ASSETS
Fixed maturities, available for sale, at fair value (allowance for credit losses: 2023-$3; 2022-$363) (amortized cost: 2023-$2,329,822; 2022-$1,990,718)	$	2,108,183	$	1,719,488
Fixed maturities, trading, at fair value (amortized cost: 2023-$27,108; 2022-$27,566)	23,938		23,782
Equity securities, at fair value (cost: 2023-$4,622; 2022-$4,614)	4,363		4,358

Policy loans	212,479		212,063
Short-term investments	12,000		7,000
Commercial mortgage and other loans (net of $499 and $408 allowance for credit losses at March 31, 2023 and December 31, 2022, respectively)	159,752		148,179
Other invested assets (includes $2,235 and $2,389 of assets measured at fair value at March 31, 2023 and December 31, 2022, respectively)	133,763		129,528
Total investments	2,654,478		2,244,398
Cash and cash equivalents	83,286		255,767
Deferred policy acquisition costs(1)	361,655		351,874
Accrued investment income	31,064		25,222
Reinsurance recoverables(1)	3,195,287		3,098,248
Receivables from parent and affiliates	17,574		19,348

Income tax assets(1)	59,075		67,615
Market risk benefit assets(1)	562,922		558,624
Other assets(1)	47,984		48,391
Separate account assets	14,413,681		13,926,958
TOTAL ASSETS	$	21,427,006	$	20,596,445
LIABILITIES AND EQUITY
LIABILITIES
Policyholders’ account balances(1)	$	2,792,291	$	2,774,315
Future policy benefits(1)	2,227,631		2,130,042
Market risk benefit liabilities(1)	562,922		558,624
Cash collateral for loaned securities	3,325		0




Payables to parent and affiliates	2,074		7,546
Other liabilities(1)	196,189		172,305
Separate account liabilities	14,413,681		13,926,958
Total liabilities	20,198,113		19,569,790
COMMITMENTS AND CONTINGENT LIABILITIES (See Note 15)
EQUITY
Common stock ($5 par value; 400,000 shares authorized, issued and outstanding)	2,000		2,000
Additional paid-in capital	950,412		775,412
Retained earnings(1)	275,039		285,433
Accumulated other comprehensive income (loss)(1)	1,442		(36,190)
Total equity	1,228,893		1,026,655
TOTAL LIABILITIES AND EQUITY	$	21,427,006	$	20,596,445

(1) Prior period amounts adjusted for the implementation of ASU 2018-12: Targeted Improvements to the Accounting for Long-Duration Contracts.

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 Nine~~ Months Ended ~~September 30,~~March 31, 2023 and 2022 ~~and 2021~~ (in thousands)


		Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended March 31,
		2022		2021		2022		2021				2023		2022
REVENUES	REVENUES									REVENUES
Premiums(1)	Premiums(1)	$	8,224	$	7,260	$	27,054	$	21,905	Premiums(1)		$	10,177	$	9,020
Policy charges and fee income(1)	Policy charges and fee income(1)	18,903		14,163		66,818		65,405		Policy charges and fee income(1)		14,138		10,595
Net investment income	Net investment income	23,450		26,944		72,683		75,387		Net investment income		28,660		24,369
Asset administration fees	Asset administration fees	2,079		2,327		6,449		6,493		Asset administration fees		2,080		2,260
Other income (loss)	Other income (loss)	266		35		(3,876)		457		Other income (loss)		1,146		(1,514)
Realized investment gains (losses), net(1)	Realized investment gains (losses), net(1)	1,212		5,355		22,850		4,743		Realized investment gains (losses), net(1)		(8,298)		15,720
Change in value of market risk benefits, net of related hedging gain (loss)(1)										Change in value of market risk benefits, net of related hedging gain (loss)(1)		(15,728)		(86,828)
TOTAL REVENUES	TOTAL REVENUES	54,134		56,084		191,978		174,390		TOTAL REVENUES		32,175		(26,378)
BENEFITS AND EXPENSES	BENEFITS AND EXPENSES									BENEFITS AND EXPENSES
Policyholders’ benefits		12,728		1,975		38,789		32,099
Policyholders’ benefits(1)										Policyholders’ benefits(1)		18,339		13,835
Change in estimates of liability for future policy benefits(1)										Change in estimates of liability for future policy benefits(1)		(1,442)		(1,177)
Interest credited to policyholders’ account balances	Interest credited to policyholders’ account balances	11,779		11,618		34,914		31,627		Interest credited to policyholders’ account balances		10,137		11,194
Amortization of deferred policy acquisition costs		782		5,291		20,889		16,565
General, administrative and other expenses		19,601		12,445		42,267		37,053
Amortization of deferred policy acquisition costs(1)										Amortization of deferred policy acquisition costs(1)		5,017		4,829
General, administrative and other expenses(1)										General, administrative and other expenses(1)		11,958		11,000
TOTAL BENEFITS AND EXPENSES	TOTAL BENEFITS AND EXPENSES	44,890		31,329		136,859		117,344		TOTAL BENEFITS AND EXPENSES		44,009		39,681
INCOME (LOSS) FROM OPERATIONS BEFORE INCOME TAXES	INCOME (LOSS) FROM OPERATIONS BEFORE INCOME TAXES	9,244		24,755		55,119		57,046		INCOME (LOSS) FROM OPERATIONS BEFORE INCOME TAXES		(11,834)		(66,059)
Income tax expense (benefit)		3,086		1,600		596		3,889
Income tax expense (benefit)(1)										Income tax expense (benefit)(1)		(1,440)		(19,943)
NET INCOME (LOSS)	NET INCOME (LOSS)	$	6,158	$	23,155	$	54,523	$	53,157	NET INCOME (LOSS)		$	(10,394)	$	(46,116)
Other comprehensive income (loss), before tax:	Other comprehensive income (loss), before tax:									Other comprehensive income (loss), before tax:
Foreign currency translation adjustments	Foreign currency translation adjustments	(328)		(110)		(745)		(190)		Foreign currency translation adjustments		100		(67)
Net unrealized investment gains (losses)		(114,154)		(18,302)		(440,618)		(69,826)
Net unrealized investment gains (losses)(1)										Net unrealized investment gains (losses)(1)		38,767		(160,093)
Interest rate remeasurement of future policy benefits(1)										Interest rate remeasurement of future policy benefits(1)		(6,959)		22,483
Gain (loss) from changes in non-performance risk on market risk benefits(1)										Gain (loss) from changes in non-performance risk on market risk benefits(1)		15,728		86,828
Total	Total	(114,482)		(18,412)		(441,363)		(70,016)		Total		47,636		(50,849)
Less: Income tax expense (benefit) related to other comprehensive income (loss)		(24,042)		(3,868)		(92,687)		(14,704)
Less: Income tax expense (benefit) related to other comprehensive income (loss)(1)										Less: Income tax expense (benefit) related to other comprehensive income (loss)(1)		10,004		(10,678)
Other comprehensive income (loss), net of taxes	Other comprehensive income (loss), net of taxes	(90,440)		(14,544)		(348,676)		(55,312)		Other comprehensive income (loss), net of taxes		37,632		(40,171)
Comprehensive income (loss)	Comprehensive income (loss)	$	(84,282)	$	8,611	$	(294,153)	$	(2,155)	Comprehensive income (loss)		$	27,238	$	(86,287)

(1) Prior period amounts adjusted for the implementation of ASU 2018-12: Targeted Improvements to the Accounting for Long-Duration Contracts.

See Notes to Unaudited Interim Financial Statements

Table of Contents

PRUCO LIFE INSURANCE COMPANY OF NEW JERSEY

Unaudited Interim Statements of Equity

Three ~~and Nine~~ Months Ended ~~September 30,~~March 31, 2023 and 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		$	2,000	$	450,102	$	387,957	$	130,653	$	970,712
Balance, December 31, 2022(1)												Balance, December 31, 2022(1)	$	2,000	$	775,412	$	285,433	$	(36,190)	$	1,026,655

Contributed capital	Contributed capital			101,700						101,700		Contributed capital			175,000						175,000

Comprehensive income (loss):	Comprehensive income (loss):											Comprehensive income (loss):
Net income (loss)	Net income (loss)					21,862				21,862		Net income (loss)					(10,394)				(10,394)
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							37,632		37,632
Total comprehensive income (loss)	Total comprehensive income (loss)									(109,617)		Total comprehensive income (loss)									27,238
Balance, March 31, 2022		$	2,000	$	551,802	$	409,819	$	(826)	$	962,795

Contributed capital				0						0
Balance, March 31, 2023												Balance, March 31, 2023	$	2,000	$	950,412	$	275,039	$	1,442	$	1,228,893

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

Contributed capital				100,000						100,000

Contributed (distributed) capital-parent/child asset transfers				(1,390)						(1,390)
Comprehensive income (loss):
Net income (loss)						6,158				6,158
Other comprehensive income (loss), net of taxes								(90,440)		(90,440)
Total comprehensive income (loss)										(84,282)
Balance, September 30, 2022		$	2,000	$	650,412	$	442,480	$	(218,023)	$	876,869

(1) Prior period amounts adjusted for the implementation of ASU 2018-12: Targeted Improvements to the Accounting for Long-Duration Contracts.


	Common Stock		Additional Paid-in Capital		Retained Earnings		Accumulated Other Comprehensive Income (Loss)		Total Equity
Balance, December 31, 2021(1)	$	2,000	$	450,102	$	355,262	$	101,987	$	909,351

Contributed capital			101,700						101,700


Comprehensive income (loss):
Net income (loss)					(46,116)				(46,116)
Other comprehensive income (loss), net of tax							(40,171)		(40,171)
Total comprehensive income (loss)									(86,287)
Balance, March 31, 2022(1)	$	2,000	$	551,802	$	309,146	$	61,816	$	924,764

(1) Prior period amounts adjusted for the implementation of ASU 2018-12: Targeted Improvements to the Accounting for Long-Duration Contracts.

See Notes to Unaudited Interim Financial Statements

Table of Contents

PRUCO LIFE INSURANCE COMPANY OF NEW JERSEY

Unaudited Interim Statements of Cash Flows

Three Months Ended March 31, 2023 and 2022 (in thousands)


	2023		2022
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)(1)	$	(10,394)	$	(46,116)
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Policy charges and fee income(1)	(1,435)		(13)
Interest credited to policyholders’ account balances	10,137		11,194
Realized investment (gains) losses, net(1)	8,298		(15,720)
Change in value of market risk benefits, net of related hedging (gains) losses(1)	15,728		86,828

Change in:
Future policy benefits and other insurance liabilities(1)	58,089		17,409
Reinsurance recoverables(1)	(19,962)		(24,103)
Accrued investment income	(5,842)		(936)
Net payables to/receivables from parent and affiliates	(1,720)		(378)
Deferred policy acquisition costs(1)	(9,781)		(13,037)
Income taxes(1)	(1,464)		3,341

Derivatives, net	(1,722)		4,574
Other, net(1)(2)	(31,721)		(33,944)
Cash flows from (used in) operating activities	8,211		(10,901)
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from the sale/maturity/prepayment of:
Fixed maturities, available-for-sale	33,170		38,502
Fixed maturities, trading	329		325
Equity securities	208		17
Policy loans	7,113		7,490
Ceded policy loans	(485)		(537)
Short-term investments	2,000		0
Commercial mortgage and other loans	2,927		3,636
Other invested assets	(353)		1,276

Payments for the purchase/origination of:
Fixed maturities, available-for-sale	(367,590)		(71,758)

Equity securities	(27)		0
Policy loans	(5,515)		(6,694)
Ceded policy loans	415		579
Short-term investments	(7,000)		0
Commercial mortgage and other loans	(14,509)		0
Other invested assets	(3,317)		(3,568)

Notes receivable from parent and affiliates, net	(8)		(9)
Derivatives, net	(298)		101
Other, net	0		4,052
Cash flows from (used in) investing activities	(352,940)		(26,588)

Table of Contents

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
Contributed capital 0 0
Contributed (distributed) capital-parent/child asset transfers 69 69
Comprehensive income (loss):
Net income (loss) 23,155 23,155
Other comprehensive income (loss), net of tax (14,544) (14,544)
Total comprehensive income (loss) 8,611
Balance, September 30, 2021 $ 2,000 $ 350,104 $ 381,607 $ 130,095 $ 863,806


CASH FLOWS FROM FINANCING ACTIVITIES:
Policyholders’ account deposits	138,201		134,084
Ceded policyholders’ account deposits	(73,649)		(87,398)
Policyholders’ account withdrawals	(131,444)		(103,693)
Ceded policyholders’ account withdrawals	60,912		69,281
Net change in securities sold under agreement to repurchase and cash collateral for loaned securities	3,325		0

Contributed capital	175,000		100,400




Drafts outstanding	(239)		5,441
Other, net	142		2,416
Cash flows from (used in) financing activities	172,248		120,531
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS	(172,481)		83,042
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR	255,767		136,316
CASH AND CASH EQUIVALENTS, END OF PERIOD	$	83,286	$	219,358

(1) Prior period amounts adjusted for the implementation of ASU 2018-12: Targeted Improvements to the Accounting for Long-Duration Contracts.

(2) Prior period has been reclassified to conform to the current period presentation.

Significant Non-Cash Transactions

There were no significant non-cash transactions for the three months ended March 31, 2023 and 2022.

See Notes to Unaudited Interim Financial Statements

~~Table of Contents~~

~~PRUCO LIFE INSURANCE COMPANY OF NEW JERSEY~~

~~Unaudited Interim Statements of Cash Flows~~

~~Nine Months Ended September 30, 2022 and 2021 (in thousands)~~

2022 2021
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 54,523 $ 53,157
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Policy charges and fee income (16,977) (16,027)
Interest credited to policyholders’ account balances 34,914 31,627
Realized investment (gains) losses, net (22,850) (4,743)
Amortization and other non-cash items (9,502) (31,316)
Change in:
Future policy benefits 176,360 241,108
Reinsurance recoverables (212,894) (162,104)
Accrued investment income (3,035) (1,508)
Net payables to/receivables from parent and affiliates 11,793 3,955
Deferred policy acquisition costs (26,900) (46,701)
Income taxes 22,695 (5,607)
Derivatives, net 4,124 17,619
Other, net 6,055 12,583
Cash flows from (used in) operating activities 18,306 92,043
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from the sale/maturity/prepayment of:
Fixed maturities, available-for-sale 75,157 81,318
Fixed maturities, trading 6,336 114
Equity securities 17 0
Policy loans 21,648 20,103
Ceded policy loans (1,399) (1,356)
Short-term investments 9,997 0
Commercial mortgage and other loans 17,578 8,978
Other invested assets 3,424 4,598
Payments for the purchase/origination of:
Fixed maturities, available-for-sale (247,523) (186,538)
Fixed maturities, trading 0 (19,724)
Policy loans (16,823) (12,739)
Ceded policy loans 1,627 1,377
Commercial mortgage and other loans (3,231) (2,437)
Other invested assets (11,464) (14,864)
Notes receivable from parent and affiliates, net (27) (25)
Derivatives, net 2,552 753
Other, net 4,053 (544)
Cash flows from (used in) investing activities (138,078) (120,986)

~~Table of Contents~~

CASH FLOWS FROM FINANCING ACTIVITIES:
Policyholders’ account deposits 381,718 423,805
Ceded policyholders’ account deposits (239,619) (247,735)
Policyholders’ account withdrawals (294,902) (397,221)
Ceded policyholders’ account withdrawals 184,201 188,008
Net change in securities sold under agreement to repurchase and cash collateral for loaned securities 0 (2,725)
Contributed capital 200,400 0
Contributed (distributed) capital - parent/child asset transfers (1,759) 88
Drafts outstanding 1,559 3,655
Other, net 494 12,736
Cash flows from (used in) financing activities 232,092 (19,389)
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 112,320 (48,332)
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR 136,316 68,527
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 248,636 $ 20,195

~~Significant Non-Cash Transactions~~

~~There were no significant non-cash transactions for the nine months ended September 30, 2022 and 2021.~~

~~See Notes to Unaudited Interim Financial Statements~~

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

On January 1, 2023, the Company adopted Accounting Standard Update (“ASU”) 2018-12, Financial Services— Insurance (Topic 944): Targeted Improvements to the Accounting for Long-Duration Contracts, which provided new authoritative guidance impacting the accounting and disclosure requirements for long-duration insurance and investment contracts issued by the Company. See “Adoption of ASU 2018-12” below for additional information regarding this adoption, including the impacts to the Company’s 2022 financial statements from implementing the new accounting standard as well as the transition impacts recorded as of January 1, 2021. See Note 2 for additional details regarding the key policy changes effected by this ASU and updated accounting policies resulting from the adoption of this ASU for all periods presented in the Unaudited Interim Financial Statements.

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, 2022.

Adoption of ASU 2018-12

In August 2018, the FASB issued ASU 2018-12, Financial Services—Insurance (Topic 944): Targeted Improvements to the Accounting for Long-Duration Contracts which provides new authoritative guidance impacting the accounting and disclosure requirements for long-duration insurance and investment contracts issued by the Company. The Company adopted this guidance, effective January 1, 2023, using the modified retrospective transition method, where permitted, for changes to the liability for future policy benefits and deferred policy acquisition costs ("DAC") and related balances, and using the retrospective transition method, as required for market risk benefits. The Company applied the guidance as of the transition date of January 1, 2021 and retrospectively adjusted prior period amounts shown in the 2023 financial statements to reflect the new guidance.

The following tables present amounts as previously reported in 2022, the effect upon those amounts from the adoption of the new guidance under ASU 2018-12, and the adjusted amounts that are reflected in the Unaudited Interim Financial Statements included herein.

Table of Contents


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

Unaudited Interim Statements of Financial Position:


	December 31, 2022
IMPACTED LINES ONLY	As Previously Reported		Effect of Change		As Currently Reported
	(in thousands)
Deferred policy acquisition costs	$	364,494	$	(12,620)	$	351,874
Reinsurance recoverables	3,258,526		(160,278)		3,098,248
Income tax assets	67,126		489		67,615
Market risk benefit assets	0		558,624		558,624
Other assets	16,207		32,184		48,391
TOTAL ASSETS	$	20,178,046	$	418,399	$	20,596,445
Policyholders’ account balances	$	2,763,730	$	10,585	$	2,774,315
Future policy benefits	2,303,407		(173,365)		2,130,042
Market risk benefit liabilities	0		558,624		558,624



Other liabilities	147,908		24,397		172,305
Total liabilities	19,149,549		420,241		19,569,790

Retained earnings	439,236		(153,803)		285,433
Accumulated other comprehensive income (loss)	(188,151)		151,961		(36,190)
Total equity	1,028,497		(1,842)		1,026,655
TOTAL LIABILITIES AND EQUITY	$	20,178,046	$	418,399	$	20,596,445

Table of Contents


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

Unaudited Interim Statements of Operations and Comprehensive Income (Loss):


	Three Months Ended March 31, 2022
IMPACTED LINES ONLY	As Previously Reported		Effect of Change		As Currently Reported
	(in thousands)
REVENUES
Premiums	$	10,195	$	(1,175)	$	9,020
Policy charges and fee income	15,721		(5,126)		10,595
Realized investment gains (losses), net	16,028		(308)		15,720
Change in value of market risk benefits, net of related hedging gain (loss)	0		(86,828)		(86,828)
TOTAL REVENUES	67,059		(93,437)		(26,378)
BENEFITS AND EXPENSES
Policyholders’ benefits	13,574		261		13,835
Change in estimates of liability for future policy benefits	0		(1,177)		(1,177)
Amortization of deferred policy acquisition costs	6,192		(1,363)		4,829
General, administrative and other expenses	12,381		(1,381)		11,000
TOTAL BENEFITS AND EXPENSES	43,341		(3,660)		39,681
INCOME (LOSS) FROM OPERATIONS BEFORE INCOME TAXES	23,718		(89,777)		(66,059)
Income tax expense (benefit)	1,856		(21,799)		(19,943)
NET INCOME (LOSS)	$	21,862	$	(67,978)	$	(46,116)
Other comprehensive income (loss), before tax:
Net unrealized investment gains (losses)	(166,361)		6,268		(160,093)
Interest rate remeasurement of future policy benefits	0		22,483		22,483
Gain (loss) from changes in non-performance risk on market risk benefits	0		86,828		86,828
Total	(166,428)		115,579		(50,849)
Less: Income tax expense (benefit) related to other comprehensive income (loss)	(34,949)		24,271		(10,678)
Other comprehensive income (loss), net of taxes	(131,479)		91,308		(40,171)
Comprehensive income (loss)	$	(109,617)	$	23,330	$	(86,287)

Table of Contents


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

Unaudited Interim Statements of Cash Flows:


	Three Months Ended March 31, 2022
IMPACTED LINES ONLY	As Previously Reported		Effect of Change		As Currently Reported
	(in thousands)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)	$	21,862	$	(67,978)	$	(46,116)
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Policy charges and fee income	(4,892)		4,879		(13)
Realized investment (gains) losses, net	(16,028)		308		(15,720)
Change in value of market risk benefits, net of related hedging (gains) losses	0		86,828		86,828
Change in:
Future policy benefits and other insurance liabilities	(873)		18,282		17,409
Reinsurance recoverables	(37,823)		13,720		(24,103)
Deferred policy acquisition costs	(11,678)		(1,359)		(13,037)
Income taxes	25,140		(21,799)		3,341
Other, net(1)	(1,063)		(32,881)		(33,944)
Cash flows from (used in) operating activities	$	(10,901)	$	0	$	(10,901)

(1) Prior period has been reclassified to conform to the current period presentation.

The following tables detail the January 1, 2021 transition adjustments by providing a rollforward of the ending reported balances as of December 31, 2020 to the opening balances as of January 1, 2021 for retained earnings, accumulated other comprehensive income (“AOCI”) and the impacted insurance-related balances.


	January 1, 2021
	Retained Earnings
	(in thousands)
Balance after-tax, prior to transition	$	328,450


Reclassification of market risk benefits non-performance risk to accumulated other comprehensive income(1)	(60,792)
Updates to certain universal life contract liabilities(2)	(20,108)
Other(3)	7,722
Total pre-tax adjustments	(73,178)
Tax impacts	15,367
Balance after-tax, after transition	$	270,639

(1) Reflects the cumulative impact of changes in the fair value of market risk benefits (“MRB”) non-performance risk (“NPR”) from the date of contract issuance to January 1, 2021. These amounts were previously recorded in retained earnings but are now reflected in AOCI under the new guidance.

(2) Reflects the impact on additional insurance reserves ("AIR") and other related balances primarily related to the no-lapse guarantee features on certain universal life contracts. For additional information, see Note 2.

(3) Primarily reflects the reassessment of deferred reinsurance losses ("DRL").

Table of Contents


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


	January 1, 2021
	Accumulated Other Comprehensive Income
	(in thousands)
Balance after-tax, prior to transition	$	185,407
Interest rate remeasurement of future policy benefits	(57,440)
Reclassification of market risk benefits non-performance risk to accumulated other comprehensive income(1)	60,792
Unwinding amounts related to unrealized investment gains and losses(2)	(15,161)
Total pre-tax adjustments	(11,809)
Tax impacts	2,480
Balance after-tax, after transition	$	176,078

(1)Reflects the cumulative impact of changes in NPR on the fair value of market risk benefits from the date of contract issuance to January 1, 2021. These amounts were previously recorded in retained earnings but are now reflected in AOCI under the new guidance.

(2) Primarily reflects amounts related to DAC and other balances as unrealized investment gains or losses no longer impact the amortization pattern of such balances under the new guidance. Also includes the impacts from updates to reserves and other related balances for certain universal life contracts. For additional information, see Note 2.


	January 1, 2021
	Deferred Policy Acquisition Costs
	Term Life		Variable/Universal Life		Total
	(in thousands)
Balance prior to transition	$	51,526	$	172,899	$	224,425
Unwinding amounts related to unrealized investment gains and losses	0		21,714		21,714
Other(1)	1		(1,922)		(1,921)
Balance after transition	$	51,527	$	192,691	$	244,218

(1) Represents miscellaneous model refinements.


	January 1, 2021
	Deferred Reinsurance Losses(1)
	Variable Annuities
	(in thousands)
Balance prior to transition	$	15,209
Unwinding amounts related to unrealized investment gains and losses	1,187
Effect of change in reserve basis to market risk benefits	4,236
Balance after transition	$	20,632

(1) Deferred reinsurance losses are included in "Other assets".

Table of Contents


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


	January 1, 2021
	Benefit Reserves(1)
	Term Life		Fixed Annuities		Total
	(in thousands)
Balance prior to transition	$	1,049,445	$	16,468	$	1,065,913


Changes in cash flow assumptions and other activity	30		(687)		(657)



Balance after transition, at original discount rate	1,049,475		15,781		1,065,256

Cumulative changes in discount rate assumptions	401,072		2,188		403,260
Balance after transition, at current discount rate	1,450,547		17,969		1,468,516


Less: Reinsurance recoverable	1,264,199		17,944		1,282,143
Balance after transition, net of reinsurance recoverable	$	186,348	$	25	$	186,373

(1) Benefit reserves, excluding amounts for reinsurance recoverable, are included in "Future policy benefits". For additional information on the liability for future policy benefits, see Note 8.


	January 1, 2021
	Deferred Profit Liability(1)
	Fixed Annuities
	(in thousands)
Balance prior to transition	$	102

Changes in benefit reserves	882
Balance after transition	984
Less: Reinsurance recoverable	984
Balance after transition, net of reinsurance recoverable	$	0

(1) Deferred profit liability ("DPL"), excluding amounts for reinsurance recoverable, is included in "Future policy benefits". For additional information regarding the liability for future policy benefits, see Note 8.


