10-Q 1 plnjform10q-2q2018.htm 2Q 2018 10-Q Document
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
 __________________________
FORM 10-Q
 __________________________
ý

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2018
OR
¨

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)
 
(IRS Employer Identification No.)
213 Washington Street
Newark, New Jersey 07102
(973) 802-6000
(Address and Telephone Number of Registrant’s Principal Executive Offices)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes  x    No  ¨
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 and post such files).  Yes  x    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
x
(Do not check if a smaller reporting company)
 
 
 
 
 
 
 
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  x
As of August 10, 2018, 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.


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TABLE OF CONTENTS
 
 
 
Page
Number
 
 
 
 
Item 1.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Item 2.
 
 
 
Item 3.
 
 
 
Item 4.
 
 
 
 
 
 
Item 1.
 
 
 
Item 1A.
 
 
 
Item 6.
 
 
 

2
        

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FORWARD-LOOKING STATEMENTS
Certain of the statements included in this Quarterly Report on Form 10-Q, including but not limited to those in Management’s Discussion and Analysis of Financial Condition and Results of Operations, 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) losses on investments or financial contracts due to deterioration in credit quality or value, or counterparty default; (2) losses on insurance products due to mortality experience or policyholder behavior experience that differs significantly from our expectations when we price our products; (3) 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; (4) guarantees within certain of our products, in particular our variable annuities, which are market sensitive and may decrease our earnings or increase the volatility of our results of operations or financial position; (5) 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; (6) financial or customer losses, or regulatory and legal actions, due to inadequate or failed processes or systems, human error or misconduct, and external events, such as (a) disruption of our systems and data, (b) an information security breach, (c) a failure to protect the privacy of sensitive data or (d) reliance on third-parties, including to distribute our products; (7) changes in the regulatory landscape, including related to (a) regulation under the Dodd-Frank Wall Street Reform and Consumer Protection Act, (b) changes in tax laws, (c) fiduciary rule developments, (d) state insurance laws and developments regarding group-wide supervision, capital and reserves, and (e) privacy and cybersecurity regulation; (8) technological changes which may adversely impact companies in our investment portfolio or cause insurance experience to deviate from our assumptions; (9) ratings downgrades; (10) market conditions that may adversely affect the sales or persistency of our products; (11) competition; and (12) reputational damage. Pruco Life Insurance Company of New Jersey does not intend, and is under no obligation, to update any particular forward-looking statement included in this document. See “Risk Factors” included in the Annual Report on Form 10-K for the year ended December 31, 2017 for discussion of certain risks relating to our business and investment in our securities.



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PART I—FINANCIAL INFORMATION
Item 1. Financial Statements

PRUCO LIFE INSURANCE COMPANY OF NEW JERSEY
Unaudited Interim Consolidated Statements of Financial Position
June 30, 2018 and December 31, 2017 (in thousands, except share amounts)
 
June 30, 2018
 
December 31, 2017
ASSETS
 
 
 
Fixed maturities, available for sale, at fair value (amortized cost: 2018– $1,267,595; 2017–$1,204,166)
$
1,263,651

 
$
1,261,237

Fixed maturities, trading, at fair value (amortized cost: 2018–$7,446; 2017–$7,446) (1)
6,215

 
6,643

Equity securities, at fair value (cost: 2018–$10,111; 2017–$8,114) (1)
12,158

 
10,842

Policy loans
199,000

 
193,244

Commercial mortgage and other loans
121,958

 
121,796

Other invested assets (includes $7,589 and $726 measured at fair value at June 30, 2018 and December 31, 2017, respectively)(1)
52,819

 
46,803

Total investments
1,655,801

 
1,640,565

Cash and cash equivalents
14,957

 
44,618

Deferred policy acquisition costs
152,462

 
145,451

Accrued investment income
17,461

 
16,580

Reinsurance recoverables
2,449,449

 
2,480,848

Receivables from parent and affiliates
40,093

 
43,051

Income taxes receivable
12,978

 
0

Other assets
29,701

 
27,328

Separate account assets
14,188,970

 
14,245,159

TOTAL ASSETS
$
18,561,872

 
$
18,643,600

LIABILITIES AND EQUITY
 
 
 
LIABILITIES
 
 
 
Policyholders’ account balances
$
2,199,989

 
$
2,083,582

Future policy benefits
1,606,043

 
1,707,184

Cash collateral for loaned securities
3,891

 
15,208

Income taxes payable
0

 
241

Payables to parent and affiliates
13,888

 
22,236

Other liabilities
111,204

 
103,632

Separate account liabilities
14,188,970

 
14,245,159

TOTAL LIABILITIES
18,123,985

 
18,177,242

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
213,148

 
211,961

Retained earnings
228,882

 
218,067

Accumulated other comprehensive income
(6,143
)
 
34,330

TOTAL EQUITY
437,887

 
466,358

TOTAL LIABILITIES AND EQUITY
$
18,561,872

 
$
18,643,600

(1) Prior period amounts have been reclassified to conform to current period presentation. See "Adoption of ASU 2016-01" in Note 2 for details.
See Notes to Unaudited Interim Consolidated Financial Statements

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PRUCO LIFE INSURANCE COMPANY OF NEW JERSEY
Unaudited Interim Consolidated Statements of Operations and Comprehensive Income (Loss)
Three and Six Months Ended June 30, 2018 and 2017 (in thousands)
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
2018
 
2017
 
2018
 
2017
REVENUES
 
 
 
 
 
 
 
Premiums
$
3,152

 
$
4,017

 
$
5,649

 
$
6,200

Policy charges and fee income
20,538

 
5,529

 
45,352

 
23,905

Net investment income
17,608

 
16,642

 
34,157

 
33,114

Asset administration fees
1,334

 
2,302

 
2,640

 
4,494

Other income (loss)
(27
)
 
860

 
344

 
2,451

Realized investment gains (losses), net:
 
 
 
 
 
 
 
Other-than-temporary impairments on fixed maturity securities
0

 
0

 
0

 
(80
)
Other realized investment gains (losses), net
(1,896
)
 
(2,871
)
 
(5,827
)
 
