cik1038509-20231231


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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

_____________________________________________________

FORM 10-K

_____________________________________________________


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

FOR THE FISCAL YEAR ENDED December 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: NONE

SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: NONE

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ☒

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☒

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 the 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 has filed a report on and attestation to its management's assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☐

If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. ☐

Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant's executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐

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 March 20, 2024, 400,000 shares of the registrant’s Common Stock (par value $5) were outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

The information required to be furnished pursuant to Part III of this Form 10-K is set forth in, and is hereby incorporated by reference herein from, Prudential Financial, Inc.’s Definitive Proxy Statement for the Annual Meeting of Shareholders to be held on May 14, 2024, to be filed by Prudential Financial, Inc. with the Securities and Exchange Commission pursuant to Regulation 14A not later than 120 days after the year ended December 31, 2023.

Pruco Life Insurance Company of New Jersey meets the conditions set

forth in General Instruction (I) (1) (a) and (b) of Form 10-K

and is therefore filing this Form with the reduced disclosure.


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			Page
PART I	Item 1.	Business	4
	Item 1A.	Risk Factors	15
	Item 1B.	Unresolved Staff Comments	27
	Item 1C.	Cybersecurity	27
	Item 2.	Properties	28
	Item 3.	Legal Proceedings	28
	Item 4.	Mine Safety Disclosures	28
PART II	Item 5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	29
	Item 6.	[Reserved]	29
	Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	29
	Item 7A.	Quantitative and Qualitative Disclosures About Market Risk	40
	Item 8.	Financial Statements and Supplementary Data	45
	Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	143
	Item 9A.	Controls and Procedures	143
	Item 9B.	Other Information	143
	Item 9C.	Disclosure Regarding Foreign Jurisdictions That Prevent Inspections	143
PART III	Item 10.	Directors, Executive Officers and Corporate Governance	144
	Item 14.	Principal Accountant Fees and Services	144
PART IV	Item 15.	Exhibits and Financial Statement Schedules	145
	Item 16.	Form 10-K Summary	147
SIGNATURES			148


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FORWARD-LOOKING STATEMENTS

Certain of the statements included in this Annual Report on Form 10-K 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. There can be no assurance that future developments affecting Pruco Life Insurance Company of New Jersey 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 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, 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; (7) 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; (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 this Annual Report on Form 10-K for discussion of certain risks relating to our business and investment in our securities.


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PART 1

Item 1. Business

Overview

Pruco Life Insurance Company of New Jersey (the “Company”, “PLNJ”, “we”, or “our”) is a wholly-owned subsidiary of the 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”). See Note 1 to the Financial Statements for additional information.

Pruco Life may make capital contributions to the Company, as needed, to enable it to comply with its reserve and capital requirements and fund expenses in connection with its business. Pruco Life is under no obligation to make such contributions and its assets do not back the benefits payable under the Company’s policyholders’ contracts.


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The Company is licensed to sell variable annuities, indexed variable annuities, fixed annuities, variable life, universal life and term life insurance in New Jersey and New York only. The Company only sells such products in New York primarily through affiliated and unaffiliated distributors.


Products
Annuities We offer a variety of products to serve different retirement needs and goals: Indexed Variable Annuities •The Prudential FlexGuard® New York Flexible Premium Deferred Index-Linked and Variable Annuity offers the contractholder an opportunity to allocate funds to variable subaccounts and index-based strategies. The strategies provide an interest component linked to, but not an investment in, the selected index, and its performance over the elected term, subject to certain contractual minimums and maximums, and also provides varying levels of downside protection at pre-determined levels and durations. The product also allows for additional deposits and provides a Return of Purchase Payment ("ROP") death benefit at no additional charge. Traditional Variable Annuities •The Prudential Premier® Investment Variable Annuity (“PPI”) offers tax-deferred asset accumulation, annuitization options and an optional death benefit that guarantees the contractholder’s beneficiary a return of total purchase payments made to the contract, adjusted for any partial withdrawals, upon death. •The Prudential MyRock® Advisor New York Variable Annuity, a fee-based variable annuity that provides longevity protection through a preset withdrawal percentage applied to a variable income base. In addition, the product offers either a basic death benefit, or an ROP death benefit for an additional fee.			Life Insurance We offer a variety of products, consisting of base contracts and riders (such as our accelerated death benefit rider), that serve different protection needs and goals, including: Variable Life - permanent coverage for life with potential to accumulate policy cash value based on underlying investment options •Our variable life policies offer flexibility in payment options and the potential to accumulate cash value through a suite of underlying investment options or a fixed rate option. Term Life - coverage for a specified number of years with a guaranteed tax-advantaged death benefit •Most of our term life policies offer an income tax-free death benefit and guaranteed premiums that will stay the same during the level-premium period. •Most of our term life policies also offer a conversion option that allows the policyholder to convert the policy into a permanent policy that can potentially cover the insured for life. Universal Life - permanent coverage for life with the potential to accumulate policy cash value •Our universal life policies offer flexibility in payment options and the potential to accumulate cash value in an account that earns interest based on a crediting rate determined by the Company, subject to contractual minimums. •Indexed universal life policies provide interest credited to the cash value that is linked to, but not an investment in, the performance of an external index subject to certain cap and participation rates as well as contractual minimums/maximums.


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Marketing and Distribution Our distribution efforts for our annuity products, which are supported by a network of internal and external wholesalers, are executed through a diverse group of distributors including: •Third-party distribution through: ◦Broker-dealers; ◦Banks and wirehouses; ◦Independent financial planners •Financial professionals, including those associated with Prudential Advisors, Prudential's proprietary nationwide sales organization. (In August 2023, the Company and LPL Financial Holdings Inc. (“LPL”) announced a strategic relationship, through which the Company will move retail brokerage and investment advisory assets from Prudential Advisors’ current third-party custodian to LPL, and leverage LPL’s broker-dealer and registered investment advisory services. The transition is expected to be completed in the latter part of 2024, subject to receipt of regulatory approval and other conditions). We primarily distribute our individual life products through the following three channels: •Third-party distribution through: ◦Independent brokers ◦Banks and wirehouses; and ◦General agencies and producer groups •Financial professionals associated with Prudential Advisors, Prudential's proprietary nationwide sales organization. •Direct-to-Consumer through: ◦Prudential.com, a digital platform that provides distribution of our simplified products online. ◦Personal Advisory Group, Prudential’s sales desk where customers can speak to an agent via phone to fulfill their insurance or investment needs.			Revenues and Profitability Our revenues primarily come in the form of: •Fee income from asset management fees and service fees, which represent administrative service and distribution fees from many of our proprietary and non-proprietary mutual funds. The asset management fees are determined as a percentage of the average assets allocated to our proprietary mutual funds in our variable annuity and variable universal life products (net of sub-advisory expenses related to non-proprietary sub-advisors). •Policy charges and fee income representing mortality, expense and other fees for various insurance-related options and features based on asset-based fees of the separate accounts, account value, premium, or guaranteed value, as applicable. •Investment income (which contributes to the net spread over interest credited on certain products and related expenses). •Premiums that are fixed in accordance with the terms of the policies. Our profitability is substantially impacted by our ability to appropriately price our products. We price our products based on our assumptions of future: •An evaluation of the risks assumed and consideration of applicable risk management strategies, including hedging and reinsurance costs. •Assumptions regarding investment returns and contractholder behavior, including persistency, benefit utilization and the timing and efficiency of withdrawals for contracts with living benefit features, as well as other assumptions. •Our life-related product assumptions of future mortality and morbidity, policyholder behavior, interest rates and investment returns, expenses, premium payment patterns, performance and cost of ceded reinsurance, separate account fund performance and product-generated tax deductions.


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Competition We are among the industry’s largest providers of individual annuities and we compete with many providers of retirement savings and accumulation products, including large, well established insurance and financial services companies, and private equity firms. We believe our competitive advantage lies primarily in our innovative product features and our risk management strategies as well as brand recognition, financial strength, the breadth of our distribution platform and our customer service capabilities. We periodically adjust product offerings, prices and features based on the market and our strategy, with a goal of achieving customer and enterprise value. In our life insurance business, we compete with many large, well-established life insurance companies in a mature market. We compete primarily based on price, service (including the speed and ease of underwriting), distribution channel relationships, brand recognition and financial strength. We periodically adjust product offerings, prices and features based on the market and our strategy, with a goal of achieving customer and enterprise value.

Seasonality of Key Financial Items

The following chart summarizes our key areas of seasonality in our results of operations:

First Quarter

Second Quarter

Third Quarter

Fourth Quarter

Annuities

Impact of annual assumption update(1)

Higher expenses(2)

Life Insurance

Lowest underwriting gains

Impact of annual assumption update(1)

Highest underwriting gains

Higher expenses(2)

(1) Impact of annual reviews and update of actuarial assumptions and other refinements.

(2) Expenses are typically higher than the quarterly average in the fourth quarter.

Reinsurance

We regularly enter into reinsurance agreements as the ceding entity. As a ceding entity, exposure to the risks reinsured is reduced by transferring certain rights and obligations of the underlying insurance product to a counterparty.

We enter into reinsurance agreements as the ceding entity for a variety of reasons but primarily do so to reduce exposure to loss, reduce risk volatility, provide additional capacity for future growth and for capital management purposes for certain of our variable annuity, term and universal life products. Under ceded reinsurance, we remain liable to the underlying policyholder if a third-party reinsurer is unable to meet its obligations. We evaluate the financial condition of reinsurers, monitor the concentration of counterparty risk and maintain collateral, as appropriate, to mitigate this exposure. For additional information on our reinsurance agreements see Note 11 to the Financial Statements.

We reinsure the majority of our mortality risk in our individual life products. The maximum amount of mortality risk we may retain on any policy is generally $100,000. See Note 11 to the Financial Statements for more information related to these reinsurance arrangements.

Regulation

Overview

Our businesses are subject to comprehensive regulation and supervision. The purpose of these regulations is primarily to protect our customers and the overall financial system. Many of the laws and regulations to which we are subject are regularly re-examined. Existing or future laws and regulations may become more restrictive or otherwise adversely affect our operations or profitability, increase compliance costs, or increase potential regulatory exposure. In recent years we have experienced, and expect to continue to experience, extensive changes in the laws and regulations, and regulatory frameworks, applicable to our businesses. We cannot predict how current or future initiatives will further impact existing laws, regulations and regulatory frameworks.

State insurance laws regulate all aspects of our business, and state insurance departments in New Jersey and New York monitor our insurance operations. The Company is domiciled in New Jersey and its principal insurance regulatory authority is the New Jersey Department of Banking and Insurance ("NJDOBI"). Generally, our insurance products must be approved by the insurance regulators in the state in which they are sold. Our insurance products are substantially affected by federal and state tax laws.


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The primary regulatory frameworks applicable to Prudential Financial and the Company are described further below under the following section headings:

•Dodd-Frank Wall Street Reform and Consumer Protection Act

•ERISA

•Fiduciary Rules and other Standards of Care

•U.S. State Insurance Holding Company Regulation

•U.S. Insurance Operations

◦State Insurance Regulation

◦U.S. Federal and State Securities Regulation Affecting Insurance Operations

◦Other Consumer Protection Regulation

•SECURE Act and other retirement product regulation

•Derivatives Regulation

•Privacy, Data Protection and Cybersecurity Regulation

•Anti-Money Laundering and Anti-Bribery Laws

•Unclaimed Property Laws

•Taxation

•International and Global Regulatory Initiatives

Dodd-Frank Wall Street Reform and Consumer Protection Act

The Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank”) increased the potential for federal regulation of our businesses. Under Dodd-Frank, the Financial Stability Oversight Council (“FSOC” or the “Council”) may designate a financial company as a non-bank systemically important financial institution (a “SIFI”) subject to supervision by the Board of Governors of the Federal Reserve System (“FRB”) if the FSOC determines that either (i) material financial distress at the entity, or (ii) the nature, scope, size, scale, concentration, interconnectedness, or mix of the entity’s activities, could pose a threat to domestic financial stability. In November 2023, the FSOC adopted revisions to SIFI designation guidance and the accompanying analytical framework for assessing risks from companies and activities, which will make it easier to designate financial companies as SIFIs going forward. Prudential is not currently designated as a SIFI.

We cannot predict what actions the FSOC will take with respect to designating Prudential or whether interpretive guidance, new legislation or other initiatives aimed at revising Dodd-Frank and regulation of the financial system will impact the Company.


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ERISA

The Employee Retirement Income Security Act (“ERISA”) is a comprehensive federal statute that applies to U.S. employee benefit plans sponsored by private employers and labor unions. Plans subject to ERISA include pension and profit sharing plans and welfare plans, including health, life and disability plans. ERISA provisions include reporting and disclosure rules, standards of conduct that apply to plan fiduciaries and prohibitions on transactions known as “prohibited transactions,” such as conflict-of-interest transactions and certain transactions between a benefit plan and a party in interest. ERISA also provides for civil and criminal penalties and enforcement. Prudential Financial's insurance, investment management and retirement businesses provide services to employee benefit plans subject to ERISA, including services where Prudential Financial may act as an ERISA fiduciary. In addition to ERISA regulation of businesses providing products and services to ERISA plans, Prudential Financial becomes subject to ERISA’s prohibited transaction rules for transactions with those plans, which may affect Prudential Financial’s ability to enter transactions, or the terms on which transactions may be entered, with those plans, even in businesses unrelated to those giving rise to party in interest status.

Fiduciary Rules and Other Standards of Care

The Company and our distributors are subject to rules regarding the standard of care applicable to sales of our products and the provision of advice to our customers, including, among others, the U.S. Department of Labor (“DOL”) fiduciary rule, the Securities and Exchange Commission (“SEC”) Regulation Best Interest, and the National Association of Insurance Commissioners (“NAIC”) and Japanese Financial Services Agency (“FSA”) Standard of Care regulations.

DOL Fiduciary Rule

The DOL "fiduciary" rule is a set of regulations establishing a uniform standard of care for investment professionals who provide advice to retirement savers. The rule is designed to ensure that investment professionals who are “fiduciaries” under the rule act in the best interest of their clients. The rule provides, among other things, that fiduciaries may not recommend investments that they own or in which they have a financial interest. The rule also requires fiduciaries to provide clients with certain information about their investment recommendations, including information about fees and risks. Compliance with the DOL fiduciary rule has resulted in increased costs, in particular in the Prudential Advisors distribution system.

In October 2023, the DOL released a proposed regulation titled “Retirement Security Rule: Definition of an Investment Advice Fiduciary” and proposed amendments to several prohibited transaction exemptions. These proposals, if adopted, would expand the criteria for determining who would be an “Investment Advice Fiduciary” and force most “Investment Advice Fiduciaries” to comply with Prohibited Transaction Exemption 2020-02 for fee and affiliated investment conflicts.

SEC Regulation Best Interest

In June 2019, the SEC adopted a package of rulemakings and interpretative guidance that, among other things, requires broker-dealers to act in the best interest of retail customers when recommending securities transactions or investment strategies to them. The guidance also clarifies the SEC’s views of the fiduciary duty that investment advisers owe to their clients. The best interest standards became effective on June 30, 2020. The standards apply to recommendations to purchase certain of our products and have resulted in increased compliance costs, in particular in our Prudential Advisors distribution system.

NAIC Standard of Care

In February 2020, the NAIC adopted revisions to the model suitability rule applicable to the sale of annuities. The revised model regulation provides that the insurance salesperson must act “without placing the producer’s or the insurer’s financial interest ahead of the consumer’s interest.” The model rule will become applicable to us as it is adopted in each state. In addition, certain state regulators and legislatures have adopted or are considering adopting.

U.S. State Insurance Holding Company Regulation

We are subject to the New Jersey insurance holding company law which requires us to register with the insurance department and to furnish annually financial and other information about the operations of the Company. Generally, all transactions with affiliates that affect the Company must be fair and reasonable and, if material, require prior notice and approval or non-disapproval by the NJDOBI.


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Change of Control

Most states have insurance laws that require regulatory approval of a direct or indirect change of control of an insurer or an insurer’s holding company. Laws such as these that apply to us prevent any person from acquiring control of Prudential Financial or of its insurance subsidiaries unless that person has filed a statement with specified information with the insurance regulators and has obtained their prior approval. Under most states’ statutes, acquiring 10% or more of the voting stock of an insurance company or its parent company is presumptively considered a change of control, although such presumption may be rebutted. As of January 2022, New Jersey has recognized an additional presumption of control upon the holding or controlling of enough proxies to elect 10% or more of the board of directors of a New Jersey-domiciled insurance company or its parent company. Accordingly, any person who acquires “control” of Prudential Financial, either by the acquisition of voting securities or, in the case of New Jersey, by the accumulation of proxies without the prior approval of the applicable insurance regulator of the states in which our U.S. insurance companies are domiciled will be in violation of these states’ laws and may be subject to injunctive action requiring the disposition or seizure of those securities or proxies by the relevant insurance regulator or prohibiting the voting of those securities or proxies and to other actions determined by the relevant insurance regulator. In addition, many state insurance laws require prior notification to state insurance departments of a change in control of a non-domiciliary insurance company doing business in that state.