	January 1, 2021
	Additional Insurance Reserves(1)
	Variable/Universal Life		Variable Annuities		Total
	(in thousands)
Balance prior to transition	$	513,812	$	24,433	$	538,245
Unwinding amounts related to unrealized investment gains and losses	(109,355)		(1,698)		(111,053)
Balance prior to transition, excluding amounts related to unrealized investment gains and losses	404,457		22,735		427,192

Reclassification of future policy benefits additional insurance reserves to market risk benefits	0		(22,735)		(22,735)
Updates to certain universal life contract liabilities(2)	142,726		0		142,726


Balance after transition, excluding amounts related to unrealized investment gains and losses	547,183		0		547,183
Amounts related to unrealized investment gains and losses after transition	95,331		0		95,331
Balance after transition	642,514		0		642,514
Less: Reinsurance recoverable	613,009		0		613,009
Balance after transition, net of reinsurance recoverable	$	29,505	$	0	$	29,505

(1) Additional insurance reserves ("AIR"), excluding amounts for reinsurance recoverable, are included in "Future policy benefits". For additional information regarding the liability for future policy benefits, see Note 8.

(2) For additional information regarding updates to reserves and other related balances for certain universal life contracts, see Note 2.

Table of Contents


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


	January 1, 2021
	Unearned Revenue Reserves(1)

	Variable/Universal Life
	(in thousands)
Balance prior to transition	$	94,480
Unwinding amounts related to unrealized investment gains and losses and other activity	92,103
Balance after transition	186,583
Less: Reinsurance recoverable	45,019
Balance after transition, net of reinsurance recoverable	$	141,564

(1) Unearned revenue reserves ("URR") are included in "Policyholders' account balances". For additional information regarding the liability for policyholders' account balances, see Note 9.


	January 1, 2021
	Market Risk Benefits(1)
	Variable Annuities
	(in thousands)
Liability for guaranteed benefits recorded at fair value, prior to transition	$	1,195,470
Additional insurance reserves to be reclassed to market risk benefits, prior to transition, excluding amounts related to unrealized investment gains and losses	22,735
Total liability prior to transition	1,218,205

Change in reserve basis to market risk benefits framework	(12,634)
Market risk benefits after transition, at current non-performance risk value	1,205,571
Less: Reinsured market risk benefits	1,205,571
Market risk benefits after transition, net of reinsurance	0

Market risk benefits after transition, at contract inception non-performance risk value	$	1,266,363
Cumulative change in non-performance risk	60,792
Market risk benefits after transition, at current non-performance risk value	$	1,205,571

(1) For additional information regarding market risk benefits, see Note 10.


	January 1, 2021
	Cost of Reinsurance(1)
	Variable/ Universal Life
	(in thousands)
Balance prior to transition	$	85,773
Unwinding amounts related to unrealized investment gains and losses	(34,617)
Balance prior to transition, excluding amounts related to unrealized investment gains and losses	51,156
Impact from updates to certain universal life contract liabilities(2)	14,045

Balance after transition, excluding amounts related to unrealized investment gains and losses	65,201
Amounts related to unrealized investment gains and losses after transition	27,620
Balance after transition	$	92,821

(1) Cost of reinsurance is included in "Other liabilities".

(2) For additional information regarding updates to reserves and other related balances for certain universal life contracts, see Note 2.

Table of Contents


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

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~~future policy ~~acquisition costs ("DAC") and related amortization;~~benefits; policyholders' account balances and reinsurance related to the fair value of embedded derivative instruments associated with the index-linked features of certain universal life and annuity products; market risk benefits; the valuation of investments including derivatives, the measurement of allowance for credit losses, and the recognition of other-than-temporary impairments; ~~future policy benefits including guarantees;~~ reinsurance recoverables; any 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~~Reclassifications

~~Since the first quarter of 2020, the novel coronavirus (“COVID-19”) has resulted~~Certain amounts in ~~extreme stress and disruption in the global economy and financial markets. The pandemic has adversely impacted, and may continue~~prior periods have been reclassified to ~~adversely impact, the Company's results of operations, financial condition and cash flows. Due~~conform to the highly uncertain nature of these conditions, it is not possible to estimate the ultimate impacts at this time. The risks 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.

~~Out of Period Adjustment~~

~~During the three months ended June 30, 2022, the Company recorded out of~~current period adjustments resulting in an aggregate net charge of $2 million to “Income (loss) from operations before income taxes”. These adjustments related to reserves for certain universal and variable life products and certain portions of reinsurance activity.

During the three months ended September 30, 2022, the Company recorded out of period adjustments resulting in an aggregate net charge of $6 million to “Income (loss) from operations before income taxes”. These adjustments primarily relate to a portion of the ceding and expense allowance incorrectly recorded in the second quarter of 2022.

~~Table of Contents~~


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

~~The aggregate impact of out of period adjustments recorded in the first nine months of 2022 was a net charge of $3 million to "Income (loss) from operations before income taxes".~~

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.presentation.

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")~~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 ~~September 30, 2022,~~March 31, 2023, 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~~Adoption of ~~September 30, 2022 —~~ ASU 2018-12

Effective January 1, 2023, the Company adopted ASU 2018-12,, Financial ~~Services -~~ 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~~. Adoption of this 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,~~impacted, 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~~and had a significant financial impact on the Financial Statements and ~~will significantly increase~~ disclosures. See Note 1 for additional information.

As of the January 1, 2021 transition date, the ~~Company estimates that the implementation~~adoption of the standard ~~will result~~resulted in ~~approximately~~ a ~~$150 million~~ decrease to ~~$50~~“Total equity” of $67 million, ~~increase to “Total equity”, largely~~primarily from remeasuring in force contract liabilities using upper-medium grade fixed income instrument yields as of the transition date and from other changes in reserves. ~~In addition~~As of the January 1, 2023 adoption date, the impact amounted to a decrease to "Total equity" of $2 million. The changes in the impacts from January 1, 2021 to January 1, 2023 primarily reflect the ~~balance sheet, the Company also expects an impact to the pattern of earnings emergence following the transition date.~~increase in market interest rates during 2021 and 2022.

Outlined below ~~are four~~are: (1) key ~~areas of change, although there are other less significant~~accounting policy changes ~~not noted below.~~effected by the ASU and (2) updated accounting policies for all of the periods presented in the Unaudited Interim Financial Statements.

1116

Table of Contents


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

(1) Key Accounting Policy Changes

~~ASU 2018-12 Amended Topic~~Area of Change

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~~limited-payment 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~~Effective January 1, 2023 using the ~~liability for future policy benefits: (1) a~~ modified retrospective transition method, ~~whereby~~which includes a cumulative effect adjustment to the ~~entity may choose to apply~~balance sheet as of January 1, 2021 (the “transition date”). Under this method, the amendments to contracts in force were applied as of ~~the beginning of the prior year (if early adoption is elected) or as of the beginning of the earliest period presented~~January 1, 2021 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.~~AOCI

The ~~Company will adopt this guidance effective January 1, 2023 using~~impact upon transition reflects the ~~modified retrospective~~impact on in force contract liabilities in instances where expected net premiums exceeded expected gross premiums at an issue-year cohort level as a result of updating to current best estimate cash flow assumptions as of the transition ~~method.~~date. As a result of the modified retrospective transition method, ~~the Company expects~~ the vast majority of the impact of updating cash flow assumptions to best estimates as of the transition date towill be reflected in the pattern of earnings in subsequent periods. See Note 1 for additional information regarding the effect on the financial statements. Adoption of the standard also resulted in additional required disclosures. See Note 8 for additional information.

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

Requires discount rate assumptions to be based on an upper-medium grade fixed income instrument ~~yield,~~yields, 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~~the guidance for the liability for future policy ~~benefits.~~benefits was adopted effective January 1, 2023 using the modified retrospective transition method, which includes a cumulative effect adjustment to the balance sheet as of January 1, 2021. Under ~~either~~this method, for balance sheet remeasurement purposes, the liability for future policy benefits ~~will be~~is 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~~January 1, 2021 with the impact recorded as a cumulative effect adjustment to AOCI.

~~As noted above,~~Adoption of the ~~Company will adopt the guidance for the liability for future policy benefits effective January 1, 2023 using the modified retrospective transition method. The Company expects an~~ASU resulted in a significant impact to AOCI as a result of remeasuring in force contract liabilities using current upper-medium grade fixed income instrument ~~yields as of the adoption date. The~~yields. This adjustment ~~will~~ largely ~~reflect~~reflects the difference between discount rates locked-in at contract inception versus current discount ~~rates as~~rates. See Note 1 for additional information regarding the effect on the financial statements. Adoption of the ~~adoption date. The magnitude of such adjustment is currently being assessed.~~standard also resulted in additional required disclosures. See Note 8 for additional information.

Amortization of ~~DAC~~deferred acquisition costs ("DAC") and other balances

Requires DAC and other balances, such as ~~unearned revenue reserves~~URR and ~~deferred sales inducements,~~Deferred Sales Inducements, 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~~Effective January 1, 2023 using the modified retrospective transition method, ~~whereby~~which includes a cumulative effect adjustment to the ~~entity may choose to apply~~balance sheet as of January 1, 2021. Under this method, the amendments to contracts in force were applied as of ~~the beginning of the prior year (if early adoption is elected) or as of the beginning of the earliest period presented~~January 1, 2021 on the basis of their existing carrying amounts, adjusted for the removal of any related amounts in ~~AOCI or (2) if an entity chooses~~AOCI.

Adoption of the ASU did not have 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~~significant impact on DAC and other ~~balances.~~

~~The Company will adopt this guidance effective January 1, 2023 using the modified retrospective~~balances upon transition, ~~method. Under the modified retrospective transition method, the Company does not expect a significant impact to the balance sheet,~~ other than the impact of the removal of any related amounts in AOCI. See Note 1 for additional information regarding the effect on the financial statements. Adoption of the standard also resulted in additional required disclosures. See Note 6 for additional information.

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

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 the 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"),~~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~~Effective January 1, 2023 using the retrospective transition ~~method. Upon~~method, which includes a cumulative effect adjustment to the balance sheet as of January 1, 2021.

Adoption of the ASU resulted in an adjustment to retained earnings for the difference between the fair value and carrying value of benefits not measured at fair value prior to the adoption of the ~~Company expects~~ASU (e.g., guaranteed minimum death benefits on variable annuities) and a ~~decrease to "Retained earnings" and an offsetting increase to AOCI from reclassifying~~reclass of the cumulative effect of changes in NPR from retained earnings to AOCI. ~~The Company~~See Note 1 for additional information regarding the effect on the financial statements. Adoption of the standard also expects an impact to “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). The magnitude of such adjustments is currently being assessed.resulted in additional required disclosures. See Note 10 for additional information.

In addition to the significant key accounting changes noted above, ASU 2018-12 also clarified the definition of assessments used to accrue additional insurance reserves and other related balances, primarily for no-lapse guarantee features on certain universal life contracts. Application of the new guidance changed the pattern of reserve recognition for these guarantees and resulted in an increase to the net contract liabilities related to these products at transition. See Note 1 for additional information regarding the effect on the financial statements.

ASU 2022-05, Financial Services – Insurance (Topic 944) Transition for Sold Contracts was issued on December 15, 2022, to amend the transition guidance in ASU 2018-12, Financial Services—Insurance (Topic 944): Targeted Improvements to the Accounting for Long-Duration Contracts. The amendment allows an insurance entity to make an accounting policy election to not apply ASU 2018-12 to contracts or legal entities sold or disposed of before the effective date, and in which the insurance entity has no significant continuing involvement with the derecognized contracts. An insurance entity is permitted to apply the policy election on a transaction by transaction basis to each sale or disposal transaction. An insurance entity is required to disclose whether it has chosen to apply this accounting policy election and provide a qualitative description of the sale or disposal transactions to which the accounting policy election is applied. The Company did not apply this accounting policy election.

(2) Updated Accounting Policies

This section includes the updated accounting policies resulting from the adoption of ASU 2018-12 which are applicable to all of the periods presented in the Unaudited Interim Financial Statements. This section is meant to serve as an update to, and should be read in conjunction with, Note 2 to the Financial Statements included in the Company's Annual Report on Form 10-K for the year ended December 31, 2022.

ASSETS

Deferred policy acquisition costs represents costs directly related to the successful acquisition of new and renewal insurance and annuity business. Such DAC primarily includes commissions, costs of policy issuance and underwriting, and certain other expenses that are directly related to successfully acquired contracts. In each reporting period, previously capitalized DAC is amortized and included in “Amortization of deferred policy acquisition costs”, and the carrying amount of DAC is not subject to recoverability testing upon adoption of the ASU.

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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~~DAC is amortized on a constant-level basis at a grouped contract level over the expected life of the underlying insurance contracts. Contracts are grouped consistent with the groupings used to estimate the liability for future policy benefits (or other related balances) for the corresponding contracts. Since contracts within a grouping may be of different sizes, contracts within a group are weighted to achieve appropriate amortization and to ensure that DAC is derecognized when a policy is no longer in force. The constant-level basis used to weight contracts within a grouping and amortize DAC is generally defined as ~~of September 30, 2022~~follows:

•Life insurance contracts – DAC associated with life insurance contracts is generally amortized in proportion to the initial face amount of life insurance in force. This is applicable to traditional and universal life insurance.

•Payout annuity contracts – DAC associated with payout annuity contracts is amortized in proportion to annual benefit payments.

•Deferred annuity contracts – DAC associated with fixed and variable deferred annuity contracts is amortized in proportion to deposits.

For single premium immediate annuities without life contingencies, acquisition expenses are deferred and amortized over the expected life of the contracts using the interest method.

Current period DAC amortization reflects the impact of changes in actual insurance in force during the period and changes in future assumptions effected as of the end of the quarter, where applicable. The Company typically updates actuarial assumptions annually in the second quarter, (see "Annual Assumptions Review" below), unless a material change is observed in an interim period that is indicative of a long-term trend. Generally, the Company does not expect trends to change significantly in the short-term and, to the extent these trends may change, the Company expects such changes to be gradual over the long-term.

Assumptions used for DAC are consistent with those used in estimating the liability for future policy benefits (or any other related balance) for the corresponding contract.Determining the level of aggregation and actuarial assumptions used in projecting in force terminations requires judgment. Internal criteria are developed to determine the level of aggregation by considering both qualitative and quantitative materiality thresholds. The assumptions used in projecting in force terminations are mortality, mortality improvement, and lapse assumptions. These assumptions are generally based on the Company’s experience, industry experience and/or other factors, as applicable. For variable deferred annuity contracts, lapse rates are adjusted at the contract level based on the in-the-moneyness of the living benefits 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 are also generally assumed to be lower for the period where surrender charges apply.

For some products, policyholders can elect to modify product benefits, features, rights or coverages by exchanging a contract for a new contract or by amendment, endorsement, or rider to a contract, or by the election of a feature or coverage within a contract. These transactions are known as internal replacements. If policyholders surrender traditional life insurance policies in exchange for life insurance policies that do not have fixed and guaranteed terms, the Company immediately charges to expense the remaining unamortized DAC on the surrendered policies. For other internal replacement transactions, except those that involve the addition of a non-integrated contract feature that does not change the existing base contract, the unamortized DAC is immediately charged to expense if the terms of the new policies are not substantially similar to those of the former policies. If the new terms are substantially similar to those of the earlier policies, the DAC is retained with respect to the new policies and amortized over the expected life of the new policies. See Note 6 for additional information regarding DAC.

Reinsurance recoverables include corresponding receivables associated with reinsurance arrangements with affiliates and third party reinsurers, andare reported on the Statements of Financial Position net of the CECL allowance. Reinsurance recoverables also include assumed modified coinsurance arrangements which generally reflect the value of the invested assets retained by the cedant and the associated asset returns. Modified coinsurance recoverables contain an embedded derivative (bifurcated and accounted for separately from the host contract) that is presented together with the derivative embedded in the modified coinsurance payables as one compound derivative. For additional information about these arrangements see Note 11.

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~~Standard~~

~~Description~~

~~Effective date and method of adoption~~

~~Effect on the financial statements or other significant matters~~PRUCO LIFE INSURANCE COMPANY OF NEW JERSEY

~~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 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~~Unaudited Interim Financial ~~Statements.~~Statements—(Continued)

The CECL allowance considers the credit quality of the reinsurance counterparty and is generally determined based on the probability of default and loss given default assumptions, after considering any applicable collateral arrangements. The CECL allowance does not apply to reinsurance recoverables with affiliated counterparties under common control. Additions to or releases of the allowance are reported in “Policyholders’ benefits.” Prior to the adoption of this standard, an allowance for credit losses for reinsurance recoverables was established only when it was deemed probable that a reinsurer may fail to make payments to us in a timely manner. Reinsurance premiums, commissions, expense reimbursements, benefits and reserves related to reinsured long-duration contracts under coinsurance arrangements are accounted for over the life of the underlying reinsured contracts using assumptions consistent with those used to account for the underlying contracts. For reinsurance of in force blocks of non-participating traditional and limited-payment contracts, the current value of the direct liability as of inception of the reinsurance agreement is used to calculate the reinsurance recoverable and cost of reinsurance such that there is no immediate other comprehensive income or loss from recognition of the reinsurance recoverable at inception. Consistent with the direct liability, the reinsurance recoverable for non-participating traditional and limited-payment contracts is remeasured each period using current single A rates with the effect on the liability resulting from such updates recorded in "Interest rate remeasurement of future policy benefits" in OCI.

Coinsurance arrangements contrast with the Company’s yearly renewable term arrangements, where only mortality risk is transferred to the reinsurer and premiums are paid to the reinsurer to reinsure that risk. The mortality risk that is reinsured under yearly renewable term arrangements represents the difference between the stated death benefits in the underlying reinsured contracts and the corresponding reserves or account value carried by the Company on those same contracts. The premiums paid to the reinsurer are based upon negotiated amounts, not on the actual premiums paid by the underlying contract holders to the Company. As yearly renewable term arrangements are usually entered into by the Company with the expectation that the contracts will be in force for the lives of the underlying policies, they are considered to be long-duration reinsurance contracts. The cost of reinsurance for universal life products is generally recognized based on the gross assessments of the underlying direct policies. The cost of reinsurance for term insurance products is generally recognized in proportion to direct premiums over the life of the underlying policies.

Market risk benefits in an asset position are presented separately from market risk benefits in a liability position. See “Market risk benefits” below.

Other assets consists primarily of premiums due and deferred loss on reinsurance with affiliates which is amortized over the expected life of the reinsured contracts on a constant-level basis.

Separate account assets represents segregated funds that are invested for certain policyholders, and other customers. The assets consist primarily of equity securities, fixed maturities, real estate-related investments, real estate mortgage loans, short-term investments and derivative instruments and are reported at fair value. The assets of each account are legally segregated and are not subject to claims that arise out of any other business of the Company. Investment risks associated with market value changes are borne by the customers, except to the extent of minimum guarantees made by the Company with respect to certain accounts. The investment income and realized investment gains or losses from separate account assets generally accrue to the policyholders and are not included in the Company’s results of operations. Mortality, policy administration and surrender charges assessed against the accounts are included in “Policy charges and fee income”. Asset administration fees charged to the accounts are included in “Asset administration fees”. Seed money that the Company invests in separate accounts is reported in the appropriate general account asset line. Investment income and realized investment gains or losses from seed money invested in separate accounts accrue to the Company and are included in the Company’s results of operations. See Note 7 for additional information regarding separate account arrangements with contractual guarantees. See also “Separate account liabilities” below.

LIABILITIES

Future policy benefits is primarily comprised of the present value of expected future payments to or on behalf of policyholders, where the timing and amount of payment depends on policyholder mortality or morbidity, less the present value of expected future net premiums (where net premiums are gross premiums multiplied by the Net-To-Gross ("NTG") ratio discussed below). The liability for future policy benefits is accrued over time as premium revenue is recognized. See Note 8 for additional information regarding future policy benefits.

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

The reserving methodology used for non-participating traditional and limited-payment contracts include the following:

•Cash Flow Assumptions. In measuring the liability for future policy benefits, the net premium valuation methodology is utilized. Under this methodology, a liability for future policy benefits is established using current best estimate insurance assumptions and interest rate assumptions locked-in at contract issuance date. The NTG ratio is calculated as the ratio of the present value of expected policy benefits and non-level claim settlement expenses divided by the present value of expected gross premiums. The NTG ratio is applied to gross premiums, as premium revenue is recognized, to determine net premiums. The liability is then determined as the present value of expected future policy benefits and non-level claim settlement expenses less the present value of expected future net premiums. For purposes of liability measurement, contracts are grouped into cohorts based primarily on issue year and major product line.

The NTG ratio is generally updated quarterly for actual experience and annually for future cash flow assumption updates during the Company’s annual assumptions review process in the second quarter of each year unless a material change is observed in an interim period that is indicative of a long-term trend (see “Annual Assumptions Review” below), and with the exception of claim settlement expense assumptions which the Company has made an entity-wide election to lock-in as of contract issuance. The NTG ratio is subject to a retrospective unlocking method whereby the Company updates its best estimate of cash flows expected over the life of the cohort using actual historical experience and updated future cash flow assumptions. These updated cash flows are used to calculate the revised NTG ratio, which is used to derive an updated liability for future policy benefits as of the beginning of the current reporting period, discounted at the original contract issuance discount rate. The updated liability for future policy benefit amount as of the beginning of the quarter is then compared to the carrying amount of the liability as of that same date, before the updates for actual experience or future cash flow assumptions, to determine the current period change in liability estimate. This current period change in the liability is the liability remeasurement gain or loss that is recorded through current period earnings in “Change in estimates of liability for future policy benefits.” In subsequent periods, the revised NTG ratio is used to measure the liability for future policy benefits, subject to future revisions.

If a cohort is in a loss position where the liability for future policy benefits plus the present value of expected future gross premiums are determined to be insufficient to provide for expected future policy benefits and non-level claim settlement expenses, the NTG ratio is capped at 100%. In these instances, all changes in expected benefits resulting from both actual experience deviations and changes in future assumptions are reflected immediately. While the liability for future policy benefits cannot be less than zero (i.e., a contra-liability) at the cohort level and thus the balance is floored at zero (i.e., “flooring”), the NTG ratio may be negative. This would be the case whereby conditions have improved such that the present value of future net premiums plus the existing liability for future policy benefits as of the valuation date exceed the present value of expected future policy benefits and non-level claim settlement expenses. In this case, the negative NTG ratio would be applied going forward to gross premiums received, effectively amortizing the gain into income and reducing the liability over time.

For contracts issued prior to January 1, 2021, the modified retrospective transition method was used to transition to ASU 2018-12. Under this method, the transition date of January 1, 2021 serves as the new issue date of the contracts in force for purposes of retrospectively unlocking the NTG ratio as described above.

•Discount Rate Assumption. The locked-in discount rate is generally based on expected investment returns at contract inception for contracts issued prior to January 1, 2021 and the upper medium grade fixed income corporate instrument yield (i.e., global single A) at contract inception for contracts issued after January 1, 2021. The discount rate in effect at contract inception is locked-in for the calculation of the NTG ratio and accretion of interest cost on the liability through net income. However, for balance sheet remeasurement purposes, the discount rate is updated using the current single A rate at each reporting period, with the effect on the liability resulting from such update recorded in “Interest rate remeasurement of future policy benefits" in OCI.

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

The methodology used in constructing the single A discount rate curve for discounting cash flows used to calculate the liability for future policy benefits is intended to be reflective of the characteristics of the applicable insurance liabilities. The single A discount rate curve is developed by reference to upper medium grade (low credit risk) fixed income instrument yields that reflect the duration characteristics of the applicable insurance liabilities. The single A discount curve for the United States and foreign economies, such as Japan, with observable corporate A spreads, is developed using government bond rates, plus globally equivalent public corporate A spreads in the observable periods. The definition of upper medium grade is based on Moody’s definition which includes the spectrum of A (i.e., A- to A+). The rate used in foreign operations (with the exception of certain emerging markets, as discussed below) is based on the equivalent of a single A rate from a global rating agency for corporate bonds issued in the same currency and country in which the insurance contract is written. Liquidity is considered in defining the observable period and linear extrapolation is performed to the Company's ultimate long-term economic assumptions. See “Annual Assumptions Review” below for further discussion regarding the Company’s long-term economic assumption setting process.

The Company’s liability for future policy benefits also includes net liabilities for guaranteed benefits related to certain long-duration life contracts, such as no-lapse guarantee contract features (AIR liability), for which a liability is established when associated assessments are recognized (which include investment margin on policyholders' account balances in the general account and all policy charges including charges for administration, mortality, expense, surrender, and other charges). This liability is established using current best estimate assumptions and is based on the ratio of the present value of total expected excess payments (i.e., payments in excess of account value) over the life of the contract divided by the present value of total expected assessments (i.e., benefit ratio).

For universal life type contracts and participating contracts, the Company performs premium deficiency tests using best estimate assumptions as of the testing date. If the liabilities determined based on these best estimate assumptions are greater than the net reserves (i.e., GAAP reserves including URR, net of reinsurance), the existing net reserves are adjusted by first reducing these assets by the amount of the deficiency or to zero through a charge to current period earnings. If the deficiency is more than these asset balances for insurance contracts, the net reserves are increased by the excess through a charge to current period earnings included in "policyholders' benefits". Since investment yields are used as the discount rate, the premium deficiency test is also performed using a discount rate based on the market yield (i.e., assuming what would be the impact if any unrealized gains (losses) were realized as of the testing date). In the event that by using the market yield a deficiency occurs, an adjustment is established for the deficiency and is included in AOCI.

In certain instances, for universal life type contracts and participating contracts, the policyholder liability for a particular line of business may not be deficient in the aggregate to trigger loss recognition, but the pattern of earnings may be such that profits are expected to be recognized in earlier years followed by losses in later years. In these situations, accounting standards require that an additional liability (Profits Followed by Losses or “PFL” liability) be recognized by an amount necessary to sufficiently offset the losses that would be recognized in later years. Historically, PFL liabilities have been predominantly associated with certain universal life contracts that measure GAAP reserves using a dynamic approach, and accordingly, are updated each quarter, using current in force and market data, and as part of the annual assumption update, such that the liability as of each measurement date represents the Company’s current estimate of the present value of the amount necessary to offset anticipated future losses.