(6,363
)
Total realized investment gains (losses), net
(1,896
)
 
(2,871
)
 
(5,827
)
 
(6,443
)
TOTAL REVENUES
40,709

 
26,479

 
82,315

 
63,721

BENEFITS AND EXPENSES
 
 
 
 
 
 
 
Policyholders’ benefits
8,607

 
(1,317
)
 
17,159

 
11,062

Interest credited to policyholders’ account balances
8,911

 
8,146

 
17,475

 
15,967

Amortization of deferred policy acquisition costs
6,027

 
3,886

 
11,994

 
5,889

General, administrative and other expenses
10,103

 
9,996

 
17,859

 
18,429

TOTAL BENEFITS AND EXPENSES
33,648

 
20,711

 
64,487

 
51,347

INCOME (LOSS) FROM OPERATIONS BEFORE INCOME TAXES
7,061

 
5,768

 
17,828

 
12,374

Income tax expense (benefit)
745

 
(2,743
)
 
1,492

 
(2,293
)
NET INCOME (LOSS)
$
6,316

 
$
8,511

 
$
16,336

 
$
14,667

Other comprehensive income (loss), before tax:
 
 
 
 
 
 
 
Foreign currency translation adjustments
(917
)
 
21

 
(1,152
)
 
25

Net unrealized investment gains (losses)
(20,757
)
 
16,948

 
(57,318
)
 
23,140

Total
(21,674
)
 
16,969

 
(58,470
)
 
23,165

Less: Income tax expense (benefit) related to other comprehensive income (loss)
(4,551
)
 
5,940

 
(12,279
)
 
8,108

Other comprehensive income (loss), net of tax
(17,123
)
 
11,029

 
(46,191
)
 
15,057

COMPREHENSIVE INCOME (LOSS)
$
(10,807
)
 
$
19,540

 
$
(29,855
)
 
$
29,724





See Notes to Unaudited Interim Consolidated Financial Statements

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PRUCO LIFE INSURANCE COMPANY OF NEW JERSEY
Unaudited Interim Consolidated Statements of Equity
Six Months Ended June 30, 2018 and 2017 (in thousands) 
 
Common Stock
 
Additional Paid-in Capital
 
Retained Earnings
 
Accumulated Other Comprehensive Income (Loss)
 
Total Equity  
Balance, December 31, 2017
$
2,000

 
$
211,961

 
$
218,067

 
$
34,330

 
$
466,358

Cumulative effect of adoption of ASU 2016-01
 
 
 
 
372

 
(175
)
 
197

Cumulative effect of adoption of ASU 2018-02
 
 
 
 
(5,893
)
 
5,893

 
0

Contributed capital
 
 
1,187

 
 
 
 
 
1,187

Comprehensive income (loss):
 
 
 
 
 
 
 
 
 
Net income (loss)
 
 
 
 
16,336

 
 
 
16,336

Other comprehensive income (loss), net of tax
 
 
 
 
 
 
(46,191
)
 
(46,191
)
Total comprehensive income (loss)
 
 
 
 
 
 
 
 
(29,855
)
Balance, June 30, 2018
$
2,000

 
$
213,148

 
$
228,882

 
$
(6,143
)
 
$
437,887


 
Common Stock
 
Additional Paid-in Capital
 
Retained Earnings
 
Accumulated Other Comprehensive Income (Loss)
 
Total Equity  
Balance, December 31, 2016
$
2,000

 
$
209,786

 
$
282,810

 
$
12,161

 
$
506,757

Contributed capital
 
 
1,300

 
 
 
 
 
1,300

Dividend to parent
 
 
 
 
(100,000
)
 
 
 
(100,000
)
Contributed (distributed) capital - parent/child asset transfers
 
 
875

 
 
 
 
 
875

Comprehensive income (loss):
 
 
 
 
 
 
 
 
 
Net income (loss)
 
 
 
 
14,667

 
 
 
14,667

Other comprehensive income (loss), net of tax
 
 
 
 
 
 
15,057

 
15,057

Total comprehensive income (loss)
 
 
 
 
 
 
 
 
29,724

Balance, June 30, 2017
$
2,000

 
$
211,961

 
$
197,477

 
$
27,218

 
$
438,656
















See Notes to Unaudited Interim Consolidated Financial Statements

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PRUCO LIFE INSURANCE COMPANY OF NEW JERSEY
Unaudited Interim Consolidated Statements of Cash Flows
Six Months Ended June 30, 2018 and 2017 (in thousands)
 
2018
 
2017
CASH FLOWS FROM OPERATING ACTIVITIES:
 
 
 
Net income (loss)
$
16,336

 
$
14,667

Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
 
 
 
Policy charges and fee income
(16,804
)
 
(5,165
)
Interest credited to policyholders’ account balances
17,475

 
15,967

Realized investment (gains) losses, net
5,827

 
6,443

Amortization and other non-cash items
(4,744
)
 
(5,160
)
Change in:
 
 
 
Future policy benefits
92,246

 
98,434

Reinsurance recoverables
(87,886
)
 
(91,548
)
Accrued investment income
(881
)
 
288

Net payables to/receivables from parent and affiliates
(5,069
)
 
4,546

Deferred policy acquisition costs
(3,107
)
 
(5,074
)
Income taxes
(995
)
 
1,471

Derivatives, net
(4,275
)
 
1,182

Other, net
3,564

 
(5,279
)
Cash flows from (used in) operating activities
11,687

 
30,772

CASH FLOWS FROM INVESTING ACTIVITIES:
 
 
 
Proceeds from the sale/maturity/prepayment of:
 
 
 
Fixed maturities, available-for-sale
27,469

 
158,242

Equity securities (1)
5

 
5

Policy loans
10,873

 
11,289

Ceded policy loans
(608
)
 
(1,076
)
Short-term investments
0

 
25,979

Commercial mortgage and other loans
1,193

 
46,538

Other invested assets (1)
1,639

 
1,192

Payments for the purchase/origination of:
 
 
 
Fixed maturities, available-for-sale
(94,921
)
 
(164,989
)
Equity securities (1)
(2,002
)
 
(2,000
)
Policy loans
(13,040
)
 