Group-Wide Supervision

The New Jersey Department of Banking and Insurance ("NJDOBI") acts as the group-wide supervisor of Prudential Financial pursuant to New Jersey legislation that authorizes group-wide supervision of internationally active insurance groups (“IAIGs”). The law, among other provisions, authorizes NJDOBI to examine Prudential Financial and its subsidiaries, including by ascertaining the financial condition of the insurance companies for purposes of assessing enterprise risk. In accordance with this authority, NJDOBI receives information about Prudential Financial’s operations beyond those of its New Jersey domiciled insurance subsidiaries.

Additional areas of focus regarding group-wide supervision of insurance holding companies include the following:

•Examination. State insurance departments conduct periodic examinations of the books and records, financial reporting, policy filings and market conduct of insurance companies domiciled in their states, generally once every three to five years under guidelines promulgated by the NAIC. As group-wide supervisor, NJDOBI, along with our other insurance regulators, has expanded the periodic examinations to cover Prudential and all of its subsidiaries. In 2023, AZDOI and NJDOBI, along with the insurance regulators of Connecticut and Indiana, concluded a global consolidated group-wide examination of Prudential Financial and its subsidiaries for the five-year period ended December 31, 2021, with no reportable findings or statutory violations.

•Group Capital Calculation. The NAIC has developed and implemented a group capital calculation that uses a risk-based capital (“RBC”) aggregation methodology to serve as an additional tool to help state regulators assess potential risks within and across insurance groups.

•College of Supervisors. Several of our domestic and foreign regulators participate in an annual supervisory college facilitated by NJDOBI. The purpose of the supervisory college is to promote ongoing supervisory coordination, facilitate the sharing of information among regulators and enhance each regulator’s understanding of the Company’s risk profile.

We cannot predict what, if any, additional requirements and compliance costs any new group-wide standards will impose on Prudential Financial.

U.S. Insurance Operations

Generally, our insurance products must be approved by the insurance regulators in the state in which they are sold. Our insurance products are substantially affected by federal and state tax laws.

State Insurance Regulation

State insurance authorities have broad administrative powers with respect to all aspects of the insurance business including: (1) licensing to transact business; (2) licensing agents; (3) admittance of assets to statutory surplus; (4) regulating premium rates for certain insurance products; (5) approving policy forms; (6) regulating unfair trade and claims practices; (7) establishing reserve requirements and solvency standards; (8) fixing maximum interest rates on life insurance policy loans and minimum accumulation or surrender values; (9) regulating the type, amounts and valuations of investments permitted; (10) regulating reinsurance transactions, including the role of captive reinsurers; and (11) other matters.


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State insurance laws and regulations require the Company to file financial statements with state insurance departments everywhere it does business in accordance with accounting practices and procedures prescribed or permitted by these departments. The Company’s operations and accounts are subject to examination by those departments at any time.

Financial Regulation

Dividend Payment Limitations. The New Jersey insurance law regulates the amount of dividends that may be paid by the Company. See Note 12 to the Financial Statements for a discussion of dividend restrictions.

Risk-Based Capital. We are subject to RBC requirements that are designed to enhance regulation of insurers’ solvency. The RBC calculation, which regulators use to assess the sufficiency of an insurer’s statutory capital, measures the risk characteristics of a company’s assets, liabilities and certain off-balance sheet items. In general, RBC is calculated by applying factors to various asset, premium, claim, expense and reserve items. Within a given risk category, these factors are higher for those items with greater underlying risk and lower for items with lower underlying risk. Insurers that have less statutory capital than required are considered to have inadequate capital and are subject to varying degrees of regulatory action depending upon the level of capital inadequacy.

The RBC framework is subject to periodic reexamination or revision. Due to the ongoing nature of the NAIC's activities regarding RBC, we cannot determine the ultimate timing of proposed changes or their impact to the Company.

Economic Scenario Generator (“Generator”). In 2017, the American Academy of Actuaries notified the NAIC that it did not have the resources to maintain its Generator used in regulatory reserve and capital calculations. In 2020, the NAIC selected a third-party vendor to provide, maintain, and support the Generator prescribed for life and annuity statutory reserve and capital calculations. Development of the new Generator is ongoing, and the NAIC expects implementation to occur no earlier than 2025. We cannot predict what impact a new Generator may ultimately have on our businesses.

Insurance Reserves. State insurance laws require us to analyze the adequacy of our reserves annually. Our appointed actuary must submit an opinion that our reserves, when considered in light of the assets we hold with respect to those reserves, make adequate provision for our contractual obligations and related expenses.

Principle-Based Reserving for Life Insurance Products. In 2016, the NAIC adopted a principle-based reserving (“PBR”) approach for life insurance products. Principle-based reserving replaces the reserving methods for life insurance products for which the former formulaic basis for reserves may not accurately reflect the risks or costs of the liability or obligations of the insurer. PBR will not affect reserves for policies in force prior to January 1, 2017.We use captive reinsurance subsidiaries to finance the portion of statutory reserves for term and universal life policies that we consider to be non-economic for policies written prior to the implementation of PBR. See “Management’s Discussion and Analysis of Financial Condition and Results of Operation Liquidity and Capital Resources Capital Financing Activities Term and Universal Life Reserve Financing” for a discussion of our life product reserves and reserve financing. The NAIC is developing a PBR framework for non-variable (fixed) annuity products in the accumulation and payout phases.

Variable Annuities Framework for Change. In 2019, the NAIC adopted final revisions to the Valuation Manual (“VM-21”) and risk-based capital instructions to implement a new variable annuity statutory framework for 2020. Changes include: (i) providing more economic reflection of hedging in liability valuations; (ii) eliminating the Standard Scenario and replacing it with the Standard Projection; and (iii) standardizing capital market assumptions and aligning frameworks for total asset requirements and reserves. There was no material impact to our target capital levels from the revised framework. The NAIC may update prescribed assumptions and/or methodologies and will be considering whether the calculation should be a binding requirement or disclosure only.

New York Life Insurance Product Reserves. As a result of an agreement with the NY DFS regarding the Company's reserving methodologies for certain life insurance products, the Company holds additional statutory reserves on a New York basis, which reduces our New York statutory surplus. The Company is not domiciled in New York, and these changes do not impact statutory reserves reported in New Jersey, the Company's state of domicile, and therefore do not impact the Company's RBC ratio; however, the agreed reserve methodology may require the Company to hold additional New York statutory reserves in the future. New York’s version of PBR, which became effective in January 2020, allows for modifications to the NAIC valuation model and New York’s modifications might require us to increase our New York statutory reserves.


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•Reinsurance. In August 2021, the NAIC adopted a limit on yearly renewable term (“YRT”) reserve credits (Amendment Proposed Form 2020-10). The adoption requires insurers to complete the phase-in of pre-2020 PBR business by December 31, 2024, unless an insurer receives an additional extension of up to four years by their domiciliary commissioner. Prudential was granted approval for a seven-year transition along with an adjustment to the starting point for the year-ended December 31, 2021. The amendment allows a prudent level of future mortality improvement (“FMI”) beyond the valuation date starting in 2022.

Interest Maintenance Reserve. In August 2023, the NAIC adopted a temporary change in the statutory accounting treatment of net negative interest maintenance reserves (“IMR”) that permits an insurer to admit net negative IMR up to 10% of their adjusted statutory surplus, provided such insurer’s RBC ratio remains above 300% of its Authorized Control Level RBC. This change is currently scheduled to expire on January 1, 2026.

Market Conduct Regulation

State insurance laws and regulations include numerous provisions governing the marketplace activities of insurers, including provisions governing the form and content of disclosure to consumers, illustrations, advertising, sales practices and complaint handling, as well as underwriting and claims activity. State regulatory authorities generally enforce these provisions through periodic market conduct examinations. We have been subject to market conduct examinations relating to our marketplace activities, including with respect to the policies and procedures we use to locate guaranteed group annuity customers and establish related reserves. Market conduct examinations by state regulatory authorities have resulted and may in the future result in us increasing statutory reserves, changing operational processes and procedures, and being subject to fines or other discipline.

Insurance Guaranty Association Assessments

Each state has insurance guaranty association laws under which insurers doing business in the state are members and may be assessed by state insurance guaranty associations for certain obligations of insolvent insurance companies to policyholders and claimants. Typically, states assess each member insurer in an amount related to the member insurer’s proportionate share of the line of business written by all member insurers in the state. The majority of state guaranty association laws provide a tax offset for a percentage of the assessment against future years' premium taxes. While we cannot predict the amount and timing of future assessments on the Company under these laws, Prudential Financial has established estimated reserves for future assessments relating to insurance companies that are currently subject to insolvency proceedings.

U.S. Federal and State Securities Regulation Affecting Insurance Operations

Our variable life insurance and variable annuity products generally are “securities” within the meaning of federal securities laws and may be required to be registered under the federal securities laws and subject to regulation by the SEC and the Financial Industry Regulatory Authority (“FINRA”). Federal securities regulation affects investment advice, sales and related activities with respect to these products.

In certain states, our variable life insurance and variable annuity products are considered “securities” within the meaning of state securities laws. As securities, these products may be subject to filing and certain other requirements. Also, sales activities with respect to these products generally are subject to state securities regulation. Such regulation may affect investment advice, sales and related activities for these products.

SECURE Act

The Setting Every Community up for Retirement Enhancement (“SECURE”), enacted in 2020, together with SECURE 2.0, which was enacted in 2022 as part of the 2023 Consolidated Appropriations Act (collectively, the "SECURE Act"), is intended to help promote retirement plan coverage and increase retirement plan savings, as well as facilitate access to guaranteed lifetime income solutions. The SECURE Act addresses coverage issues by making it easier for small businesses to participate in pooled employer plans and requires coverage of certain long-term, part-time workers. The SECURE Act addresses savings issues by raising the cap on amounts contributed through auto-enrollment, increasing the maximum age for required minimum withdrawals and removing the age cap for making Individual Retirement Account ("IRA") contributions. The SECURE Act also made it easier for employers to include guaranteed lifetime income as part of their plan by providing an annuity provider selection safe harbor, as well as providing for the portability of participant investments in annuity products.


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Derivatives Regulation

Prudential Financial and its subsidiaries use derivatives for various purposes, including hedging interest rate, foreign currency, equity market and other exposures. Dodd-Frank established a framework for regulation of the over-the-counter derivatives markets. This framework sets out requirements regarding the clearing and reporting of derivatives transactions, as well as collateral posting requirements. Affiliated swaps entered into between Prudential Financial subsidiaries are generally exempt from most of these requirements.

We continue to monitor regulatory developments and the potential hedging cost impacts of margin requirements, and increased capital requirements for derivatives transactions. Additionally, the need to post cash and certain collateral may also require the liquidation of higher yielding assets for cash, resulting in a negative impact on investment income.

Privacy, Data Protection and Cybersecurity Regulation

We are subject to laws, regulations and directives that require financial institutions and other businesses to protect the security and confidentiality of personal, proprietary, or other non-public information, including intellectual property, health-related and customer information, and to notify their customers and other appropriate individuals of their policies and practices relating to the collection, use and disclosure of such information. In addition, we are subject to international data protection and privacy laws, regulations, and directives concerning the safeguarding and protection of personal information, including as such laws relate to the cross border transfer or use of personal information. These laws, regulations and directives also:

•require protections regarding or limiting the use and disclosure of certain sensitive personal information such as national identifier numbers (e.g., social security numbers) or racial or ethnic origin;

•require notice to affected individuals, regulators and others if there is a breach of the confidentiality, integrity, or availability of certain personal or confidential information;

•require financial institutions and creditors to implement effective programs to detect, prevent, and mitigate identity theft;

•regulate the process by which financial institutions make telemarketing calls and send e-mail, text, or fax messages to consumers and customers;

•require oversight of third-parties that have access to, and handle, personal or confidential information;

•provide individuals with certain rights over their personal information, such as the right to know what personal information is being collected and whether the information is being sold or shared, and the right to obtain portable copies of or request the deletion or correction of their personal information; and

•prescribe the permissible uses of certain personal information, including customer information and consumer report information.

Regulatory and legislative activity in the areas of privacy, data protection and information and cybersecurity continues to increase worldwide. Financial regulators in the U.S. and international jurisdictions in which Prudential Financial operates continue to focus on data privacy and cybersecurity, including in rulemaking and examinations of regulated entities, and have communicated heightened expectations. For example, the E.U.’s General Data Protection Regulation (“GDPR”), which became effective in May 2018, and the U.K,'s Data Protection Act 2018, confer additional privacy rights on individuals in the E.U. and U.K. and establish significant penalties for violations. The E.U.’s Digital Operational Resilience Act came in force in January 2023 and will be effective from January 2025. Internationally, a number of countries such as Brazil, India, and Japan have enacted GDPR-like regulations, while others, such as Argentina, are considering such regulations or, in the case of China, have enacted other privacy and data security regulations. In addition, in the U.S., certain lawmakers in Congress have proposed a number of sweeping privacy laws and amendments to the Gramm-Leach-Bliley Act of 1999 took effect in June 2023. In California, the California Consumer Privacy Act (the “CCPA”) became effective in 2020 and confers numerous privacy rights on individuals and corresponding obligations on businesses. The California Privacy Rights Act (the “CPRA”), which became operative in January 2023 and amends the CCPA, imposes additional rights and obligations including expanding consumers rights with respect to certain sensitive personal information. The CPRA also creates a new state agency that will be vested with authority to implement and enforce the CCPA and the CPRA. Additional states, such as Colorado, Connecticut, Utah, and Virginia have also passed comprehensive privacy laws similar in scope to the CCPA and CPRA, some of which became effective in 2023.


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In October 2017, the NAIC adopted the Insurance Data Security Model Law. The model law requires that insurance companies establish a cybersecurity program and includes specific technical safeguards as well as requirements regarding governance, incident planning, data management, system testing, vendor oversight and regulator notification. The NY DFS adopted a regulation similar to the NAIC effective March 2017, and in November 2023, finalized amendments taking effect from December 2023 through November 2025 to expand their cybersecurity regulation. Other states have either implemented the NAIC Insurance Data Security Model Law or are anticipated to implement it or similar laws in the near future. In February 2023, the NAIC released updated model privacy legislation that expressly supersedes the NAIC Insurance Information and Privacy Protection Model Act #670 and the Privacy of Consumer Financial and Health Information Regulation #672, with states beginning to adopt the updated model law in 2024.

The Company is monitoring regulatory guidance and rulemaking in these areas, and may be subject to increased compliance costs and regulatory requirements. For additional information on our cybersecurity risk management and governance, see “Cybersecurity.”

Anti-Money Laundering and Anti-Bribery Laws

Our business is subject to various anti-money laundering and financial transparency laws and regulations that seek to promote cooperation among financial institutions, regulators and law enforcement entities in identifying parties that may be involved in terrorism or money laundering. In addition, under current U.S. law and regulations we may be prohibited from dealing with certain individuals or entities in certain circumstances and we may be required to monitor customer activities, which may affect our ability to attract and retain customers. We are also subject to various laws and regulations relating to corrupt and illegal payments to government officials and others, including the U.S. Foreign Corrupt Practices Act and the U.K.’s Anti-Bribery Law. The obligation of financial institutions, including the Company, to identify their clients, to monitor for and report suspicious transactions, to monitor dealings with government officials, to respond to requests for information by regulatory authorities and law enforcement agencies, and to share information with other financial institutions, has required the implementation and maintenance of internal practices, procedures and controls.

Unclaimed Property Laws

We are subject to the laws and regulations of states and other jurisdictions concerning the identification, reporting and escheatment of unclaimed or abandoned funds, and we are subject to audit and examination for compliance with these requirements. For additional discussion of these matters, see Note 16 to the Financial Statements.