The Company’s liability for future policy benefits also includes a liability for unpaid claims and claim adjustment expenses. The Company does not establish claim liabilities until a loss has been incurred. However, unpaid claims and claim adjustment expenses include estimates of claims that the Company believes have been incurred but have not yet been reported as of the balance sheet date.

Policyholders’ account balances liability represents the contract value that has accrued to the benefit of the policyholder as of the balance sheet date. This liability is primarily associated with the accumulated account deposits, plus interest credited, less policyholder withdrawals and other charges assessed against the account balance, as applicable. These policyholders’ account balances also include provision for benefits under non-life contingent payout annuities and certain unearned revenues. The unearned revenue liability represents policy charges for services to be provided in future periods. The charges are deferred as incurred and are generally amortized over the expected life of the contract using the same methodology, factors, and assumption used to amortize DAC. See Note 9 for additional information regarding policyholders’ account balances. Policyholders' account balances also include amounts representing the fair value of embedded derivative instruments associated with the index-linked feature of certain universal life and annuity products. For additional information regarding the valuation of these embedded derivatives, see Note 5.

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

Market risk benefitliabilities (or assets) represents contracts or contract features that provide protection to the contractholder and exposes the Company to other than nominal capital market risk, primarily related to deferred annuities with guaranteed minimum benefits associated with Annuities products including guaranteed minimum death benefits (“GMDB”), guaranteed minimum income benefits (“GMIB”), guaranteed minimum accumulation benefits (“GMAB”), guaranteed minimum withdrawal benefits (“GMWB”) and guaranteed minimum income and withdrawal benefits (“GMIWB”). The benefits are accounted for using a fair value measurement framework. If a contract contains multiple market risk benefits, the benefits are bundled together and accounted for as a single compound market risk benefit. Market risk benefits in an asset position are presented separately from those in a liability position as there is no legal right of offset between contracts. The fair value of market risk benefits is calculated as the present value of expected future benefit payments to contractholders less the present value of expected future rider fees attributable to the market risk benefit. The fair value of market risk benefits is based on assumptions a market participant would use in valuing market risk benefits. For additional information regarding the valuation of market risk benefits, see Note 5. On a quarterly basis, changes in the fair value of market risk benefits are recorded in net income, net of related hedges, in "Change in value of market risk benefits, net of related hedging gains (losses)", except for the portion of the change attributable to changes in the Company’s NPR which is recorded in OCI. See Note 10 for additional information regarding market risk benefits.

Other liabilities consists primarily of accrued expenses, reinsurance payables and technical overdrafts.

Separate account liabilities primarily represents the contractholders’ account balance in separate account assets and to a lesser extent borrowings of the separate account, and will be equal and offsetting to total separate account assets. See also “Separate account assets” above.

REVENUES AND BENEFITS AND EXPENSES

Insurance Revenue and Expense Recognition

Premiums from individual life products, other than universal and variable life contracts, are recognized when due. When premiums are due over a significantly shorter period than the period over which benefits are provided, any gross premium in excess of the net premium (i.e., the portion of the gross premium required to provide for all expected future benefits and expenses) is generally deferred and recognized into revenue in a constant relationship to insurance in force. Benefits are recorded as an expense when they are incurred. A liability for future policy benefits is recorded when premiums are recognized using the net level premium valuation methodology.

Premiums from single premium immediate annuities with life contingencies are recognized when due. When premiums are due over a significantly shorter period than the period over which benefits are provided, any gross premium in excess of the net premium is generally deferred and recognized into revenue based on expected future benefit payments. Benefits are recorded as an expense when they are incurred. A liability for future policy benefits is recorded when premiums are recognized using the net level premium valuation methodology.

Certain individual annuity contracts provide the contractholder a guarantee that the benefit received upon death or annuitization will be no less than a minimum prescribed amount. These benefits are generally accounted for as market risk benefits (see “Market risk benefits” above).

Amounts received as payment for universal or variable individual life contracts, deferred fixed or variable annuities and other contracts without life contingencies are reported as deposits to “Policyholders’ account balances” and/or “Separate account liabilities.” Revenues from these contracts are reflected in “Policy charges and fee income” consisting primarily of fees assessed during the period against the policyholders’ account balances for mortality and other benefit charges, policy administration charges and surrender charges. In addition to fees, the Company earns investment income from the investment of deposits in the Company’s general account portfolio. Fees assessed that represent compensation to the Company for services to be provided in future periods and certain other fees are generally deferred and amortized into revenue over the life of the related contracts using the same methodology, factors, and assumption used to amortize DAC as described above. Benefits and expenses for these products include claims in excess of related account balances, expenses of contract administration, interest credited to policyholders’ account balances and amortization of DAC.

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

Policyholders’ account balances also includes amounts representing the fair value of embedded derivative instruments associated with the index-linked features of certain universal life and annuity products where changes in the value of the embedded derivatives are recorded through "Realized investment gains (losses), net". For additional information regarding the valuation of these embedded derivatives, see Note 5.

Annual Assumptions Review

Annually, the Company performs a comprehensive review of the assumptions set for purposes of estimating future premiums, benefits, and other cash flows. The assumptions are based on the Company’s best estimates of future rates of mortality, morbidity, lapse, surrender, annuitization, expenses and other items. The Company generally looks to relevant Company experience as the primary basis for assumptions. If relevant Company experience is not available or does not have sufficient credibility, the Company may look to experience of similar blocks of business, either in the Company or the industry. Mortality rate assumptions are generally based on Company experience, sometimes blending Company experience with an industry table where the Company experience alone is not credible. The Company sets mortality assumptions that vary by major type of business, with different assumptions for life insurance, annuities, and retirement products. Within type of business, rates vary by age and gender. The Company applies an adjustment for future mortality improvement, consistent with observed long-term trends of population mortality over time. Lapse and surrender assumptions are based on Company and industry experience, where available. The Company sets rates that vary by product type, taking into account features specific to the product.

The Company also performs a comprehensive review of the long-term interest rate assumptions and equity return assumptions that impact reserve calculations. The Company generally utilizes relevant economic outlook information and industry survey as the primary basis for assumptions.

Other ASUs adopted during the three months ended March 31, 2023

The Company adopted ASU 2022-02, Financial Instruments – Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosure, effective January 1, 2023, on a prospective basis. This ASU eliminates the accounting guidance for Troubled Debt Restructurings (“TDR”) for creditors and adds enhanced disclosure requirements. Following adoption of the ASU, all loan refinancings and restructurings are subject to the modification guidance in ASC 310-20. Specific to the accounting policy for commercial mortgage and other loans, adoption of the ASU resulted in the elimination of TDRs such that, on a prospective basis, all modifications are evaluated under the existing modification guidance in ASC 310-20 to determine whether a modification results in a new financial instrument or a continuation of the existing financial instrument. Furthermore, for modifications of loans that have a CECL allowance and result in a continuation of the existing loan, the CECL allowance of the loan is remeasured using the modified terms and the post-modification effective yield. Prior to the adoption of the ASU, if a loan modification was a TDR, the CECL allowance of the loan was remeasured using the modified terms and the loan’s original effective yield. Adoption of the ASU did not have a significant impact on the Company’s Financial Statements and Notes to the Financial Statements.

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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:


		September 30, 2022											March 31, 2023
		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	$	12,526	$	18	$	283	$	0	$	12,261	U.S. Treasury securities and obligations of U.S. government authorities and agencies	$	52,350	$	530	$	216	$	0	$	52,664
Obligations of U.S. states and their political subdivisions	Obligations of U.S. states and their political subdivisions	165,214		292		12,298		0		153,208		Obligations of U.S. states and their political subdivisions	182,985		700		3,779		0		179,906
Foreign government bonds	Foreign government bonds	87,901		0		20,465		0		67,436		Foreign government bonds	94,250		50		14,977		0		79,323

U.S. public corporate securities	U.S. public corporate securities	1,064,878		1,235		206,292		0		859,821		U.S. public corporate securities	1,348,104		7,322		152,907		0		1,202,519
U.S. private corporate securities	U.S. private corporate securities	182,128		64		16,095		503		165,594		U.S. private corporate securities	195,195		781		10,532		0		185,444
Foreign public corporate securities	Foreign public corporate securities	136,506		14		31,712		0		104,808		Foreign public corporate securities	167,603		381		22,925		0		145,059
Foreign private corporate securities	Foreign private corporate securities	127,343		0		30,105		0		97,238		Foreign private corporate securities	136,113		983		18,377		0		118,719
Asset-backed securities(1)	Asset-backed securities(1)	18,632		298		340		0		18,590		Asset-backed securities(1)	17,731		242		208		0		17,765
Commercial mortgage-backed securities	Commercial mortgage-backed securities	125,344		0		8,527		0		116,817		Commercial mortgage-backed securities	123,021		0		8,555		0		114,466
Residential mortgage-backed securities(2)	Residential mortgage-backed securities(2)	12,428		91		410		3		12,106		Residential mortgage-backed securities(2)	12,470		113		262		3		12,318
Total fixed maturities, available-for-sale	Total fixed maturities, available-for-sale	$	1,932,900	$	2,012	$	326,527	$	506	$	1,607,879	Total fixed maturities, available-for-sale	$	2,329,822	$	11,102	$	232,738	$	3	$	2,108,183

(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											December 31, 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	$	12,832	$	673	$	0	$	0	$	13,505	U.S. Treasury securities and obligations of U.S. government authorities and agencies	$	62,210	$	0	$	1,074	$	0	$	61,136
Obligations of U.S. states and their political subdivisions	Obligations of U.S. states and their political subdivisions	161,812		17,198		0		0		179,010		Obligations of U.S. states and their political subdivisions	165,109		421		6,315		0		159,215
Foreign government bonds	Foreign government bonds	93,062		8,731		1,002		0		100,791		Foreign government bonds	87,853		1		15,891		0		71,963

U.S. public corporate securities	U.S. public corporate securities	908,129		117,450		2,994		0		1,022,585		U.S. public corporate securities	1,062,342		1,943		180,880		0		883,405
U.S. private corporate securities	U.S. private corporate securities	190,157		13,128		52		1,558		201,675		U.S. private corporate securities	186,123		141		13,465		358		172,441
Foreign public corporate securities	Foreign public corporate securities	105,346		8,481		644		0		113,183		Foreign public corporate securities	138,717		28		25,783		0		112,962
Foreign private corporate securities	Foreign private corporate securities	138,753		6,620		2,015		0		143,358		Foreign private corporate securities	133,074		523		21,562		0		112,035
Asset-backed securities(1)	Asset-backed securities(1)	16,685		596		4		0		17,277		Asset-backed securities(1)	18,358		272		256		0		18,374
Commercial mortgage-backed securities	Commercial mortgage-backed securities	132,961		8,401		7		0		141,355		Commercial mortgage-backed securities	124,486		0		8,595		0		115,891
Residential mortgage-backed securities(2)	Residential mortgage-backed securities(2)	2,474		385		0		0		2,859		Residential mortgage-backed securities(2)	12,446		92		467		5		12,066
Total fixed maturities, available-for-sale	Total fixed maturities, available-for-sale	$	1,762,211	$	181,663	$	6,718	$	1,558	$	1,935,598	Total fixed maturities, available-for-sale	$	1,990,718	$	3,421	$	274,288	$	363	$	1,719,488

(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:


		September 30, 2022													March 31, 2023
		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	$	2,428	$	283	$	0	$	0	$	2,428	$	283	U.S. Treasury securities and obligations of U.S. government authorities and agencies	$	0	$	0	$	2,025	$	216	$	2,025	$	216
Obligations of U.S. states and their political subdivisions	Obligations of U.S. states and their political subdivisions	126,641		12,298		0		0		126,641		12,298		Obligations of U.S. states and their political subdivisions	91,811		1,768		23,724		2,011		115,535		3,779
Foreign government bonds	Foreign government bonds	54,484		13,250		12,952		7,215		67,436		20,465		Foreign government bonds	20,990		888		56,267		14,089		77,257		14,977
U.S. public corporate securities	U.S. public corporate securities	794,924		183,510		39,760		22,782		834,684		206,292		U.S. public corporate securities	294,009		13,374		682,776		139,533		976,785		152,907
U.S. private corporate securities	U.S. private corporate securities	157,197		15,583		2,705		512		159,902		16,095		U.S. private corporate securities	42,180		909		110,537		9,623		152,717		10,532
Foreign public corporate securities	Foreign public corporate securities	96,247		27,379		8,168		4,333		104,415		31,712		Foreign public corporate securities	25,478		1,167		97,851		21,758		123,329		22,925
Foreign private corporate securities	Foreign private corporate securities	76,363		22,373		20,874		7,732		97,237		30,105		Foreign private corporate securities	9,224		233		87,892		18,144		97,116		18,377
Asset-backed securities	Asset-backed securities	7,503		294		1,328		46		8,831		340		Asset-backed securities	1,237		20		7,233		188		8,470		208
Commercial mortgage-backed securities	Commercial mortgage-backed securities	113,764		8,518		3,053		9		116,817		8,527		Commercial mortgage-backed securities	30,033		3,122		84,434		5,433		114,467		8,555
Residential mortgage-backed securities	Residential mortgage-backed securities	10,493		410		0		0		10,493		410		Residential mortgage-backed securities	10,350		250		273		12		10,623		262
Total fixed maturities, available-for-sale	Total fixed maturities, available-for-sale	$	1,440,044	$	283,898	$	88,840	$	42,629	$	1,528,884	$	326,527	Total fixed maturities, available-for-sale	$	525,312	$	21,731	$	1,153,012	$	211,007	$	1,678,324	$	232,738

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 September 30, 2022 and December 31, 2021, the gross unrealized losses on fixed maturity available-for-sale securities without an allowance were composed of $319.7 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 $6.8 million and $1.4 million, respectively, related to other than high or highest quality securities based on NAIC or equivalent rating. As of September 30, 2022, the $42.6 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. 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.


	December 31, 2022
	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:
U.S. Treasury securities and obligations of U.S. government authorities and agencies	$	61,136	$	1,074	$	0	$	0	$	61,136	$	1,074
Obligations of U.S. states and their political subdivisions	113,693		6,315		0		0		113,693		6,315
Foreign government bonds	46,826		5,741		24,746		10,150		71,572		15,891
U.S. public corporate securities	704,906		111,763		155,138		69,117		860,044		180,880
U.S. private corporate securities	149,670		11,857		9,273		1,608		158,943		13,465
Foreign public corporate securities	69,310		11,016		38,996		14,767		108,306		25,783
Foreign private corporate securities	62,044		12,499		33,858		9,063		95,902		21,562
Asset-backed securities	5,570		160		3,289		96		8,859		256
Commercial mortgage-backed securities	110,820		8,398		5,071		197		115,891		8,595
Residential mortgage-backed securities	10,509		467		0		0		10,509		467
Total fixed maturities, available-for-sale	$	1,334,484	$	169,290	$	270,371	$	104,998	$	1,604,855	$	274,288

1526

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

As of March 31, 2023 and December 31, 2022, the gross unrealized losses on fixed maturity available-for-sale securities without an allowance were composed of $228.4 million and $269.6 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 $4.3 million and $4.7 million, respectively, related to other than high or highest quality securities based on NAIC or equivalent rating. As of March 31, 2023, the $211.0 million of gross unrealized losses of twelve months or more were concentrated in the Company’s corporate securities within the finance, utility and consumer non-cyclical sectors. As of December 31, 2022, the $105.0 million of gross unrealized losses of twelve months or more were concentrated in the Company’s corporate securities within the finance, consumer non-cyclical and capital goods sectors.

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,~~2022, the Company concluded that an adjustment to earnings for credit losses related to these fixed maturity securities was not warranted at ~~September 30, 2022.~~March 31, 2023. 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 ~~September 30, 2022,~~March 31, 2023, 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:


		September 30, 2022					March 31, 2023
		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	$	53,999	$	51,440	Due in one year or less	$	81,580	$	78,489
Due after one year through five years	Due after one year through five years	232,286		213,030		Due after one year through five years	250,358		235,884
Due after five years through ten years	Due after five years through ten years	88,365		71,783		Due after five years through ten years	154,199		149,387
Due after ten years	Due after ten years	1,401,846		1,124,113		Due after ten years	1,690,463		1,499,874
Asset-backed securities	Asset-backed securities	18,632		18,590		Asset-backed securities	17,731		17,765
Commercial mortgage-backed securities	Commercial mortgage-backed securities	125,344		116,817		Commercial mortgage-backed securities	123,021		114,466
Residential mortgage-backed securities	Residential mortgage-backed securities	12,428		12,106		Residential mortgage-backed securities	12,470		12,318
Total fixed maturities, available-for-sale	Total fixed maturities, available-for-sale	$	1,932,900	$	1,607,879	Total fixed maturities, available-for-sale	$	2,329,822	$	2,108,183

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,
	2023		2022
	(in thousands)
Fixed maturities, available-for-sale:
Proceeds from sales(1)	$	886	$	20,241
Proceeds from maturities/prepayments	32,121		18,233
Gross investment gains from sales and maturities	29		2
Gross investment losses from sales and maturities	(415)		(1,961)
(Addition to) release of allowance for credit losses	360		0

Three Months Ended September 30, Nine Months Ended September 30,
2022 2021 2022 2021
(in thousands)
Fixed maturities, available-for-sale:
Proceeds from sales(1) $ 4,741 $ 29,890 $ 33,745 $ 42,325
Proceeds from maturities/prepayments 11,264 6,627 41,384 37,493
Gross investment gains from sales and maturities (1,053) 742 (983) 799
Gross investment losses from sales and maturities 0 (151) (2,972) (777)
(Addition to) release of allowance for credit losses 385 (1,558) 1,052 (1,558)
(1) Excludes activity from non-cash related proceeds due to the timing of trade settlements of ~~$0.0~~$0.2 million and ~~$1.5~~$0.0 million for the ~~nine~~three months ended ~~September 30,~~March 31, 2023 and 2022, ~~and 2021,~~ respectively.

1627

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

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


		Three Months Ended September 30, 2022															Three Months Ended March 31, 2023
		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			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)															(in thousands)
Fixed maturities, available-for-sale:	Fixed maturities, available-for-sale:															Fixed maturities, available-for-sale:
Balance, beginning of period	Balance, beginning of period	$	0	$	0	$	891	$	0	$	0	$	0	$	891	Balance, beginning of period	$	0	$	0	$	358	$	0	$	0	$	5	$	363
Reductions for securities sold during the period																Reductions for securities sold during the period	0		0		(358)		0		0		(1)		(359)
Additions (reductions) on securities with previous allowance	Additions (reductions) on securities with previous allowance	0		0		(388)		0		0		0		(388)		Additions (reductions) on securities with previous allowance	0		0		0		0		0		(1)		(1)

Additions to allowance for credit losses not previously recorded		0		0		0		0		0		3		3

Balance, end of period	Balance, end of period	$	0	$	0	$	503	$	0	$	0	$	3	$	506	Balance, end of period	$	0	$	0	$	0	$	0	$	0	$	3	$	3

Three Months Ended September 30, 2021
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 $ 0 $ 0 $ 0 $ 0 $ 0
Additions (reductions) on securities with previous allowance 0 0 1,558 0 0 0 1,558
Balance, end of period $ 0 $ 0 $ 1,558 $ 0 $ 0 $ 0 $ 1,558

Nine Months Ended September 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
Additions (reductions) on securities with previous allowance 0 0 (1,055) 0 0 0 (1,055)
Additions to allowance for credit losses not previously recorded 0 0 0 0 0 3 3
Balance, end of period $ 0 $ 0 $ 503 $ 0 $ 0 $ 3 $ 506

~~Table of Contents~~


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

Nine Months Ended September 30, 2021
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 $ 0 $ 0 $ 0 $ 0 $ 0
Additions (reductions) on securities with previous allowance 0 0 1,558 0 0 0 1,558
Balance, end of period $ 0 $ 0 $ 1,558 $ 0 $ 0 $ 0 $ 1,558
For the three months ended March 31, 2022, there was no activity in the allowance for credit losses for 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~~2022 for additional information about the Company’s methodology for developing our allowance ~~for credit~~and expected losses.

For ~~both~~ the three ~~and nine~~ months ended ~~September 30, 2022,~~March 31, 2023, the net decrease in the allowance for credit losses on available-for-sale securities was primarily related to ~~improved cash flows~~a restructuring in the transportation sector within corporate securities. For both the three and nine months ended September 30, 2021, the net increase in the allowance for credit losses for available-for-sale securities was primarily related to adverse projected cash flows on securities in the transportation sector within private corporate securities.

The Company did not have any fixed maturity securities purchased with credit deterioration, as of both ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021.~~2022.

Fixed Maturities, Trading

The net change in unrealized gains (losses) from fixed maturities, trading still held at period end, recorded within “Other income (loss),” was ~~$0.0~~$0.6 million and ~~$(0.8)~~$(1.8) million during the three months ended ~~September 30,~~March 31, 2023 and 2022, ~~and 2021, respectively, and $(4.7) million and $(1.5) million during the nine months ended September 30, 2022 and 2021,~~ respectively.

Equity Securities

The net change in unrealized gains (losses) from equity securities still held at period end, recorded within “Other income (loss)”, was ~~$(0.3)~~$(0.0) million and ~~$0.0~~$(0.5) million during the three months ended ~~September 30,~~March 31, 2023 and 2022, ~~and 2021, respectively, and $(1.3) million and $(0.2) million during the nine months ended September 30, 2022 and 2021,~~ respectively.

1828

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:


		September 30, 2022				December 31, 2021					March 31, 2023				December 31, 2022
		Amount (in thousands)		% of Total		Amount (in thousands)		% of Total			Amount (in thousands)		% of Total		Amount (in thousands)		% of Total
Commercial mortgage and agricultural property loans by property type:	Commercial mortgage and agricultural property loans by property type:									Commercial mortgage and agricultural property loans by property type:
Apartments/Multi-Family	Apartments/Multi-Family	$	37,622	37.6	%	$	42,188	36.4	%	Apartments/Multi-Family	$	62,244	38.8	%	$	62,434	42.0	%
Hospitality	Hospitality	13,142		13.1		13,709		11.8		Hospitality	12,849		8.0		12,996		8.7
Industrial	Industrial	17,066		17.0		17,356		15.0		Industrial	31,627		19.7		17,132		11.5
Office	Office	10,497		10.4		16,880		14.6		Office	8,188		5.1		10,568		7.1
Other	Other	7,614		7.6		7,927		6.8		Other	7,796		4.9		7,767		5.2
Retail	Retail	12,202		12.1		15,511		13.4		Retail	22,021		13.8		22,123		14.9
Total commercial mortgage loans	Total commercial mortgage loans	98,143		97.8		113,571		98.0		Total commercial mortgage loans	144,725		90.3		133,020		89.4
Agricultural property loans	Agricultural property loans	2,173		2.2		2,251		2.0		Agricultural property loans	15,526		9.7		15,567		10.6
Total commercial mortgage and agricultural property loans	Total commercial mortgage and agricultural property loans	100,316		100.0	%	115,822		100.0	%	Total commercial mortgage and agricultural property loans	160,251		100.0	%	148,587		100.0	%
Allowance for credit losses	Allowance for credit losses	(276)				(246)				Allowance for credit losses	(499)				(408)

Total net commercial mortgage and other loans	Total net commercial mortgage and other loans	$	100,040			$	115,576			Total net commercial mortgage and other loans	$	159,752			$	148,179

As of ~~September 30, 2022,~~March 31, 2023, the commercial mortgage and agricultural property loans were secured by properties geographically dispersed throughout the United States (with the largest concentrations in New ~~York (14%~~Jersey (13%), Florida ~~(12%~~(11%), ~~Texas (11%~~New York (9%)) and included loans secured by properties in Europe ~~(4%~~(3%) and Mexico ~~(4%~~(2%).

The following ~~tables set~~table sets forth the activity in the allowance for credit losses for commercial mortgage and other loans, as of the dates indicated:


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

															Three Months Ended March 31,
															2023				2022
															Commercial Mortgage Loans		Agricultural Property Loans		Total		Commercial Mortgage Loans		Agricultural Property Loans		Total
															(in thousands)
Allowance, beginning of period	Allowance, beginning of period	$	289	$	1	$	290	$	350	$	0	$	350	Allowance, beginning of period	$	405	$	3	$	408	$	246	$	0	$	246
Addition to (release of) allowance for expected losses	Addition to (release of) allowance for expected losses	(14)		0		(14)		(100)		0		(100)		Addition to (release of) allowance for expected losses	38		53		91		(16)		1		(15)
Allowance, end of period	Allowance, end of period	$	275	$	1	$	276	$	250	$	0	$	250	Allowance, end of period	$	443	$	56	$	499	$	230	$	1	$	231

Nine Months Ended September 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 29 1 30 (190) 0 (190)
Allowance, end of period $ 275 $ 1 $ 276 $ 250 $ 0 $ 250

See Note 2 to the Financial Statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022 for additional information about the Company's methodology for developing our allowance and expected losses.

For the three months ended March 31, 2023, the net increase in the allowance for credit losses on commercial mortgage and other loans was primarily related to portfolio growth. For the three months ended March 31, 2022, the net decrease in the allowance for credit losses on commercial mortgage and other loans was primarily related to net positive credit migration.

1929

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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 September 30, 2022, the net decrease in the allowance for credit losses on commercial mortgage and other loans was primarily related to a net positive migration. For the three months ended September 30, 2021, the net decrease in the allowance for credit losses on commercial mortgage and other loans was primarily related to the improving credit environment.

For the nine months ended September 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 declining market conditions, partially offset by net positive migration. For the nine months ended September 30, 2021, the net decrease in the allowance for credit losses on commercial mortgage and other loans was primarily related to the improving credit environment.