(9,496
)
Ceded policy loans
1,163

 
1,383

Short-term investments
0

 
(21,981
)
Commercial mortgage and other loans
(1,595
)
 
(10,631
)
Other invested assets (1)
(2,673
)
 
(2,107
)
Notes receivable from parent and affiliates, net
220

 
140

Derivatives, net
(16
)
 
(40
)
Other, net
2

 
(223
)
Cash flows from (used in) investing activities
(72,291
)
 
32,225

CASH FLOWS FROM FINANCING ACTIVITIES:
 
 
 
Policyholders’ account deposits
249,188

 
249,578

Ceded policyholders’ account deposits
(167,109
)
 
(164,249
)
Policyholders’ account withdrawals
(134,241
)
 
(114,449
)

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Ceded policyholders’ account withdrawals
86,696

 
77,491

Net change in securities sold under agreement to repurchase and cash collateral for loaned securities
(11,317
)
 
(8,482
)
Dividend to parent
0

 
(100,000
)
Contributed (distributed) capital - parent/child asset transfers
0

 
1,347

Net change in financing arrangements (maturities 90 days or less)
0

 
0

Drafts outstanding
7,726

 
(1,860
)
Cash flows from (used in) financing activities
30,943

 
(60,624
)
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
(29,661
)
 
2,373

CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR
44,618

 
56,984

CASH AND CASH EQUIVALENTS, END OF PERIOD
$
14,957

 
$
59,357

(1) Prior period amounts have been reclassified to conform to current period presentation. See Note 2 for details.

Significant Non-Cash Transactions

There were no significant non-cash transactions for the six months ended June 30, 2018 and 2017.
























See Notes to Unaudited Interim Consolidated Financial Statements

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PRUCO LIFE INSURANCE COMPANY OF NEW JERSEY
Notes to Unaudited Interim Consolidated Financial Statements

1.    BUSINESS AND BASIS OF PRESENTATION

Pruco Life Insurance Company of New Jersey ("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.

PLNJ has one subsidiary, formed in 2009 for the purpose of holding certain commercial loans and other investments. PLNJ and its subsidiary are together referred to as the "Company”, "we" or "our" and all financial information is shown on a consolidated basis.

Variable Annuities Recapture

Through March 31, 2016, the Company reinsured the majority of its variable annuity living benefit guarantees to its affiliated companies, Pruco Reinsurance, Ltd. ("Pruco Re") and Pruco Life. Effective April 1, 2016, the Company recaptured the risks related to its variable annuity living benefit guarantees that were previously reinsured to Pruco Re and Pruco Life. In addition, the Company reinsured the variable annuity base contracts, along with the living benefit guarantees, to Prudential Insurance under coinsurance and modified coinsurance agreements. This reinsurance agreement covers new and in force business. The product risks related to the reinsured business are being managed in Prudential Insurance. In addition, the living benefit hedging program related to the reinsured living benefit guarantees is being managed within Prudential Insurance. These series of transactions are collectively referred to as the "Variable Annuities Recapture".

Basis of Presentation

The Unaudited Interim Consolidated Financial Statements have been prepared in accordance with accounting principles generally accepted 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 Consolidated Financial Statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2017.

Use of Estimates

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

The most significant estimates include those used in determining deferred policy acquisition costs and related amortization; amortization of deferred sales inducements; valuation of investments including derivatives and the recognition of other-than-temporary impairments (“OTTI”); future policy benefits including guarantees; reinsurance recoverables; provision for income taxes and valuation of deferred tax assets; and accruals for contingent liabilities, including estimates for losses in connection with unresolved legal and regulatory matters.

Reclassifications

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


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

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 ("ASU") to the FASB Accounting Standards Codification. The Company considers the applicability and impact of all ASU. ASU 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 the date of this filing. ASU not listed below were assessed and determined to be either not applicable or not material.

Adoption of ASU 2016-01

Effective January 1, 2018, the Company adopted ASU 2016-01, Financial Instruments - Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Liabilities using a modified retrospective method. Adoption of this ASU impacted the Company’s accounting and presentation related to equity investments. The most significant impact is that the changes in fair value of equity securities previously classified as “available for sale” are to be reported in net income within “Other income” in the Consolidated Statements of Operations. Prior to this, the changes in fair value on equity securities classified as “available for sale” were reported in “Accumulated other comprehensive income”.

The impacts of this ASU on the Company’s Consolidated Financial Statements can be categorized as follows: (1) Changes to the presentation within the Consolidated Statements of Financial Position; (2) Cumulative-effect Adjustment Upon Adoption; and (3) Changes to Accounting Policies. Each of these components is described below. This section is meant to serve as an update to, and should be read in conjunction with Note 2 to the Consolidated Financial Statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2017.

(1) Changes to the presentation within the Consolidated Statements of Financial Position

Because of the fundamental accounting changes as described in section "(3) Changes to Accounting Policies" below, the Company determined that changes to the presentation of certain balances in the investment section of the Company’s Consolidated Statements of Financial Position were also necessary to maintain clarity and logical presentation. The table below illustrates these changes by presenting the balances as previously reported in the Company’s Annual Report on Form 10-K for the year ended December 31, 2017 and the reclassifications that were made, along with a footnote explanation of each reclassification.
 
December 31, 2017
 
As previously reported
 
Reclassifications
 
As currently reported
Consolidated Statements of Financial Position Line Items
 
(1)
 
(2)
 
(3)
 
 
(in thousands)
Fixed maturities, available-for-sale, at fair value
$
1,261,237

 
 
 
 
 
 
 
$
1,261,237

*Fixed maturities, trading, at fair value
0

 
 
 
6,643

 
 
 
6,643

Equity securities, available-for-sale, at fair value
3,414

 
(3,414
)
 
 
 
 
 
0

*Equity securities, at fair value
0

 
3,414

 
7,428

 
 
 
10,842

Trading account assets, at fair value
14,071

 
 
 
(14,071
)
 
 
 
0

Policy loans
193,244

 
 
 
 
 
 
 
193,244

Short-term investments
0

 
 
 
 
 
 
 
0

Commercial mortgage and other loans
121,796

 
 
 
 
 
 
 
121,796

Other long-term investments
46,803

 
 
 
 
 
(46,803
)
 
0

*Other invested assets
0

 
 
 
 
 
46,803

 
46,803

Total investments
$
1,640,565

 
$
0

 
$
0

 
$
0

 
$
1,640,565

* - New line item effective January 1, 2018.
Strikethrough - Eliminated line item effective January 1, 2018.
(1)
Retitled “Equity securities, available-for-sale, at fair value” to “Equity securities, at fair value” as equity securities can no longer be described as available-for-sale.
(2)
Eliminated the line item “Trading account assets, at fair value” and reclassified each component to another line item.
(3)
Retitled “Other long-term investments” to “Other invested assets”.