Taxation

U.S. Taxation

Prudential Financial and certain domestic subsidiaries, including the Company, file a consolidated federal income tax return that includes both life insurance companies and non-life insurance companies. The principal differences between the Company’s actual income tax expense and the applicable statutory federal income tax rate are generally deductions for non-taxable investment income, including the Dividends Received Deduction (“DRD”) and certain tax credits. The applicable statutory federal income tax rate is 21%. A future increase in the applicable statutory federal income tax rate above 21% would adversely impact the Company's tax position. In addition, as discussed further below, the tax attributes of our products may impact both the Company’s and our customers’ tax positions. See “Income Taxes” in Note 2 to the Financial Statements and Note 12 to the Financial Statements for a description of the Company’s tax position. As discussed further below, new tax legislation and other potential changes to the tax law may impact the Company’s tax position and the attractiveness of our products.

The United States Tax Cuts and Jobs Act of 2017 ("Tax Act of 2017") changed the taxation of businesses and individuals by lowering tax rates and broadening the tax base through the acceleration of taxable income and the deferral or elimination of certain deductions, as well as changing the system of taxation of earnings of foreign subsidiaries. The most significant changes for the Company were: (1) the reduction of the corporate tax rate from 35% to 21%; (2) revised methodologies for determining deductions for tax reserves and the DRD; and (3) an increased capitalization and amortization period for acquisition costs related to certain products.


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The Inflation Reduction Act of 2022 (the “Inflation Reduction Act”), among other provisions, imposes a 15% alternative minimum tax on corporations (“CAMT”) with average applicable financial statement income over $1 billion for any three-year period ending with 2022 or later. This provision is effective in taxable years beginning after December 31, 2022. The impact of the alternative minimum tax, if any, will vary from year to year based on the relationship of our GAAP income to our taxable income. Prudential Financial and the controlled group of corporations of which the Company is a member has determined that it is an "applicable corporation" to determine if CAMT exceeds the regular federal income tax payable. Prudential Financial has amended its Tax Allocation Agreement, which covers all insurance companies within the US consolidated tax group, to allocate all impacts of the CAMT solely to Prudential Financial. Accordingly, none of the insurance companies in the Prudential Group will be subject to any CAMT impact for reporting purposes.

U.S. federal tax law generally permits tax deferral on the inside build-up of investment value of certain retirement savings, annuities and life insurance products until there is a contract distribution and, in general, excludes from taxation the death benefit paid under a life insurance contract. The Tax Act of 2017 did not change these rules, though it is possible that some individuals with overall lower effective tax rates could be less attracted to the tax deferral aspect of the Company’s products. The general reduction in individual tax rates and elimination of certain individual deductions may also impact the Company, depending on whether current and potential customers have more or less after-tax income to save for retirement and manage their mortality and longevity risk through the purchase of the Company’s products. Congress from time to time may enact other changes to the tax law that could make our products less attractive to consumers, including legislation that would modify the tax favored treatment of retirement savings, life insurance and annuities products. Such legislation could be in the form of a direct change to the tax favored aspects of life insurance, retirement savings or annuities, or an indirect change, such as a wealth tax or mark to market tax structure, which could make holding our products less attractive.

The products we sell have different tax characteristics and, in some cases, generate tax deductions and credits for the Company. Changes in either the U.S. or foreign tax laws may negatively impact the deductions and credits available to the Company, including the ability of the Company to claim foreign tax credits with respect to taxes withheld on our investments supporting separate account products. These changes would increase the Company’s actual tax expense and reduce its net income.

The profitability of any particular product is significantly dependent on the unique characteristics of the product and our ability to continue to generate taxable income, which is taken into consideration when pricing a product and is a component of our capital management strategies. Accordingly, changes in tax law, our ability to generate taxable income, or other factors impacting the availability or value of the tax characteristics generated by our products, could impact product pricing, increase our tax expense or require us to reduce our sales of these products or implement other actions that could be disruptive to our businesses.

International and Global Regulatory Initiatives

The Group of Twenty nations ("G20"), the Financial Stability Board ("FSB") and related bodies have developed proposals to address issues such as financial group supervision, capital and solvency standards, systemic risk, corporate governance including executive compensation, climate-related financial risks, and a host of related issues. The International Association of Insurance Supervisors ("IAIS"), the global standard setting body for the insurance sector contributes to the work of G20 and FSB through the development of standards that are intended to promote effective and globally consistent supervision and maintain fair, safe and stable insurance markets. As a standard setting body, the IAIS does not have direct authority to require insurance companies to comply with the standards it develops. However, the Company and its businesses could become subject to them if they were adopted by their respective regulators, which could impact the manner in which Prudential Financial deploys its capital, structures and manages its businesses, and otherwise operates both within the U.S. and abroad.

Human Capital Resources

The Company has no employees. Services to the Company are primarily provided by employees of Prudential Insurance as described under “Expense Charges and Allocations” in Note 15 to the Financial Statements.

Item 1A. Risk Factors

You should carefully consider the following risks. Additional risks to which we are subject include, but are not limited to, the factors mentioned under “Forward-Looking Statements” above and the risks of our businesses described elsewhere in this Annual Report on Form 10-K. Many of these risks are interrelated and could occur under similar business and economic conditions, and the occurrence of certain of them may in turn cause the emergence or exacerbate the effect of others. Such a combination could materially increase the severity of the impact of these risks on our businesses, results of operations, financial condition and liquidity.


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Overview

The Company uses an integrated risk management framework to manage and oversee its risks. The Company’s risks include investment, insurance, market, liquidity, operational, and model risk as well as strategic risks that may cause the Company’s core business model to change, either through a shift in the businesses in which it is engaged or a change in execution. The Company’s strategic risks include regulatory and technological changes and other external factors. The Company's risks are further discussed below.

Investment Risk

Our investment portfolios are subject to the risk of loss due to default or deterioration in credit quality or value.

We are exposed to investment risk through our investments, which primarily consist of public and private fixed maturity securities, commercial mortgage and other loans, equity securities and alternative assets including private equity, hedge funds and real estate. We are also exposed to investment risk through a potential counterparty default.

Investment risk may result from: (1) economic conditions; (2) adverse capital market conditions, including disruptions in individual market sectors or a lack of buyers in the marketplace; (3) volatility; (4) credit spread changes; (5) benchmark interest rate changes; and (6) declines in value of underlying collateral. These factors may impact the credit quality, liquidity and value of our investments and derivatives, potentially resulting in higher capital charges and unrealized or realized losses. Also, certain investments we hold, regardless of market conditions, are relatively illiquid and our ability to promptly sell these assets for their full value may be limited. Additionally, our valuation of investments may include methodologies, inputs and assumptions which could result in changes to investment valuations that may materially impact our results of operations or financial condition. For information about the valuation of our investments, see Note 5 to the Financial Statements.

Our investment portfolio is subject to credit risk, which is the risk that an obligor (or guarantor) is unable or unwilling to meet its contractual payment obligations on its fixed maturity security, loan or other obligations. Credit risk may manifest in an idiosyncratic manner (i.e., specific to an individual borrower or industry) or through market-wide credit cycles. Financial deterioration of the obligor increases the risk of default and may increase the capital charges required under such regimes as the NAIC RBC, or other constructs to hold the investment and in turn, potentially limit our overall capital flexibility. Credit defaults (as well as credit impairments, realized losses on credit-related sales, and increases in credit related reserves) may result in losses which adversely impact earnings, capital and our ability to appropriately match our liabilities and meet future obligations.

Our Company is subject to counterparty risk, which is the risk that the counterparty to a transaction could default or deteriorate in creditworthiness before or at the final settlement of a transaction. In the normal course of business, we enter into financial contracts to manage risks (such as derivatives to manage market risk and reinsurance treaties to manage insurance risk), improve the return on investments (such as securities lending and repurchase transactions) and provide sources of liquidity or financing (such as credit agreements, securities lending agreements and repurchase agreements). Reinsurance treaties may also be used to further strategic goals of the Company by facilitating the acquisition or divestiture of a block of business if an entity purchase or sale is not practical. These transactions expose the Company to counterparty risk. Counterparties include commercial banks, investment banks, broker-dealers and insurance and reinsurance companies. In the event of a counterparty deterioration or default, the magnitude of the losses will depend on current market conditions and the feasibility (dependent on the complexity) and time requirement of entering a replacement transaction with a new counterparty. Highly bespoke transactions (e.g. strategic reinsurance) may not be replicable with any degree of certainty. Losses are likely to be higher under stressed conditions.

Our investment portfolio is subject to equity risk, which is the risk of loss due to deterioration in market value of public equity or alternative assets. We include public equity and alternative assets (including private equity, hedge funds and real estate) in our portfolio constructions, as these asset classes can provide returns over longer periods of time, aligning with the long-term nature of certain of our liabilities. Public equity and alternative assets have varying degrees of price transparency. Equities traded on stock exchanges (public equities) have significant price transparency, as transactions are often required to be disclosed publicly. Assets with less price transparency include private equity (joint ventures/limited partnerships) and direct real estate. As these investments typically do not trade on public markets and indications of realizable market value may not be readily available, valuations can be infrequent and/or more volatile. A sustained decline in public equity and alternative markets may reduce the returns earned by our investment portfolio through lower-than-expected dividend income, property operating income, and capital gains, thereby adversely impacting earnings, capital, and product pricing assumptions. These assets may also produce volatility in earnings as a result of uneven distributions on the underlying investments.


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Insurance Risk

We have significant liabilities for policyholders' benefits which are subject to insurance risk. Insurance risk is the risk that actual experience deviates adversely from our insurance assumptions, including mortality, morbidity, and policyholder behavior assumptions. We provide a variety of insurance products, on both an individual and group basis, that are designed to help customers protect against a variety of financial uncertainties. Our insurance products protect customers against their potential risk of loss by transferring those risks to the Company, where those risks can be managed more efficiently through pooling and diversification over a larger number of independent exposures. During this transfer process, we assume the risk that actual losses experienced in our insurance products deviates significantly from what we expect. More specifically, insurance risk is concerned with the deviations that impact our future liabilities. Our profitability may decline if mortality experience, morbidity experience or policyholder behavior experience differ significantly from our expectations when we price our products. In addition, if we experience higher-than-expected surrenders, withdrawals or claims, our liquidity position may be adversely impacted, and we may incur losses on investments if we are required to sell assets in order to fund surrenders, withdrawals or claims. If it is necessary to sell assets at a loss, our results of operations and financial condition could be adversely impacted. For a discussion of the impact of changes in insurance assumptions on our financial condition, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Accounting Policies and Pronouncements—Application of Critical Accounting Estimates—Insurance Liabilities”.

Certain of our insurance products are subject to mortality risk, which is the risk that actual deaths experienced deviate adversely from our expectations. Mortality risk is a biometric risk that can manifest in the following ways:

•Mortality calamity is the risk that mortality rates in a single year deviate adversely from what is expected as the result of pandemics, natural or man-made disasters, military actions or terrorism. A mortality calamity event will reduce our earnings and capital and we may be forced to liquidate assets before maturity in order to pay the excess claims. Mortality calamity risk is more pronounced in respect of specific geographic areas (including major metropolitan centers, where we have concentrations of customers, including under group and individual life insurance, concentrations of employees or significant operations,) and in respect of countries and regions in which we operate that are subject to a greater potential threat of military action or conflict. Ultimate losses would depend on several factors, including the rates of mortality and morbidity among various segments of the insured population, the collectability of reinsurance, the possible macroeconomic effects on our investment portfolio, the effect on lapses and surrenders of existing policies, as well as sales of new policies and other variables.

•Mortality trend is the risk that mortality improvements in the future deviate adversely from what is expected. Mortality trend is a long-term risk that could emerge gradually over time. Longevity products, such as annuities, experience adverse impacts due to higher-than-expected mortality improvement. Mortality products, such as life insurance, experience adverse impacts due to lower-than-expected mortality improvement. If this risk were to emerge, the Company would update assumptions used to calculate reserves for in-force business, which may result in additional assets needed to meet the higher expected annuity claims or earlier expected life claims. An increase in reserves due to revised assumptions has an immediate impact on our results of operations and financial condition; however, economically the impact is generally long-term as the excess outflow is paid over time.

•Mortality base is the risk that actual base mortality deviates adversely from what is expected in pricing and valuing our products. Base mortality risk can arise from a lack of credible data on which to base the assumptions.


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Certain of our insurance products are subject to policyholder behavior risk, which is the risk that actual policyholder behavior deviates adversely from what is expected.

•Lapse calamity is the risk that lapse rates over the short-term deviate adversely from what is expected, for example, surrenders of certain insurance products may increase following a downgrade of our financial strength ratings, adverse publicity or economic conditions. Only certain products are exposed to this risk. Products that offer a cash surrender value that resides in the general account, such as non-participating whole life products, could pose a potential short-term lapse calamity risk. Surrender of these products can impact liquidity, and it may be necessary in certain market conditions to sell assets to meet surrender demands. Lapse calamity can also impact our earnings through its impact on estimated future profits.

•Policyholder behavior risk is the risk that the behavior of our customers or policyholders deviates adversely from what is expected. Policyholder behavior risk arises through product features which provide some degree of choice or flexibility for the policyholder, which can impact the amount and/or timing of claims. Such choices include surrender, lapse, partial withdrawal, policy loan, utilization, and premium payment rates for contracts with flexible premiums. While some behavior is driven by macro factors such as market movements, policyholder behavior at a fundamental level is driven primarily by policyholders’ individual needs, which may differ significantly from product to product depending on many factors including the features offered, the approach taken to market each product, and competitor pricing. For example, persistency (the probability that a policy or contract will remain in force) within our annuities business may be significantly impacted by the value of guaranteed minimum benefits contained in many of our variable annuity products being higher than current account values in light of poor market performance as well as other factors. Many of our products also provide our customers with wide flexibility with respect to the amount and timing of premium deposits and the amount and timing of withdrawals from the policy’s value. Results may vary based on differences between actual and expected premium deposits and withdrawals for these products, especially if these product features are relatively new to the marketplace. The pricing of certain of our variable annuity products that contain certain living benefit guarantees is also based on assumptions about utilization rates, or the percentage of contracts that will utilize the benefit during the contract duration, including the timing of the first withdrawal. Results may vary based on differences between actual and expected benefit utilization. We may also be impacted by customers seeking to sell their benefits. In particular, the development of a secondary market for life insurance, including life settlements or “viaticals” and investor owned life insurance, and third-party investor strategies in our annuities business, could adversely affect the profitability of existing business and our pricing assumptions for new business. Policyholder behavior risk is generally a long-term risk that emerges over time. An increase in reserves due to revised assumptions has an immediate impact on our results of operations and financial condition; however, from an economic or cash flow perspective, the impact is generally long-term as the excess outflow is paid over time.

Our ability to reprice products is limited, and may not compensate for deviations from our expected insurance assumptions. Although some of our products permit us to increase premiums or adjust other charges and credits during the life of the policy or contract, the adjustments permitted under the terms of the policies or contracts may not be sufficient to maintain profitability or may cause the policies or contracts to lapse. Many of our products do not permit us to increase premiums or adjust other charges and credits or limit those adjustments during the life of the policy or contract. Even if permitted under the policy or contract, other factors may impact our decision whether to raise premiums or adjust other charges sufficiently, or at all. Accordingly, significant deviations in actual experience from our pricing assumptions could have an adverse effect on the profitability of our products.

Market Risk

The profitability of many of our insurance and annuity products are subject to market risk. Market risk is the risk of loss from changes in interest rates and equity prices.

The profitability of many of our insurance and annuity products depends in part on the value of the separate accounts supporting these products, which can fluctuate substantially depending on market conditions.

Derivative instruments that we use to hedge and manage interest rate and equity market risks associated with our products and businesses, and other risks might not perform as intended or expected resulting in higher-than-expected realized losses and stresses on liquidity and/or regulatory capital. Market conditions can limit availability of hedging instruments, require us to post additional collateral, and further increase the cost of executing product related hedges and such costs may not be recovered in the pricing of the underlying products being hedged.


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Market risk may limit opportunities for investment of available funds at desired returns, including due to the prevailing interest rate environment, or other factors, with possible negative impacts on our overall results. Limited opportunities for attractive investments may lead to holding cash for long periods of time and an increased use of derivatives for duration management and other portfolio management purposes. The increased use of derivatives or portfolio rebalancing may increase the volatility of our U.S. GAAP results and our statutory capital.

Our investments, results of operations and financial condition may also be adversely affected by developments in the global economy, and in the U.S. economy (including as a result of actions by the Federal Reserve with respect to interest rate and monetary policy, and adverse political developments). Global or U.S. economic activity and financial markets may in turn be negatively affected by adverse developments or conditions in specific geographical regions.

For a discussion of the impact of changes in market conditions on our financial condition see Item 7A “Quantitative and Qualitative Disclosures About Market Risk".