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


		September 30, 2022														March 31, 2023
		Amortized Cost by Origination Year														Amortized Cost by Origination Year
		2022		2021		2020		2019		2018		Prior		Total				2023		2022		2021		2020		2019		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	$	796	$	0	$	6,345	$	1,399	$	49,171	$	57,711		0%-59.99%	$	0	$	19,978	$	787	$	0	$	10,030	$	47,468	$	78,263
60%-69.99%	60%-69.99%	0		1,615		2,198		22,325		0		4,117		30,255			60%-69.99%	0		15,000		1,615		2,198		18,953		1,016		38,782
70%-79.99%	70%-79.99%	0		347		0		3,855		0		5,975		10,177			70%-79.99%	14,509		0		347		0		3,855		7,175		25,886
80% or greater	80% or greater	0		0		0		0		0		0		0			80% or greater	0		0		0		0		0		1,794		1,794
Total	Total	$	0	$	2,758	$	2,198	$	32,525	$	1,399	$	59,263	$	98,143		Total	$	14,509	$	34,978	$	2,749	$	2,198	$	32,838	$	57,453	$	144,725
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	$	2,758	$	2,198	$	27,355	$	1,399	$	37,218	$	70,928		Greater or Equal to 1.2x	$	14,509	$	34,978	$	2,749	$	2,198	$	27,743	$	39,083	$	121,260
1.0 - 1.2x	1.0 - 1.2x	0		0		0		0		0		12,168		12,168			1.0 - 1.2x	0		0		0		0		0		8,735		8,735
Less than 1.0x	Less than 1.0x	0		0		0		5,170		0		9,877		15,047			Less than 1.0x	0		0		0		0		5,095		9,635		14,730
Total	Total	$	0	$	2,758	$	2,198	$	32,525	$	1,399	$	59,263	$	98,143		Total	$	14,509	$	34,978	$	2,749	$	2,198	$	32,838	$	57,453	$	144,725
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	$	1,103	$	0	$	0	$	0	$	1,070	$	2,173		0%-59.99%	$	0	$	1,068	$	1,080	$	0	$	0	$	1,033	$	3,181
60%-69.99%	60%-69.99%	0		0		0		0		0		0		0			60%-69.99%	0		12,345		0		0		0		0		12,345
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	$	1,103	$	0	$	0	$	0	$	1,070	$	2,173		Total	$	0	$	13,413	$	1,080	$	0	$	0	$	1,033	$	15,526
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	$	1,103	$	0	$	0	$	0	$	1,070	$	2,173		Greater or Equal to 1.2x	$	0	$	13,413	$	1,080	$	0	$	0	$	1,033	$	15,526
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	$	1,103	$	0	$	0	$	0	$	1,070	$	2,173		Total	$	0	$	13,413	$	1,080	$	0	$	0	$	1,033	$	15,526

2030

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


		December 31, 2021												December 31, 2022
		Amortized Cost by Origination Year												Amortized Cost by Origination Year
		2021		2020		2019		2018		2017		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%	$	360	$	0	$	7,203	$	1,433	$	8,836	$	50,537		$	68,369	0%-59.99%	$	20,000	$	792	$	0	$	9,993	$	1,387	$	48,812	$	80,984
60%-69.99%	60%-69.99%	2,066		2,198		24,368		0		1,016		8,524			38,172		60%-69.99%	15,000		1,615		2,198		18,982		0		1,016		38,811
70%-79.99%	70%-79.99%	347		0		3,855		0		0		1,870			6,072		70%-79.99%	0		347		0		3,855		0		7,213		11,415
80% or greater	80% or greater	0		0		0		0		958		0			958		80% or greater	0		0		0		0		0		1,810		1,810
Total	Total	$	2,773	$	2,198	$	35,426	$	1,433	$	10,810	$	60,931		$	113,571	Total	$	35,000	$	2,754	$	2,198	$	32,830	$	1,387	$	58,851	$	133,020
Debt Service Coverage Ratio:	Debt Service Coverage Ratio:																Debt Service Coverage Ratio:
Greater or Equal to 1.2x	Greater or Equal to 1.2x	$	2,773	$	2,198	$	30,009	$	1,433	$	5,671	$	42,469		$	84,553	Greater or Equal to 1.2x	$	35,000	$	2,754	$	2,198	$	27,697	$	1,387	$	40,285	$	109,321
1.0 - 1.2x	1.0 - 1.2x	0		0		0		0		958		9,186			10,144		1.0 - 1.2x	0		0		0		0		0		8,809		8,809
Less than 1.0x	Less than 1.0x	0		0		5,417		0		4,181		9,276			18,874		Less than 1.0x	0		0		0		5,133		0		9,757		14,890
Total	Total	$	2,773	$	2,198	$	35,426	$	1,433	$	10,810	$	60,931		$	113,571	Total	$	35,000	$	2,754	$	2,198	$	32,830	$	1,387	$	58,851	$	133,020
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%	$	1,126	$	0	$	0	$	0	$	0	$	1,125		$	2,251	0%-59.99%	$	1,078	$	1,092	$	0	$	0	$	0	$	1,052	$	3,222
60%-69.99%	60%-69.99%	0		0		0		0		0		0			0		60%-69.99%	12,345		0		0		0		0		0		12,345
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	$	1,126	$	0	$	0	$	0	$	0	$	1,125		$	2,251	Total	$	13,423	$	1,092	$	0	$	0	$	0	$	1,052	$	15,567
Debt Service Coverage Ratio:	Debt Service Coverage Ratio:																Debt Service Coverage Ratio:
Greater or Equal to 1.2x	Greater or Equal to 1.2x	$	1,126	$	0	$	0	$	0	$	0	$	1,125		$	2,251	Greater or Equal to 1.2x	$	13,423	$	1,092	$	0	$	0	$	0	$	1,052	$	15,567
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	$	1,126	$	0	$	0	$	0	$	0	$	1,125		$	2,251	Total	$	13,423	$	1,092	$	0	$	0	$	0	$	1,052	$	15,567

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~~2022 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:


		September 30, 2022													March 31, 2023
		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	$	98,143	$	0	$	0	$	0	$	98,143	$	0	Commercial mortgage loans	$	144,725	$	0	$	0	$	0	$	144,725	$	0
Agricultural property loans	Agricultural property loans	2,173		0		0		0		2,173		0		Agricultural property loans	15,526		0		0		0		15,526		0

Total	Total	$	100,316	$	0	$	0	$	0	$	100,316	$	0	Total	$	160,251	$	0	$	0	$	0	$	160,251	$	0

(1)As of ~~September 30,~~March 31, 2023, 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, 2022.

Table of Contents


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


	December 31, 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)
	(in thousands)
Commercial mortgage loans	$	133,020	$	0	$	0	$	0	$	133,020	$	0
Agricultural property loans	15,567		0		0		0		15,567		0
Total	$	148,587	$	0	$	0	$	0	$	148,587	$	0

(1)As of December 31, 2022, there were no loans in this category accruing interest.

~~Table of Contents~~


~~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.~~

~~(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, 2021.2022.

For both the three ~~and nine~~ months ended ~~September 30,~~March 31, 2023 and 2022, there were $0.0 million and $3.4 million commercial mortgage and other loans acquired, other than those through direct origination, and there were $0.0 million and $3.8 million commercial mortgage and other loans sold, respectively.

~~For the three and nine months ended September 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 ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021.~~2022.

Other Invested Assets

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


		September 30, 2022		December 31, 2021			March 31, 2023		December 31, 2022
		(in thousands)					(in thousands)
Company’s investment in separate accounts		$	0	$	4,053

LPs/LLCs:	LPs/LLCs:					LPs/LLCs:
Equity method:	Equity method:					Equity method:
Private equity	Private equity	70,869		63,705		Private equity	78,320		74,468
Hedge funds	Hedge funds	41,177		38,216		Hedge funds	43,407		42,472
Real estate-related	Real estate-related	10,105		8,326		Real estate-related	9,801		10,199
Subtotal equity method	Subtotal equity method	122,151		110,247		Subtotal equity method	131,528		127,139
Fair value:	Fair value:					Fair value:
Private equity	Private equity	265		400		Private equity	256		279
Hedge funds	Hedge funds	60		66		Hedge funds	44		55
Real estate-related	Real estate-related	2,157		2,374		Real estate-related	1,935		2,055
Subtotal fair value	Subtotal fair value	2,482		2,840		Subtotal fair value	2,235		2,389
Total LPs/LLCs	Total LPs/LLCs	124,633		113,087		Total LPs/LLCs	133,763		129,528
Derivative instruments		7,057		7,187

Total other invested assets	Total other invested assets	$	131,690	$	124,327	Total other invested assets	$	133,763	$	129,528

2232

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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:


		September 30, 2022		December 31, 2021			March 31, 2023		December 31, 2022
		(in thousands)					(in thousands)
Fixed maturities	Fixed maturities	$	19,221	$	16,561	Fixed maturities	$	24,081	$	18,653
Equity securities	Equity securities	92		1		Equity securities	92		1
Commercial mortgage and other loans	Commercial mortgage and other loans	257		301		Commercial mortgage and other loans	455		352
Policy loans	Policy loans	5,701		5,670		Policy loans	5,745		5,612

Short-term investments and cash equivalents	Short-term investments and cash equivalents	303		6		Short-term investments and cash equivalents	691		604

Total accrued investment income	Total accrued investment income	$	25,574	$	22,539	Total accrued investment income	$	31,064	$	25,222

There were no significant write-downs on accrued investment income for both the three months ended March 31, 2023 and ~~nine months ended September 30, 2022 and 2021.~~2022.

Net Investment Income

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


		Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended March 31,
		2022		2021		2022		2021					2023		2022
		(in thousands)								(in thousands)
Fixed maturities, available-for-sale	Fixed maturities, available-for-sale	$	18,145	$	16,491	$	54,152	$	49,081			Fixed maturities, available-for-sale	$	21,117	$	17,125
Fixed maturities, trading	Fixed maturities, trading	245		209		784		546				Fixed maturities, trading	157		274
Equity securities	Equity securities	91		91		273		273				Equity securities	91		91
Commercial mortgage and other loans	Commercial mortgage and other loans	1,069		1,317		3,212		4,102				Commercial mortgage and other loans	1,679		1,082
Policy loans	Policy loans	2,219		2,881		7,790		8,540				Policy loans	2,525		2,772
Other invested assets	Other invested assets	1,902		7,182		8,364		16,098				Other invested assets	1,478		4,000
Short-term investments and cash equivalents	Short-term investments and cash equivalents	796		8		1,148		40				Short-term investments and cash equivalents	2,641		60
Gross investment income	Gross investment income	24,467		28,179		75,723		78,680				Gross investment income	29,688		25,404
Less: investment expenses	Less: investment expenses	(1,017)		(1,235)		(3,040)		(3,293)				Less: investment expenses	(1,028)		(1,035)
Net investment income	Net investment income	$	23,450	$	26,944	$	72,683	$	75,387			Net investment income	$	28,660	$	24,369

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 September 30,				Nine Months Ended September 30,					Three Months Ended March 31,
		2022		2021		2022		2021					2023		2022
		(in thousands)								(in thousands)
Fixed maturities(1)	Fixed maturities(1)	$	(668)	$	(967)	$	(2,903)	$	(1,536)			Fixed maturities(1)	$	(26)	$	(1,959)

Commercial mortgage and other loans	Commercial mortgage and other loans	14		100		(21)		190				Commercial mortgage and other loans	(91)		15
Other invested assets	Other invested assets	0		1		(51)		172				Other invested assets	0		(51)
Derivatives	Derivatives	1,872		6,221		25,860		5,925				Derivatives	(8,241)		17,727

Short term investments and cash equivalents	Short term investments and cash equivalents	(6)		0		(35)		(8)				Short term investments and cash equivalents	60		(12)
Realized investment gains (losses), net	Realized investment gains (losses), net	$	1,212	$	5,355	$	22,850	$	4,743			Realized investment gains (losses), net	$	(8,298)	$	15,720

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

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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:


		September 30, 2022		December 31, 2021
		(in thousands)

							March 31, 2023		December 31, 2022
							(in thousands)
Fixed maturity securities, available-for-sale without an allowance	Fixed maturity securities, available-for-sale without an allowance	$	(324,515)	$	174,945	Fixed maturity securities, available-for-sale without an allowance	$	(221,636)	$	(270,867)
Derivatives designated as cash flow hedges(1)	Derivatives designated as cash flow hedges(1)	22,787		5,407		Derivatives designated as cash flow hedges(1)	12,513		14,102
Affiliated notes	Affiliated notes	57		194		Affiliated notes	61		59
Other investments	Other investments	134		260		Other investments	127		122
Net unrealized gains (losses) on investments	Net unrealized gains (losses) on investments	$	(301,537)	$	180,806	Net unrealized gains (losses) on investments	$	(208,935)	$	(256,584)

(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 ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021,~~2022, the Company had no repurchase agreements.

The following table sets forth the composition of “Cash collateral for loaned securities” which represents the liability to return cash collateral received for the following types of securities loaned, as of the dates indicated:


	March 31, 2023						December 31, 2022
	Remaining Contractual Maturities of the Agreements						Remaining Contractual Maturities of the Agreements
	Overnight & Continuous		Up to 30 Days		Total		Overnight & Continuous		Up to 30 Days		Total
	(in thousands)
U.S. public corporate securities	$	3,325	$	0	$	3,325	$	0	$	0	$	0
Total cash collateral for loaned securities(1)	$	3,325	$	0	$	3,325	$	0	$	0	$	0

(1)The Company did not have agreements with remaining contractual maturities greater than thirty days, as of the dates indicated.

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.~~2022.

2434

Table of Contents


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.


		September 30, 2022						December 31, 2021							March 31, 2023						December 31, 2022
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	$	116,282	$	22,771	$	0	$	124,950	$	4,416	$	(291)	Foreign Currency Swaps	$	121,573	$	12,726	$	(716)	$	117,015	$	14,281	$	(516)
Total Derivatives Designated as Hedge Accounting Instruments:	Total Derivatives Designated as Hedge Accounting Instruments:	$	116,282	$	22,771	$	0	$	124,950	$	4,416	$	(291)	Total Derivatives Designated as Hedge Accounting Instruments:	$	121,573	$	12,726	$	(716)	$	117,015	$	14,281	$	(516)
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	$	0	$	(425)	$	30,200	$	2,757	$	0	Interest Rate Swaps	$	30,200	$	169	$	(348)	$	30,200	$	0	$	(383)
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	24,036		4,734		0		35,204		2,685		(637)		Foreign Currency Swaps	24,035		2,535		0		24,035		2,957		0
Foreign Currency	Foreign Currency													Foreign Currency
Foreign Currency Forwards	Foreign Currency Forwards	7,559		348		(45)		4,667		66		(9)		Foreign Currency Forwards	8,336		1		(125)		7,520		3		(368)
Equity	Equity													Equity
Equity Options	Equity Options	508,450		0		(20,326)		488,850		18,761		(20,561)		Equity Options	510,150		2,199		(18,506)		509,200		555		(20,562)
Total Derivatives Not Qualifying as Hedge Accounting Instruments:	Total Derivatives Not Qualifying as Hedge Accounting Instruments:	$	570,245	$	5,082	$	(20,796)	$	558,921	$	24,269	$	(21,207)	Total Derivatives Not Qualifying as Hedge Accounting Instruments:	$	572,721	$	4,904	$	(18,979)	$	570,955	$	3,515	$	(21,313)
Total Derivatives(1)(2)	Total Derivatives(1)(2)	$	686,527	$	27,853	$	(20,796)	$	683,871	$	28,685	$	(21,498)	Total Derivatives(1)(2)	$	694,294	$	17,630	$	(19,695)	$	687,970	$	17,796	$	(21,829)

(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 ~~$446~~$127 million and ~~$822~~$108 million as of ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021, respectively included in “Future policy benefits” and $101 million and $153 million as of September 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 $446 million and $822 million as of September 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.

2535

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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.


		September 30, 2022											March 31, 2023
		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	$	27,853	$	(20,796)	$	7,057	$	(7,057)	$	0	Derivatives	$	17,630	$	(17,630)	$	0	$	0	$	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	$	27,853	$	(20,796)	$	7,057	$	(7,057)	$	0	Total Assets	$	17,630	$	(17,630)	$	0	$	0	$	0
Offsetting of Financial Liabilities:	Offsetting of Financial Liabilities:											Offsetting of Financial Liabilities:
Derivatives	Derivatives	$	20,796	$	(20,796)	$	0	$	0	$	0	Derivatives	$	19,695	$	(17,630)	$	2,065	$	(2,065)	$	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	$	20,796	$	(20,796)	$	0	$	0	$	0	Total Liabilities	$	19,695	$	(17,630)	$	2,065	$	(2,065)	$	0


		December 31, 2021											December 31, 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	$	28,685	$	(21,498)	$	7,187	$	(7,187)	$	0	Derivatives	$	17,796	$	(17,796)	$	0	$	0	$	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	$	28,685	$	(21,498)	$	7,187	$	(7,187)	$	0	Total Assets	$	17,796	$	(17,796)	$	0	$	0	$	0
Offsetting of Financial Liabilities:	Offsetting of Financial Liabilities:											Offsetting of Financial Liabilities:
Derivatives	Derivatives	$	21,498	$	(21,498)	$	0	$	0	$	0	Derivatives	$	21,829	$	(17,796)	$	4,033	$	(4,033)	$	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	$	21,498	$	(21,498)	$	0	$	0	$	0	Total Liabilities	$	21,829	$	(17,796)	$	4,033	$	(4,033)	$	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 9.14. 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 onregarding 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.~~2022.

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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 September 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 $ 614 $ 475 $ 580 $ 7,594
Total cash flow hedges 614 475 580 7,594
Derivatives Not Qualifying as Hedge Accounting Instruments:
Interest Rate (859) 0 0 0
Currency 404 0 0 0
Currency/Interest Rate 785 0 (2) 0
Credit 0 0 0 0
Equity (2,197) 0 0 0
Embedded Derivatives 3,125 0 0 0
Total Derivatives Not Qualifying as Hedge Accounting Instruments 1,258 0 (2) 0
Total $ 1,872 $ 475 $ 578 $ 7,594


		Nine Months Ended September 30, 2022									Three Months Ended March 31, 2023
		Realized Investment Gains (Losses)		Net Investment Income		Other Income		Change in AOCI			Realized Investment Gains (Losses)		Change in Value of Market Risk Benefits, Net of Related Hedging Gain (Loss)		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	$	737	$	1,392	$	1,625	$	17,380	Currency/Interest Rate	$	18	$	0	$	481	$	(112)	$	(1,589)
Total cash flow hedges	Total cash flow hedges	737		1,392		1,625		17,380		Total cash flow hedges	18		0		481		(112)		(1,589)
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	(2,621)		0		0		0		Interest Rate	167		0		0		0		0
Currency	Currency	892		0		0		0		Currency	(82)		0		0		0		0
Currency/Interest Rate	Currency/Interest Rate	3,921		0		46		0		Currency/Interest Rate	(228)		0		0		(8)		0
Credit	Credit	0		0		0		0		Credit	0		0		0		0		0
Equity	Equity	(13,763)		0		0		0		Equity	1,759		0		0		0		0
Embedded Derivatives	Embedded Derivatives	36,694		0		0		0		Embedded Derivatives	(9,875)		0		0		0		0
Total Derivatives Not Qualifying as Hedge Accounting Instruments	Total Derivatives Not Qualifying as Hedge Accounting Instruments	25,123		0		46		0		Total Derivatives Not Qualifying as Hedge Accounting Instruments	(8,259)		0		0		(8)		0
Total	Total	$	25,860	$	1,392	$	1,671	$	17,380	Total	$	(8,241)	$	0	$	481	$	(120)	$	(1,589)

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


		Three Months Ended September 30, 2021									Three Months Ended March 31, 2022 (1)
		Realized Investment Gains (Losses)		Net Investment Income		Other Income		Change in AOCI			Realized Investment Gains (Losses)		Change in Value of Market Risk Benefits, Net of Related Hedging Gain (Loss)		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	$	(44)	$	378	$	327	$	3,563	Currency/Interest Rate	$	31	$	0	$	451	$	188	$	1,222
Total cash flow hedges	Total cash flow hedges	(44)		378		327		3,563		Total cash flow hedges	31		0		451		188		1,222
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	(49)		0		0		0		Interest Rate	(1,201)		0		0		0		0
Currency	Currency	87		0		0		0		Currency	115		0		0		0		0
Currency/Interest Rate	Currency/Interest Rate	1,880		0		7		0		Currency/Interest Rate	290		0		0		8		0
Credit	Credit	0		0		0		0		Credit	0		0		0		0		0
Equity	Equity	43		0		0		0		Equity	(1,526)		0		0		0		0
Embedded Derivatives	Embedded Derivatives	4,304		0		0		0		Embedded Derivatives	20,018		0		0		0		0
Total Derivatives Not Qualifying as Hedge Accounting Instruments	Total Derivatives Not Qualifying as Hedge Accounting Instruments	6,265		0		7		0		Total Derivatives Not Qualifying as Hedge Accounting Instruments	17,696		0		0		8		0
Total	Total	$	6,221	$	378	$	334	$	3,563	Total	$	17,727	$	0	$	451	$	196	$	1,222

(1)

Nine Months Ended September 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 $ (6) $ 1,154 $ 360 $ 7,252
Total cash flow hedges (6) 1,154 360 7,252
Derivatives Not Qualifying as Hedge Accounting Instruments:
Interest Rate (560) 0 0 0
Currency 182 0 0 0
Currency/Interest Rate 2,519 0 1 0
Credit (4) 0 0 0
Equity 4,492 0 0 0
Embedded Derivatives (698) 0 0 0
Total Derivatives Not Qualifying as Hedge Accounting Instruments 5,931 0 1 0
Total $ 5,925 $ 1,154 $ 361 $ 7,252

Prior period amounts have been updated to conform to current period presentation.

~~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~~2022	$	~~5,407~~14,102
Amount recorded in AOCI


Currency/Interest Rate	~~21,134~~ (1,202)
Total amount recorded in AOCI	~~21,134~~ (1,202)
Amount reclassified from AOCI to income


Currency/Interest Rate	~~(3,754)~~(387)
Total amount reclassified from AOCI to income	~~(3,754)~~(387)
Balance, ~~September 30, 2022~~March 31, 2023	$	~~22,787~~12,513

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 ~~September 30, 2022~~March 31, 2023 values, it is estimated that a pre-tax gain of ~~$1.9~~$1.7 million is expected to be reclassified from AOCI to earnings during the subsequent twelve months ending ~~September 30, 2023.~~March 31, 2024.

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 ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021.~~2022.

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.~~2022.

As a result of the adoption of ASU 2018-12 in the first quarter of 2023, the Company is required to measure all market risk benefits (e.g., living benefit and death benefit guarantees associated with variable annuities) at fair value. Market risk benefit liabilities (or assets) represent contracts or contract features that provide protection to the contractholder and exposes the Company to other than nominal capital market risk, primarily related to deferred annuities with guaranteed minimum benefits in the annuities products including guaranteed minimum death benefits (“GMDB”), guaranteed minimum income benefits (“GMIB”), guaranteed minimum accumulation benefits (“GMAB”), guaranteed minimum withdrawal benefits (“GMWB”) and guaranteed minimum income and withdrawal benefits (“GMIWB”). The benefits are bundled together and accounted for as single compound market risk benefits using a fair value measurement framework.

~~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.~~

September 30, 2022
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 $ 12,261 $ 0 $ $ 12,261
Obligations of U.S. states and their political subdivisions 0 153,208 0 153,208
Foreign government bonds 0 67,436 0 67,436
U.S. corporate public securities 0 859,821 0 859,821
U.S. corporate private securities 0 161,935 3,659 165,594
Foreign corporate public securities 0 104,808 0 104,808
Foreign corporate private securities 0 97,238 0 97,238
Asset-backed securities(2) 0 18,590 0 18,590
Commercial mortgage-backed securities 0 95,731 21,086 116,817
Residential mortgage-backed securities 0 12,106 0 12,106
Subtotal 0 1,583,134 24,745 1,607,879
Fixed maturities, trading 0 22,887 0 22,887
Equity securities 0 91 4,511 4,602
Short-term investments 0 0 0 0
Cash equivalents 0 242,478 0 242,478
Other invested assets(3) 0 27,853 0 (20,796) 7,057
Reinsurance recoverables 0 0 445,746 445,746
Receivables from parent and affiliates 0 679 0 679
Subtotal excluding separate account assets 0 1,877,122 475,002 (20,796) 2,331,328
Separate account assets(4)(5) 0 11,600,941 0 11,600,941
Total assets $ 0 $ 13,478,063 $ 475,002 $ (20,796) $ 13,932,269
Future policy benefits(6) $ 0 $ 0 $ 445,746 $ $ 445,746
Policyholders' account balances 0 0 100,752 100,752
Payables to parent and affiliates 0 20,796 0 (20,796) 0
Total liabilities $ 0 $ 20,796 $ 546,498 $ (20,796) $ 546,498

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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
The fair value of these market risk benefits is calculated as the present value of expected future benefit payments to contract holders less the present value of expected future rider fees attributable to the market risk benefit. The fair value of these benefit features is based on assumptions a market participant would use in valuing market risk benefits. This methodology could result in either a liability or asset balance, given changing capital market conditions and various actuarial assumptions. Since there is no observable active market for the transfer of these obligations, the valuations are calculated using internally-developed models with option pricing techniques. The models are based on a risk neutral valuation framework and incorporate premiums for risks inherent in valuation techniques, inputs, and the general uncertainty around the timing and amount of future cash flows. The determination of these risk premiums requires the use of management’s judgment.