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


(2) Cumulative-effect Adjustment Upon Adoption

The provisions of ASU 2016-01 require that the Company apply the amendments through a cumulative-effect adjustment to the Consolidated Statements of Financial Position as of the beginning of the fiscal year of adoption. The following table illustrates the impact on the Company’s Consolidated Statement of Financial Position as a result of recording this cumulative-effect adjustment on January 1, 2018.

Summary of ASU 2016-01 Transition Impacts on the Consolidated Statement
of Financial Position upon Adoption on January 1, 2018
 
 
(in thousands)
 
Increase / (Decrease)
Other invested assets
$
250

Total assets
$
250

Income taxes
$
53

Total liabilities
53

Accumulated other comprehensive income (loss)
(175
)
Retained earnings
372

Total equity
197

Total liabilities and equity
$
250


(3) Changes to Accounting Policies

This section summarizes the changes in our accounting policies resulting from the adoption of ASU 2016-01 as well as an update to the components of the financial statement line items impacted by the Company’s Consolidated Statements of Financial Position presentation changes described above.

ASSETS

Fixed maturities, trading is a new financial statement line item comprised of fixed maturities that are carried at fair value. Prior to the adoption of the standard, these fixed maturities were reported in “Trading account assets, at fair value”. Realized and unrealized gains and losses on these investments are reported in “Other income”, and interest and dividend income from these investments is reported in “Net investment income”.

Equity securities, at fair value is the new title of the financial statement line item formerly titled “Equity securities, available for sale, at fair value”. As a result of the adoption of the standard, equity securities previously reported in “Trading account assets, at fair value” were reclassified to “Equity securities, at fair value”. The retitled financial statement line is comprised of common stock and mutual fund shares, which are carried at fair value. Realized and unrealized gains and losses on these investments are reported in “Other income”, and dividend income is reported in “Net investment income” on the ex-dividend date. Prior to the adoption of the standard, for the equity investments reported in the financial statement line formerly titled “Equity securities, available for sale, at fair value,” the associated net realized gains and losses were included in “Realized investment gains (losses), net” and the associated net unrealized gains and losses were included in “Accumulated other comprehensive income (loss)” (“AOCI”). In addition, with the adoption of the standard, the identification of OTTI for these investments is no longer needed as all of these investments are now measured at fair value with changes in fair value reported in earnings.


11
        

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

Other invested assets is the new title of the financial statement line formerly titled “Other long-term investments”. Investments previously reported in “Other long-term investments” were reclassified to “Other invested assets”. The retitled financial statement line consists of the Company’s non-coupon investments in Limited Partnerships and Limited Liability Companies ("LPs/LLCs")(other than operating joint ventures) and derivative assets. LPs/LLCs interests are accounted for using either the equity method of accounting, or at fair value with changes in fair value reported in “Other income”. Prior to the adoption of the standard, the Company applied the cost method of accounting for certain LPs/LLCs interests when its partnership interest was considered minor. The standard effectively eliminated the cost method of accounting for these equity investments. The Company’s income from investments in LPs/LLCs accounted for using the equity method, other than the Company’s investments in operating joint ventures, is included in “Net investment income”. The carrying value of these investments is written down, or impaired, to fair value when a decline in value is considered to be other-than-temporary. In applying the equity method (including assessment for OTTI), the Company uses financial information provided by the investee, generally on a one to three month lag. For the investments reported at fair value with changes in fair value reported in current earnings, the associated realized and unrealized gains and losses are reported in “Other income”.

REVENUES AND BENEFITS AND EXPENSES

Other income includes realized and unrealized gains or losses from investments reported as “Fixed maturities, trading”, “Equity securities, at fair value”, and “Other invested assets” that are measured at fair value.

Other ASU adopted during the six months ended June 30, 2018.

Standard
 
Description
 
Effective date and method of adoption
 
Effect on the financial statements or other significant matters
ASU 2014-09,
Revenue from Contracts with Customers (Topic 606)
 
The ASU is based on the core principle that revenue is recognized to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods and services. The standard also requires additional disclosures about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts, and assets recognized from the costs to obtain or fulfill a contract with a customer. Revenue recognition for insurance contracts and financial instruments is explicitly scoped out of the standard.
 
January 1, 2018 using the modified retrospective method which will
include a cumulative-effect
adjustment on the
balance sheet as of
the beginning of the
fiscal year of
adoption.
 
Adoption of the ASU did not have an impact on the Company’s Consolidated Financial Statements and Notes to the Consolidated Financial Statements.
ASU 2016-15,
Statement of Cash
Flows (Topic 230):
Classification of Certain Cash Receipts and Cash
Payments (a
Consensus of the
Emerging Issues
Task Force)
 
This ASU addresses diversity in practice in how certain cash receipts and cash payments are presented and classified in the statement of cash flows. The standard provides clarity on the treatment of eight specifically defined types of cash inflows and outflows.
 
January 1, 2018 using the retrospective method (with early adoption permitted provided that all amendments are adopted in the same period).
 
Adoption of the ASU did not have a significant impact on the Company’s Consolidated Financial Statements and Notes to the Consolidated Financial Statements.

12
        

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

ASU 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash
 
In November 2016, the FASB issued this ASU to address diversity in practice from entities classifying and presenting transfers between cash and restricted cash as operating, investing, or financing activities, or as a combination of those activities in the Statement of Cash Flows. The ASU requires entities to show the changes in the total of cash, cash equivalents, restricted cash, and restricted cash equivalents in the Statement of Cash Flows. As a result, transfers between such categories will no longer be presented in the Statement of Cash Flows.
 