Our insurance and annuity products, and our investment returns, are subject to interest rate risk, which is the risk of loss arising from asset/liability duration mismatches within our general account investments. The risk of mismatch in asset/liability duration is mainly driven by the specific dynamics of product liabilities. Some product liabilities are expected to have only modest risk related to interest rates because cash flows can be matched by available assets; however, other product liabilities generate long-term cash flows (i.e., 30 years or more), resulting in significant interest rate risk, since these cash flows cannot be matched by assets for sale in the marketplace, exposing the Company to future reinvestment risk. In addition, certain of our products provide for recurring premiums which may be invested at interest rates lower than the rates included in our pricing assumptions. Market-sensitive cash flows exist with other product liabilities including products whose cash flows can be linked to market performance through secondary guarantees, minimum crediting rates, and/or changes in insurance assumptions.

Our exposure to interest rates can manifest over years as in the case of earnings compression or in the short term by creating volatility in both earnings and capital. For example, some of our products expose us to the risk that changes in interest rates will reduce the spread between the amounts that we are required to pay under contracts and the rate of return we are able to earn on our general account investments supporting these contracts. When interest rates decline or remain low, we must invest in lower-yielding instruments, potentially reducing net investment income and constraining our ability to offer certain products. This risk is increased as more policyholders may retain their policies in a low rate environment. Since many of our policies and contracts have guaranteed minimum crediting rates or limit the resetting of crediting rates, the spreads could decrease or go negative.

Alternatively, when interest rates rise, we may not be able to replace the assets in our general account with the higher-yielding assets as quickly as needed to fund the higher crediting rates necessary to keep these products and contracts competitive. It is possible that fewer policyholders may retain their policies and annuity contracts as they pursue higher crediting rates, which could expose the Company to losses and liquidity stress.

Our mitigation efforts with respect to interest rate risk are primarily focused on maintaining an investment portfolio with diversified maturities that has a key rate duration profile that is approximately equal to the key rate duration profile of our liability and surplus benchmarks; however, these benchmarks are based on estimates of the liability cash flow profiles which are complex and could be inaccurate, especially when markets are volatile. In addition, there are practical and capital market limitations on our ability to accomplish this matching. Due to these and other factors we may need to liquidate investments prior to maturity at a loss in order to satisfy liabilities or be forced to reinvest funds in a lower rate environment.


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Guarantees within certain of our products, in particular our variable annuities and to a lesser extent certain individual life products, are market sensitive and may decrease our earnings or increase the volatility of our results of operations or financial position under U.S. GAAP. Certain of our products, particularly our variable annuity products, include guarantees of minimum surrender values or income streams for stated periods or for life, which may be in excess of account values. Certain of our products, particularly certain index-linked annuity and individual life products, include interest crediting guarantees based on the performance of an index. Downturns in equity markets, increased equity volatility, increased credit spreads, or (as discussed above) reduced interest rates could result in an increase in the valuation of liabilities associated with such guarantees, resulting in increases in reserves and reductions in net income. We use a variety of hedging and risk management strategies, including product features, to mitigate these risks in part and we may periodically change our strategies over time. These strategies may, however, not be fully effective. In addition, we may be unable or may choose not to fully hedge these risks. Hedging instruments may not effectively offset the costs of guarantees or may otherwise be insufficient in relation to our obligations. Hedging instruments also may not change in value correspondingly with associated liabilities due to equity market or interest rate conditions, non-performance risk or other reasons. We may choose to hedge these risks on a basis that does not correspond to their anticipated or actual impact upon our results of operations or financial position under U.S. GAAP. Changes from period to period in the valuation of these policy benefits, and in the amount of our obligations effectively hedged, will result in volatility in our results of operations and financial position under U.S. GAAP and our statutory capital levels. Estimates and assumptions we make in connection with hedging activities may fail to reflect or correspond to our actual long-term exposure from our guarantees. Further, the risk of increases in the costs of our guarantees not covered by our hedging and other capital and risk management strategies may become more significant due to changes in policyholder behavior driven by market conditions or other factors. The above factors, individually or collectively, may have a material adverse effect on our results of operations, financial condition or liquidity.

Our valuation of the liabilities for the minimum benefits contained in many of our variable annuity products requires us to consider the market perception of our risk of non-performance, and a decrease in our own credit spreads resulting from ratings upgrades or other events or market conditions could cause the recorded value of these liabilities to increase, which in turn could adversely affect our results of operations and financial position.

We are subject to counterparty risk associated with reinsurance transactions. To mitigate this risk, we may use coinsurance with funds withheld or modified coinsurance. With these reinsurance arrangements, we retain assets on our balance sheet whose related investment performance accrues to third-party reinsurers. The composition of these assets is subject to investment guidelines specific to the reinsurance treaties and may differ from those we would normally invest in. Under GAAP, funds withheld and modified coinsurance reinsurance most often create embedded derivatives for the ceding company and the reinsurer, which are measured at fair value. The valuation of these embedded derivatives is sensitive to market factors, including credit spreads of the assets held by the ceding insurer, and can generate significant volatility in net income depending on market conditions. Changes in the fair value of embedded derivatives are included in "Realized investment gains (losses), net" on the Statements of Operations, whereas changes in the fair value of assets are recorded in "Accumulated other comprehensive income".

Liquidity Risk

As a financial services company, we are exposed to liquidity risk, which is the risk that the Company is unable to meet near-term obligations as they come due.

Liquidity risk is a manifestation of events that are driven by other risk types (market, insurance, investment, operational). A liquidity shortfall may arise in the event of insufficient funding sources or an immediate and significant need for cash or collateral. In addition, it is possible that expected liquidity sources may be unavailable or inadequate to satisfy the liquidity demands described below.


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The Company has four primary sources of liquidity exposure and associated drivers that trigger material liquidity demand. Those sources are:

•Derivative collateral market exposure: Abrupt changes to interest rate, equity, and/or currency markets may increase collateral requirements to counterparties and create liquidity risk for the Company.

•Asset liability mismatch: There are liquidity risks associated with liabilities coming due prior to the matching asset cash flows. Structural maturities mismatch can occur in activities such as securities lending, where the liabilities are effectively overnight open transactions used to fund longer term assets.

•Wholesale funding: We depend upon the financial markets for funding. These sources might not be available during times of stress, or may only be available on unfavorable terms, which can result in a decrease in our profitability and a significant reduction in our financial flexibility.

•Insurance cash flows: We face potential liquidity risks from unexpected cash demands due to severe mortality calamity, customer withdrawals or lapse events. If such events were to occur, the Company may face unexpectedly high levels of claim payments to policyholders.

For a discussion of the Company's liquidity and sources and uses of liquidity see “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources—Liquidity".

Operational Risk

Our operations are exposed to the risk of loss resulting from inadequate or failed processes or systems, human error or misconduct, and as a result of external events.

An operational risk failure may result in one or more actual or potential impacts to the Company. Operational risk may be elevated as a result of significant changes to how the Company operates, including organizational changes and transformation efforts underway that increase execution risk.

Operational Risk Types

•People - Internal fraud, breaches of employment law, unauthorized activities; loss or lack of key personnel, inadequate training; inadequate supervision.

•Processes - Processing failure; failure to safeguard or retain documents/records; errors in valuation/pricing models and processes; project management or execution failures; improper sales practices; improper administration of our products.

•Technology - Failures during the development and implementation of new systems; systems failures.

•External Events - External crime; cyber-attack; outsourcing risk; vendor risk; natural and other disasters; changes in laws/regulations.

•Legal and Regulatory - Legal and regulatory compliance failures.

Potential Impacts

•Financial losses - The Company experiences a financial loss. This loss may originate from various causes including, but not limited to, transaction processing errors and fraud.

•Client service impacts - The Company may not be able to service customers. This may result if the Company is unable to continue operations during a business continuation event or if systems are compromised due to malware or virus.

•Regulatory fines or sanctions - When the Company fails to comply with applicable laws or regulations, regulatory fines or sanctions may be imposed. In addition, possible restrictions on business activities may result.

•Legal actions - Failure to comply with laws and regulations also exposes the Company to litigation risk. This may also result in financial losses.

•Reputational harm - Failure to meet regulator, customer, investor and other stakeholder expectations may cause

reputational harm.

Liabilities we may incur as a result of operational failures are described further under “Contingent Liabilities” in Note 16 to the Financial Statements. In addition, certain pending regulatory and litigation matters affecting us, and certain risks to our businesses presented by such matters, are discussed in Note 16 to the Financial Statements. We may become subject to additional regulatory and legal actions in the future.


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Key Enterprise Operational Risks - Key enterprise operational risks include, among others, the following:

We are subject to business continuation risk, which is the risk that our operations, systems or data, or those of third- parties on whom we rely, may be disrupted. We may experience a disruption in business continuity as a result of, among other things, the following:

•Severe pandemic, epidemic, or other public health crises, either naturally occurring or resulting from intentionally manipulated pathogens;

•Geo-political risks, including armed conflict and civil unrest;

•Terrorist events;

•Significant natural or accidental disasters;

•Cyber-attacks, both systemic (e.g., affecting the internet, cloud services, and/or other financial services industry infrastructure) and targeted (e.g., failures in or breach of our systems or that of third-parties on whom we rely);

•Insider threats;

•Physical infrastructure outages; and

•Workforce unavailability resulting from any of the above events, among others.

We depend heavily on our telecommunication, information technology and other operational systems and on the integrity and continuing availability of data we use to run our businesses and service our customers. These systems, and any available backups, may fail to operate properly or become disabled as a result of events or circumstances wholly or partly beyond our control.

Further, we face the risk of operational and technology failures experienced by others, including clearing agents, exchanges and other financial intermediaries and vendors and other third-parties to which we outsource the provision of services or business operations.

We, or third-parties on whom we rely, may not adequately maintain information security. There continues to be significant and increased cyber-attack activity against businesses, including but not limited to the financial services sector and no organization, regardless of measures implemented to safeguard the systems and detect threats, is fully immune to cyber-attacks. Our cybersecurity risk remains heightened because of, among other things, the rapidly evolving nature and pervasiveness of cyber threats, our brand and reputation, our size and scale, our geographic presence and our role in the financial services industry and the broader economy. Risks related to cyber-attack arise in various areas, including:

•Protecting sensitive information is a constant need; however, some risks cannot be fully mitigated using administrative, technological, or physical controls, or otherwise.

•Employees, customers, third-party service providers on whom we rely, or other users of our systems continue to be a key avenue for malicious external parties to gain access to our network, systems, data, or that of our customers. Many attacks leverage social engineering schemes (such as phishing, vishing, or smishing) to coax an internal user to click on a malicious attachment or link to introduce malware into companies’ systems or steal the user’s username and password. Such social engineering schemes are becoming increasingly sophisticated and may involve emerging technologies such as deepfakes. Senior-level executives are increasingly becoming the targets of such attacks. Fraudulent schemes to solicit information via call centers, remote help desks and interactive voice response systems continue to increase in both volume and sophistication.

•Cyber-attacks involving the encryption and/or threat to disclose personal or confidential information (i.e., ransomware) or disruptions of communications (i.e., denial of service) for the purposes of, among other things, extortion or other motives persist and are on the rise.

•Financial services companies and their third-party service providers (including their downstream service providers) are increasingly being targeted by hackers and fraudulent actors seeking to monetize personal or confidential information to extort money, or for other malicious purposes. Such campaigns have targeted online applications and services.

•Nation-state sponsored or affiliated organizations are engaged in cyber-attacks, not only for monetization purposes, but also to gain information about foreign citizens, businesses and governments, or to influence or cause disruptions in commerce or political affairs. In light of recent geopolitical events, including conflicts in Europe and the Middle East, state-sponsored or affiliated parties and/or their supporters may launch retaliatory cyber-attacks, and may attempt to cause supply chain and other third-party service provider disruptions, or take other geopolitically motivated retaliatory actions that may disrupt our business operations, and/or result in the compromise of our systems or data.


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•Increasingly, malicious actors can be in companies’ systems for an extended period of time before being detected. Even if the malicious actors are discovered quickly, it could take considerable additional time for us to determine the scope of compromise, and the extent, amount, and type of information compromised, if any, and to fully contain the malicious actors, remediate and recover.

•Employees, third-party service providers or other individuals purportedly acting on behalf of the Company may fail (as a result of human error or misconduct) to comply with applicable policies and procedures, and/or circumvent controls or safeguards for unauthorized purposes.

•We rely on third-parties to provide services, as described further below. While we maintain certain standards for all vendors that provide us services, our vendors, and in turn, their own service providers, have become subject to security breaches, including as a result of their failure to perform in accordance with their contractual obligations.

•Hardware, software or applications developed by, obtained from, or implemented in accordance with specifications provided by third-parties may contain vulnerabilities in design, maintenance or manufacturing that could be exploited to compromise the Company’s information security.

•Continuing use of remote or flexible work arrangements, including remote access tools and mobile technology (including use of personal devices), have expanded potential attack surfaces.

•The proliferation of third-party financial data aggregators and emerging technologies, including the development and use of artificial intelligence (“AI”), increase our information security risks and exposure.

The development and adoption of artificial intelligence ("AI"), including generative artificial intelligence (“Generative AI”), and its use and anticipated use by us or by third-parties on whom we rely, may increase the operational risks discussed above or create new operational risks that we are not currently anticipating. AI technologies offer potential benefits in areas such as customer service personalization and process automation, and we expect to use AI and Generative AI to help deliver products and services and support critical functions. We also expect third-parties on whom we rely to do the same. AI and Generative AI may be misused by us or by such third-parties, and that risk is increased by the relative newness of the technology, the speed at which it is being adopted, and the lack of laws, regulations or standards governing its use. Such misuse could expose the Company to legal or regulatory risk, damage customer relationships or cause reputational harm. Our competitors may also adopt AI or Generative AI more quickly or more effectively than we do, which could cause competitive harm. Because the Generative AI technology is so new, many of the potential risks of Generative AI are currently unknowable, however, specific risks relating to AI and Generative AI could include, among others:

•Reputational Damage: Malicious actors could use AI to create deepfakes of the Company's executives or manipulate financial documents, leading to loss of customer trust and significant reputational damage. Moreover, the use of AI trained on inaccurate data sets could result in inaccurate or biased decisions.

•Fraudulent Activity: AI could be used to create forged documents or impersonate individuals to commit financial fraud, leading to financial losses and regulatory scrutiny.

•Misinformation and Disinformation: The ability to generate realistic and convincing synthetic media could be used to spread misinformation and disinformation, impacting public opinion and undermining trust in the financial system.

•Privacy Concerns: AI could be used to create synthetic identities or manipulate personal data, raising privacy concerns and potentially violating data protection regulations.

•Cybersecurity Threats: AI could be used to create sophisticated phishing attacks or bypass security measures, increasing the risk of cyberattacks and data breaches.

We, or third-parties on whom we rely, may not adequately ensure the integrity, confidentiality, or availability of personal and confidential information. In the course of our ordinary business, we collect, store and disclose to various third-parties (e.g., service providers, reinsurers, etc.) substantial amounts of personal and confidential information, including in some instances sensitive personal information, including health-related information. We are subject to the risk that the integrity, confidentiality, or availability of this information may be compromised, including as a result of an information security breach described above, or that such events occurring at third-parties may not be disclosed to us in a timely manner. We have experienced cybersecurity events resulting in, among other things the compromise of personal and confidential information, including sensitive health information, of our customers and other stakeholders. See “Business—Regulation—Privacy and Cybersecurity Regulation” for a discussion of the applicable laws and regulations (including those requiring notice, disclosure or remediation) relating to cybersecurity events.


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We may incur significant costs and other negative consequences resulting from cyber-attacks or other information security breaches. Any compromise or perceived compromise of the security of our systems or data or that of one of our vendors could damage our reputation, cause the deterioration or termination of relationships with among others, customers, distributors, government-run health insurance exchanges, marketing partners and insurance carriers, reduce demand for our services, result in the loss of business opportunities, and subject us to significant liability and expense as well as regulatory action and lawsuits, which would harm our business, operating results and financial condition. We may also incur significant costs in connection with our response, recovery, remediation, and compliance efforts. Additionally, our failure to timely or accurately communicate cyber incidents to relevant parties could result in regulatory, operational and reputational risk. To the extent we maintain cyber insurance, liabilities or losses arising from certain cyber incidents may not be covered or fully covered under such policies, and the amount of insurance may not be adequate.

Third-parties (outsourcing providers, vendors and suppliers) present added operational risk to our enterprise. The Company's business model relies heavily on the use of third-parties to deliver contracted services in a broad range of areas. This presents the risk that the Company is unable to meet legal, regulatory, financial or customer obligations because third-parties fail to deliver contracted services, or that the Company is exposed to reputational damage because third-parties operate in a poorly controlled manner. We use affiliates and third-party vendors located outside the U.S. to provide certain services and functions, which also exposes us to business disruptions and political risks as a result of risks inherent in conducting business outside of the United States.