The significant inputs to the valuation models for these market risk benefits include capital market assumptions, such as interest rate levels and volatility assumptions, the Company’s market-perceived NPR, as well as actuarially determined assumptions, including contractholder behavior, such as lapse rates, benefit utilization rates, withdrawal rates, and mortality rates. Since many of these assumptions are unobservable and are considered to be significant inputs to the valuations, the assets and liabilities included in market risk benefits have been reflected within Level 3 in the fair value hierarchy.

Capital market inputs and actual policyholders’ account values are updated each quarter based on capital market conditions as of the end of the quarter, including interest rates, equity markets and volatility. In the risk neutral valuation, the initial swap curve drives the total return used to grow the policyholders’ account values. The Company’s discount rate assumption is based on the SOFR swap curve adjusted for an additional spread relative to SOFR to reflect the Company’s market-perceived 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 the Company issued 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.

Actuarial assumptions, including contractholder behavior and mortality, are reviewed at least annually, and updated based upon company emerging experience and industry studies, future expectations and other data, including any observable market data. These assumptions are generally updated annually unless a material change that the Company feels is indicative of a long-term trend is observed in an interim period.

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, 2023
	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	$	52,664	$	0	$		$	52,664
Obligations of U.S. states and their political subdivisions	0		179,906		0				179,906
Foreign government bonds	0		79,323		0				79,323
U.S. corporate public securities	0		1,202,519		0				1,202,519
U.S. corporate private securities	0		181,868		3,576				185,444
Foreign corporate public securities	0		145,059		0				145,059
Foreign corporate private securities	0		118,719		0				118,719
Asset-backed securities(2)	0		17,765		0				17,765
Commercial mortgage-backed securities	0		94,585		19,881				114,466
Residential mortgage-backed securities	0		12,318		0				12,318
Subtotal	0		2,084,726		23,457				2,108,183
Market risk benefit assets	0		0		562,922				562,922
Fixed maturities, trading	0		23,938		0				23,938
Equity securities	0		69		4,294				4,363
Short-term investments	0		8,000		0				8,000
Cash equivalents	0		81,323		0				81,323
Other invested assets(3)	0		17,630		0		(17,630)		0
Reinsurance recoverable	0		0		1,357				1,357
Receivables from parent and affiliates	0		699		0				699
Subtotal excluding separate account assets	0		2,216,385		592,030		(17,630)		2,790,785
Separate account assets(4)(5)	0		12,452,598		0				12,452,598
Total assets	$	0	$	14,668,983	$	592,030	$	(17,630)	$	15,243,383
Market risk benefit liabilities	$	0	$	0	$	562,922	$		$	562,922
Policyholders' account balances	0		0		127,032				127,032
Payables to parent and affiliates	0		19,695		0		(17,630)		2,065
Total liabilities	$	0	$	19,695	$	689,954	$	(17,630)	$	692,019

Table of Contents


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


	December 31, 2022
	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	$	61,136	$	0	$		$	61,136
Obligations of U.S. states and their political subdivisions	0		159,215		0				159,215
Foreign government bonds	0		71,963		0				71,963
U.S. corporate public securities	0		883,405		0				883,405
U.S. corporate private securities	0		168,638		3,803				172,441
Foreign corporate public securities	0		112,962		0				112,962
Foreign corporate private securities	0		112,035		0				112,035
Asset-backed securities(2)	0		18,374		0				18,374
Commercial mortgage-backed securities	0		95,190		20,701				115,891
Residential mortgage-backed securities	0		12,066		0				12,066
Subtotal	0		1,694,984		24,504				1,719,488
Market risk benefit assets	0		0		558,624				558,624
Fixed maturities, trading	0		23,782		0				23,782
Equity securities	0		67		4,291				4,358
Short-term investments	0		3,000		0				3,000
Cash equivalents	0		245,302		0				245,302
Other invested assets(3)	0		17,796		0		(17,796)		0
Reinsurance recoverable	0		0		0				0
Receivables from parent and affiliates	0		688		0				688
Subtotal excluding separate account assets	0		1,985,619		587,419		(17,796)		2,555,242
Separate account assets(4)(5)	0		12,014,623		0				12,014,623
Total assets	$	0	$	14,000,242	$	587,419	$	(17,796)	$	14,569,865
Market risk benefit liabilities	$	0	$	0	$	558,624	$		$	558,624
Policyholders' account balances	0		0		108,144				108,144
Payables to parent and affiliates	0		21,829		0		(17,796)		4,033
Total liabilities	$	0	$	21,829	$	666,768	$	(17,796)	$	670,801

(1)“Netting” amounts represent cash collateral of $0 million as of both ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021.~~2022.

(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 ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021,~~2022, the fair values of such investments were ~~$2.5~~$2.2 million and ~~$2.8~~$2.4 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 ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021,~~2022, the fair value of such investments ~~was $1,849~~were $1,961 million and ~~$2,190~~$1,912 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 September 30, 2022, the net embedded derivative liability position of $446 million includes $74 million of embedded derivatives in an asset position and $520 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.

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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 onregarding significant internally-priced Level 3 assets and liabilities.


		September 30, 2022												March 31, 2023
		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)	$	3,659	Discounted cash flow	Discount rate	10.50	%	10.50	%	10.50	%	Decrease	Corporate securities(2)	$	3,576	Discounted cash flow	Discount rate	10.68	%	10.68	%	10.68	%	Decrease

Reinsurance recoverables		$	445,746	Fair values are determined using the same unobservable inputs as future policy benefits.
Liabilities:
Future policy benefits(3)		$	445,746	Discounted cash flow	Lapse rate(5)	1	%	20	%			Decrease
Commercial mortgage-backed securities													Commercial mortgage-backed securities	$	19,881	Discounted cash flow	Liquidity premium	0.60	%	0.75	%	0.69	%	Decrease
Market risk benefit assets(3)													Market risk benefit assets(3)	$	562,922	Discounted cash flow	Lapse rate(4)	1	%	20	%			Increase
					Spread over SOFR(6)	0.50	%	2.35	%			Decrease					Spread over SOFR(5)	0.52	%	2.20	%			Increase
					Utilization rate(7)	38	%	95	%			Increase					Utilization rate(6)	38	%	95	%			Decrease
					Withdrawal rate	See table footnote (8) below.											Withdrawal rate	See table footnote (7) below.
					Mortality rate (9)	0	%	15	%			Decrease					Mortality rate(8)	0	%	15	%			Increase
					Equity volatility curve	18	%	29	%			Increase					Equity volatility curve	18	%	25	%			Decrease
Policyholders' account balances(4)		$	100,752	Discounted cash flow	Lapse rate(5)	1	%	6	%			Decrease
Liabilities:													Liabilities:
Market risk benefit liabilities(3)													Market risk benefit liabilities(3)	$	562,922	Discounted cash flow	Lapse rate(4)	1	%	20	%			Decrease
					Spread over SOFR(6)	0.52	%	1.48	%			Decrease					Spread over SOFR(5)	0.52	%	2.20	%			Decrease
																	Utilization rate(6)	38	%	95	%			Increase
					Mortality rate (9)	0	%	23	%			Decrease					Withdrawal rate	See table footnote (7) below.
					Equity volatility curve	22	%	35	%			Increase					Mortality rate(8)	0	%	15	%			Decrease
																	Equity volatility curve	18	%	25	%			Increase
Policyholders' account balances(9)													Policyholders' account balances(9)	$	127,032	Discounted cash flow	Lapse rate(4)	1	%	80	%			Decrease
																	Spread over SOFR(5)	0.27	%	2.34	%			Decrease
																	Mortality rate(8)	0	%	23	%			Decrease
																	Equity volatility curve	14	%	30	%			Increase
																	Option budget(10)	(2)	%	6	%			Increase

3243

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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

~~Table of Contents~~ ��


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


	December 31, 2022
	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)	$	3,803	Discounted cash flow	Discount rate	10.18	%	10.18	%	10.18	%	Decrease
Commercial mortgage-backed securities	$	20,701	Discounted cash flow	Liquidity premium	60	%	75	%	69.05	%	Decrease
Market risk benefit assets(3)	$	558,624	Discounted cash flow	Lapse rate(4)	1	%	20	%			Increase
				Spread over SOFR(5)	0.51	%	2.14	%			Increase
				Utilization rate(6)	38	%	95	%			Decrease
				Withdrawal rate	See table footnote (7) below.
				Mortality rate(8)	0	%	15	%			Increase
				Equity volatility curve	18	%	28	%			Decrease
Liabilities:
Market risk benefit liabilities(3)	$	558,624	Discounted cash flow	Lapse rate(4)	1	%	20	%			Decrease
				Spread over SOFR(5)	0.51	%	2.14	%			Decrease
				Utilization rate(6)	38	%	95	%			Increase
				Withdrawal rate	See table footnote (7) below.
				Mortality rate(8)	0	%	15	%			Decrease
				Equity volatility curve	18	%	28	%			Increase
Policyholders' account balances(9)	$	108,144	Discounted cash flow	Lapse rate(4)	1	%	6	%			Decrease
				Spread over SOFR(5)	0.17	%	0.66	%			Decrease
				Mortality rate(8)	0	%	23	%			Decrease
				Equity volatility curve	18	%	28	%			Increase

(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~~Market risk benefits primarily represent ~~general account liabilities~~fair value for ~~the~~all living benefit ~~features of the Company’s variable annuity contracts which are accounted for as embedded derivatives.~~guarantees including accommodation, withdrawal and income benefits. Since the valuation methodology for these assets and 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 a 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)~~(5)The spread over the Secured Overnight Financing Rate (“SOFR”) swap curve and the London Inter-Bank Offered Rate (“LIBOR”) swap curve represents the premium added to the proxy for the risk-free rate (SOFR or LIBOR, as applicable) to reflect the 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 as of ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021,~~2022, 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)~~(6)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)~~Table of Contents


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

(7)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 ~~September 30, 2022~~both March 31, 2023 and December 31, ~~2021,~~2022, the minimum withdrawal rate assumption is 77% and ~~76%, respectively. As of September 30, 2022 and December 31, 2021, 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)~~(8)The range reflects the mortality rates for the vast majority of business with living benefits and other contracts, with policyholders ranging from 4550 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.

(9)Policyholders’ account balances primarily represent general account liabilities for the index-linked interest credited on certain of the Company’s life and annuity 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.

(10)Option budget estimates the expected long-term cost of options used to hedge exposures associated with equity price and interest rate changes. The level of option budgets determines future costs of the options, which impacts the growth in account value and the valuation of embedded derivatives.

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~~Commercial Mortgage-backed Securities – Interrelationships may exist between the prepayment rate, the default rate and/ or loss severity, depending on specific market conditions. In stronger economic cycles, prepayment rates are generally driven by underlying property appreciation and subsequent cash-out refinances, while default rates and loss severity may be lower. During weaker economic cycles, prepayment rates may decline, while default rates and loss severity increase. Generally, a change in the assumption used for the probability of default would have been accompanied by a directionally similar change in the assumption used for the loss severity and a directionally opposite change in the assumption used for prepayment rates. The impact of these factors on average life and economics varies with the deal structure and tranche subordination.

Market Risk Benefits – The Company expects efficient benefit utilization and withdrawal rates to generally be correlated with lapse rates. However, behavior is generally 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.

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


		Three Months Ended September 30, 2022																							Three Months Ended March 31, 2023(5)
		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)		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(1)
		(in thousands)																							(in thousands)
Fixed maturities, available-for-sale:	Fixed maturities, available-for-sale:																							Fixed maturities, available-for-sale:

Corporate securities~~(3)~~(2)	Corporate securities~~(3)~~(2)	$	3,271	$	388	$	0	$	0	$	0	$	0	$	0	$	0	$	0	$	3,659	$	388	Corporate securities~~(3)~~(2)	$	3,803	$	(36)	$	3,644	$	0	$	0	$	(3,835)	$	0	$	0	$	0	$	3,576	$	(37)
Structured securities~~(4)~~(3)	Structured securities~~(4)~~(3)	22,170		(679)		0		0		0		(85)		0		0		(320)		21,086		(671)		Structured securities~~(4)~~(3)	20,701		(733)		0		0		0		(87)		0		0		0		19,881		(720)
Other assets:	Other assets:																							Other assets:

Equity securities	Equity securities	4,853		(342)		0		0		0		0		0		0		0		4,511		(342)		Equity securities	4,291		3		0		0		0		0		0		0		0		4,294		3

Reinsurance recoverables		514,181		(93,105)		24,670		0		0		0		0		0		0		445,746		(89,634)
Reinsurance recoverable																								Reinsurance recoverable	0		1,357		0		0		0		0		0		0		0		1,357		1,357

Liabilities:	Liabilities:																							Liabilities:
Future policy benefits		(514,181)		93,105		0		0		(24,670)		0		0		0		0		(445,746)		89,634
Policyholders' account balances(5)		(112,672)		3,226		0		0		8,694		0		0		0		0		(100,752)		806
Policyholders' account balances(4)																								Policyholders' account balances(4)	(108,144)		(10,832)		0		0		(8,056)		0		0		0		0		(127,032)		(13,914)


		Three Months Ended September 30, 2022															Three Months Ended March 31, 2023(5)
		Total realized and unrealized gains (losses)								Unrealized gains (losses) for assets still held(2)							Total realized and unrealized gains (losses)						Unrealized gains (losses) for assets still held(1)
		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)				Realized investment gains (losses), net		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)															(in thousands)
Fixed maturities, available-for-sale	Fixed maturities, available-for-sale	$	389	$	0	$	(671)	$	(9)		$	388	$	0	$	(671)		Fixed maturities, available-for-sale	$	(2)	$	0	$	(756)	$	(11)	$	0	$	0	$	(757)
Other assets:	Other assets:																	Other assets:

Equity securities	Equity securities	0		(342)		0		0			0		(342)		0			Equity securities	0		3		0		0		0		3		0

Reinsurance recoverables		(93,105)		0		0		0			(89,634)		0		0
Reinsurance recoverable																		Reinsurance recoverable	1,357		0		0		0		1,357		0		0

Liabilities:	Liabilities:																	Liabilities:
Future policy benefits		93,105		0		0		0			89,634		0		0
Policyholders' account balances	Policyholders' account balances	3,226		0		0		0			806		0		0			Policyholders' account balances	(10,832)		0		0		0		(13,914)		0		0

3546

Table of Contents


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

Nine Months Ended September 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 $ (1,809) $ 0 $ 0 $ 0 $ (632) $ 0 $ 0 $ (18,219) $ 3,659 $ (1,766)
Structured securities(4) 27,274 (5,903) 320 0 0 (285) 0 0 (320) 21,086 (5,886)
Other assets:
Equity securities 5,812 (1,301) 0 0 0 0 0 0 0 4,511 (1,302)
Reinsurance recoverables 821,596 (452,057) 76,207 0 0 0 0 0 0 445,746 (432,150)
Liabilities:
Future policy benefits (821,596) 452,057 0 0 (76,207) 0 0 0 0 (445,746) 432,150
Policyholders' account balances(5) (153,127) 35,383 0 0 16,992 0 0 0 0 (100,752) 33,842

Nine Months Ended September 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 $ 1,056 $ 0 $ (8,750) $ (18) $ 1,055 $ 0 $ (8,707)
Other assets:
Equity securities 0 (1,301) 0 0 0 (1,302) 0
Reinsurance recoverables (452,057) 0 0 0 (432,150) 0 0
Liabilities:
Future policy benefits 452,057 0 0 0 432,150 0 0
Policyholders' account balances 35,383 0 0 0 33,842 0 0

~~Table of Contents~~


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

Three Months Ended September 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) $ 22,743 $ (2,443) $ 0 $ 0 $ 0 $ 0 $ 0 $ 4,106 $ 0 $ 24,406 $ (2,443)
Structured securities 0 0 0 0 0 0 0 0 0 0 0
Other assets:
Equity securities 5,904 (28) 0 0 0 0 0 0 0 5,876 (28)
Reinsurance recoverables 834,207 (33,172) 27,852 0 0 0 0 0 0 828,887 (23,244)
Liabilities:
Future policy benefits (834,207) 33,172 0 0 (27,852) 0 0 0 0 (828,887) 23,244
Policyholders' account balances(5) (152,149) 3,886 0 0 0 1,051 0 0 0 (147,212) 6,067

Three Months Ended September 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 $ (1,559) $ 0 $ (884) $ 0 $ (1,558) $ 0 $ (885)
Other assets:
Equity securities 0 (28) 0 0 0 (28) 0
Reinsurance recoverables (33,172) 0 0 0 (23,244) 0 0
Liabilities:
Future policy benefits 33,172 0 0 0 23,244 0 0
Policyholders' account balances 3,886 0 0 0 6,067 0 0



	Three Months Ended March 31, 2022(5)
	Fair Value, beginning of period	Total realized and unrealized gains (losses)	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(1)
	(in thousands)
Fixed maturities, available-for-sale:
Corporate securities(2)	24,319	(2,864)	0	0	0	(632)	0	0	0	20,823	(2,821)
Structured securities(3)	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 recoverable	0	0	0	0	0	0	0	0	0	0	0
Liabilities:
Policyholders' account balances(4)	(153,127)	19,553	0	0	0	2,644	0	0	0	(130,930)	21,607

~~Table of Contents~~


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

Nine Months Ended September 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 $ (3,708) $ 0 $ 0 $ 0 $ (37) $ 0 $ 4,106 $ 0 $ 24,406 $ (3,707)
Structured securities 0 0 0 0 0 0 0 0 0 0 0
Other assets:
Equity securities 6,095 (219) 0 0 0 0 0 0 0 5,876 (219)
Reinsurance recoverables 1,195,469 (449,896) 83,314 0 0 0 0 0 0 828,887 (408,850)
Liabilities:
Future policy benefits (1,195,469) 449,896 0 0 (83,314) 0 0 0 0 (828,887) 408,850
Policyholders' account balances(5) (153,937) (1,785) 0 0 0 8,510 0 0 0 (147,212) 4,701

Nine Months Ended September 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 $ (1,559) $ 0 $ (2,149) $ 0 $ (1,558) $ 0 $ (2,149)
Other assets:
Equity securities 0 (219) 0 0 0 (219) 0
Reinsurance recoverables (449,896) 0 0 0 (408,850) 0 0
Liabilities:
Future policy benefits 449,896 0 0 0 408,850 0 0
Policyholders' account balances (1,785) 0 0 0 4,701 0 0


	Three Months Ended March 31, 2022(5)
	Total realized and unrealized gains (losses)								Unrealized gains (losses) for assets still held(1)
	Realized investment gains (losses), net		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 recoverable	0		0		0		0			0		0		0
Liabilities:
Policyholders' account balances	19,553		0		0		0			21,607		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)~~(2)Includes U.S. corporate private ~~and foreign corporate private~~ securities.

~~(4)~~(3)Includes ~~asset backed and~~ commercial mortgage-backed securities.

~~(5)~~(4)Issuances and settlements for Policyholders' account balances are presented net in the rollforward.

(5)Effective January 1, 2021, Future policy benefits previously included in “changes in level 3 assets and liabilities” are reported in Note 10 Market Risk Benefits.

3847

Table of Contents


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

Fair Value of Financial Instruments

The ~~table~~tables below ~~presents~~present 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.

September 30, 2022
Fair Value Carrying
Amount(1)
Level 1 Level 2 Level 3 Total Total
(in thousands)
Assets:
Commercial mortgage and other loans $ 0 $ 0 $ 93,470 $ 93,470 $ 100,040
Policy loans 0 0 212,059 212,059 212,059
Cash and cash equivalents 6,158 0 0 6,158 6,158
Accrued investment income 0 25,574 0 25,574 25,574
Reinsurance recoverables 0 0 24,534 24,534 26,975
Receivables from parent and affiliates 0 8,074 0 8,074 8,074
Other assets 0 3,139 0 3,139 3,139
Total assets $ 6,158 $ 36,787 $ 330,063 $ 373,008 $ 382,019
Liabilities:
Policyholders’ account balances - investment contracts $ 0 $ 188,085 $ 36,206 $ 224,291 $ 226,732
Payables to parent and affiliates 0 1,649 0 1,649 1,649
Other liabilities 0 46,007 0 46,007 46,007
Total liabilities $ 0 $ 235,741 $ 36,206 $ 271,947 $ 274,388


		December 31, 2021											March 31, 2023
		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	$	121,594	$	121,594	$	115,576	Commercial mortgage and other loans	$	0	$	0	$	155,427	$	155,427	$	159,752
Policy loans	Policy loans	0		0		210,730		210,730		210,730		Policy loans	0		0		212,479		212,479		212,479

Short-term investments												Short-term investments	4,000		0		0		4,000		4,000
Cash and cash equivalents	Cash and cash equivalents	7,597		0		0		7,597		7,597		Cash and cash equivalents	1,963		0		0		1,963		1,963
Accrued investment income	Accrued investment income	0		22,539		0		22,539		22,539		Accrued investment income	0		31,064		0		31,064		31,064
Reinsurance recoverables	Reinsurance recoverables	0		0		29,931		29,931		28,883		Reinsurance recoverables	0		0		24,462		24,462		26,196
Receivables from parent and affiliates	Receivables from parent and affiliates	0		20,650		0		20,650		20,650		Receivables from parent and affiliates	0		16,875		0		16,875		16,875
Other assets	Other assets	0		3,013		0		3,013		3,013		Other assets	0		3,805		0		3,805		3,805
Total assets	Total assets	$	7,597	$	46,202	$	362,255	$	416,054	$	408,988	Total assets	$	5,963	$	51,744	$	392,368	$	450,075	$	456,134
Liabilities:	Liabilities:											Liabilities:
Policyholders’ account balances - investment contracts	Policyholders’ account balances - investment contracts	$	0	$	201,955	$	41,939	$	243,894	$	242,846	Policyholders’ account balances - investment contracts	$	0	$	165,411	$	34,845	$	200,256	$	201,990

Cash collateral for loaned securities												Cash collateral for loaned securities	0		3,325		0		3,325		3,325

Payables to parent and affiliates	Payables to parent and affiliates	0		2,432		0		2,432		2,432		Payables to parent and affiliates	0		9		0		9		9
Other liabilities	Other liabilities	0		49,130		0		49,130		49,130		Other liabilities	0		56,513		0		56,513		56,513
Total liabilities	Total liabilities	$	0	$	253,517	$	41,939	$	295,456	$	294,408	Total liabilities	$	0	$	225,258	$	34,845	$	260,103	$	261,837

3948

Table of Contents


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


	December 31, 2022
	Fair Value								Carrying Amount(1)
	Level 1		Level 2		Level 3		Total		Total
	(in thousands)
Assets:
Commercial mortgage and other loans	$	0	$	0	$	141,513	$	141,513	$	148,179
Policy loans	0		0		212,063		212,063		212,063
Short-term investments	4,000		0		0		4,000		4,000
Cash and cash equivalents	10,465		0		0		10,465		10,465
Accrued investment income	0		25,222		0		25,222		25,222
Reinsurance recoverables	0		0		25,127		25,127		27,183
Receivables from parent and affiliates	0		18,660		0		18,660		18,660
Other assets	0		3,852		0		3,852		3,852
Total assets	$	14,465	$	47,734	$	378,703	$	440,902	$	449,624
Liabilities:
Policyholders’ account balances - investment contracts	$	0	$	180,576	$	36,746	$	217,322	$	219,378
Cash collateral for loaned securities	0		0		0		0		0
Payables to parent and affiliates	0		3,513		0		3,513		3,513
Other liabilities	0		51,312		0		51,312		51,312
Total liabilities	$	0	$	235,401	$	36,746	$	272,147	$	274,203

(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. DEFERRED POLICY ACQUISITION COSTS AND DEFERRED REINSURANCE

The following tables show a rollforward for the lines of business that contain DAC balances, along with a reconciliation to the Company's total DAC balance:


	March 31, 2023
	Term Life		Variable / Universal Life		Total
	(in thousands)
Balance, beginning of period	$	70,213	$	281,661	$	351,874
Capitalization	4,007		10,791		14,798
Amortization expense	(1,748)		(3,272)		(5,020)
Other	0		3		3
Balance, end of period	$	72,472	$	289,183	$	361,655


	March 31, 2022
	Term Life		Variable / Universal Life		Total
	(in thousands)
Balance, beginning of period	$	62,091	$	246,653	$	308,744
Capitalization	4,228		13,642		17,870
Amortization expense	(1,650)		(3,179)		(4,829)
Other	0		(4)		(4)
Balance, end of period	$	64,669	$	257,112	$	321,781

Table of Contents


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

Deferred Reinsurance Losses

The following tables show a rollforward of DRL balances for variable annuity products, which is the only line of business that contains a DRL balance, along with a reconciliation to the Company's total DRL balance:


	March 31, 2023
	Variable Annuities
	(in thousands)
Balance, beginning of period	$	17,425

Amortization expense	(378)

Balance, end of period	$	17,047


	March 31, 2022
	Variable Annuities
	(in thousands)
Balance, beginning of period	$	18,977

Amortization expense	(395)

Balance, end of period	$	18,582

7. SEPARATE ACCOUNTS

The Company issues annuity and life insurance variable contracts through its separate accounts for which investment income and investment gains and losses accrue directly to, and investment risk is borne by, the contractholder. Most annuity and life insurance variable contracts are offered with both separate and general account options.

The Company also issues variable annuity contracts where the Company contractually guarantees to the contractholder a return of no less than total deposits made to the contract adjusted for any partial withdrawals. In certain of these variable annuity contracts, the Company also contractually guarantees to the contractholder a return of no less than (1) total deposits made to the contract adjusted for any partial withdrawals plus a minimum return, and/or (2) the highest contract value on a specified date adjusted for any withdrawals. These guarantees include benefits that are payable in the event of death, annuitization or at specified dates during the accumulation period and withdrawal and income benefits payable during specified periods.

The assets supporting the variable portion of annuity and life insurance variable contracts are carried at fair value and reported as “Separate account assets” with an equivalent amount reported as “Separate account liabilities.” The liabilities related to the net amount at risk are reflected within future policy benefits or market risk benefits. Amounts assessed against the contractholders for mortality, administration, and other services are included within revenue in “Policy charges and fee income” and changes in liabilities for minimum guarantees are generally included in “Policyholders’ benefits” or “Realized investment gains (losses), net.”