January 1, 2018 using the retrospective method (with early adoption permitted).
 
Adoption of the ASU did not have a significant impact on the Company’s Consolidated Financial Statements and Notes to the Consolidated Financial Statements.
ASU 2018-02, Income Statement - Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income

 
In February 2018, this ASU was issued following the enactment of the Tax Act of 2017. This ASU allows an entity to elect a reclassification from accumulated other comprehensive income to retained earnings for stranded effects resulting from the Tax Act of 2017.

 
January 1, 2019 with early adoption permitted. The ASU should be applied either in the period of adoption or retrospectively to each period in which the effect of the change in the U.S. federal corporate income tax rate in the Tax Act of 2017 is recognized.

 
The Company early adopted the ASU effective January 1, 2018 and elected to apply the ASU in the period of adoption subsequent to recording the adoption impacts of ASU 2016-01 as described above. As a result, the Company reclassified stranded effects resulting from the Tax Act of 2017 by increasing accumulated other comprehensive income and decreasing retained earnings, each
by $5.9 million. Stranded effects unrelated to the Tax Act of 2017 are generally released from accumulated other comprehensive income when an entire portfolio of the type of item related to the
stranded effect is liquidated, sold or extinguished (i.e., portfolio approach).




























13
        

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

ASU issued but not yet adopted as of June 30, 2018

Standard
 
Description
 
Effective date and method of adoption
 
Effect on the financial statements or other significant matters
ASU 2016-13,
Financial Instruments-Credit Losses (Topic 326):
Measurement of
Credit Losses on
Financial
Instruments
 
This ASU provides a new current expected credit loss model to account for credit losses on certain financial assets and off-balance sheet exposures (e.g., loans held for investment, debt securities held to maturity, reinsurance receivables, net investments in leases and loan commitments). The model requires an entity to estimate lifetime credit losses related to such financial assets and exposures based on relevant information about past events, current conditions, and reasonable and supportable forecasts that affect the collectability of the reported amount. The standard also modifies the current other-than-temporary impairment standard for available-for-sale debt securities to require the use of an allowance rather than a direct write down of the investment, and replaces existing standard for purchased credit deteriorated loans and debt securities.
 
January 1, 2020 using the modified retrospective method which will
include a cumulative-effect
adjustment on the
balance sheet as of
the beginning of the fiscal year of
adoption.
However, prospective application is required for purchased credit deteriorated assets previously accounted for under ASU 310-30 and for debt securities for which an other-than-temporary-impairment was recognized prior to the date of adoption. Early
adoption is permitted
beginning January 1,
2019.
 
The Company is currently assessing the impact of the ASU on the Company’s Consolidated Financial Statements and Notes to the Consolidated Financial Statements.
ASU 2017-08,
Receivables -
Nonrefundable Fees
and Other Costs
(Subtopic 310-20)
Premium
Amortization on
Purchased Callable
Debt Securities
 
This ASU requires certain premiums on callable debt securities to be amortized to the earliest call date.

 
January 1, 2019 using the modified
retrospective method (with early adoption
permitted) which will include a
cumulative-effect
adjustment on the
balance sheet as of the beginning of the fiscal year of adoption.
 
The Company does not expect the adoption of the ASU to have a significant impact on the Company’s Consolidated Financial Statements and Notes to the Consolidated Financial
Statements.


14
        

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

Standard
 
Description
 
Effective date and method of adoption
 
Effect on the financial statements or other significant matters
ASU 2017-12,
Derivatives and
Hedging (Topic
815): Targeted
Improvements to
Accounting for
Hedging Activities

 
This ASU makes targeted changes to the existing hedge accounting model to better portray the economics of an entity’s risk management activities and to simplify the use of hedge accounting.

 
January 1, 2019 using
the modified
retrospective method (with early adoption
permitted) which will include a cumulative-effect adjustment on the balance sheet as of the beginning of the fiscal year of adoption.
 
The Company does not expect the adoption of the ASU to have a significant impact on the Company’s Consolidated Financial Statements and Notes to the Consolidated Financial
Statements.


3.    INVESTMENTS

Fixed Maturity Securities

The following tables set forth information relating to fixed maturity securities (excluding investments classified as trading), as of the dates indicated:
 
June 30, 2018
 
Amortized
Cost
 
Gross
Unrealized
Gains
 
Gross
Unrealized
Losses
 
Fair
Value
 
OTTI
in AOCI(3)
 
(in thousands)
Fixed maturities, available-for-sale:
 
 
 
 
 
 
 
 
 
U.S. Treasury securities and obligations of U.S. government authorities and agencies
$
17,637

 
$
972

 
$
0

 
$
18,609

 
$
0

Obligations of U.S. states and their political subdivisions
121,120

 
2,839

 
242

 
123,717

 
0

Foreign government bonds
62,438

 
22

 
3,525

 
58,935

 
0

Public utilities
209,639

 
5,379

 
3,731

 
211,287

 
0

All other U.S. public corporate securities
339,570

 
8,800

 
7,973

 
340,397

 
0

All other U.S. private corporate securities
173,873

 
849

 
4,425

 
170,297

 
0

All other foreign public corporate securities
47,123

 
897

 
1,781

 
46,239

 
0

All other foreign private corporate securities
139,674

 
1,953

 
2,223

 
139,404

 
0

Asset-backed securities(1)
24,479

 
1,157

 
10

 
25,626

 
(46
)
Commercial mortgage-backed securities
123,611

 
472

 
4,004

 
120,079

 
0

Residential mortgage-backed securities(2)
8,431

 
634

 
4

 
9,061

 
(73
)
Total fixed maturities, available-for-sale
$
1,267,595

 
$
23,974

 
$
27,918

 
$
1,263,651

 
$
(119
)

(1)
Includes credit-tranched securities collateralized by loan obligations, sub-prime mortgages, and education loans.
(2)
Includes publicly-traded agency pass-through securities and collateralized mortgage obligations.
(3)
Represents the amount of unrealized losses remaining in AOCI, from the impairment measurement date. Amount excludes $0.3 million of net unrealized gains on impaired available-for-sale securities relating to changes in the value of such securities subsequent to the impairment measurement date.