Affiliate and third-party distributors of our products present added regulatory, competitive and other risks to our enterprise. Our products are sold primarily through captive/affiliated distributors and third-party distributing firms. Our captive/affiliated distributors are made up of sales personnel who are generally compensated based on commissions. The third-party distributing firms are rarely dedicated to us exclusively and may frequently recommend and/or market products of our competitors. Accordingly, we must compete for their services. Our sales could be adversely affected if we are unable to attract, retain or motivate third-party distributing firms or if we do not adequately provide support, training, compensation, and education to this sales network regarding our products, or if our products are not competitive and not appropriately aligned with consumer needs. While third-party distributing firms have an independent regulatory accountability, regulators have been clear with expectations that product manufacturers retain significant sales practices accountability.

The Company and our distributors are subject to rules regarding the standard of care applicable to sales of our products and the provision of advice to our customers, and in recent years many of these rules have been revised or re-examined. In addition, there have been a number of investigations regarding the marketing practices of brokers and agents selling annuity and insurance products and the payments they receive. Furthermore, sales practices and investor protection have increasingly become areas of focus in regulatory examinations. These investigations and examinations have resulted in enforcement actions against us and companies in our industry and brokers and agents marketing and selling those companies’ products. Enforcement actions could result in penalties and the imposition of corrective action plans and/or changes to industry practices, which could adversely affect our ability to market our products. If our products are distributed in an inappropriate manner, or to customers for whom they are unsuitable, or distributors of our products otherwise engage in misconduct, we may suffer reputational and other harm to our business and be subject to regulatory action, penalties or damages. Our business may also be harmed if captive/affiliate distributors engage in inappropriate conduct in connection with the sale of third-party products.

Additionally, certain of our affiliated distributors engage in direct marketing to consumers through telemarketing, email marketing and other lead generation activities that subject us to various state and federal laws and regulations, including the Telephone Consumer Protection Act and the Americans with Disabilities Act. Violations of these regulations could subject our affiliated distributors to litigation and regulatory inquiries that result in penalties or damages.

Many of our distribution personnel are independent contractors or franchisees. From time to time, their status has been challenged in courts and by government agencies, and various legislative or regulatory proposals have been introduced addressing the criteria for determining the status of independent contractors’ classification as employees for, among other things, employment tax purposes or other employment benefits. The costs associated with potential changes with respect to these independent contractor and franchisee classifications have impacted our results previously and could have a material adverse effect on our business in the future.

See Note 16 to the Financial Statements for additional information regarding litigation and regulatory matters relating to the distribution of products.


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Although we distribute our products through a wide variety of distribution channels, we do maintain relationships with certain key distributors. We periodically negotiate the terms of these relationships, and there can be no assurance that such terms will remain acceptable to us or such third-parties. An interruption in certain key relationships could materially affect our ability to market our products and could have a material adverse effect on our business, operating results and financial condition. Distributors may elect to reduce or terminate their distribution relationships with us, including for such reasons as adverse developments in our business, competitiveness of product offerings, adverse rating agency actions or concerns about market-related risks. We are also at risk that key distribution partners may merge, change their business models in ways that affect how our products are sold, or terminate their distribution contracts with us, or that new distribution channels could emerge and adversely impact the effectiveness of our distribution efforts. An increase in bank and broker-dealer consolidation activity could increase competition for access to distributors, result in greater distribution expenses and impair our ability to market products through these channels. Consolidation of distributors and/or other industry changes may also increase the likelihood that distributors will try to renegotiate the terms of any existing selling agreements to terms less favorable to us. Finally, we also may be challenged by new technologies and marketplace entrants that could interfere with our existing relationships.

Model Risk

As a financial services company, we are exposed to model risk, which is the risk of financial loss or reputational damage or adverse regulatory impacts caused by model errors or limitations, incorrect implementation of models, or misuse of or overreliance upon models. Models are utilized by our businesses and corporate areas primarily to project future cash flows associated with pricing products, calculating reserves and valuing assets, as well as in evaluating risk and determining capital requirements, among other uses. Because models are used across the Company, model risk impacts all risk types. As our businesses continue to grow and evolve, the number and complexity of models we utilize expands, increasing our exposure to error in the design, implementation or use of models, including the associated input data and assumptions. Furthermore, model risk will be elevated during periods of transformation or due to new or changing laws or regulations.

Strategic Risk

We are subject to the risk of events that can cause our fundamental business model to change, either through a shift in the businesses in which we are engaged or a change in our execution. In addition, other risks may become strategic risks. For example, we have considered and must continue to consider the impact of the interest rate environment on new product development and continued sales of interest sensitive products.

Changes in the regulatory landscape may be unsettling to our business model. New laws and regulations are being considered in the U.S. and our other countries of operation at an increasing pace, as there has been greater scrutiny on financial regulation over the past several years. Proposed or unforeseen changes in law or regulation, or changes in the way existing laws or regulations are enforced, may adversely impact our business. See “Business—Regulation” for a discussion of certain recently enacted and pending proposals by international, federal and state regulatory authorities and their potential impact on our business, including in the following areas:

•Financial sector regulatory reform.

•U.S. federal, state and local tax laws, including CAMT.

•Fiduciary rules and other standards of care.

•Our regulation under U.S. state insurance laws and developments regarding group-wide supervision and capital standards, accounting rules, RBC factors for invested assets and reserves for life insurance, variable annuities and other products.

•Privacy, data, artificial intelligence and cybersecurity regulation.

Changes in accounting rules applicable to our business may also have an adverse impact on our results of operations or financial condition. For a discussion of accounting pronouncements and their potential impact on our business, including ASU 2018-12, Financial Services - Insurance (Topic 944): Targeted Improvements to the Accounting for Long-Duration Contracts, see Note 2 to the Financial Statements.

Changes in technology and other external factors may be unsettling to our business model. We believe the following aspects of technological and other changes would significantly impact our business model. There may be other unforeseen changes in technology and the external environment, including the regulatory response to technological change, which may have a significant impact on our business model.

•Interaction with customers. Technology is moving rapidly and as it does, it puts pressure on existing business models. Some of the changes we can anticipate are increased choices about how customers want to interact with the Company or how they want the Company to interact with them. Evolving customer preferences and changing privacy regulations may drive a need to redesign products and change the way we interact with customers. Our distribution channels may change to become more automated, at the place and time of the customer’s choosing. Such changes clearly have the potential to disrupt our business model.


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•Investment Portfolio. Technology may have a significant impact on the companies in which the Company invests. For example, environmental concerns spur scientific inquiry which may reposition the relative attractiveness of wind or sun power over oil and gas. The transportation industry may favor alternative modes of conveyance of goods which may shift trucking or air transport out of favor. Consumers may change their purchasing behavior to favor online activity which would change the role of malls and retail properties.

•Medical Advances. The Company is exposed to the impact of medical advances in two major ways. Genetic testing and the availability of that information unequally to consumers and insurers can bring anti-selection risks. Specifically, data from genetic testing can give our prospective customers a clearer view into their future, allowing them to select products protecting them against likelihoods of mortality or longevity with more precision. Also, technologies that extend lives will challenge our actuarial assumptions especially in the annuity-based businesses.

The following items are examples of other factors which could have a meaningful impact on our business.

•A downgrade in our financial strength or credit ratings could potentially, among other things, adversely impact our business prospects, results of operations, financial condition and liquidity. For a discussion of our ratings and the potential impact of a ratings downgrade on our business, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources—Capital.” We cannot predict what additional actions rating agencies may take, or what actions we may take in response to the actions of rating agencies, which could adversely affect our business. Our ratings could be downgraded at any time and without notice by any rating agency. Credit rating agencies continually review their methodologies, including capital and earnings assessment models, as well as their ratings for the companies that they follow, including us. The credit rating agencies also evaluate the industry as a whole and may change our credit rating based on their overall view of our industry. In addition, a sovereign downgrade could result in a downgrade of PLNJ.

•The changing competitive landscape may adversely affect the Company. In our business we face intense competition from insurance companies and diversified financial institutions, both for the ultimate customers for our products and, in many businesses, for distribution through non-affiliated distribution channels. Technological advances, changing customer expectations, including related to digital offerings, access to customer data or other changes in the marketplace may present opportunities for new or smaller companies without established products or distribution channels to meet consumers’ increased expectations more efficiently than us. Fintech and insurtech companies and companies in other industries with greater access to customers and data have the potential to disrupt industries globally, and many participants have been partially funded by industry players.

•Climate change may increase the severity and frequency of calamities, or adversely affect our investment portfolio or investor sentiment. Climate change may increase the frequency and severity of weather-related disasters and pandemics. In addition, climate change regulation may affect the prospects of companies and other entities whose securities we hold, or our willingness to continue to hold their securities. It may also impact other counterparties, including reinsurers, and affect the value of investments. We cannot predict the long-term impacts on us from climate change or related regulation. Climate change may also influence investor sentiment with respect to the Company and investments in our portfolio.

•We may fail to meet expectations relating to environmental, social, and governance standards and practices. Certain existing or potential investors, customers and regulators evaluate our business or other practices according to a variety of environmental, social and governance (“ESG”) standards and expectations. Certain of our regulators have proposed or adopted, or may propose or adopt, ESG rules or standards that would apply to our business. Our practices may be judged by ESG standards that are continually evolving and not always clear. Prevailing ESG standards and expectations may also reflect contrasting or conflicting values or agendas. We may fail to meet our commitments or targets, and our policies and processes to evaluate and manage ESG standards in coordination with other business priorities may not be completely effective or satisfy investors, customers, regulators, or others. We may face adverse regulatory, investor, customer, media, or public scrutiny leading to business, reputational, or legal challenges.


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•Market conditions and other factors may adversely impact product sales or increase expenses. Examples include:

•A change in market conditions, such as higher inflation and higher interest rates, like we have seen since 2022, could cause a change in consumer sentiment and behavior adversely affecting sales and persistency of our savings and protection products. Conversely, low inflation and low interest rates could cause persistency of these products to vary from that anticipated and adversely affect profitability. Similarly, changing economic conditions and unfavorable public perception of financial institutions can influence customer behavior, including increasing claims or surrenders in certain products.

•Lapses and surrenders of certain insurance products may increase if a market downturn, increased market volatility or other market conditions result in customers becoming dissatisfied with their investments or products.

•Our reputation may be adversely impacted if any of the risks described in this section are realized. Reputational risk could manifest from any of the risks as identified in the Company’s risk identification process. Failure to effectively manage risks across a broad range of risk issues exposes the Company to reputational harm. If the Company were to suffer a significant loss in reputation, both policyholders and counterparties could seek to exit existing relationships. Additionally, large changes in credit worthiness, especially credit ratings, could impact access to funding markets while creating additional collateral requirements for existing relationships. The mismanagement of any such risks may potentially damage our reputational asset. Our business is anchored in the strength of our brand, our alignment to our values, and our proven commitment to keep our promises to our customers. Any negative public perception, founded or otherwise, can be widely and rapidly shared over social media or other means, and could cause damage to our reputation.

Item 1B. Unresolved Staff Comments

None.

Item 1C. Cybersecurity

Risk Management and Strategy

Because of the size and scope of our business, we are subject to numerous and evolving cybersecurity risks, any of which, if it materializes, could affect our business strategy, results of operations, or financial condition. See “Item 1A. Risk Factors Operational Risk” for a discussion of such risks.

Cybersecurity risk management is integrated within our risk management framework. See Item 7. "Management's Discussion and Analysis of Financial Condition and Results of Operations - Risk Management" for additional information on our risk management. We conduct risk identification through several processes at the business unit, corporate, senior management, and Board levels. This framework includes escalation points to Prudential's risk committees, allowing cyber risk and control matters to be elevated to the Board of Directors or its Audit Committee for oversight.

In order to respond to the threat of security breaches and cyber-attacks, Prudential Financial has developed an information security program designed to protect and preserve the confidentiality, integrity, and continued availability of information owned by, or in the care of, the Company. This information security program provides for the coordination of various corporate functions and governance groups, including global technology, risk, legal, compliance and corporate audit, and serves as a framework for the execution of responsibilities across businesses and operational roles. Among other things, the information security program establishes security standards for our technological resources and includes training for employees, contractors and third-parties. Employees with access to our Company’s systems are subject to comprehensive annual training on responsible information security, data security, and cybersecurity practices and how to protect data against cyber threats.

As part of the information security program, we conduct periodic exercises with independent outside advisors to assess the effectiveness of our program and our internal response preparedness. We regularly engage with the broader security community and monitor cyber threat information.

To address risks associated with third-parties, Prudential Financial has established an enterprise-wide Third-Party Risk Management Program. This program’s features include, among other things, identifying, assessing and managing cybersecurity risks throughout the life of our third-party relationships.


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We also maintain an incident response plan, which specifies escalation and evaluation processes for cyber events. This plan is executed in close coordination with our corporate functions, including a dedicated cyber and privacy law function, external affairs, and risk management, and is designed to ensure, among other things, appropriate and timely reporting and disclosure.

During the period covered by this Report, we did not identify any cybersecurity threats that have materially affected or are reasonably likely to materially affect our business strategy, results of operations, or financial condition. See “Item 1A. Risk Factors Operational Risk” for a discussion of risks related to cybersecurity.

Governance

Prudential Financial's information security program is overseen by the Chief Information Security Officer (“CISO”) and Information Security Office, as well as the Chief Information Officer (“CIO”). We believe that Prudential Financial's employees responsible for managing cybersecurity risk have the skills and knowledge to assess and manage the Company's material risks from cybersecurity threats, and their qualifications include degrees and certifications typical for cybersecurity professionals. We expect these employees to, among other things, understand computer systems, networks, and security technologies and be proficient in a variety of security tools and techniques, including intrusion detection, malware analysis and penetration testing. The CISO has served in various roles in information technology and information security for over 25 years, including serving as the head of information technology risk at two large public companies. The CISO holds a graduate degree in technology management and has attained the professional certifications of Certified Information Systems Security Professional and Certified Information Privacy Professional.

Prudential Financial's Audit Committee of the Board of Directors which is responsible for oversight of certain risk issues, including cybersecurity, receives reports from the CISO, the CIO and Operational Risk Management throughout the year. At least annually, Prudential Financial's Board and the Audit Committee also receive updates about the results of program reviews, including exercises and response readiness assessments led by outside advisors who provide a third-party independent assessment of our technical program and internal response preparedness. To the extent cybersecurity controls are related to internal control over financial reporting, such controls are considered in the context of Prudential Financial's annual external integrated audit.

Prudential Financial's Audit Committee regularly briefs the full Board of Directors on these matters, and the full Board of Directors also receives periodic briefings on cyber threats in order to enhance our directors’ literacy on cyber issues.

Item 2. Properties

Office space is provided by Prudential Insurance, as described under “Expense Charges and Allocations” in Note 15 to the Financial Statements.

Item 3. Legal Proceedings

See Note 16 to the 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.

Item 4. Mine Safety Disclosures

Not Applicable.


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PART II

Item 5. Market for the Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

The Company is a wholly-owned subsidiary of Pruco Life Insurance Company. There is no public market for the Company’s common stock.

Item 6. [Reserved]

Part II. Item 6 is no longer required pursuant to certain amendments to Regulation S-K that eliminated Item 301.

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

You should read the following analysis of our financial condition and results of operations in conjunction with the "Forward-Looking Statements" included below the Table of Contents, “Risk Factors”, and the Financial Statements included in this Annual Report on Form 10-K.

Overview

The Company is licensed to sell variable annuities, indexed variable annuities, fixed 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.

In July 2023, the Company entered into an agreement with Somerset Reinsurance Ltd. (“Somerset Re”) to coinsure a closed block of guaranteed universal life ("GUL") policies to the Prudential Universal Reinsurance Entity Company (“PURE”), a newly formed wholly-owned subsidiary of Prudential Insurance Company of America ("Prudential Insurance"), with retrocession by PURE of such liabilities, on a modified coinsurance basis, to Somerset Re. The deal is subject to the satisfaction of customary closing conditions. We will continue to manage financing related to Guideline AXXX reserves for the business reinsured to Somerset Re; as a result, we anticipate changes to our current captive financing arrangements upon closing of the reinsurance transaction, including an increase in the amount of financing related to Guideline AXXX reserves. See “Liquidity and Capital Resources Liquidity Term and Universal Life Reserve Financing” below for discussion of our current captive financing arrangements.

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.

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.

Industry Trends

Our business is impacted by financial markets, economic conditions, regulatory oversight, and a variety of trends that affect the industries where we compete.