Separate Account Assets

The aggregate fair value of assets, by major investment asset category, supporting separate accounts is as follows:


	March 31, 2023		December 31, 2022
	(in thousands)
Asset Type:







Mutual funds:
Equity	$	7,642,559	$	7,430,452
Fixed Income	4,139,655		3,973,001
Other	670,384		611,170


Other invested assets	1,961,083		1,912,335


Total	$	14,413,681	$	13,926,958

Table of Contents


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

For the periods ended March 31, 2023 and December 31, 2022, there were no transfers of assets, other than cash, from the general account to a separate account; therefore, no gains or losses were recorded.

Separate Account Liabilities

The balances of and changes in separate account liabilities are as follows:


	March 31, 2023
	Variable Annuities		Variable Life		Total
	(in thousands)
Balance, beginning of period	$	8,928,568	$	4,998,390	$	13,926,958
Deposits	8,431		43,878		52,309
Investment performance	439,099		263,521		702,620

Policy charges	(55,991)		(25,372)		(81,363)
Surrenders and withdrawals	(194,702)		(11,989)		(206,691)
Benefit payments	(1,378)		(9,924)		(11,302)
Net transfers (to) from general account	913		28,189		29,102

Other	397		1,651		2,048
Balance, end of period	$	9,125,337	$	5,288,344	$	14,413,681

Cash surrender value(1)	$	8,933,846	$	5,208,516	$	14,142,362

(1) Cash surrender value represents the amount of the contractholder's account balances distributable at the balance sheet date less certain surrender charges.


	March 31, 2022
	Variable Annuities		Variable Life		Total
	(in thousands)
Balance, beginning of period	$	11,982,322	$	5,940,046	$	17,922,368
Deposits	24,269		48,156		72,425
Investment performance	(776,250)		(296,251)		(1,072,501)

Policy charges	(64,417)		(25,566)		(89,983)
Surrenders and withdrawals	(217,281)		(6,875)		(224,156)
Benefit payments	(1,219)		(13,214)		(14,433)
Net transfers (to) from general account	(2)		(12,141)		(12,143)

Other	270		2,298		2,568
Balance, end of period	$	10,947,692	$	5,636,453	$	16,584,145

Cash surrender value(1)	$	10,707,646	$	5,561,179	$	16,268,825

(1) Cash surrender value represents the amount of the contractholder's account balances distributable at the balance sheet date less certain surrender charges.

Table of Contents


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

8. LIABILITY FOR FUTURE POLICY BENEFITS

Liability for Future Policy Benefits primarily consists of the following sub-components, which are discussed in greater detail below.

•Benefit Reserves;

•Deferred Profit Liability; and

•Additional Insurance Reserves

Benefit Reserves

The balances of and changes in Benefit Reserves as of and for the periods indicated consist of the three tables presented below: Present Value of Expected Net Premiums rollforward, Present Value of Expected Future Policy Benefits rollforward, and Net Liability for Future Policy Benefits.


	March 31, 2023
	Present Value of Expected Net Premiums
	Term Life		Fixed Annuities		Total
	(in thousands)
Balance, beginning of period	$	1,416,807	$	0	$	1,416,807
Effect of cumulative changes in discount rate assumptions, beginning of period	73,563		0		73,563
Balance at original discount rate, beginning of period	1,490,370		0		1,490,370


Effect of actual variances from expected experience	(10,232)		(599)		(10,831)
Adjusted balance, beginning of period	1,480,138		(599)		1,479,539
Issuances	16,867		710		17,577
Net premiums / considerations collected	(43,352)		(111)		(43,463)
Interest accrual	17,156		0		17,156

Balance at original discount rate, end of period	1,470,809		0		1,470,809
Effect of cumulative changes in discount rate assumptions, end of period	(40,753)		0		(40,753)
Balance, end of period	$	1,430,056	$	0	$	1,430,056


	March 31, 2023
	Present Value of Expected Future Policy Benefits
	Term Life		Fixed Annuities		Total
	(in thousands)
Balance, beginning of period	$	2,551,191	$	16,460	$	2,567,651
Effect of cumulative changes in discount rate assumptions, beginning of period	137,962		1,899		139,861
Balance at original discount rate, beginning of period	2,689,153		18,359		2,707,512


Effect of actual variances from expected experience and other activity	(14,462)		183		(14,279)
Adjusted balance, beginning of period	2,674,691		18,542		2,693,233
Issuances	16,867		710		17,577
Interest accrual	32,494		171		32,665
Benefit payments	(40,914)		(551)		(41,465)
Other adjustments	(372)		0		(372)
Balance at original discount rate, end of period	2,682,766		18,872		2,701,638
Effect of cumulative changes in discount rate assumptions, end of period	(64,374)		(1,536)		(65,910)
Balance, end of period	$	2,618,392	$	17,336	$	2,635,728

Table of Contents


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


	March 31, 2023
	Net Liability for Future Policy Benefits (Benefit Reserves)
	Term Life		Fixed Annuities		Total
	(in thousands)
Balance, end of period, pre-flooring	$	1,188,336	$	17,336	$	1,205,672
Flooring impact, end of period	0		0		0
Balance, end of period, post-flooring	1,188,336		17,336		1,205,672
Less: Reinsurance recoverable	1,036,995		17,336		1,054,331
Balance after reinsurance recoverable, end of period, post-flooring	$	151,341	$	0	$	151,341


	March 31, 2022
	Present Value of Expected Net Premiums
	Term Life		Fixed Annuities		Total
	(in thousands)
Balance, beginning of period	$	1,641,933	$	0	$	1,641,933
Effect of cumulative changes in discount rate assumptions, beginning of period	(253,752)		0		(253,752)
Balance at original discount rate, beginning of period	1,388,181		0		1,388,181


Effect of actual variances from expected experience and other activity	3,165		0		3,165
Adjusted balance, beginning of period	1,391,346		0		1,391,346
Issuances	20,680		341		21,021
Net premiums / considerations collected	(40,394)		(341)		(40,735)
Interest accrual	16,119		0		16,119

Balance at original discount rate, end of period	1,387,751		0		1,387,751
Effect of cumulative changes in discount rate assumptions, end of period	120,622		0		120,622
Balance, end of period	$	1,508,373	$	0	$	1,508,373


	March 31, 2022
	Present Value of Expected Future Policy Benefits
	Term Life		Fixed Annuities		Total
	(in thousands)
Balance, beginning of period	$	3,041,562	$	19,314	$	3,060,876
Effect of cumulative changes in discount rate assumptions, beginning of period	(561,455)		(1,459)		(562,914)
Balance at original discount rate, beginning of period	2,480,107		17,855		2,497,962


Effect of actual variances from expected experience	(706)		196		(510)
Adjusted balance, beginning of period	2,479,401		18,051		2,497,452
Issuances	20,680		341		21,021
Interest accrual	30,217		150		30,367
Benefit payments	(35,047)		(529)		(35,576)
Other adjustments	(41)		(74)		(115)
Balance at original discount rate, end of period	2,495,210		17,939		2,513,149
Effect of cumulative changes in discount rate assumptions, end of period	285,629		(132)		285,497
Balance, end of period	$	2,780,839	$	17,807	$	2,798,646

Table of Contents


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


	March 31, 2022
	Net Liability for Future Policy Benefits (Benefit Reserves)
	Term Life		Fixed Annuities		Total
	(in thousands)
Balance, end of period, pre-flooring	$	1,272,466	$	17,807	$	1,290,273
Flooring impact, end of period	6,028		0		6,028
Balance, end of period, post-flooring	1,278,494		17,807		1,296,301
Less: Reinsurance recoverable	1,112,534		17,807		1,130,341
Balance after reinsurance recoverable, end of period, post-flooring	$	165,960	$	0	$	165,960

The following tables provide supplemental information related to the balances of and changes in Benefit Reserves included in the disaggregated tables above, on a gross (direct and assumed) basis, as of and for the periods indicated:


	March 31, 2023
	Term Life			Fixed Annuities
	(in thousands)
Undiscounted expected future gross premiums	$	3,056,399		$	0
Discounted expected future gross premiums (at original discount rate)	$	2,057,345		$	0
Discounted expected future gross premiums (at current discount rate)	$	2,006,982		$	0
Undiscounted expected future benefits and expenses	$	4,332,537		$	24,654
Interest accrual	$	15,338		$	171
Gross premiums	$	61,365		$	112
Weighted-average duration of the liability in years (at original discount rate)	11			7
Weighted-average duration of the liability in years (at current discount rate)	10			6
Weighted-average interest rate (at original discount rate)	5.31		%	3.61		%
Weighted-average interest rate (at current discount rate)	5.07		%	4.98		%


	March 31, 2022
	Term Life			Fixed Annuities
	(in thousands)
Undiscounted expected future gross premiums	$	3,307,354		$	0
Discounted expected future gross premiums (at original discount rate)	$	2,192,982		$	0
Discounted expected future gross premiums (at current discount rate)	$	2,396,738		$	0
Undiscounted expected future benefits and expenses	$	4,023,253		$	23,522
Interest accrual	$	14,098		$	150
Gross premiums	$	62,991		$	653
Weighted-average duration of the liability in years (at original discount rate)	10			7
Weighted-average duration of the liability in years (at current discount rate)	11			7
Weighted-average interest rate (at original discount rate)	5.34		%	3.39		%
Weighted-average interest rate (at current discount rate)	3.55		%	3.49		%

For additional information regarding observable market information and the techniques used to determine the interest rate assumptions seen above, see Note 2.

Table of Contents


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

For non-participating traditional and limited-payment products, if a cohort is in a loss position where the liability for future policy benefits plus the present value of expected future gross premiums are determined to be insufficient to provide for the present value of expected future policy benefits and non-level claim settlement expenses, then the liability for future policy benefits is adjusted at that time, and thereafter such that all changes, both favorable and unfavorable, in expected benefits resulting from both actual experience deviations and changes in future assumptions are recognized immediately as a gain or loss.

In the first three months of 2023, there was a $3 million gain in net income for nonparticipating traditional and limited-payment products, where net premiums exceeded gross premiums for certain issue-year cohorts, mostly offset by a $3 million loss, reflecting the impact of ceded reinsurance on the affected cohorts. The favorable impact in the first three months of 2023 is primarily due to favorable mortality experience related to individual term life products.

In the first three months of 2022, there was a $2 million gain in net income for nonparticipating traditional and limited-payment products, where net premiums exceeded gross premiums for certain issue-year cohorts, mostly offset by a $2 million charge, reflecting the impact of ceded reinsurance on the affected cohorts. The favorable impact in the first three months of 2022 is primarily due to favorable mortality experience related to individual term life products.

Deferred Profit Liability

The balances of and changes in Deferred Profit Liability as of and for the periods indicated are as follows:


	March 31, 2023		March 31, 2022
	Fixed Annuities
	(in thousands)
Balance, beginning of period	$	1,684	$	1,726
Effect of actual variances from expected experience	(107)		(164)
Adjusted balance, beginning of period	1,577		1,562
Profits deferred	0		309
Interest accrual	13		16
Amortization	(45)		(52)
Other adjustments	0		(6)
Balance, end of period	1,545		1,829
Less: Reinsurance recoverable	1,545		1,829
Balance after reinsurance recoverable	$	0	$	0

The following table provides supplemental information related to the balances of and changes in Deferred Profit Liability, included in the disaggregated table above, on a gross (direct and assumed) basis, as of and for the period indicated:


	March 31, 2023		March 31, 2022
	Fixed Annuities
	(in thousands)
Revenue(1)	$	139	$	(103)
Interest accrual	13		16

(1) Represents the gross premiums collected in changes in deferred profit liability.

Table of Contents


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

Additional Insurance Reserves

AIR represents the additional liability for annuitization, death, or other insurance benefits, including GMDB and GMIB contract features, that are above and beyond the contractholder's account balance.

The following table shows a rollforward of AIR balances for variable and universal life products, for the periods indicated:


	March 31, 2023		March 31, 2022
	(in thousands)
Balance including amounts in AOCI, beginning of period, post-flooring	$	827,478	$	703,968
Flooring impact and amounts in AOCI	91,115		(71,467)

Balance, excluding amounts in AOCI, beginning of period, pre-flooring	918,593		632,501




Effect of actual variances from expected experience and other activity	(342)		(10,170)
Adjusted balance, beginning of period	918,251		622,331
Assessments collected(1)	14,827		39,441
Interest accrual	7,840		5,339
Benefits paid	(3,995)		(3,284)

Balance, excluding amounts in AOCI, end of period, pre-flooring	936,923		663,827



Flooring impact and amounts in AOCI	(65,818)		14,281


Balance, including amounts in AOCI, end of period, post-flooring	871,105		678,108
Less: Reinsurance recoverable	834,640		643,583
Balance after reinsurance recoverable, including amounts in AOCI, end of period	$	36,465	$	34,525

(1) Represents the portion of gross assessments required to fund the future policy benefits.


	March 31, 2023			March 31, 2022

	(in thousands)
Interest accrual	$	7,840		$	5,339
Gross assessments	$	46,941		$	92,938
Weighted-average duration of the liability in years (at original discount rate)	28			26
Weighted-average interest rate (at original discount rate)	3.42		%	3.33		%

Future Policy Benefits Reconciliation

The following table presents the reconciliation of the ending balances from the above rollforwards, Benefit Reserves, Additional Insurance Reserves, and Deferred Profit Liability including other liabilities, gross of related reinsurance recoverables, to the total liability for Future Policy Benefits as reported on the Company's Unaudited Interim Statements of Financial Position as of the periods indicated:

Table of Contents


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


		March 31, 2023		March 31, 2022

	(in thousands)
Benefit reserves, end of period, post-flooring		$	1,205,672	$	1,296,301
Additional insurance reserves, including amounts in AOCI, end of period, post-flooring		871,105		678,108
Deferred profit liability, end of period, post-flooring		1,545		1,829
Subtotal of amounts disclosed above		2,078,322		1,976,238
Other Future policy benefits reserves(1)		149,309		171,407
Total Future policy benefits		$	2,227,631	$	2,147,645

(1)Represents balances for which disaggregated rollforward disclosures are not required, including unpaid claims and claims expenses, and incurred but not reported and in course of settlement claim liabilities.

Revenue and Interest Expense

The following tables present revenue and interest expense related to Benefit Reserves, Additional Insurance Reserves, and Deferred Profit Liability, as well as related revenue and interest expense not presented in the above supplemental tables, in the Company's Statement of Operations for the periods indicated:


	March 31, 2023
	Revenues(1)
	Fixed Annuities		Term Life		Variable and Universal Life		Total
	(in thousands)
Benefit reserves	$	112	$	61,365	$	0	$	61,477
Additional insurance reserves	0		0		46,941		46,941
Deferred profit liability	139		0		0		139
Total	$	251	$	61,365	$	46,941	$	108,557


	March 31, 2022
	Revenues(1)
	Fixed Annuities		Term Life		Variable and Universal Life		Total
	(in thousands)
Benefit reserves	$	653	$	62,991	$	0	$	63,644
Additional insurance reserves	0		0		92,938		92,938
Deferred profit liability	(103)		0		0		(103)
Total	$	550	$	62,991	$	92,938	$	156,479

(1)Represents "Gross premiums" for benefit reserves; "Gross assessments" for additional insurance reserves; and "Revenue" for deferred profit liability.


	March 31, 2023
	Interest Expense
	Fixed Annuities		Term Life		Variable and Universal Life		Total
	(in thousands)
Benefit reserves	$	171	$	15,338	$	0	$	15,509
Additional insurance reserves	0		0		7,840		7,840
Deferred profit liability	13		0		0		13
Total	$	184	$	15,338	$	7,840	$	23,362

Table of Contents


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


	March 31, 2022
	Interest Expense
	Fixed Annuities		Term Life		Variable and Universal Life		Total
	(in thousands)
Benefit reserves	$	150	$	14,098	$	0	$	14,248
Additional insurance reserves	0		0		5,339		5,339
Deferred profit liability	16		0		0		16
Total	$	166	$	14,098	$	5,339	$	19,603

9. POLICYHOLDERS' ACCOUNT BALANCES

Policyholders' Account Balances

The Company issuesvariable life and variable universal life insurance contracts where the Company contractually guarantees to the contractholder a death benefit even when there is insufficient value to cover monthly mortality and expense charges, whereas otherwise the contract would typically lapse (“no-lapse guarantee”).

For those guarantees of benefits that are payable in the event of death, the net amount at risk is generally defined as the current guaranteed minimum death benefit in excess of the current account balance at the balance sheet date. The Company’s primary risk exposures for these contracts relates to actual deviations from, or changes to, the assumptions used in the original pricing of these products, including fixed income and equity market returns, contract lapses and contractholder mortality.

For guarantees of benefits that are payable at annuitization, the net amount at risk is generally defined as the present value of the minimum guaranteed annuity payments available to the contractholder determined in accordance with the terms of the contract in excess of the current account balance. The Company’s primary risk exposures for these contracts relates to actual deviations from, or changes to, the assumptions used in the original pricing of these products, including fixed income and equity market returns, timing of annuitization, contract lapses and contractholder mortality.

For guarantees of benefits that are payable at withdrawal, the net amount at risk is generally defined as the present value of the minimum guaranteed withdrawal payments available to the contractholder determined in accordance with the terms of the contract in excess of the current account balance.

For guarantees of accumulation balances, the net amount at risk is generally defined as the guaranteed minimum accumulation balance minus the current account balance. The Company’s primary risk exposures for these contracts relates to actual deviations from, or changes to, the assumptions used in the original pricing of these products, including equity market returns, interest rates, market volatility and contractholder behavior.

Table of Contents


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

The balance of and changes in policyholders' account balances as of and for the periods ended are as follows:


	March 31, 2023

	Variable Annuities			Variable Life / Universal Life			Total
	(in thousands)
Balance, beginning of period	$	327,124		$	2,084,680		$	2,411,804
Deposits	25,558			57,220			82,778
Interest credited	2,015			13,972			15,987

Policy charges	(40)			(36,360)			(36,400)
Surrenders and withdrawals	(8,163)			(29,361)			(37,524)
Benefit payments	(1,647)			(422)			(2,069)
Net transfers (to) from separate account	(913)			(28,189)			(29,102)

Change in market value and other adjustments	(131)			10,436			10,305
Balance, end of period	343,803			2,071,976			2,415,779
Reinsurance and other recoverables(1)	319,707			765,282			1,084,989
Policyholders' account balance net of reinsurance and other recoverables	$	24,096		$	1,306,694		$	1,330,790

Unearned revenue reserve							328,956
Other							47,556
Total Policyholders' account balances							$	2,792,291

Weighted-average crediting rate	2.40		%	2.69		%	2.65		%
Net amount at risk(2)	$	0		$	33,887,277		$	33,887,277
Cash surrender value(3)	$	322,593		$	1,733,643		$	2,056,236

(1) The amount of recoverables related to reinsurance agreements that reduce the risk of the policyholders’ account balances gross liability.

(2) The net amount at risk calculation includes both general and separate account balances.

(3) Cash surrender value represents the amount of the contractholder's account balances distributable at the balance sheet date less certain surrender charges.

Table of Contents


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


	March 31, 2022

	Variable Annuities			Variable Life / Universal Life			Total
	(in thousands)
Balance, beginning of period	$	344,945		$	2,052,065		$	2,397,010
Deposits	298			64,070			64,368
Interest credited	1,564			15,441			17,005

Policy charges	(48)			(36,141)			(36,189)
Surrenders and withdrawals	(5,197)			(34,575)			(39,772)
Benefit payments	(1,257)			365			(892)
Net transfers (to) from separate account	2			12,141			12,143

Change in market value and other adjustments	0			(19,553)			(19,553)
Balance, end of period	340,307			2,053,813			2,394,120
Reinsurance and other recoverables(1)	336,619			738,500			1,075,119
Policyholders' account balance net of reinsurance and other recoverables	$	3,688		$	1,315,313		$	1,319,001

Unearned revenue reserve							268,002
Other							50,657
Total Policyholders' account balances							$	2,712,779

Weighted-average crediting rate	1.83		%	3.01		%	2.84		%
Net amount at risk(2)	$	0		$	32,527,594		$	32,527,594
Cash surrender value(3)	$	319,207		$	1,700,247		$	2,019,454

(1) The amount of recoverables related to reinsurance agreements that reduce the risk of the policyholders’ account balances gross liability.

(2) The net amount at risk calculation includes both general and separate account balances.

(3) Cash surrender value represents the amount of the contractholder's account balances distributable at the balance sheet date less certain surrender charges.

The balance of account values by range of guaranteed minimum crediting rates and the related range of difference, in basis points, between rates being credited to policyholders and the respective guaranteed minimums are as follows:


	March 31, 2023
Range of Guaranteed Minimum Crediting Rate	At guaranteed minimum		1 -50 bps above guaranteed minimum		51 - 150 bps above guaranteed minimum		Greater than 150 bps above guaranteed minimum		Total
	(in thousands)
Variable Annuities
Less than 1.00%	$	1,651	$	0	$	0	$	0	$	1,651
1.00% - 1.99%	189,516		1,592		0		0		191,108
2.00% - 2.99%	1,784		0		0		0		1,784
3.00% - 4.00%	128,371		116		0		0		128,487
Greater than 4.00%	126		0		0		0		126
Total	$	321,448	$	1,708	$	0	$	0	$	323,156
Variable and Universal Life
Less than 1.00%	$	0	$	0	$	0	$	640	$	640
1.00% - 1.99%	17,633		0		148,939		290,129		456,701
2.00% - 2.99%	4,463		15,422		317,044		26,632		363,561
3.00% - 4.00%	150,092		343,976		60,552		0		554,620
Greater than 4.00%	376,561		0		0		0		376,561
Total	$	548,749	$	359,398	$	526,535	$	317,401	$	1,752,083

Table of Contents


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


	March 31, 2022
Range of Guaranteed Minimum Crediting Rate	At guaranteed minimum		1 - 50 bps above guaranteed minimum		51 - 150 bps above guaranteed minimum		Greater than 150 bps above guaranteed minimum		Total
	(in thousands)
Variable Annuities
Less than 1.00%	$	0	$	0	$	0	$	0	$	0
1.00% - 1.99%	200,629		1,610		0		0		202,239
2.00% - 2.99%	1,901		0		0		0		1,901
3.00% - 4.00%	139,888		0		0		0		139,888
Greater than 4.00%	122		0		0		0		122
Total	$	342,540	$	1,610	$	0	$	0	$	344,150
Variable and Universal Life
Less than 1.00%	$	1,142	$	0	$	0	$	0	$	1,142
1.00% - 1.99%	47,280		0		89,655		289,338		426,273
2.00% - 2.99%	671		0		183,982		161,233		345,886
3.00% - 4.00%	140,738		3,741		450,770		0		595,249
Greater than 4.00%	360,973		0		0		0		360,973
Total	$	550,804	$	3,741	$	724,407	$	450,571	$	1,729,523

Unearned Revenue Reserve

The balance of the changes in URR are as follows:


	March 31, 2023

	Variable Life / Universal Life
	(in thousands)


Balance, beginning of period	$	313,711
Unearned revenue	19,030
Amortization expense	(3,785)


Balance, end of period	328,956
Reinsurance recoverables	85,048
Unearned revenue reserve net of reinsurance recoverables	$	243,908


	March 31, 2022

	Variable Life / Universal Life
	(in thousands)


Balance, beginning of period	$	251,573
Unearned revenue	19,737
Amortization expense	(3,308)


Balance, end of period	268,002
Reinsurance recoverables	68,241
Unearned revenue reserve net of reinsurance recoverables	$	199,761

Table of Contents


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

10. MARKET RISK BENEFITS

The following tables show a rollforward of MRB balances for variable annuity products, along with a reconciliation to the Company’s total net MRB positions as of the following dates:


	March 31, 2023
	Variable Annuities		Less: Reinsured Market Risk Benefits		Total, Net of Reinsurance
	(in thousands)
Balance, beginning of period	$	398,254	$	(398,254)	$	0
Effect of cumulative changes in non-performance risk	163,169		0		163,169
Balance, beginning of period, before effect of changes in non-performance risk	561,423		(398,254)		163,169
Attributed fees collected	27,304		(27,304)		0
Claims paid	(1,653)		1,653		0
Interest accrual	7,035		(7,035)		0
Actual in force different from expected	2,229		(2,229)		0
Effect of changes in interest rates	33,851		(33,851)		0
Effect of changes in equity markets	(54,966)		54,966		0
Effect of changes in current period counterparty non-performance risk	0		15,728		15,728

Balance, end of period, before effect of changes in non-performance risk	575,223		(396,326)		178,897
Effect of cumulative changes in non-performance risk	(178,897)		0		(178,897)


Balance, end of period	$	396,326	$	(396,326)	$	0


	March 31, 2022
	Variable Annuities		Less: Reinsured Market Risk Benefits		Total, Net of Reinsurance
	(in thousands)
Balance, beginning of period	$	796,913	$	(796,913)	$	0
Effect of cumulative changes in non-performance risk	21,123		0		21,123
Balance, beginning of period, before effect of changes in non-performance risk	818,036		(796,913)		21,123
Attributed fees collected	31,799		(31,799)		0
Claims paid	(38)		38		0
Interest accrual	549		(549)		0
Actual in force different from expected	2,255		(2,255)		0
Effect of changes in interest rates	(204,292)		204,292		0
Effect of changes in equity markets	71,053		(71,053)		0
Effect of changes in current period counterparty non-performance risk	0		86,828		86,828
Balance, end of period, before effect of changes in non-performance risk	719,362		(611,411)		107,951
Effect of cumulative changes in non-performance risk	(107,951)		0		(107,951)


Balance, end of period	$	611,411	$	(611,411)	$	0

Table of Contents


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

The following table presents accompanying information to the rollforward table above. See Note 9 for information on "Net amount at risk".