15
        

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

 
December 31, 2017
 
Amortized
Cost
 
Gross
Unrealized
Gains
 
Gross
Unrealized
Losses
 
Fair
Value
 
OTTI
in AOCI(3)
 
(in thousands)
Fixed maturities, available-for-sale:
 
 
 
 
 
 
 
 
 
U.S. Treasury securities and obligations of U.S. government authorities and agencies
$
17,831

 
$
1,465

 
$
0

 
$
19,296

 
$
0

Obligations of U.S. states and their political subdivisions
121,208

 
6,660

 
0

 
127,868

 
0

Foreign government bonds
29,489

 
377

 
161

 
29,705

 
0

Public utilities
204,343

 
14,664

 
409

 
218,598

 
0

All other U.S. public corporate securities
331,641

 
23,732

 
1,248

 
354,125

 
(45
)
All other U.S. private corporate securities
176,411

 
3,583

 
609

 
179,385

 
0

All other foreign public corporate securities
36,790

 
1,448

 
557

 
37,681

 
0

All other foreign private corporate securities
131,896

 
6,175

 
859

 
137,212

 
0

Asset-backed securities(1)
26,539

 
1,275

 
0

 
27,814

 
(51
)
Commercial mortgage-backed securities
118,818

 
1,883

 
1,174

 
119,527

 
0

Residential mortgage-backed securities(2)
9,200

 
826

 
0

 
10,026

 
(85
)
Total fixed maturities, available-for-sale
$
1,204,166

 
$
62,088

 
$
5,017

 
$
1,261,237

 
$
(181
)

(1)
Includes credit-tranched securities collateralized by loan obligations, sub-prime mortgages, auto loans, credit cards, education loans and other asset types.
(2)
Includes publicly-traded agency pass-through securities and collateralized mortgage obligations.
(3)
Represents the amount of unrealized losses remaining in AOCI, from the impairment measurement date. Amount excludes $0.3 million of net unrealized gains on impaired available-for-sale securities relating to changes in the value of such securities subsequent to the impairment measurement date.

The following tables set forth the fair value and gross unrealized 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:

 
June 30, 2018
 
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:
 
 
 
 
 
 
 
 
 
 
 
Obligations of U.S. states and their political subdivisions
$
21,080

 
$
242

 
$
0

 
$
0

 
$
21,080

 
$
242

Foreign government bonds
52,262

 
2,959

 
5,704

 
566

 
57,966

 
3,525

Public utilities
109,772

 
3,193

 
6,612

 
538

 
116,384

 
3,731

All other U.S. public corporate securities
146,634

 
4,904

 
41,082

 
3,069

 
187,716

 
7,973

All other U.S. private corporate securities
115,762

 
3,679

 
14,503

 
746

 
130,265

 
4,425

All other foreign public corporate securities
27,390

 
929

 
6,656

 
852

 
34,046

 
1,781

All other foreign private corporate securities
45,854

 
1,390

 
5,922

 
833

 
51,776

 
2,223

Asset-backed securities
5,001

 
10

 
0

 
0

 
5,001

 
10

Commercial mortgage-backed securities
47,543

 
1,136

 
42,853

 
2,868

 
90,396

 
4,004

Residential mortgage-backed securities
287

 
4

 
0

 
0

 
287

 
4

Total fixed maturities, available-for-sale
$
571,585

 
$
18,446

 
$
123,332

 
$
9,472

 
$
694,917

 
$
27,918



16
        

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

 
December 31, 2017
 
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:
 
 
 
 
 
 
 
 
 
 
 
Obligations of U.S. states and their political subdivisions
$
0

 
$
0

 
$
0

 
$
0

 
$
0

 
$
0

Foreign government bonds
3,354

 
42

 
6,210

 
119

 
9,564

 
161

Public utilities
8,797

 
263

 
7,014

 
146

 
15,811

 
409

All other U.S. public corporate securities
12,254

 
93

 
43,337

 
1,155

 
55,591

 
1,248

All other U.S. private corporate securities
38,778

 
377

 
10,401

 
232

 
49,179

 
609

All other foreign public corporate securities
5,565

 
27

 
7,369

 
530

 
12,934

 
557

All other foreign private corporate securities
8,671

 
148

 
11,333

 
711

 
20,004

 
859

Asset-backed securities
0

 
0

 
0

 
0

 
0

 
0

Commercial mortgage-backed securities
12,774

 
56

 
44,627

 
1,118

 
57,401

 
1,174

Residential mortgage-backed securities
0

 
0

 
0

 
0

 
0

 
0

Total fixed maturities, available-for-sale
$
90,193

 
$
1,006

 
$
130,291

 
$
4,011

 
$
220,484

 
$
5,017


As of June 30, 2018 and December 31, 2017, the gross unrealized losses on fixed maturity securities were composed of $25.3 million and $4.2 million, respectively, related to "1" highest quality or "2" high quality securities based on the National Association of Insurance Commissioners (“NAIC”) or equivalent rating and $2.6 million and $0.8 million, respectively, related to other than high or highest quality securities based on NAIC or equivalent rating. As of June 30, 2018, the $9.5 million of gross unrealized losses on fixed maturity securities of twelve months or more were concentrated in commercial mortgage-backed securities and in the Company's corporate securities within the finance, transportation and consumer non-cyclical sectors. As of December 31, 2017, the $4.0 million of gross unrealized losses on fixed maturity securities of twelve months or more were concentrated in commercial mortgage-backed securities and in the Company's corporate securities within the finance and technology sectors. In accordance with its policy described in Note 2 to the Consolidated Financial Statements included in the Company's Annual Report on Form 10-K for the year ended December 31, 2017, the Company concluded that an adjustment to earnings for OTTI for these fixed maturity securities was not warranted at either June 30, 2018 or December 31, 2017. These conclusions were based on a detailed analysis of the underlying credit and cash flows on each security. Gross unrealized losses are primarily attributable to general credit spread widening, increases in interest rates and foreign currency exchange rate movements. As of June 30, 2018, 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:
 