Financial and Economic Environment. Interest rates in the U.S. experienced a prolonged period of historically low levels, followed by a sharp rise in 2022 and sustained higher levels in 2023. We expect that a continued level of higher interest rates will benefit our results over time. We continue to monitor current market conditions and the impact to our business from slowing or negative economic growth. In addition, we are subject to financial impacts associated with movements in equity markets and the evolution of the credit cycle as discussed in “Risk Factors”.

Demographics. Customer demographics continue to evolve and new opportunities present themselves in different consumer segments such as the millennial and multicultural markets. Consumer expectations and preferences are changing. We believe existing and potential customers are increasingly looking for cost-effective solutions that they can easily understand and access through technology-enabled devices. At the same time, income protection, wealth accumulation and the needs of retiring baby boomers are continuing to shape the insurance industry. A persistent retirement security gap exists in terms of both savings and protection.


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Regulatory Environment. See “Business—Regulation” for a discussion of regulatory developments that may impact the Company and the associated risks.

Competitive Environment. See “Business” for a discussion of the competitive environment and the basis on which we compete.

Impact of Changes in the Interest Rate Environment

As a financial services company, market interest rates are a key driver of our liquidity and capital positions, cash flows, results of operations and financial position. Changes in interest rates can affect these in several ways, including favorable or adverse impacts to:

•investment-related activity, including: investment income returns, 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;

•customer account values and assets under management, including their impacts on fee-related income;

•insurance reserve levels, including market risk benefits ("MRBs"), and market experience true-ups;

•policyholder behavior, including surrender or withdrawal activity; and

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

For additional information regarding interest rate risks, see "Risk Factors—Market Risk".

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”) 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 to assumptions and estimates are appropriate given current facts and circumstances, the Company’s results of operations and financial position as reported in the Financial Statements could change significantly. See Note 1 to the Financial Statements for additional information.

The following sections discuss the accounting policies 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.


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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:

•For some 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 is based on 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 projections are updated quarterly to reflect actual experience and are generally updated annually to reflect changes in best estimate future insurance 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 projections, 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 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 profit liability (“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.

•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 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.


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•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 "Accumulated other comprehensive income (loss)" ("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 in our own experience or in industry experience made available to us 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 cash flows, including reviews related to mortality, morbidity, lapse, surrender, and other contractholder behavior assumptions, and economic assumptions, including expected future rates of returns on investments. The Company generally looks to relevant Company experience as the primary basis for these 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 elsewhere within the Company or within the industry. 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 we feel is indicative of a long-term trend.

The quarterly adjustments for market performance referred to above reflect the impact of changes to our estimate of future rates of returns on investments to reflect actual fund performance and market conditions. A portion of returns on investments for 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 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 life contracts and decrease expected claims to be paid on variable life contracts. The opposite occurs when returns are lower than our expectations.

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 liabilities for future policy benefits for certain of our products, primarily our domestic 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 December 31, 2023, our variable life insurance businesses assume an 8.0% long-term equity expected rate of return and a 4.3% near-term mean reversion equity expected rate of return.

With regard to interest rate assumptions used in evaluating 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 2023 annual reviews and update of assumptions and other refinements, we kept our long-term expectation of the 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 the Financial Statements.


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The following paragraph provides additional details about the reserves we have established:

The reserves for future policy benefits as of December 31, 2023, primarily relate to term life, universal life and variable life products. For term life contracts, the future policy benefit reserves are generally calculated using the net premium valuation methodology, as described above. The primary assumptions used in determining these expected future benefits and expenses include mortality, lapse, and investment yield assumptions. For variable and universal life products, which include universal life contracts that contain no-lapse guarantees, reserves for future policy benefits are established using current best estimate assumptions and are based on the benefit ratio, as described above. The primary assumptions used in establishing these reserves generally include mortality, lapse, and premium pattern, as well as interest rate and equity market return assumptions. Reserves also include claims reported but not yet paid, and claims incurred but not yet reported.

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 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. MRBs are primarily related to deferred annuities with guaranteed minimum benefits 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 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 contractholders 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 gain (loss)", 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 MRBs 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 an increase and a decrease to OCI of $80 million and $70 million, respectively, and an increase and a decrease to net income of $5 million and $5 million, respectively. For additional information regarding the valuation of these MRB features, see Note 5 to the Financial Statements.

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, 2023 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. Changes to the insurance cash flow assumptions are reflected in net income through the retrospective unlocking method for traditional long duration, limited-payment and universal life type products.


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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 7A. Quantitative and Qualitative Disclosures about Market Risk” for hypothetical impacts on related balances as a result of changes in certain significant assumptions.



	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%	$	10
Decrease by 1%	$	(10)
Lapse(2):
Increase by 10%	$	20
Decrease by 10%	$	(20)

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

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

Valuation of Investments, Including Derivatives, Measurement of Allowance for Credit Losses and the Recognition of Other-than-Temporary Impairments

Our investment portfolio consists of public and private fixed maturity securities, commercial mortgage and other loans, equity securities, other invested assets and derivative financial instruments. Derivatives are financial instruments whose values are derived from interest rates, foreign exchange rates, financial indices, values of securities, credit spreads, market volatility, expected returns, and liquidity. Derivative financial instruments that are generally used include swaps, futures, forwards and options and may be exchange-traded or contracted in the over-the-counter (“OTC”) market. We are also party to financial instruments that contain derivative instruments that are “embedded” in the financial instruments. Management believes the following accounting policies related to investments, including derivatives, are most dependent on the application of estimates and assumptions. Each of these policies is discussed further within other relevant disclosures related to investments and derivatives, as referenced below:

•Valuation of investments, including derivatives;

•Measurement of the allowance for credit losses on fixed maturity securities classified as available-for-sale, commercial mortgage loans, and other loans; and

•Recognition of other-than-temporary impairments ("OTTI") for equity method investments.

We present at fair value in the statements of financial position our debt security investments classified as available-for-sale, investments classified as trading, and certain fixed maturities, equity securities and certain investments within “Other invested assets,” such as derivatives. For additional information regarding the key estimates and assumptions surrounding the determination of fair value of fixed maturity and equity securities, as well as derivative instruments, embedded derivatives and other investments, see Note 5 to the Financial Statements.

For our investments classified as available-for-sale, the impact of changes in fair value is recorded as an unrealized gain or loss in AOCI, a separate component of equity. For our investments classified as trading and equity securities, the impact of changes in fair value is recorded within “Other income (loss)”. Our commercial mortgage and other loans are carried primarily at unpaid principal balances, net of unamortized deferred loan origination fees and expenses and unamortized premiums or discounts and a valuation allowance for losses.


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In addition, an allowance for credit losses is measured each quarter for available-for-sale fixed maturity securities, commercial mortgage and other loans. For additional information regarding our policies regarding the measurement of credit losses, see Note 2 to the Financial Statements.

For equity method investments, 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. For additional information regarding our OTTI policies, see Note 2 to the Financial Statements.

Taxes on Income

Our effective tax rate is based on income, non-taxable and non-deductible items, tax credits, statutory tax rates and tax planning opportunities available in the various jurisdictions in which we operate. Inherent in determining our annual tax rate are judgments regarding business plans, planning opportunities and expectations about future outcomes. The Dividend Received Deduction (“DRD”) is a major reason for the difference between the Company’s effective tax rate and the U.S. federal statutory rate. The DRD is an estimate that incorporates the prior and current year information, as well as the current year’s equity market performance. Both the current estimate of the DRD and the DRD in future periods can vary based on factors such as, but not limited to, changes in the amount of dividends received that are eligible for the DRD, changes in the amount of distributions received from underlying fund investments, changes in the account balances of variable life and annuity contracts, and the Company’s taxable income before the DRD.

An increase or decrease in our effective tax rate by one percentage point would have resulted in a decrease or increase in our 2023 "Income tax expense (benefit)" of $1 million.

Contingencies

A contingency is an existing condition that involves a degree of uncertainty that will ultimately be resolved upon the occurrence of future events. Accruals for contingencies are required to be established when the future event is probable and its impact can be reasonably estimated, such as in connection with an unresolved legal matter. The initial reserve reflects management’s best estimate of the probable cost of ultimate resolution of the matter and is revised accordingly as facts and circumstances change and, ultimately, when the matter is brought to closure.

Adoption of New Accounting Pronouncements

Effective January 1, 2023, the Company adopted Accounting Standards Update ("ASU") 2018-12, Financial Services—Insurance (Topic 944): Targeted Improvements to the Accounting for Long-Duration Contracts. Adoption of this ASU impacted, at least to some extent, the accounting and disclosure requirements for all long-duration insurance and investment contracts issued by the Company and had a significant financial impact on the Financial Statements and disclosures. See Note 1 for additional information.

As of the January 1, 2021 transition date, the adoption of the standard resulted in a decrease to “Total equity” of $67 million, 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. 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 increase in market interest rates during 2021 and 2022. See Note 2 to the 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.


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Changes in Financial Position

2023 to 2022 Annual Comparison

Total assets increased $2.3 billion from $20.6 billion at December 31, 2022 to $22.9 billion at December 31, 2023. Significant components were:

•Total investments increased $1.7 billion primarily driven by an increase in policy loans from variable life contracts and an increase in fixed maturity investments primarily due to business growth and reinvestment of capital contributions; and

•Reinsurance recoverables increased $0.5 billion primarily due to business growth from universal life guarantees and term products in addition to affiliated reinsurance from new sales of indexed annuities.

Total liabilities increased $1.9 billion from $19.6 billion at December 31, 2022 to $21.5 billion at December 31, 2023. Significant components were:

•Policyholders' account balances increased $1.2 billion primarily driven by separate account transfers to fund variable life contract policy loans;

•Future policy benefits increased $0.3 billion primarily due to higher reserves for universal life guarantees and term life products driven by business growth; and

•Other liabilities increased $0.3 billion primarily driven by affiliated reinsurance from new sales of indexed annuities.

Total equity increased $0.3 billion primarily driven by $257 million of capital contributions to fund statutory reserve requirements and net income of $96 million.

Results of Operations

Income (loss) from Operations before Income Taxes

2023 to 2022 Annual Comparison

Income (loss) from operations before income taxes increased $209 million from a loss of $101 million in 2022 to a gain of $108 million in 2023. The impact from our annual reviews and update of assumptions and other refinements was a net gain of $11 million. Excluding the comparative impact of our annual reviews and update of assumptions and other refinements, income (loss) increased $198 million primarily driven by higher Change in value of market risk benefits, net of related hedging gain (loss), from ceded NPR.

Revenues, Benefits and Expenses

2023 to 2022 Annual Comparison

Revenues increased $228 million from $68 million in 2022 to $296 million in 2023. This includes an unfavorable comparative decrease of $4 million from our annual reviews and update of assumptions and other refinements. Excluding the comparative impact of our annual reviews and update of assumptions and other refinements, revenues increased $232 million primarily driven by:

•Higher Change in value of market risk benefits, net of related hedging gain (loss), from ceded NPR; and

•Higher net investment income due to the impact of higher reinvestment rates.

Benefits and expenses increased $20 million from $169 million in 2022 to $189 million in 2023. This includes a favorable comparative decrease of $15 million from our annual reviews and update of assumptions and other refinements. Excluding the impact of our annual reviews and update of assumptions and other refinements, the increase was $35 million primarily driven by higher Policyholders' benefits due to business growth in traditional life product reserves, net of reinsurance.

Risks and Risk Mitigants

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


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Product Design Features:

A portion of the variable annuity contracts that we 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 our 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 annuity guarantees. The MRB liability that we hedge consists of expected living and death benefit claims under various market conditions, which are managed using fixed income instruments, derivatives, or a combination thereof. For our Prudential Defined Income variable annuity, we utilize fixed income instruments to meet expected liabilities. For the portion of our ALM strategy executed with derivatives, we enter into a range of exchange-traded and 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 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

The differences between income taxes expected at the U.S. federal statutory income tax rate of 21% applicable for 2023, 2022 and 2021, and the reported income tax expense (benefit) are provided in the following table:


	Years Ended December 31,
	2023			2022			2021
	($ in millions)
Expected federal income tax expense (benefit) at federal statutory rate(1)	$	23		$	(21)		$	20
Non-taxable investment income	(6)			(6)			(6)
Tax credits	(4)			(3)			(3)
Changes in tax law	0			0			0

Other	(1)			0			1
Reported income tax expense (benefit)	$	12		$	(31)		$	11
Effective tax rate(1)	11.0		%	30.6		%	11.6		%

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

Effective Tax Rate

The effective tax rate is the ratio of “Income tax expense (benefit)” divided by “Income (loss) from operations before income taxes.” Our effective tax rate for fiscal years 2023, 2022 and 2021 was 11.0%, 30.6% and 11.6%, respectively. For a detailed description of the nature of each significant reconciling item, see Note 12 to the Financial Statements.

Unrecognized Tax Benefits

The Company’s liability for income taxes includes the liability for unrecognized tax benefits and interest that relate to tax years still subject to review by the Internal Revenue Service or other taxing authorities. The completion of review or the expiration of the Federal statute of limitations for a given audit period could result in an adjustment to the liability for income taxes. The Company had no unrecognized benefit as of December 31, 2023, 2022 and 2021. We do not anticipate any significant changes within the next twelve months to our total unrecognized tax benefits related to tax years for which the statute of limitations has not expired.


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Income Tax Expense vs. Income Tax Paid in Cash

Income tax expense recorded under U.S. GAAP routinely differs from the income taxes paid in cash in any given year. Income tax expense recorded under U.S. GAAP is based on income reported in our Statements of Operations for the current period and it includes both current and deferred taxes. Income taxes paid during the year include tax installments made for the current year as well as tax payments and refunds related to prior periods.

For additional information regarding income tax related items, see “Business—Regulation” and Note 12 to the Financial Statements.

Liquidity and Capital Resources

Overview

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

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".

Capital

We manage 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

Prudential Financial and the Company use captive reinsurance companies for our individual life business to more effectively manage our reserves and capital on an economic basis and to enable the aggregation and transfer of risks. The captive reinsurance companies assume business from affiliates only. To support the risks they assume, our captives are capitalized to a level we believe is consistent with the “AA” financial strength rating targets of Prudential Financial’s insurance subsidiaries. All of the captive reinsurance companies are wholly-owned subsidiaries of Prudential Financial and are located domestically, typically in the state of domicile of the direct writing insurance subsidiary that cedes the majority of business to the captive. In addition to state insurance regulation, the captives are subject to internal policies governing their activities. In the normal course of business, Prudential Financial contributes capital to the captives to support business growth and other needs. Prudential Financial has also entered into support agreements with several of the captives in connection with financing arrangements.


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Prudential Financial's life insurance subsidiaries are subject to a regulation entitled “Valuation of Life Insurance Policies Model Regulation,” commonly known as “Regulation XXX,” and a supporting guideline entitled “The Application of the Valuation of Life Insurance Policies Model Regulation,” commonly known as “Guideline AXXX.” The regulation and supporting guideline require insurers to establish statutory reserves for term and universal life insurance policies with long-term premium guarantees at a level that exceeds what our actuarial assumptions for this business would otherwise require. Prudential Financial uses captive reinsurance companies to finance the portion of the reserves for this business that we consider to be non-economic as described below under “—Financing Activities—Term and Universal Life Reserve Financing.”

Liquidity

Our liquidity is managed to ensure stable, reliable and cost-effective sources of cash flows to meet all of our obligations. Liquidity is provided by a variety of sources, as described more fully below, including portfolios of liquid assets. Our investment portfolios are integral to the overall liquidity of the Company. We use a projection process for cash flows from operations to ensure sufficient liquidity to meet projected cash outflows, including claims. The impact of Prudential Funding, LLC’s ("Prudential Funding"), a wholly-owned subsidiary of Prudential Insurance, financing capacity on liquidity (as described below) 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 (e.g., type of asset and credit quality) in calculating internal liquidity measures to evaluate our liquidity under various stress scenarios, including company-specific and market-wide events. We continue to believe that cash generated by ongoing operations and the liquidity profile of our assets provide sufficient liquidity under reasonably foreseeable stress scenarios.

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

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, fixed maturities that are not designated as held-to-maturity, and public equity securities. As of December 31, 2023 and 2022, the Company had liquid assets of $2,582 million and $2,010 million, respectively. The portion of liquid assets comprised cash and cash equivalents and short-term investments was $192 million and $263 million as of December 31, 2023 and 2022, respectively. As of December 31, 2023, $2,268 million, or 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.