	March 31, 2023		March 31, 2022
	Variable Annuities
	($ in thousands)
Net amount at risk	$	877,211	$	305,180
Weighted-average attained age of contractholders	68		66

The table below reconciles MRB asset and liability positions as of the following dates:


	March 31, 2023		March 31, 2022
	Variable Annuities
	(in thousands)
Market risk benefit assets	$	562,922	$	755,053
Market risk benefit liabilities	562,922		755,053
Net liability	$	0	$	0

11. 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~~Change in value of market risk benefits, net of related hedging gain (loss) 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~~market risk benefits 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”.~~manner. See Note 4 for additional information related to the accounting for ~~embedded derivatives.~~market risk benefits.

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

September 30, 2022 December 31, 2021
(in thousands)
Reinsurance recoverables $ 3,236,519 $ 3,601,212
Policy loans (22,723) (22,028)
Deferred policy acquisition costs (660,768) (634,661)
Deferred sales inducements (34,396) (37,905)
Other assets 10,851 12,941
Other liabilities 80,926 140,248

4063

Table of Contents


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 Financial Position as of March 31, 2023 and December 31, 2022 were as follows:


	March 31, 2023		December 31, 2022
	(in thousands)
Reinsurance recoverables(1)	$	3,195,287	$	3,098,248
Policy loans	(23,082)		(22,999)
Deferred policy acquisition costs(1)	(637,032)		(646,737)
Deferred sales inducements(1)	(37,515)		(38,146)
Market risk benefit assets(1)	479,624		478,439
Other assets(1)	42,256		42,265
Market risk benefit liabilities(1)	83,298		80,185
Other liabilities(1)	120,976		115,351

(1) Prior period amounts adjusted for the implementation of ASU 2018-12: Targeted Improvements to the Accounting for Long-Duration Contracts.

Reinsurance recoverables by counterparty are broken out below:


		September 30, 2022		December 31, 2021			March 31, 2023		December 31, 2022
		(in thousands)					(in thousands)
Prudential Insurance(1)	Prudential Insurance(1)	$	908,079	$	1,344,251	Prudential Insurance(1)	$	480,064	$	456,633
PAR U(1)	PAR U(1)	1,278,653		1,213,038		PAR U(1)	1,611,135		1,575,260
PARCC(1)	PARCC(1)	386,591		415,266		PARCC(1)	464,565		464,142
PAR Term(1)	PAR Term(1)	255,549		248,387		PAR Term(1)	268,770		258,169
Term Re(1)	Term Re(1)	274,582		256,283		Term Re(1)	252,206		232,796
DART(1)	DART(1)	91,127		77,995		DART(1)	85,369		73,702
Pruco Life(1)	Pruco Life(1)	35,554		40,804		Pruco Life(1)	31,553		34,720
Unaffiliated	Unaffiliated	6,384		5,188		Unaffiliated	1,625		2,826
Total reinsurance recoverables	Total reinsurance recoverables	$	3,236,519	$	3,601,212	Total reinsurance recoverables	$	3,195,287	$	3,098,248

(1) Prior period amounts adjusted for the implementation of ASU 2018-12: Targeted Improvements to the Accounting for Long-Duration Contracts.

4164

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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 nine~~ months ended ~~September 30,~~March 31, were as follows:


		Three Months Ended September 30,				Six Months Ended September 30,					Three Months Ended March 31,
		2022		2021		2022		2021				2023		2022
		(in thousands)										(in thousands)
Premiums:	Premiums:									Premiums:
Direct		$	60,591	$	60,911	$	185,958	$	189,718
Direct(1)										Direct(1)		$	62,583	$	63,330

Ceded		(52,367)		(53,651)		(158,904)		(167,813)
Ceded(1)										Ceded(1)		(52,406)		(54,310)
Net premiums(1)	Net premiums(1)	8,224		7,260		27,054		21,905		Net premiums(1)		10,177		9,020
Policy charges and fee income:	Policy charges and fee income:									Policy charges and fee income:
Direct		93,034		106,559		295,093		313,517
Direct(1)										Direct(1)		86,513		95,926

Ceded~~(1)~~(2)	Ceded~~(1)~~(2)	(74,131)		(92,396)		(228,275)		(248,112)		Ceded~~(1)~~(2)		(72,375)		(85,331)
Net policy charges and fee income(1)	Net policy charges and fee income(1)	18,903		14,163		66,818		65,405		Net policy charges and fee income(1)		14,138		10,595
Net investment income:	Net investment income:									Net investment income:
Direct	Direct	23,632		27,126		73,263		75,980		Direct		28,886		24,563

Ceded	Ceded	(182)		(182)		(580)		(593)		Ceded		(226)		(194)
Net investment income	Net investment income	23,450		26,944		72,683		75,387		Net investment income		28,660		24,369
Asset administration fees:	Asset administration fees:									Asset administration fees:
Direct	Direct	9,223		11,494		29,306		33,434		Direct		8,776		10,502

Ceded	Ceded	(7,144)		(9,167)		(22,857)		(26,941)		Ceded		(6,696)		(8,242)
Net asset administration fees	Net asset administration fees	2,079		2,327		6,449		6,493		Net asset administration fees		2,080		2,260

Realized investment gains (losses), net:	Realized investment gains (losses), net:									Realized investment gains (losses), net:
Direct		94,398		38,102		473,580		453,521
Direct(1)										Direct(1)		(9,457)		15,227

Ceded		(93,186)		(32,747)		(450,730)		(448,778)
Ceded(1)										Ceded(1)		1,159		493
Realized investment gains (losses), net(1)	Realized investment gains (losses), net(1)	1,212		5,355		22,850		4,743		Realized investment gains (losses), net(1)		(8,298)		15,720
Change in value of market risk benefits, net of related hedging gain (loss):										Change in value of market risk benefits, net of related hedging gain (loss):
Direct(1)										Direct(1)		(13,801)		128,811
Ceded(1)										Ceded(1)		(1,927)		(215,639)
Net change in value of market risk benefits, net of related hedging gain (loss)(1)										Net change in value of market risk benefits, net of related hedging gain (loss)(1)		(15,728)		(86,828)
Policyholders’ benefits (including change in reserves):	Policyholders’ benefits (including change in reserves):									Policyholders’ benefits (including change in reserves):
Direct		107,774		94,805		379,548		312,750
Direct(1)										Direct(1)		107,337		128,710

Ceded(2)		(95,046)		(92,830)		(340,759)		(280,651)
Net policyholders’ benefits (including change in reserves)		12,728		1,975		38,789		32,099
Ceded(1)(3)										Ceded(1)(3)		(88,998)		(114,875)
Net policyholders’ benefits (including change in reserves)(1)										Net policyholders’ benefits (including change in reserves)(1)		18,339		13,835
Change in estimates of liability for future policy benefits:										Change in estimates of liability for future policy benefits:
Direct(1)										Direct(1)		(3,917)		(13,818)
Ceded(1)										Ceded(1)		2,475		12,641
Net change in estimates of liability for future policy benefits(1)										Net change in estimates of liability for future policy benefits(1)		(1,442)		(1,177)
Interest credited to policyholders’ account balances:	Interest credited to policyholders’ account balances:									Interest credited to policyholders’ account balances:
Direct		21,091		20,377		66,878		56,837
Direct(1)										Direct(1)		18,022		19,797

Ceded		(9,312)		(8,759)		(31,964)		(25,210)
Ceded(1)										Ceded(1)		(7,885)		(8,603)
Net interest credited to policyholders’ account balances	Net interest credited to policyholders’ account balances	11,779		11,618		34,914		31,627		Net interest credited to policyholders’ account balances		10,137		11,194
Reinsurance expense allowances and general and administrative expenses, net of capitalization and amortization		(23,275)		(39,700)		(105,350)		(112,762)
Reinsurance expense allowances and general and administrative expenses, net of capitalization and amortization(1)										Reinsurance expense allowances and general and administrative expenses, net of capitalization and amortization(1)		(32,950)		(37,277)

(1)Prior period amounts adjusted for the implementation of ASU 2018-12: Targeted Improvements to the Accounting for Long-Duration Contracts.

(2)Includes ~~$(1.0)~~$(1.2) million and ~~$(5.2)~~$(1.3) million of unaffiliated activity for the three months ended ~~September 30,~~March 31, 2023 and 2022, ~~and 2021, respectively, and $(4.0)~~respectively.

(3)Includes $0 million and ~~$(5.2) million for the nine months ended September 30, 2022 and 2021, respectively.~~

~~(2)Includes $0.0 million and $(3.9)~~$(0.1) million of unaffiliated activity for the three months ended ~~September 30,~~March 31, 2023 and 2022, ~~and 2021, respectively, and $(0.1) million and $(3.8) million for the nine months ended September 30, 2022 and 2021,~~ respectively.

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

2022 2021
(in thousands)
Direct gross life insurance face amount in force $ 154,612,881 $ 155,764,627
Reinsurance ceded (140,809,087) (140,780,880)
Net life insurance face amount in force $ 13,803,794 $ 14,983,747

4265

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

The gross and net amounts of life insurance face amount in force as of March 31, 2023 and 2022 were as follows:


	2023		2022
	(in thousands)
Direct gross life insurance face amount in force	$	154,115,666	$	155,729,264
Reinsurance ceded	(139,826,733)		(141,264,004)
Net life insurance face amount in force	$	14,288,933	$	14,465,260

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. Effective February 1, 2023, PLNJ began selling indexed variable annuities products, which is reinsured to Prudential Insurance through the existing reinsurance agreement. The reinsurance of the indexed variable annuities transfers all significant risks, including mortality risk, embedded in the reinsured contracts to Prudential Insurance. As a result of the agreement, reinsurance payables includes the ceded modified coinsurance arrangement, which reflects the value of the invested assets retained by the Company and the associated asset returns.

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.

Table of Contents


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

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.

~~Table of Contents~~


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

7.12. 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 ~~$0.6~~$(1.4) million, or ~~1.08%~~12.17% of income (loss) from operations before income taxes in the first ~~nine~~three months of ~~2022,~~2023, compared to ~~$3.9~~$(19.9) million, or ~~6.82%~~30.19%, in the first ~~nine~~three months of ~~2021.~~2022. 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.

~~Regulatory Developments~~

Inflation Reduction Act. On August 16, 2022, President Biden signed into law the Inflation Reduction Act of 2022 (the “Inflation Reduction Act”). One of the most significant provisions of the Inflation Reduction Act is a 15% ~~book-income~~ alternative minimum tax based on ~~corporations~~the Company’s GAAP income, with certain adjustments. This provision which is applicable only to companies with average applicable financial statement income over $1 billion for any ~~3-year~~three-year period ending ~~with~~in 2022 or ~~later. This provision~~later, is effective in taxable years beginning after December 31, ~~2022, and therefore does not impact the Company’s current effective tax rate.~~2022. The impact of the book-income alternative minimum tax, if any,, will vary from year to year based on the relationship of ~~our book-income~~the Company’s GAAP income to ~~our~~the Company’s taxable income. Any tax paid pursuant to this provision is available as a tax credit in future years when the Company’s tax rate exceeds the 15% minimum tax threshold.

8.13. 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 ~~nine~~three months ended ~~September 30,~~March 31, 2023 and 2022, ~~and 2021,~~ are as follows:

Accumulated Other Comprehensive Income (Loss)
Foreign Currency Translation Adjustment Net Unrealized
Investment Gains
(Losses)(1) Total Accumulated Other Comprehensive Income (Loss)
(in thousands)
Balance, December 31, 2021 $ (988) $ 131,641 $ 130,653
Change in OCI before reclassifications (745) (439,767) (440,512)
Amounts reclassified from AOCI 0 (851) (851)
Income tax benefit (expense) 189 92,498 92,687
Balance, September 30, 2022 $ (1,544) $ (216,479) $ (218,023)

Accumulated Other Comprehensive Income (Loss)
Foreign Currency Translation Adjustment Net Unrealized
Investment Gains
(Losses)(1) Total Accumulated Other Comprehensive Income (Loss)
(in thousands)
Balance, December 31, 2020 $ (783) $ 186,190 $ 185,407
Change in OCI before reclassifications (190) (69,854) (70,044)
Amounts reclassified from AOCI 0 28 28
Income tax benefit (expense) 40 14,664 14,704
Balance, September 30, 2021 $ (933) $ 131,028 $ 130,095

~~(1)~~Includes cash flow hedges of $23 million and $5 million as of September 30, 2022 and December 31, 2021, respectively, and $4 million and $(3) million as of September 30, 2021 and December 31, 2020, respectively.

4467

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


	Accumulated Other Comprehensive Income (Loss)
	Foreign Currency Translation Adjustment		Net Unrealized Investment Gains (Losses)(1)		Interest Rate Remeasurement of Future Policy Benefits		Gain (loss) from Changes in Non-Performance Risk on Market Risk Benefits		Total Accumulated Other Comprehensive Income (Loss)
	(in thousands)
Balance, December 31, 2022	$	(1,214)	$	(176,386)	$	12,504	$	128,906	$	(36,190)
Change in OCI before reclassifications	100		39,128		(6,958)		15,727		47,997
Amounts reclassified from AOCI	0		(361)		0		0		(361)
Income tax benefit (expense)	(22)		(8,139)		1,463		(3,306)		(10,004)
Balance, March 31, 2023	$	(1,136)	$	(145,758)	$	7,009	$	141,327	$	1,442


	Accumulated Other Comprehensive Income (Loss)
	Foreign Currency Translation Adjustment		Net Unrealized Investment Gains (Losses)(1)		Interest Rate Remeasurement of Future Policy Benefits		Gain (loss) from Changes in Non-Performance Risk on Market Risk Benefits		Total Accumulated Other Comprehensive Income (Loss)
	(in thousands)
Balance, December 31, 2021	$	(988)	$	121,075	$	(34,788)	$	16,688	$	101,987
Change in OCI before reclassifications	(67)		(161,382)		22,482		86,829		(52,138)
Amounts reclassified from AOCI	0		1,289		0		0		1,289
Income tax benefit (expense)	16		33,616		(4,722)		(18,232)		10,678
Balance, March 31, 2022	$	(1,039)	$	(5,402)	$	(17,028)	$	85,285	$	61,816

(1)Includes cash flow hedges of $13 million and $0 million as of March 31, 2023 and December 31, 2022, respectively, and $7 million and $(3) million as of March 31, 2022 and December 31, 2021, respectively.

Reclassifications out of Accumulated Other Comprehensive Income (Loss)


		Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended March 31,
		2022		2021		2022		2021				2023		2022
		(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)	$	1,669	$	662	$	3,754	$	1,508	Cash flow hedges - Currency/Interest rate(3)		$	387	$	670
Net unrealized investment gains (losses) on available-for-sale securities	Net unrealized investment gains (losses) on available-for-sale securities	(668)		(967)		(2,903)		(1,536)		Net unrealized investment gains (losses) on available-for-sale securities		(26)		(1,959)
Total net unrealized investment gains (losses)(4)	Total net unrealized investment gains (losses)(4)	1,001		(305)		851		(28)		Total net unrealized investment gains (losses)(4)		361		(1,289)
Total reclassifications for the period	Total reclassifications for the period	$	1,001	$	(305)	$	851	$	(28)	Total reclassifications for the period		$	361	$	(1,289)

(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.

Table of Contents


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

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”~~income (loss)” 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 ~~September 30, 2022.~~March 31, 2023. The amounts for the periods indicated below represent all other net unrealized investment gains (losses):, are as follows:

~~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)		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		$	180,806	$	26,048	$	(40,221)	$	(34,992)	$	131,641
Balance, December 31, 2022												Balance, December 31, 2022	$	(256,584)	$	(83,712)	$	117,070	$	46,840	$	(176,386)
Net investment gains (losses) on investments arising during the period	Net investment gains (losses) on investments arising during the period	(481,492)		0		0		101,079		(380,413)		Net investment gains (losses) on investments arising during the period	48,010		0		0		(10,081)		37,929
Reclassification adjustment for (gains) losses included in net income	Reclassification adjustment for (gains) losses included in net income	(851)		0		0		179		(672)		Reclassification adjustment for (gains) losses included in net income	(361)		0		0		76		(285)

Impact of net unrealized investment (gains) losses	Impact of net unrealized investment (gains) losses	0		(98,430)		140,155		(8,760)		32,965		Impact of net unrealized investment (gains) losses	0		22,817		(31,699)		1,866		(7,016)
Balance, September 30, 2022		$	(301,537)	$	(72,382)	$	99,934	$	57,506	$	(216,479)
Balance, March 31, 2023												Balance, March 31, 2023	$	(208,935)	$	(60,895)	$	85,371	$	38,701	$	(145,758)

(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.~~recoverables.

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

~~Table of Contents~~


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

9.14. 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 ~~$0.1 million and~~ $0.0 million for both the three months ended ~~September 30, 2022~~March 31, 2023 and ~~2021, respectively, and $0.1 million and $0.0 million for the nine months ended September 30, 2022 and 2021, respectively.~~2022. The expense charged to the Company for the deferred compensation program was ~~$0.0~~$0.3 million for both the three months ended ~~September 30, 2022~~March 31, 2023 and ~~2021, and $0.3 million for both the nine months ended September 30, 2022 and 2021.~~2022.

Table of Contents


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

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 $0.3 million ~~and $0.4 million~~ for both the three months ended ~~September 30, 2022~~March 31, 2023 and ~~2021, respectively, and $1.0 million for both the nine months ended September 30, 2022 and 2021.~~2022.

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 $0.4 million and $0.3 million for ~~both~~ the three months ended ~~September 30,~~March 31, 2023 and 2022, ~~and 2021, and $1.1 million for both the nine months ended September 30, 2022 and 2021.~~respectively.

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 ~~$0.1~~$0.2 million and ~~$0.2~~$0.1 million for the three months ended ~~September 30,~~March 31, 2023 and 2022, ~~and 2021, respectively, and $0.4 million for both the nine months ended September 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~~Prudential's proprietary nationwide sales organization, "Prudential Advisors" through a transfer pricing agreement, which is intended to reflect a market-based pricing arrangement. Prudential Advisors distributes Prudential life insurance, annuities, and investment products with proprietary and non-proprietary product options.

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 $7$8 million and ~~$10~~$12 million for the three months ended ~~September 30,~~March 31, 2023 and 2022, ~~and 2021, respectively, and $24 million and $28 million for the nine months ended September 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 $3$4 million and $2 million for the three months ended ~~September 30,~~March 31, 2023 and 2022, ~~and 2021, respectively, and $7 million and $6 million for the nine months ended September 30, 2022 and 2021,~~ respectively.

~~Table of Contents~~


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

Corporate-Owned Life Insurance

The Company has sold three Corporate-Owned Life Insurance ("COLI") policies to Prudential Insurance and one to Prudential Financial. The cash surrender value included in separate accounts for these COLI policies was ~~$2,811~~$3,070 million at ~~September 30, 2022~~March 31, 2023 and ~~$3,465~~$2,946 million at December 31, ~~2021.~~2022. Fees related to these COLI policies were $7$6 million and $8$7 million for the three months ended ~~September 30,~~March 31, 2023 and 2022, ~~and 2021, respectively, and $21 million and $22 million for the nine months ended September 30, 2022 and 2021,~~ respectively. The Company retains 10% of the mortality risk associated with these COLI policies up to $0.1 million per individual policy.

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 ~~$0.9~~$0.7 million for the three months ended ~~September 30,~~March 31, 2023 and 2022, ~~and 2021, respectively, and $1.9 million and $2.3 million for the nine months ended September 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.

Table of Contents


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

Joint Ventures

The Company has made investments in joint ventures with certain subsidiaries of Prudential Financial. "Other invested assets" includes ~~$50~~$52 million and ~~$48~~$51 million of investments in joint ventures as of ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021,~~2022, respectively. "Net investment income" related to these ventures includes gains of ~~$0.2~~$0.0 million and ~~$1.9~~$0.5 million for the three months ended ~~September 30,~~March 31, 2023 and 2022, ~~and 2021, respectively, and gains of $1.4 million and $3.4 million for the nine months ended September 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 $7 million and $9$8 million for the three months ended ~~September 30,~~March 31, 2023 and 2022, ~~and 2021, respectively, and $23 million and $27 million for the nine months ended September 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 ~~September 30, 2022~~March 31, 2023 and ~~2021, and $6 million for both the nine months ended September 30, 2022 and 2021.~~2022. These revenues are recorded as “Asset administration fees” in the Company’s Unaudited Interim Statements of Operations and Comprehensive Income (Loss).

~~Table of Contents~~


~~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 ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021~~2022 were as follows:

Maturity Date Interest Rates September 30, 2022 December 31, 2021
(in thousands)
U.S. dollar fixed rate notes 2027 0.00% - 14.85 % $ 678 $ 788
Total long-term notes receivable - affiliated(1) $ 678 $ 788


	Maturity Date		Interest Rates				March 31, 2023		December 31, 2022
							(in thousands)

U.S. dollar fixed rate notes		2027	0.00%	-	14.85	%	$	700	$	688
Total long-term notes receivable - affiliated(1)							$	700	$	688

(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~~Accrued interest receivable related to these loans ~~as of~~was $0.0 million for both ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021.~~2022. Revenues related to these loans were $0.0 million for both the three months ended ~~September 30,~~March 31, 2023 and 2022, ~~and 2021, and $0.0 million for both the nine months ended September 30, 2022 and 2021,~~ and are included in “Other income (loss)”.

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 ~~nine~~three months ended ~~September 30, 2022~~March 31, 2023 and for the year ended December 31, ~~2021.~~2022.

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
Prudential Insurance August 2022 Purchase Fixed Maturities $ 21,389 $ 19,630 $ (1,390) $ 0

~~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 September 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 September 30, 2022 and 2021, and $0.0 million for both the nine months ended September 30, 2022 and 2021.

Affiliate

Date

Transaction

Security Type

Fair Value

Book Value

APIC, Net of Tax Increase/(Decrease)

Realized
Investment
Gain (Loss)

(in thousands)

Prudential Insurance

August 2022

Purchase

Fixed Maturities

21,389

19,630

(1,390)

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

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, 2023 and December 31, 2022, 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, 2023 and 2022.

Contributed Capital and Dividends

~~The~~In February 2023, the Company received capital contribution in the amount of $175 million from Pruco Life. In February, March, September and December 2022, the Company received capital contributions in the amount of ~~$202~~$100 million, $2 million, $100 million and $125 million from Pruco Life, ~~through September 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 ~~September 2022~~March 2023 and December ~~2021,~~2022, the Company did not pay any dividends to Pruco Life.

Reinsurance with Affiliates

As discussed in Note 6,11, the Company participates in reinsurance transactions with certain affiliates.

~~10.~~15. COMMITMENTS AND CONTINGENT LIABILITIES

Commitments

The Company has made commitments to fund commercial mortgage loans. As of ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021,~~2022, the outstanding balances on these commitments were ~~$36~~$6 million and $1$15 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 ~~September 30, 2022~~March 31, 2023 or December 31, ~~2021.~~2022. For the three ~~and nine~~ months ended ~~September 30,~~March 31, 2023, and 2022, ~~and 2021,~~ there was no change in allowance for credit losses. The Company ~~has~~also made commitments to purchase or fund investments, mostly private fixed maturities. As of ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021, $65~~2022, $50 million and ~~$61~~$62 million, respectively, of these commitments were outstanding. These amounts include unfunded commitments that are not unconditionally cancellable. There were no related charges for credit losses for either the three ~~or nine~~ months ended ~~September 30, 2022~~March 31, 2023 or ~~2021.~~2022.

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.

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

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.

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 ~~September 30, 2022,~~March 31, 2023, 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,~~2022, 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.~~2022.

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 ~~September 30, 2022,~~March 31, 2023, compared with December 31, ~~2021,~~2022, and its results of operations for the three ~~and nine~~ months ended ~~September 30, 2022~~March 31, 2023 and ~~2021.~~2022. 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,~~2022, 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.~~ ~~COVID-19 may contribute 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 third quarter and the first nine 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 most of the workforce has adopted a hybrid work arrangement.

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 Changes in the 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;

•the valuation of fixed income investments and derivative instruments;

•collateral posting requirements, 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~~insurance reserve levels, including market risk benefits ("MRB"), and ~~sales mix; and~~market experience true-ups;

•policyholder behavior, including surrender or withdrawal ~~activity.~~activity; and

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

For ~~more~~additional information onregarding interest rate risks, see “Risk Factors—Market Risk” included in our Annual Report on Form 10-K for the year ended December 31, ~~2021.~~2022.

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 generally accepted accounting principles in the United States of America ("U.S. ~~GAAP~~GAAP") requires the application of accounting policies that often involve a significant degree of judgment. Management, on an ongoing basis, reviews the estimates and assumptions used in the preparation of the Company's financial statements. If management determines that modifications into 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~~

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The following sections discuss the accounting policies ~~relating to the following areas~~applied in preparing our financial statements that management believes are most dependent on the application of estimates and assumptions and require management’s most difficult, subjective, or complex ~~judgments:~~judgments.