June 30, 2018
 
Amortized Cost
 
Fair Value
 
(in thousands)
Fixed maturities, available-for-sale:
 
 
 
Due in one year or less
$
31,315

 
$
31,800

Due after one year through five years
170,348

 
169,128

Due after five years through ten years
296,893

 
289,656

Due after ten years
612,518

 
618,301

Asset-backed securities
24,479

 
25,626

Commercial mortgage-backed securities
123,611

 
120,079

Residential mortgage-backed securities
8,431

 
9,061

Total fixed maturities, available-for-sale
$
1,267,595

 
$
1,263,651


17
        

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


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 impairments of fixed maturities, for the periods indicated:
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
2018
 
2017
 
2018
 
2017
 
(in thousands)
Fixed maturities, available-for-sale:
 
 
 
 
 
 
 
Proceeds from sales(1)
$
1,565

 
$
29,081

 
$
1,565

 
$
92,607

Proceeds from maturities/prepayments
21,510

 
34,371

 
30,311

 
66,009

Gross investment gains from sales and maturities
(56
)
 
99

 
(54
)
 
442

Gross investment losses from sales and maturities
(130
)
 
(99
)
 
(130
)
 
(906
)
OTTI recognized in earnings(2)
0

 
0

 
0

 
(80
)

(1)
Includes $4.4 million and $0.4 million of non-cash related proceeds due to the timing of trade settlements for the six months ended June 30, 2018 and 2017, respectively.
(2)
Excludes the portion of OTTI recorded in “Other comprehensive income (loss)” ("OCI"), representing any difference between the fair value of the impaired debt security and the net present value of its projected future cash flows at the time of the impairment.

The following table sets forth a rollforward of pre-tax amounts remaining in OCI related to fixed maturity securities with credit loss impairments recognized in earnings, for the periods indicated:
 
Three Months Ended June 30, 2018
 
Six Months Ended June 30, 2018
 
Three Months Ended June 30, 2017
 
Six Months Ended June 30, 2017
 
(in thousands)
Credit loss impairments:
 
 
 
 
 
 
 
Balance, beginning of period
$
560

 
$
561

 
$
566

 
$
563

Increases due to the passage of time on previously recorded credit losses
4

 
15

 
13

 
23

Reductions for securities which matured, paid down, prepaid or were sold during the period
(387
)
 
(399
)
 
(14
)
 
(21
)
Accretion of credit loss impairments previously recognized due to an increase in cash flows expected to be collected
0

 
0

 
0

 
0

Assets transferred to parent and affiliates
0

 
0

 
0

 
0

Balance, end of period
$
177

 
$
177

 
$
565

 
$
565


Equity Securities

The net change in unrealized gains (losses) from equity securities still held at period end, recorded within “Other income,” was $(0.2) million and $(0.1) million during the three months ended June 30, 2018 and 2017, respectively.

The net change in unrealized gains (losses) from equity securities still held at period end, recorded within “Other income,” was $(0.7) million and $0.5 million during the six months ended June 30, 2018 and 2017, respectively.



18
        

Table of Contents         
                        
PRUCO LIFE INSURANCE COMPANY OF NEW JERSEY
Notes to Unaudited Interim Consolidated 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:
 
June 30, 2018
 
December 31, 2017
 
Amount
(in thousands)
 
% of Total
 
Amount
(in thousands)
 
% of Total
Commercial mortgage and agricultural property loans by property type:
 
 
 
 
 
 
 
Apartments/Multi-Family
$
43,980

 
36.0
%
 
$
44,405

 
36.4
%
Hospitality
10,127

 
8.3

 
10,263

 
8.4

Industrial
12,402

 
10.2

 
10,924

 
9.0

Office
17,375

 
14.2

 
17,738

 
14.5

Other
19,103

 
15.6

 
19,154

 
15.7

Retail
14,011

 
11.5

 
14,180

 
11.6

Total commercial mortgage loans
116,998

 
95.8

 
116,664

 
95.6

Agricultural property loans
5,141

 
4.2

 
5,312

 
4.4

Total commercial mortgage and agricultural property loans by property type
122,139

 
100.0
%
 
121,976

 
100.0
%
Valuation allowance
(181
)
 
 
 
(180
)
 
 
Total commercial mortgage and other loans
$
121,958

 
 
 
$
121,796

 
 

As of June 30, 2018, the commercial mortgage and agricultural property loans were geographically dispersed throughout the United States (with the largest concentrations in Illinois (16%), New York (14%) and Texas (10%)) and included loans secured by properties in Europe (8%).

The following tables set forth the activity in the allowance for credit losses for commercial mortgage and other loans, as of the dates indicated:
 
June 30, 2018
 
Commercial Mortgage Loans
 
Agricultural Property Loans
 
Total
 
(in thousands)
Allowance for credit losses:
 
 
 
 
 
Balance, beginning of year
$
179

 
$
1

 
$
180

Addition to (release of) allowance for losses
1

 
0

 
1

Charge-offs, net of recoveries
0

 
0

 
0

Total ending balance
$
180

 
$
1

 
$
181

 
December 31, 2017
 
Commercial Mortgage Loans
 
Agricultural Property Loans
 
Total
 
(in thousands)
Allowance for credit losses:
 
 
 
 
 
Balance, beginning of year
$
207

 
$
2

 
$
209

Addition to (release of) allowance for losses
(28
)
 
(1
)
 
(29
)
Charge-offs, net of recoveries
0

 
0

 
0

Total ending balance
$
179

 
$
1

 
$
180



19
        

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

The following tables set forth the allowance for credit losses and the recorded investment in commercial mortgage and other loans, as of the dates indicated:
 
June 30, 2018
 
Commercial Mortgage Loans
 
Agricultural Property Loans
 
Total
 
(in thousands)
Allowance for credit losses:
 
 
 
 
 
Individually evaluated for impairment
$
0

 
$
0

 
$
0

Collectively evaluated for impairment
180

 
1

 
181

Total ending balance(1)
$
180

 
$
1

 
$
181

Recorded investment(2):
 
 
 
 
 
Individually evaluated for impairment
$
0

 
$
0

 
$
0

Collectively evaluated for impairment
116,998

 
5,141

 
122,139

Total ending balance(1)
$
116,998

 
$
5,141

 
$
122,139


(1)
As of June 30, 2018, there were no loans acquired with deteriorated credit quality.
(2)
Recorded investment reflects the carrying value gross of related allowance.
 