Financing Activities

Term and Universal Life Reserve Financing

For business written prior to the implementation of principle-based reserving, Regulation XXX and Guideline AXXX require domestic life insurers to establish statutory reserves for term and universal life insurance policies with long-term premium guarantees that are consistent with the statutory reserves required for other individual life policies with similar guarantees. Many market participants believe that these levels of reserves are excessive relative to the levels reasonably required to maintain solvency for moderately adverse experience. The difference between the statutory reserve and the amount necessary to maintain solvency for moderately adverse experience is considered to be the non-economic portion of the statutory reserve.

The Company uses affiliated captive reinsurance companies 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.


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As of December 31, 2023, the affiliated captive reinsurance companies have entered into agreements with external counterparties providing for the issuance of up to an aggregate of $15,700 million of surplus notes by our affiliated captive reinsurers in return for the receipt of credit-linked notes (“Credit-Linked Note Structures”), of which $13,820 million of surplus notes was outstanding, as compared to an aggregate issuance capacity of $16,050 million, of which $14,070 million was outstanding as of December 31, 2022. 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. The captive can redeem the principal amount of the outstanding credit-linked notes for cash upon the occurrence of, and in an amount necessary to remedy, a specified liquidity stress event affecting the captive. Under the agreements, the external counterparties have agreed to fund any such payments under the credit-linked notes in return for the receipt of fees. Under certain of the transactions, Prudential Financial has agreed to make capital contributions to the captive to reimburse it for investment losses in excess of specified amounts and/or has agreed to reimburse the external counterparties for any payments made under the credit-linked notes. To date, no such payments under the credit-linked notes have been required. Under these transactions, because valid rights of set-off exist, interest and principal payments on the surplus notes and on the credit-linked notes are settled on a net basis, and the surplus notes are reflected in the Company’s total consolidated borrowings on a net basis.

As of December 31, 2023, our affiliated captive reinsurance companies had outstanding an aggregate of $2,600 million of debt issued for the purpose of financing Regulation XXX and Guideline AXXX non-economic reserves, of which approximately $700 million relates to Regulation XXX reserves and approximately $1,900 million relates to Guideline AXXX reserves. In addition, as of December 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.

Prudential Funding, LLC

Prudential Financial and Prudential Funding borrow funds in the capital markets primarily through the direct issuance of commercial paper. The borrowings serve as an additional source of financing to meet our working capital needs. Prudential Funding operates under a support agreement with Prudential Insurance whereby Prudential Insurance has agreed to maintain Prudential Funding’s positive tangible net worth at all times.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk

Market risk is defined as the risk of loss from changes in interest rates, equity prices and foreign currency exchange rates resulting from asset/liability mismatches where the change in the value of our liabilities is not offset by the change in value of our assets.

For additional information regarding the potential impacts of interest rate and other market fluctuations, as well as general economic and market conditions on our businesses and profitability, see “Item 1A. Risk Factors” above. For additional information regarding our liquidity and capital resources, which may be impacted by changing market risks, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources” above.

Market Risk Management

Management of market risk, which we consider to be a combination of both investment risk and market risk exposures, includes the identification and measurement of various forms of risk, the establishment of risk thresholds and the creation of processes intended to maintain risks within these thresholds while optimizing returns on the underlying assets or liabilities. As an indirect wholly-owned subsidiary of Prudential Financial, the Company benefits from the risk management strategies implemented by Prudential Financial.

Our risk management process utilizes a variety of tools and techniques, including:

•Measures of price sensitivity to market changes (e.g., interest rates, equity index prices, foreign exchange);

•Asset/liability management;

•Stress scenario testing;

•Hedging programs and affiliated reinsurance; and

•Risk management governance, including policies, limits, and a committee that oversees investment and market risk.


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Market Risk Mitigation

Risk mitigation takes three primary forms:

•Asset/Liability Management: Managing assets to liability-based measures. For example, investment policies identify target durations for assets based on liability characteristics and asset portfolios are managed within ranges around them. This mitigates potential unanticipated economic losses from interest rate movements.

•Hedging: Using derivatives to offset risk exposures. For example, for our variable annuities business, potential living benefit claims resulting from more severe market conditions are hedged using derivative instruments.

•Management of portfolio concentration risk. For example, ongoing monitoring and management of key rate, currency and other concentration risks support diversification efforts to mitigate exposure to individual markets and sources of risk.

Market Risk Related to Interest Rates

We perform liability-driven investing and engage in careful asset/liability management. Asset/liability mismatches create the risk that changes in liability values will differ from the changes in the value of the related assets. Additionally, changes in interest rates may impact other items including, but not limited to, the following:

•Net investment spread between the amounts that we are required to pay and the rate of return we are able to earn on investments for certain products supported by general account investments;

•Asset-based fees earned on assets under management or contractholder account values;

•Net exposure to the guarantees provided under certain products; and

•Our capital levels.

In order to mitigate the impact that an unfavorable interest rate environment has on our net interest margins, we employ a proactive asset/liability management program, which includes strategic asset allocation and derivative strategies within a disciplined risk management framework. These strategies seek to match the characteristics of our products, and to approximate the interest rate sensitivity of the assets with the estimated interest rate sensitivity of the product liabilities. Our asset/liability management program also helps manage duration gaps, currency and other risks between assets and liabilities through the use of derivatives. We adjust this dynamic process as products change, as customer behavior changes and as changes in the market environment occur. As a result, our asset/liability management process has permitted us to manage interest rate risk successfully through several market cycles.

We use duration and convexity analyses to measure price sensitivity to interest rate changes. Duration measures the relative sensitivity of the fair value of a financial instrument to changes in interest rates. Convexity measures the rate of change in duration with respect to changes in interest rates. We use asset/liability management and derivative strategies to manage our interest rate exposure by matching the relative sensitivity of asset and liability values to interest rate changes, or by controlling the “duration mismatch” of assets and liability duration targets. In certain markets, capital market limitations that hinder our ability to acquire assets that approximate the duration of some of our liabilities are considered in setting duration targets. We consider risk-based capital and tax implications as well as current market conditions in our asset/liability management strategies.

The Company also mitigates interest rate risk through a market value adjusted (“MVA”) provision on certain of the Company’s annuity products' fixed investment options. This MVA provision limits interest rate risk by subjecting the contractholder to an MVA when funds are withdrawn or transferred to variable investment options before the end of the guarantee period. In the event of rising interest rates, which generally make the fixed maturity securities underlying the guarantee less valuable, the MVA could be negative. In the event of declining interest rates, which generally make the fixed maturity securities underlying the guarantee more valuable, the MVA could be positive. The resulting increase or decrease in the value of the fixed option, from calculation of the MVA, is designed to offset the decrease or increase in the market value of the securities underlying the guarantee.


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We assess the impact of interest rate movements on the value of our financial assets, financial liabilities and derivatives using hypothetical test scenarios that assume either upward or downward 100 basis point parallel shifts in the 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 as of December 31, 2023 and 2022. This table is presented on a gross basis and excludes offsetting impacts to certain insurance liabilities that are not considered financial liabilities under U.S. GAAP. This scenario results in the greatest net exposure to interest rate risk of the hypothetical scenarios tested at those dates. While the test scenario is for illustrative purposes only and does not reflect our expectations regarding future interest rates or the performance of fixed income markets, it is a near-term, reasonably possible hypothetical change that illustrates the potential impact of such events. These test scenarios do not measure the changes in value that could result from non-parallel shifts in the yield curve which we would expect to produce different changes in discount rates for different maturities. As a result, the actual loss in fair value from a 100 basis point change in interest rates could be different from that indicated by these calculations. The estimated changes in fair values do not include separate account assets.


	December 31, 2023						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)			$	2,386	$	(224)			$	1,743	$	(166)
Policy loans			1,115		0				212		0
Commercial mortgage and other loans			238		(11)				142		(7)
Derivatives:

Swaps	$	297	3		3		$	171	16		(2)
Options	1,289		(13)		10		509		(20)		0
Forwards	10		0		0		8		0		0
Indexed universal life contracts			(142)		19				(108)		17
Indexed annuity contracts			(95)		(9)				0		0
Total embedded derivatives(2)			(237)		10				(108)		17
Financial liabilities with interest rate risk(3):
Policyholders' account balances-investment contracts			179		0				217		1
Insurance liabilities with interest rate risk:
Benefit reserves (traditional and limited-payment contracts)(4)			1,249		102				1,151		102
Market risk benefits(5)			302		186				398		216
Net estimated potential gain					$	76					$	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 embedded derivatives. Amounts reported gross of reinsurance.

(3)Excludes approximately $5 billion and $4 billion as of December 31, 2023 and 2022, respectively, 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 liabilities, including investment contracts.

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

(5)Amounts reported gross of reinsurance.


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Under U.S. GAAP, the fair value of the MRBs and embedded derivatives for certain features associated with indexed universal life, and indexed annuity contracts, reflected in the table above, includes the impact of the market’s perception of our 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” above.

Market Risk Related to Equity Prices

We have exposure to equity price risk through our investments in equity securities, equity-based derivatives, MRBs and embedded derivatives associated with index-linked crediting features of universal life and annuity contracts. Changes in equity prices may impact other items including, but not limited to, the following:

•Asset-based fees earned on assets under management or contractholder account value; and

•Net exposure to the guarantees provided under certain products.

We manage equity price risk against benchmarks in respective markets. We benchmark our return on equity holdings against a blend of market indices, mainly the S&P 500 and Russell 2000 for U.S. equities. We benchmark foreign equities against the Tokyo Price Index, and the MSCI EAFE, a market index of European, Australian, and Far Eastern equities. We target price sensitivities that approximate those of the benchmark indices. For equity investments within the separate accounts, the investment risk is borne by the separate account contractholder rather than by the Company.

We estimate our equity risk from a hypothetical 10% decline in equity benchmark market levels. The following table sets forth the net estimated potential loss in fair value from such a decline as of December 31, 2023 and 2022. While these scenarios are for illustrative purposes only and do not reflect our expectations regarding future performance of equity markets or of our equity portfolio, they represent near-term reasonably possible hypothetical changes that illustrate the potential impact of such events. These scenarios consider only the direct impact on fair value of declines in equity benchmark market levels and not changes in asset-based fees recognized as revenue, or changes in assumptions such as market volatility or mortality, utilization or persistency rates in our variable annuity contracts that could also impact the fair value of our living benefit features. In addition, these scenarios do not reflect the impact of basis risk, such as potential differences in the performance of the investment funds underlying the variable annuity products relative to the market indices we use as a basis for developing our hedging strategy. The impact of basis risk could result in larger differences between the change in fair value of the equity-based derivatives and the related living benefit features in comparison to these scenarios. In calculating these amounts, we exclude separate account equity securities.


	December 31, 2023						December 31, 2022
	Notional		Fair Value		Hypothetical Change in Fair Value		Notional		Fair Value		Hypothetical Change in Fair Value
	(in millions)
Equity securities			$	5	$	(1)			$	4	$	0
Equity-based derivatives(1)	$	1,289	(13)		(23)		$	509	(20)		(3)
Indexed universal life contracts			(142)		2				(108)		3
Indexed annuity contracts			(95)		20				0		0
Total embedded derivatives(1)(2)			(237)		22				(108)		3
Market risk benefits(3)			302		(83)				398		(80)
Net estimated potential loss					$	(85)					$	(80)

(1)The notional and fair value of equity-based derivatives and the fair value of embedded derivatives are also reflected in amounts under “Market Risk Related to Interest Rates” above and are not cumulative.

(2)Excludes any offsetting impact of derivative instruments purchased to hedge changes in the embedded derivatives. Amounts reported gross of reinsurance.

(3)Amounts reported gross of reinsurance.

Market Risk Related to Foreign Currency Exchange Rates

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


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Derivatives

We use derivative financial instruments primarily to reduce market risk from changes in interest rates, equity prices and foreign currency exchange rates, including their use to alter interest rate or foreign currency exposures arising from mismatches between assets and liabilities. Our derivatives primarily include swaps, futures, options and forward contracts that are exchange-traded or contracted in the OTC market.

Additionally, our derivatives include embedded derivative instruments associated with the index-linked features of certain universal life and annuity products. For additional information regarding our derivative activities, see Note 4 to the Financial Statements.

Market Risk Related to Variable Annuity Products

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, market volatility and actuarial assumptions. We manage our exposure to certain risks driven by fluctuations in capital markets primarily through a combination of product design features, such as an automatic rebalancing feature and/or inclusion in our ALM strategy. In addition, we hedge or limit our exposure to the risk created by capital market fluctuations through affiliated reinsurance. Our guaranteed living and death benefit features on variable annuities are accounted for as MRBs and recorded at fair value. The market risk sensitivities associated with U.S. GAAP values of both the MRBs and the related derivatives used to hedge the changes in fair value of these MRBs are provided under “Market Risk Related to Interest Rates” and “Market Risk Related to Equity Prices” above.

For additional information regarding our risk management strategies, including our ALM strategy and product design features, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Results of Operations” above.


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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

PRUCO LIFE INSURANCE COMPANY OF NEW JERSEY

FINANCIAL STATEMENTS INDEX


			Page
Management’s Annual Report on Internal Control Over Financial Reporting			46
Report of Independent Registered Public Accounting Firm (PCAOB ID 238)			47
Statements of Financial Position as of December 31, 202 3 and 202 2			49
Statements of Operations and Comprehensive Income (Loss) for the years ended December 31, 202 3 , 202 2 and 202 1			50
Statements of Equity for the years ended December 31, 202 3 , 202 2 and 202 1			51
Statements of Cash Flows for the years ended December 31, 202 3 , 202 2 and 202 1			52
Notes to Financial Statements:			53
1. Business and Basis of Presentation			54
2. Significant Accounting Policies and Pronouncements			63
3 . Investments			79
4. Derivatives and Hedging			90
5 . Fair Value of Assets and Liabilities			97
6 . Deferred Policy Acquisition Costs and Deferred Reinsurance			110
7. Separate Accounts			111
8. L iability for Future Policy Benefits			113
9 . Policyholders' Account Balances			122
10 . Market Risk Benefits			127
11 . Reinsurance			129
12 . Income Taxes			133
13 . Equity			136
14. Statutory Net Income and Surplus and Dividend Restrictions			137
15 . Related Party Transactions			138
16 . Commitments and Contingent Liabilities			140


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Management’s Annual Report on Internal Control Over Financial Reporting

Management of Pruco Life Insurance Company of New Jersey (the “Company”) is responsible for establishing and maintaining adequate internal control over financial reporting. Management conducted an assessment of the effectiveness, as of December 31, 2023, of the Company’s internal control over financial reporting, based on the framework established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”). Based on our assessment under that framework, management concluded that the Company’s internal control over financial reporting was effective as of December 31, 2023.

Our internal control over financial reporting is a process designed by or under the supervision of our principal executive and principal financial officers to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. Our internal control over financial reporting includes policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect transactions and dispositions of assets; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures are being made only in accordance with authorizations of management and the directors of the Company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the Company’s assets that could have a material effect on our financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

This Annual Report does not include an attestation report of the Company’s registered public accounting firm, PricewaterhouseCoopers LLP, regarding the internal control over financial reporting. Management’s report was not subject to attestation by the Company’s registered public accounting firm pursuant to rules of the Securities and Exchange Commission that permit the Company to provide only management’s report in this Annual Report.

March 20, 2024


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Report of Independent Registered Public Accounting Firm

To the Board of Directors and Stockholder of Pruco Life Insurance Company of New Jersey

Opinion on the Financial Statements

We have audited the accompanying statements of financial position of Pruco Life Insurance Company of New Jersey (the "Company") as of December 31, 2023 and 2022, and the related statements of operations and comprehensive income, of equity and of cash flows for each of the three years in the period ended December 31, 2023, including the related notes and financial statement schedule listed in the index appearing under Item 15(a)(2) (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2023 and 2022, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2023 in conformity with accounting principles generally accepted in the United States of America.

Change in Accounting Principle

As discussed in Note 2 to the financial statements, the Company changed the manner in which it accounts for long-duration insurance and investment contracts in 2023.

Basis for Opinion

These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits of these financial statements in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matters

The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that (i) relates to accounts or disclosures that are material to the financial statements and (ii) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Valuation of Guaranteed Benefit Features Associated with Certain Life Products Included in the Liability for Future Policy Benefits

As described in Notes 2 and 8 to the financial statements, the Company issues certain life contracts which contain guaranteed benefit features, including no-lapse guarantees. For these contract features, additional insurance reserves are established when associated assessments are recognized. The liability for no-lapse guarantee features is included within the additional insurance reserves balance. As of December 31, 2023, the additional insurance reserve was $986 million, recorded within the liability for future policy benefits. As disclosed by management, this liability is established using current best estimate assumptions, including mortality rates, lapse rates, and premium pattern rates, as well as interest rate and equity market return assumptions (collectively, the significant 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). The liability equals the current benefit ratio multiplied by cumulative assessments recognized to date, plus interest, less cumulative excess payments to date.