Insurance Liabilities

Future Policy Benefits

Future Policy Benefit Reserves, including Unpaid Claims and Claim Adjustment Expenses

We establish reserves for future policy benefits to, or on behalf of, policyholders using methodologies prescribed by U.S. GAAP. The reserving methodologies used include the following:

•~~DAC~~For most long-duration contracts, we utilize a net premium valuation methodology in measuring the liability for future policy benefits. Under this methodology, the Company accrues a liability for future policy benefits when premium revenue is recognized. The liability represents the present value of expected future benefits to be paid to or on behalf of policyholders and related non-level claim settlement expenses less the present value of expected future net premiums (portion of the gross premium required to provide for all benefits and related non-level claim settlement expenses using current best estimate assumptions). A net-to-gross (“NTG”) ratio is calculated as the ratio of the present value of expected policy benefits and non-level claim settlement expenses divided by the present value of expected gross premiums. The NTG ratio is applied to gross premiums, as premium revenue is recognized, to determine net premiums that are subtracted from the present value of expected benefits and non-level claim settlement expenses to determine the liability for future policy benefits, which cannot be less than zero. The NTG ratio at the cohort measurement unit level cannot exceed 100%, and if it exceeds 100%, the excess benefit expenses are recorded as a charge to current period earnings. The result of the net premium valuation methodology is that the liability at any point in time represents an accumulation of the portion of premiums received to date expected to fund future benefits (i.e., net premiums received to date), less any benefits and expenses already paid. The liability does not necessarily reflect the full policyholder obligation the Company expects to pay at the conclusion of the contract since a portion of that obligation would be funded by net premiums received in the future and would be recognized in the liability at that time. The insurance cash flow assumptions are updated quarterly to reflect actual experience and are generally updated annually to reflect changes in best estimate future insurance cash flow assumptions using a retrospective unlocking method with the impact recorded through current period earnings. At the time of an experience or best estimate assumption unlocking, a revised NTG ratio is calculated using actual historical cash flow experience and updated, if any, best estimate future cash flow assumptions, discounted using the locked-in discount rate. The revised NTG ratio is then applied to prior period cashflows to derive a cumulative catch-up adjustment as of the beginning of the quarter. The revised NTG ratio is then used going forward to accrue the reserve, until the next unlocking. The liability is also remeasured each quarter using a current discount rate, based on an upper medium grade fixed-income instrument yield, with the impact recorded through accumulated other comprehensive income. Expense assumptions included in the liability only include claim related expenses and exclude acquisition costs ~~including~~and non-claim related costs such as costs relating to investments, general administration, policy maintenance, product development, market research, and general overhead. For limited-payment contracts, a deferred ~~sales inducements~~profit liability (“~~DSI”~~DPL”); is established for the amount of gross premiums received in excess of expected net premiums and is amortized into premium income in relation to the discounted amount of insurance in force for life insurance or expected benefit payments for annuity contracts. The DPL is subject to a retrospective unlocking adjustment consistent with the liability for future policy benefits.

•~~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~~For certain contract features, such as no-lapse guarantees, a liability is established when associated assessments (which include investment margin on policyholders' account balances in the general account and ~~Interest Rate Assumptions~~policy charges for administration, mortality, expense, surrender, and other charges) are recognized. This liability is established using current best estimate assumptions and is based on the ratio of the present value of total expected excess payments (e.g., payments in excess of account value) over the life of the contract divided by the present value of total expected assessments (i.e., benefit ratio). The liability equals the current benefit ratio multiplied by cumulative assessments recognized to date, plus interest, less cumulative excess payments to date. The liability does not necessarily reflect the full policyholder obligation the Company expects to pay at the conclusion of the contract since a portion of that excess payment would be funded by assessments received in the future and would be recognized in the liability at that time. The reserves are subject to adjustments based on annual reviews of assumptions and quarterly adjustments for experience as described below, including market performance. These adjustments reflect the impact on the benefit ratio of using actual historical experience from the issuance date to the balance sheet date plus updated estimates of future experience. The updated benefit ratio is then applied to all prior periods’ assessments to derive an adjustment to the reserve recognized through a benefit or charge to current period earnings.

~~DAC~~•For universal life type contracts and participating contracts, the Company performs premium deficiency tests using best estimate assumptions, at a minimum, on an annual basis, and on a quarterly basis for business whose profitability is closely tied to equity market performance. If the current net reserves are less than the best estimate liability, the existing net reserves are adjusted by first reducing the associated deferred sales inducements (“DSI”) by the amount of the deficiency or to zero through a charge to current period earnings. If the deficiency is more than the DSI for insurance contracts, the net reserves are increased by the excess through a charge to current period earnings. Since investment yields are used as the discount rate, the premium deficiency test is also performed using a discount rate based on the market yield (i.e., assuming what would be the impact if any unrealized gains (losses) were realized as of the testing date). In the event that by using the market yield a deficiency occurs, an adjustment is established for the deficiency and is included in AOCI.

Annual assumptions review and quarterly adjustments

The assumptions used in establishing reserves are generally based on the Company’s experience, industry experience and/or other factors, as applicable. We update our actuarial assumptions, such as mortality, morbidity, retirement and policyholder behavior assumptions, annually unless a material change is observed in an interim period that we feel is indicative of a long-term trend. Generally, we do not expect trends to change significantly in the short-term and, to the extent these trends may change, we expect such changes to be gradual over the long-term.

We perform an annual comprehensive review of the assumptions used for estimating future premiums, benefits, and other ~~costs associated with~~cash flows. The Company’s assumption updates have been related to mortality, morbidity, lapse, surrender, and other contractholder behavior assumptions, and revisions to expected future rates of returns on investments. The Company generally looks to relevant Company experience as the ~~variable~~primary basis for assumptions. If relevant Company experience is not available or does not have sufficient credibility, the Company may look to experience of similar blocks of business, either in the Company or the industry. The impact on our results of operations of changes in these assumptions can be offsetting and ~~universal life policies and the variable and fixed annuity contracts~~we are ~~generally amortized~~unable to predict their movement or offsetting impact 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.~~ time.

The quarterly adjustments for market performance referred to above reflect the impact of changes to our estimate of ~~total gross profits~~future rates of returns on investments to reflect actual fund performance and market conditions. A ~~significant~~ portion of ~~gross profits~~returns on investments 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~~

Table 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.Contents

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 ~~September 30, 2022,~~March 31, 2023, our ~~variable annuities and~~ variable life insurance businesses assume an 8.0% long-term equity expected rate of return and a ~~8.3%~~5.5% 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 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. For additional information regarding discount rates used to establish the liability for future policy benefits, see Note 2 to theFinancial Statements.

Policyholders’ Account Balances

Policyholders’ account balances liability represents the contract value that has accrued to the benefit of the policyholder as of the balance sheet date. This liability is primarily associated with the accumulated account deposits, plus interest credited, less policyholder withdrawals and other charges assessed against the account balance, as applicable. The liability also includes provisions for benefits under non-life contingent payout annuities. Policyholders’ account balances also include amounts representing the fair value of embedded derivative instruments associated with the index-linked features of certain universal life and annuity products. The changes in the fair value of the embedded derivatives, including changes in non-performance risk (“NPR”) are recorded in net income. For additional information regarding the valuation of these embedded derivatives, see Note 5 to the Financial Statements.

Market Risk Benefits

Market risk benefits liabilities (or assets) represent contracts or contract features that provide protection to the contract holder and exposes the Company to other than nominal capital market risk. MRBs are primarily related to deferred annuities with guaranteed minimum benefits including guaranteed minimum death benefits (“GMDB”), guaranteed minimum accumulation benefits (“GMWB”), guaranteed minimum withdrawal benefit (“GMAB”) and guaranteed minimum income and withdrawal benefits ("GMIWB”). The liability (or asset) for MRBs is estimated using a fair value measurement methodology. The fair value of these MRBs is based on assumptions a market participant would use in valuing market risk benefits. On a quarterly basis, the fair value of these MRBs is calculated as the present value of expected future benefit payments to contract holders less the present value of expected future rider fees attributable to the market risk benefits. The changes in the fair value of market risk benefits are recorded in net income, net of related hedges, in "Change in value of market risk benefits, net of related hedging gains (losses)", except for the portion of the change attributable to changes in the Company’s own NPR which is recorded in other comprehensive income ("OCI") for the direct and assumed businesses. However, the change in NPR for the ceded MRB will go through net income. The Company estimates that a hypothetical change to its own credit risk of plus 50 and minus 50 basis points would result in a decrease and an increase to net income of $95 million and $105 million, respectively. For additional information regarding the valuation of these MRB features, see Note 10 to the Financial Statements.

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Sensitivities for Insurance Assets and Liabilities

The following table summarizes the impact that could result on each of the listed financial statement balances from changes in certain key assumptions. The information below is for illustrative purposes and includes only the hypothetical direct impact on December 31, 2022, balances of changes in a single assumption and not changes in any combination of assumptions. Additionally, the illustration of the insurance assumption impacts below reflects a parallel shift in the insurance assumptions; however, these may be non-parallel in practice. Changes in current assumptions could result in impacts to financial statement balances that are in excess of the amounts illustrated. A description of the estimates and assumptions used in the preparation of each of these financial statement balances is provided above. For traditional long-duration and limited-payment contracts, U.S. GAAP requires the original assumptions used when the contracts are issued to be locked-in and that those assumptions be used in all future liability calculations as long as the resulting liabilities are adequate to provide for the future benefits and expenses (i.e., there is no premium deficiency). Therefore, these products are not reflected in the sensitivity table below unless the hypothetical change in assumption would result in an adverse impact that would cause a premium deficiency. Similarly, the impact of any favorable hypothetical change in assumptions for traditional long duration and limited-payment contracts is not reflected in the table below given that the current assumption is required to remain locked-in and instead the positive impacts would be recognized into net income over the life of the policies in force.

The impacts presented within this table exclude the impacts of our asset liability management strategy, which seeks to offset the changes in the balances presented within this table and is primarily composed of investments and derivatives. See further below for a discussion of the estimates and assumptions involved with the application of U.S. GAAP accounting policies for these instruments and “Item 3. Quantitative and Qualitative Disclosures about Market Risk” for hypothetical impacts on related balances as a result of changes in certain significant assumptions.


	March 31, 2023
	Increase (Decrease) in Net Income due to changes in Future Policy Benefits, Market Risk Benefits(1), and Policyholders' Account Balances, Net of Reinsurance
	(in millions)
Hypothetical change in current assumptions:

Long-term interest rate:
Increase by 25 basis points	$	0
Decrease by 25 basis points	$	0
Long-term equity expected rate of return:
Increase by 50 basis points	$	0
Decrease by 50 basis points	$	0
Mortality:
Increase by 1%	$	5
Decrease by 1%	$	(5)
Lapse(2)(3):
Increase by 10%	$	15
Decrease by 10%	$	(15)

(1) MRB impact reflects the net impact of MRB assets and liabilities prior to hedging.

(2) The lapse sensitivity shocks applied for the post-level premium period for term products are capped at the level where the rates would equal 100% under an increase lapse scenario. The same capped shock levels are also applied for the decrease lapse scenario.

(3) Assumes the same shock across all products; however, we would not expect lapse rates of different products to move uniformly.

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Other Accounting Policies

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

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

•Reinsurance recoverables;

•Taxes on income; and

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

For further discussion of impacts that could result from changes in ~~certain~~these key estimates and assumptions, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Accounting Policies and Pronouncements—Application of Critical Accounting ~~Estimates”~~Estimates—Other Accounting Policies” in our Annual Report on Form 10-K for the year ended December 31, ~~2021.~~2022.

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~~Future~~ Adoption of New Accounting Pronouncements

Effective January 1, 2023, the Company adopted ASU 2018-12, Financial Services - Insurance (Topic 944): Targeted Improvements to the Accounting for Long-Duration ~~Contracts~~Contracts. ~~, was issued by the Financial Accounting Standards Board (“FASB”) on August 15, 2018, and was amended by~~Adoption of this 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,~~impacted, 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~~and had a significant financial impact on the Financial Statements ~~and will significantly increase~~ disclosures. See Note 1 for additional information.

As of the January 1, 2021 transition date, the ~~Company estimates that the implementation~~adoption of the standard ~~will result~~resulted in ~~approximately~~ a ~~$150 million~~ decrease to ~~$50~~“Total equity” of $67 million, ~~increase to “Total equity”, largely~~primarily from remeasuring in force contract liabilities using upper-medium grade fixed income instrument yields as of the transition date and from other changes in reserves. ~~In addition~~As of the January 1, 2023 adoption date, the impact amounted to a decrease to "Total equity" of $2 million. The changes in the impacts from January 1, 2021 to January 1, 2022 primarily reflect the ~~balance sheet, the Company also expects an impact to the pattern of earnings emergence following the transition date.~~increase in market interest rates during 2021 and 2023. 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 $5~~increased $0.8 billion from ~~$24.5~~$20.6 billion at December 31, ~~2021~~2022 to ~~$19.5~~$21.4 billion at ~~September 30, 2022.~~March 31, 2023. Significant components were:

•Separate account assets ~~decreased $4.5~~increased $0.5 billion primarily driven by ~~unfavorable~~favorable equity market performance, ~~increase in interest rates and~~partially offset by net outflows; and

•~~Reinsurance recoverables decreased~~Total investments increased $0.4 billion primarily ~~related to~~driven by an increase in fixed maturity investment from the ~~variable annuity reinsured living benefit liabilities resulting~~reinvestment of cash and cash equivalents and higher unrealized capital gains from ~~a decrease in future expected benefit payments from rising~~lower interest rates.

Total liabilities ~~decreased $4.9~~increased $0.6 billion from ~~$23.5~~$19.6 billion at December 31, ~~2021~~2022 to ~~$18.6~~$20.2 billion at ~~September 30, 2022. Significant components were:~~

•March 31, 2023 primarily from the increase in Separate account liabilities ~~decreased $4.5~~of $0.5 billion, corresponding to the ~~decrease~~increase in Separate account assets, as discussed ~~above; and~~above.

•~~Future policy benefits decreased $0.5~~Total equity increased $0.2 billion from $1.0 billion at December 31, 2022 to $1.2 billion at March 31, 2023 primarily driven by a ~~decrease in reserves related~~$175 million capital contribution to ~~our variable annuity living benefit liabilities, as discussed above.~~

Total equity decreased $94 million from $971 million at December 31, 2021 to $877 million at September 30, 2022 primarily driven by unrealized losses on fair value investments driven mostly by higher interest rates reflected in Accumulated other comprehensive income (loss), partially offset by $202 million in capital contributions and net income of $55 million.fund statutory reserve requirements.

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Results of Operations

Income (loss) from Operations before Income Taxes

Three Months Comparison

Income (loss) from operations before income taxes ~~decreased $16~~increased $54 million from ~~income~~a loss of ~~$25~~$66 million for the three months ended ~~September 30, 2021~~March 31, 2022 to ~~income~~a loss of $9$12 million for the three months ended ~~September 30, 2022.~~March 31, 2023.

•Higher ~~General and administrative expenses driven by a true up~~Change in value of ~~costs~~market risk benefits, net of related ~~to the reinsurance with PICA;~~hedging gains (loss) from ceded NPR.

•

Partially offset by:

~~Lower Net investment income, primarily from lower non-coupon investment returns due to declining equity markets; and~~

•Lower Realized investments gains (losses), net from ~~lower gains~~losses on indexed universal life ("IUL") embedded derivatives due to the increase in the present value of future index segment ~~credits.~~

~~Table of Contents~~

~~Nine Months Comparison~~

~~Income (loss)~~credits from operations before income taxes decreased $2 million from income of $57 million for the nine months ended September 30, 2021 to income of $55 million for the nine months ended September 30, 2022. The impact from our annual reviews and update of assumptions and other refinement was relatively flat at a net loss of $1 ~~million. Excluding the comparative impact of our annual reviews and update of assumptions and other refinements, income (loss) from operations decreased~~ $1 ~~million primarily driven by:~~

•~~Higher General and administrative expenses driven by business growth; and~~

•~~Higher Interest credited to policyholders' account balances due to higher crediting~~lower rates.

~~Mostly offset by:~~

•~~Higher Realized investment gains (losses), net from gains on IUL embedded derivatives due to a decrease in the present value of future index segment credits, net of related charges on reserves.~~

Revenues, Benefits and Expenses

Three Months Comparison

Revenues ~~decreased $2~~increased $59 million from ~~$56~~a loss $26 million for the three months ended ~~September 30, 2021~~March 31, 2022 to ~~$54~~a gain of $33 million for the three months ended ~~September 30, 2022.~~March 31, 2023.

•Higher Change in value of market risk benefits, net of related hedging gains (loss) from ceded NPR.

Partially offset by:

•Lower Realized investments gains (losses), net from lower ~~gains~~losses on IUL embedded derivatives due to the increase in the present value of future index segment ~~credits; and~~

•~~Lower Net investment income, primarily from lower non-coupon investment returns~~credits due to ~~declining equity markets.~~

~~Mostly offset by:~~

•~~Higher Policy charges and fee income due to a change in presentation of yearly renewable term ("YRT") premiums offset in benefits and expenses below.~~lower rates.

Benefits and expenses increased ~~$14~~$4 million from ~~$31~~$40 million for the three months ended ~~September 30, 2021~~March 31, 2022 to ~~$45~~$44 million for the three months ended ~~September 30, 2022.~~March 31, 2023.

•Higher ~~Policyholders'~~policyholders' benefits due to ~~a change~~business growth in ~~presentation~~traditional life product reserves, net of ~~ceded YRT premiums, offsetting~~reinsurance.

Risks and Risk Mitigants:

Indexed Variable Annuity Risks and Risk Mitigants. The primary risk exposure of these indexed variable annuity products relates to the ~~impact mentioned above~~investment risks we bear in ~~revenues;~~order to credit to the customer’s account balance the required crediting rate based on the performance of the elected indices at the end of each term. We manage this risk primarily through our investment strategies including derivatives and

•~~Higher General and administrative expenses driven by~~ product design features, which include credit rate resetting subject to contractual minimums as well as surrender charges applied during the early years of the contract that help to provide protection for premature withdrawals. In addition, our indexed variable annuity strategies have an ~~out of period adjustment.~~

~~Nine Months Comparison~~

~~Revenues increased $18 million~~interim value provision that provides protection from ~~$174 million for the nine months ended September 30, 2021 to $192 million for the nine months ended September 30, 2022. This includes a favorable~~ c~~omparative 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 $5 ~~million primarily driven by:~~

•~~Higher Realized investment gains (losses), net from gains on IUL embedded derivatives due to a decrease~~lapse in the ~~present value~~case of ~~future index segment credits, net of related charges on reserves; and~~

•~~Higher Policy charges and fee income driven by a change in presentation of ceded YRT premiums, offset in benefits and expenses below.~~rising interest rates.

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~~Benefits and expenses increased $20 million from $117 million for the nine months ended September 30, 2021 to $137 million for the nine months ended September 30, 2022. This includes an unfavorable~~ c~~omparative 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 increased $6 million primarily driven by:

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

•~~Higher General and administrative expenses driven by business growth; and~~

•~~Higher Interest credited to policyholders' account balances due to higher crediting rates.~~

Variable Annuity Risks and Risk ~~Mitigants:~~

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 of i) Product Design Features, and anii) our 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~~offer 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.

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~~MRB liability that we ~~manage with this ALM strategy~~hedge consists of expected living and death benefit claims under ~~less severe~~various 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.~~thereof. For our Prudential Defined Income (“PDI”) 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 (“OTC”) 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~~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 712 to the Unaudited Interim Financial Statements.

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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 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 and liquidity management. For information on these regulatory initiatives and their potential impact on us, see “Business—Regulation" and “Risk Factors” included in our Annual Report on Form 10-K for the year ended December 31, ~~2021.~~2022.

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.

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,~~2022, 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, 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.

~~Table of Contents~~

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 ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021,~~2022, the Company had liquid assets of ~~$1,884~~$2,232 million and ~~$2,124~~$2,010 million, respectively. The portion of liquid assets comprised of cash and cash equivalents was ~~$249~~$95 million and ~~$146~~$263 million as of ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021,~~2022, respectively. As of ~~September 30, 2022, $1,561~~March 31, 2023, $2,022 million, or ~~97%~~96%, 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 ~~September 30,~~both March 31, 2023, and December 31, 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~~$16,050 million of surplus notes by our affiliated captive reinsurers in return for the receipt of credit-linked notes (“Credit-Linked Note Structures”), of which ~~$12,896~~$14,070 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.~~outstanding. 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.

As of ~~September 30, 2022,~~March 31, 2023, 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~~$925 million relates to Regulation XXX reserves and approximately ~~$1,900~~$2,100 million relates to Guideline AXXX reserves. In addition, as of ~~September 30, 2022,~~March 31, 2023, 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 September 30, 2022, there have been no material changes in our exposure to market risk from December 31, 2021,~~For additional information regarding a description of ~~which may be found~~market risk, market risk management and mitigation, see Item 7A, “Quantitative and Qualitative Disclosures about Market Risk,” included in ~~our~~the Company’s Annual Report on Form 10-K for the year ended December 31, ~~2021, Item 7A, “Quantitative~~2022.

As a result of the adoption of ASU 2018-12 in the first quarter of 2023, the following table has been updated to reflect the current impacts on hypothetical changes in fair value based on the new accounting standard.

Market Risk Related to Interest Rates

We assess the impact of interest rate movements on the value of our financial assets, financial liabilities and ~~Qualitative Disclosures about Market Risk,” filed with~~derivatives using hypothetical test scenarios that assume either upward or downward 100 basis point parallel shifts in the ~~Securities~~yield curve from prevailing interest rates, reflecting changes in either credit spreads or the risk-free rate. The following table sets forth the net estimated potential loss in fair value on these financial instruments from a hypothetical 100 basis point upward shift at March 31, 2023 and ~~Exchange Commission. See Item 1A, “Risk Factors”~~December 31, 2022.


	As of March 31, 2023						As of December 31, 2022
	Notional		Fair Value		Hypothetical Change in Fair Value		Notional		Fair Value		Hypothetical Change in Fair Value
	(in millions)
Financial assets with interest rate risk:
Fixed maturities(1)			$	2,132	$	(219)			$	1,743	$	(166)
Policy loans			212		0				212		0
Commercial mortgage and other loans			155		(7)				142		(7)
Derivatives:

Swaps	$	176	14		(1)		$	171	16		(2)
Options	510		(16)		0		509		(20)		0
Forwards	8		0		0		8		0		0
Market risk benefits			(396)		220				(398)		216
Indexed universal life contracts			(121)		23				(108)		17
Indexed annuity contracts			(6)		(1)				0		0
Total embedded derivatives(2)			(523)		242				(506)		233
Financial liabilities with interest rate risk(3):
Policyholders' account balances-investment contracts			200		1				217		1
Insurance liabilities with interest rate risk:
Benefit reserves (traditional and limited-payment contracts)(4)			1,206		106				1,151		102
Net estimated potential gain(5)					$	122					$	161

(1)Includes assets classified as "Fixed maturities, available-for-sale, at fair value" and "Fixed maturities, trading, at fair value." Changes in fair value of fixed maturities classified as available-for-sale are included in AOCI.

(2)Excludes any offsetting impact of derivative instruments purchased to hedge changes in the ~~Annual Report on Form 10-K for the year ended~~embedded derivatives. Amounts reported gross of reinsurance.

(3)Excludes $4 billion as of both March 31, 2023 and December 31, ~~2021,~~2022, of certain insurance reserve and deposit liabilities that are not considered financial liabilities. We believe that the interest rate sensitivities of these insurance liabilities would serve as an offset to the net interest rate risk of the financial assets and financial liabilities, including investment contracts.

(4)Changes in fair value of benefit reserves (traditional and limited-payments contracts) are included in AOCI.

(5)Excludes reinsurance recoverable which largely offsets the gains and losses of embedded derivatives related primarily to certain features associated with variable annuity contracts and "Policyholders' account balances-investment contracts."

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Under U.S. GAAP, the fair value of the embedded derivatives for ~~a discussion of how difficult conditions~~certain features associated with MRBs, indexed universal life, and indexed annuity contracts, reflected in the ~~financial markets and~~table above, includes the ~~economy generally may materially adversely affect our business and results~~impact of the market’s perception of our ~~operations.~~NPR. For additional information regarding the key estimates and assumptions used in our determination of fair value, including NPR, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Accounting Policies & Pronouncements—Application of Critical Accounting Estimates—Market Risk Benefits (“MRB”)” above.

Market Risk Related to Equity Prices

We estimate our equity risk from a hypothetical 10% decline in equity benchmark levels. As of March 31, 2023, excluding the embedded derivatives associated with variable annuity contracts (generally reinsured to an affiliate as part of our risk management strategy), the impact from this hypothetical scenario was primarily from embedded derivatives associated with indexed universal life contracts of fair value and hypothetical change in fair value of $(121) million and $4 million, respectively. While this scenario is for illustrative purposes only and does not reflect our expectations regarding future performance of equity markets, it does represent near-term, reasonably possible hypothetical changes that illustrate the potential impact of such event.

Market Risk Related to Foreign Currency Exchange Rates

The Company does not have significant market risk exposure to foreign exchange rates.

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 ~~September 30, 2022.~~March 31, 2023. Based on such evaluation, the Chief Executive Officer and Chief Financial Officer have concluded that, as of ~~September 30, 2022,~~March 31, 2023, 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 ~~September 30, 2022,~~March 31, 2023, 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 1015 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.~~2022. 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~~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: ~~November 10, 2022~~May 11, 2023

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CASH FLOWS FROM FINANCING ACTIVITIES:
Policyholders’ account deposits	381,718		423,805
Ceded policyholders’ account deposits	(239,619)		(247,735)
Policyholders’ account withdrawals	(294,902)		(397,221)
Ceded policyholders’ account withdrawals	184,201		188,008
Net change in securities sold under agreement to repurchase and cash collateral for loaned securities	0		(2,725)

Contributed capital	200,400		0
Contributed (distributed) capital - parent/child asset transfers	(1,759)		88



Drafts outstanding	1,559		3,655
Other, net	494		12,736
Cash flows from (used in) financing activities	232,092		(19,389)
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS	112,320		(48,332)
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR	136,316		68,527
CASH AND CASH EQUIVALENTS, END OF PERIOD	$	248,636	$	20,195


	Nine Months Ended September 30, 2021
	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	$	0	$	0	$	0	$	0	$	0
Additions (reductions) on securities with previous allowance	0		0		1,558		0		0		0		1,558






Balance, end of period	$	0	$	0	$	1,558	$	0	$	0	$	0	$	1,558