December 31, 2017
 
Commercial Mortgage Loans
 
Agricultural Property Loans
 
Total
 
(in thousands)
Allowance for credit losses:
 
 
 
 
 
Individually evaluated for impairment
$
0

 
$
0

 
$
0

Collectively evaluated for impairment
179

 
1

 
180

Total ending balance(1)
$
179

 
$
1

 
$
180

Recorded investment(2):
 
 
 
 
 
Individually evaluated for impairment
$
0

 
$
0

 
$
0

Collectively evaluated for impairment
116,664

 
5,312

 
121,976

Total ending balance(1)
$
116,664

 
$
5,312

 
$
121,976


(1)
As of December 31, 2017, there were no loans acquired with deteriorated credit quality.
(2)
Recorded investment reflects the carrying value gross of related allowance.

The following tables set forth certain key credit quality indicators for commercial mortgage and agricultural property loans based upon the recorded investment gross of allowance for credit losses, as of the dates indicated:
 
June 30, 2018
 
Debt Service Coverage Ratio
 
 
 
≥ 1.2X
 
1.0X to < 1.2X
 
< 1.0X
 
Total
 
(in thousands)
Loan-to-Value Ratio:
 
 
 
 
 
 
 
0%-59.99%
$
72,247

 
$
0

 
$
0

 
$
72,247

60%-69.99%
37,541

 
6,671

 
1,976

 
46,188

70%-79.99%
2,125

 
1,579

 
0

 
3,704

80% or greater
0

 
0

 
0

 
0

Total loans
$
111,913

 
$
8,250

 
$
1,976

 
$
122,139


20
        

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

 
December 31, 2017
 
Debt Service Coverage Ratio
 
 
 
≥ 1.2X
 
1.0X to < 1.2X
 
< 1.0X
 
Total
 
(in thousands)
Loan-to-Value Ratio:
 
 
 
 
 
 
 
0%-59.99%
$
83,304

 
$
0

 
$
0

 
$
83,304

60%-69.99%
27,727

 
3,155

 
2,009

 
32,891

70%-79.99%
0

 
5,781

 
0

 
5,781

80% or greater
0

 
0

 
0

 
0

Total loans
$
111,031

 
$
8,936

 
$
2,009

 
$
121,976


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:
 
June 30, 2018
 
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
$
116,998

 
$
0

 
$
0

 
$
0

 
$
116,998

 
$
0

Agricultural property loans
5,141

 
0

 
0

 
0

 
5,141

 
0

Total
$
122,139

 
$
0

 
$
0

 
$
0

 
$
122,139

 
$
0


(1)
As of June 30, 2018, 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 Consolidated Financial Statements included in the Company's Annual Report on Form 10-K for the year ended December 31, 2017.
 
December 31, 2017
 
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
$
116,664

 
$
0

 
$
0

 
$
0

 
$
116,664

 
$
0

Agricultural property loans
5,312

 
0

 
0

 
0

 
5,312

 
0

Total
$
121,976

 
$
0

 
$
0

 
$
0

 
$
121,976

 
$
0


(1)
As of December 31, 2017, 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 Consolidated Financial Statements included in the Company's Annual Report on Form 10-K for the year ended December 31, 2017.

For the three and six months ended June 30, 2018, 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. For both the three and six months ended June 30, 2017, there were no commercial mortgage and other loans acquired, other than those through direct origination, and there were $42 million of commercial mortgage and other loans sold.


21
        

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

Other Invested Assets

The following table sets forth the composition of “Other invested assets,” as of the dates indicated:
 
June 30, 2018
 
December 31, 2017
 
(in thousands)
Company's investment in separate accounts
$
2,988

 
$
2,726

LPs/LLCs:
 
 
 
Equity method:
 
 
 
Private equity
12,377

 
12,350

Hedge funds
28,827

 
28,167

Real estate-related
1,038

 
1,112

Subtotal equity method
42,242

 
41,629

Fair value:
 
 
 
Private equity
1,170

 
1,141

Hedge funds
107

 
121

Real estate-related
1,581

 
1,186

Subtotal fair value(1)
2,858

 
2,448

Total LPs/LLCs
45,100

 
44,077

Derivative instruments
4,731

 
0

Total other invested assets(2)
$
52,819

 
$
46,803


(1)
As of December 31, 2017, $2.3 million was accounted for under the cost method.
(2)
Prior period amounts have been reclassified to conform to current period presentation. For additional information, see Note 2.

Net Investment Income

The following table sets forth "Net investment income" by investment type, for the periods indicated:
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
2018
 
2017
 
2018
 
2017
 
(in thousands)
Fixed maturities, available-for-sale
$
12,957

 
$
12,028

 
$
25,596

 
$
23,646

Fixed maturities, trading
81

 
74

 
163

 
148

Equity securities, at fair value
91

 
91

 
182

 
182

Commercial mortgage and other loans
1,220

 
1,542

 
2,459

 
3,608

Policy loans
2,751

 
2,647

 
5,408

 
5,224

Short-term investments and cash equivalents
61

 
145

 
150

 
257

Other invested assets
1,315

 
1,039

 
1,988

 
1,939

Gross investment income
18,476

 
17,566

 
35,946

 
35,004

Less: investment expenses
(868
)
 
(924
)
 
(1,789
)
 
(1,890
)
Net investment income(1)
$
17,608

 
$
16,642

 
$
34,157

 
$
33,114


(1)
Prior period amounts have been reclassified to conform to current period presentation.


22
        

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

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 June 30,
 
Six Months Ended June 30,
 
2018
 
2017
 
2018
 
2017
 
(in thousands)
Fixed maturities(1)
$
(186
)
 
$
0

 
$
(184