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The principal considerations for our determination that performing procedures relating to the valuation of guaranteed benefit features associated with certain life products included in the liability for future policy benefits is a critical audit matter are (i) the significant judgment by management when developing the significant assumptions for the guaranteed benefit features accounted for as additional insurance reserves, (ii) a high degree of auditor judgment, subjectivity and effort in performing procedures and evaluating audit evidence related to the significant assumptions used by management, and (iii) the audit effort involved the use of professionals with specialized skill and knowledge.

Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the financial statements. These procedures included testing the effectiveness of controls relating to the valuation of guaranteed benefit features associated with certain life products included in the liability for future policy benefits, including controls over the development of the significant assumptions. These procedures also included, among others, (i) testing management’s process for determining the valuation of guaranteed benefit features associated with certain life products included in the liability for future policy benefits, (ii) the use of professionals with specialized skill and knowledge to assist in evaluating the reasonableness of the significant assumptions used in the valuation based on industry knowledge and data as well as historical Company data and experience. The procedures also included testing the completeness and accuracy of data used to develop the significant assumptions and testing that the significant assumptions are accurately reflected in the models.

/s/ PricewaterhouseCoopers LLP

New York, New York

March 20, 2024

We have served as the Company's auditor since 1996.


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Pruco Life Insurance Company of New Jersey

Statements of Financial Position

December 31, 2023 and 2022 (in thousands, except share amounts)


	December 31, 2023		December 31, 2022
ASSETS
Fixed maturities, available-for-sale, at fair value (allowance for credit losses: 2023 – $4; 2022 – $363) (amortized cost: 2023 – $2,559,973; 2022 – $1,990,718)	$	2,362,095	$	1,719,488
Fixed maturities, trading, at fair value (amortized cost: 2023 – $25,745; 2022 – $27,566)	23,440		23,782
Equity securities, at fair value (cost: 2023 – $4,653; 2022 – $4,614)	4,615		4,358

Policy loans	1,115,096		212,063
Short-term investments	5,959		7,000
Commercial mortgage and other loans (net of $1,162 and $408 allowance for credit losses at December 31, 2023 and December 31, 2022, respectively)	239,629		148,179
Other invested assets (includes $4,387 and $2,389 of assets measured at fair value at December 31, 2023 and 2022, respectively)	153,885		129,528
Total investments	3,904,719		2,244,398
Cash and cash equivalents	186,383		255,767
Deferred policy acquisition costs(1)	393,139		351,874
Accrued investment income	53,906		25,222
Reinsurance recoverables(1)	3,603,225		3,098,248
Receivables from parent and affiliates	24,502		19,348

Income tax assets(1)	68,079		67,615
Market risk benefit assets(1)	537,659		558,624
Other assets(1)	49,010		48,391
Separate account assets	14,077,103		13,926,958
TOTAL ASSETS	$	22,897,725	$	20,596,445
LIABILITIES AND EQUITY
LIABILITIES
Policyholders' account balances(1)	$	4,036,184	$	2,774,315
Future policy benefits(1)	2,398,443		2,130,042



Market risk benefit liabilities(1)	537,659		558,624

Payables to parent and affiliates	9,380		7,546
Other liabilities(1)	470,830		172,305
Separate account liabilities	14,077,103		13,926,958
Total liabilities	21,529,599		19,569,790
COMMITMENTS AND CONTINGENT LIABILITIES (See Note 16)
EQUITY
Common stock ($5 par value; 400,000 shares authorized; issued and outstanding)	2,000		2,000
Additional paid-in capital	1,032,513		775,412
Retained earnings(1)	381,140		285,433
Accumulated other comprehensive income (loss)(1)	(47,527)		(36,190)
Total equity	1,368,126		1,026,655
TOTAL LIABILITIES AND EQUITY	$	22,897,725	$	20,596,445

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

See Notes to Financial Statements


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PRUCO LIFE INSURANCE COMPANY OF NEW JERSEY

Statements of Operations and Comprehensive Income (Loss)

Years Ended December 31, 2023, 2022 and 2021 (in thousands)


	2023		2022		2021
REVENUES
Premiums(1)	$	39,553	$	33,708	$	28,749
Policy charges and fee income(1)	59,679		57,734		72,162
Net investment income	166,024		98,392		100,491
Asset administration fees	9,147		8,480		8,875
Other income (loss)	3,576		(2,153)		781
Realized investment gains (losses), net(1)	(44,310)		13,835		515
Change in value of market risk benefits, net of related hedging gain (loss)(1)	62,792		(142,046)		39,670
TOTAL REVENUES	296,461		67,950		251,243
BENEFITS AND EXPENSES
Policyholders’ benefits(1)	55,503		28,189		40,779
Change in estimates of liability for future policy benefits(1)	(2,115)		16,631		2,819
Interest credited to policyholders’ account balances	64,135		47,578		43,004
Amortization of deferred policy acquisition costs(1)	20,572		19,290		18,198
General, administrative and other expenses(1)	50,789		56,865		50,727
TOTAL BENEFITS AND EXPENSES	188,884		168,553		155,527
INCOME (LOSS) FROM OPERATIONS BEFORE INCOME TAXES	107,577		(100,603)		95,716
Income tax expense (benefit)(1)	11,870		(30,774)		11,093
NET INCOME (LOSS)	$	95,707	$	(69,829)	$	84,623
Other comprehensive income (loss), before tax:
Foreign currency translation adjustments	225		(336)		(259)
Net unrealized investment gains (losses)(1)	58,515		(376,485)		(67,261)
Interest rate remeasurement of future policy benefits(1)	(10,299)		59,867		13,404
Gain (loss) from changes in non-performance risk on market risk benefits(1)	(62,792)		142,046		(39,669)
Total	(14,351)		(174,908)		(93,785)
Less: Income tax expense (benefit) related to other comprehensive income (loss)(1)	(3,014)		(36,731)		(19,694)
Other comprehensive income (loss), net of taxes	(11,337)		(138,177)		(74,091)
Comprehensive income (loss)	$	84,370	$	(208,006)	$	10,532

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

See Notes to Financial Statements


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PRUCO LIFE INSURANCE COMPANY OF NEW JERSEY

Statements of Equity

Years Ended December 31, 2023, 2022 and 2021 (in thousands)


	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
Cumulative effect of adoption of ASU 2018-12					(57,811)		(9,329)		(67,140)
Contributed capital			101,300						101,300

Contributed (distributed) capital- parent/child asset transfers			67						67
Comprehensive income (loss):
Net income (loss)					84,623				84,623
Other comprehensive income (loss), net of tax							(74,091)		(74,091)
Total comprehensive income (loss)									10,532
Balance, December 31, 2021(1)	2,000		450,102		355,262		101,987		909,351

Contributed capital			326,700						326,700

Contributed (distributed) capital- parent/child asset transfers			(1,390)						(1,390)
Comprehensive income (loss):
Net income (loss)					(69,829)				(69,829)
Other comprehensive income (loss), net of tax							(138,177)		(138,177)
Total comprehensive income (loss)									(208,006)
Balance, December 31, 2022(1)	2,000		775,412		285,433		(36,190)		1,026,655

Contributed capital			256,600						256,600

Contributed (distributed) capital- parent/child asset transfers			501						501
Comprehensive income (loss):
Net income (loss)					95,707				95,707
Other comprehensive income (loss), net of tax							(11,337)		(11,337)
Total comprehensive income (loss)									84,370
Balance, December 31, 2023	$	2,000	$	1,032,513	$	381,140	$	(47,527)	$	1,368,126

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

See Notes to Financial Statements


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PRUCO LIFE INSURANCE COMPANY OF NEW JERSEY

Statements of Cash Flows

Years Ended December 31, 2023, 2022 and 2021 (in thousands)


	2023		2022		2021
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)(1)	$	95,707	$	(69,829)	$	84,623
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Policy charges and fee income(1)	(9,491)		(3,182)		6,705
Interest credited to policyholders’ account balances	64,135		47,578		43,004
Realized investment (gains) losses, net(1)	44,310		(13,835)		(515)
Change in value of market risk benefits, net of related hedging (gains) losses(1)	(62,792)		142,046		(39,670)
Change in:
Future policy benefits and other insurance liabilities(1)	290,389		422,975		315,782
Reinsurance recoverables(1)	(150,499)		(365,401)		(116,031)
Accrued investment income	(28,684)		(2,683)		(1,291)
Net payables to/receivables from parent and affiliates	(8,270)		3,073		(4,223)
Deferred policy acquisition costs(1)	(41,264)		(43,130)		(64,526)
Income taxes(1)	2,416		(8,362)		4,550
Derivatives, net	14,217		4,514		25,229
Other, net(1)	(117,664)		(102,980)		(123,099)
Cash flows from (used in) operating activities	92,510		10,784		130,538
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from the sale/maturity/prepayment of:
Fixed maturities, available-for-sale	114,300		101,647		101,100
Fixed maturities, trading	1,821		6,251		580
Equity securities	27		45		0
Policy loans	30,698		28,786		28,007
Ceded policy loans	(2,198)		(1,687)		(1,827)
Short-term investments	12,000		9,997		32
Commercial mortgage and other loans	10,772		18,108		21,360
Other invested assets	2,288		3,014		6,414

Payments for the purchase/origination of:
Fixed maturities, available-for-sale	(681,930)		(335,123)		(226,125)
Fixed maturities, trading	0		0		(19,724)
Equity securities	(57)		(182)		0
Policy loans	(926,073)		(21,782)		(17,769)
Ceded policy loans	3,058		2,033		1,770
Short-term investments	(10,949)		(7,000)		(9,997)
Commercial mortgage and other loans	(102,277)		(51,654)		(3,912)
Other invested assets	(16,146)		(16,508)		(23,513)

Notes receivable from parent and affiliates, net	629		(36)		(33)
Derivatives, net	458		3,806		1,301
Other, net	0		4,053		(785)
Cash flows from (used in) investing activities	(1,563,579)		(256,232)		(143,121)


Table of Contents


	2023		2022		2021
CASH FLOWS FROM FINANCING ACTIVITIES:
Policyholders’ account deposits	1,592,494		496,074		559,970
Ceded policyholders’ account deposits	(319,300)		(313,962)		(331,276)
Policyholders’ account withdrawals	(408,084)		(384,210)		(514,729)
Ceded policyholders’ account withdrawals	265,027		240,291		248,163
Net change in securities sold under agreement to repurchase and cash collateral for loaned securities	0		0		(2,725)

Contributed / (return of) capital	255,000		325,400		100,000
Contributed (distributed) capital - parent/child asset transfers	634		(1,759)		85



Drafts outstanding	202		5,501		(1,804)
Other, net	15,712		(2,436)		22,688
Cash flows from (used in) financing activities	1,401,685		364,899		80,372
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS	(69,384)		119,451		67,789
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR	255,767		136,316		68,527
CASH AND CASH EQUIVALENTS, END OF YEAR	$	186,383	$	255,767	$	136,316
SUPPLEMENTAL CASH FLOW INFORMATION
Income taxes paid (refund)	$	9,454	$	(22,412)	$	6,543
Interest paid	$	156	$	0	$	18

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

Significant Non-Cash Transactions

There were no significant non-cash transactions for the years ended December 31, 2023, 2022 and 2021.

See Notes to Financial Statements

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PRUCO LIFE INSURANCE COMPANY OF NEW JERSEY

Notes to Financial Statements

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 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 and 2021 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 Financial Statements.

The Financial Statements have been prepared in accordance with generally accepted accounting principles in the United States of America ("U.S. GAAP"). Intercompany balances and transactions have been eliminated.

Adoption of ASU 2018-12

In August 2018, the Financial Accounting Standards Board ("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 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 originally reported for 2022 and 2021, 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 Financial Statements included herein.

Table of Contents

PRUCO LIFE INSURANCE COMPANY OF NEW JERSEY

Notes to Financial Statements—(Continued)

Statements of Financial Position:


	December 31, 2022
IMPACTED LINES ONLY	As Originally 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

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PRUCO LIFE INSURANCE COMPANY OF NEW JERSEY

Notes to Financial Statements—(Continued)

Statements of Operations and Comprehensive Income (Loss):


	Year Ended December 31, 2022
IMPACTED LINES ONLY	As Originally Reported		Effect of Change		As Currently Reported
	(in thousands)
REVENUES
Premiums	$	34,901	$	(1,193)	$	33,708
Policy charges and fee income	85,416		(27,682)		57,734
Realized investment gains (losses), net	13,416		419		13,835
Change in value of market risk benefits, net of related hedging gain (loss)	0		(142,046)		(142,046)
TOTAL REVENUES	238,452		(170,502)		67,950
BENEFITS AND EXPENSES
Policyholders’ benefits	55,094		(26,905)		28,189
Change in estimates of liability for future policy benefits	0		16,631		16,631
Amortization of deferred policy acquisition costs	24,512		(5,222)		19,290
General, administrative and other expenses	58,570		(1,705)		56,865
TOTAL BENEFITS AND EXPENSES	185,754		(17,201)		168,553
INCOME (LOSS) FROM OPERATIONS BEFORE INCOME TAXES	52,698		(153,301)		(100,603)
Income tax expense (benefit)	1,419		(32,193)		(30,774)
NET INCOME (LOSS)	$	51,279	$	(121,108)	$	(69,829)
Other comprehensive income (loss), before tax:
Net unrealized investment gains (losses)	(403,214)		26,729		(376,485)
Interest rate remeasurement of future policy benefits	0		59,867		59,867
Gain (loss) from changes in non-performance risk on market risk benefits	0		142,046		142,046
Total	(403,550)		228,642		(174,908)
Less: Income tax expense (benefit) related to other comprehensive income (loss)	(84,746)		48,015		(36,731)
Other comprehensive income (loss), net of taxes	(318,804)		180,627		(138,177)
Comprehensive income (loss)	$	(267,525)	$	59,519	$	(208,006)

Table of Contents

PRUCO LIFE INSURANCE COMPANY OF NEW JERSEY

Notes to Financial Statements—(Continued)


	Year Ended December 31, 2021
IMPACTED LINES ONLY	As Originally Reported		Effect of Change		As Currently Reported
	(in thousands)
REVENUES
Premiums	$	29,945	$	(1,196)	$	28,749
Policy charges and fee income	89,781		(17,619)		72,162
Realized investment gains (losses), net	1,968		(1,453)		515
Change in value of market risk benefits, net of related hedging gain (loss)	0		39,670		39,670
TOTAL REVENUES	231,841		19,402		251,243
BENEFITS AND EXPENSES
Policyholders’ benefits	48,516		(7,737)		40,779
Change in estimates of liability for future policy benefits	0		2,819		2,819
Amortization of deferred policy acquisition costs	24,203		(6,005)		18,198
General, administrative and other expenses	52,194		(1,467)		50,727
TOTAL BENEFITS AND EXPENSES	167,917		(12,390)		155,527
INCOME (LOSS) FROM OPERATIONS BEFORE INCOME TAXES	63,924		31,792		95,716
Income tax expense (benefit)	4,417		6,676		11,093
NET INCOME (LOSS)	$	59,507	$	25,116	$	84,623
Other comprehensive income (loss), before tax:
Net unrealized investment gains (losses)	(69,049)		1,788		(67,261)
Interest rate remeasurement of future policy benefits	0		13,404		13,404
Gain (loss) from changes in non-performance risk on market risk benefits	0		(39,669)		(39,669)
Total	(69,308)		(24,477)		(93,785)
Less: Income tax expense (benefit) related to other comprehensive income (loss)	(14,554)		(5,140)		(19,694)
Other comprehensive income (loss), net of taxes	(54,754)		(19,337)		(74,091)
Comprehensive income (loss)	$	4,753	$	5,779	$	10,532

Table of Contents

PRUCO LIFE INSURANCE COMPANY OF NEW JERSEY

Notes to Financial Statements—(Continued)

Statements of Cash Flows:


	Year Ended December 31, 2022
IMPACTED LINES ONLY	As Originally Reported		Effect of Change		As Currently Reported
	(in thousands)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)	$	51,279	$	(121,108)	$	(69,829)
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Policy charges and fee income	(19,960)		16,778		(3,182)
Realized investment (gains) losses, net	(13,416)		(419)		(13,835)
Change in value of market risk benefits, net of related hedging (gains) losses	0		142,046		142,046
Change in:
Future policy benefits and other insurance liabilities	222,224		200,751		422,975
Reinsurance recoverables	(268,022)		(97,379)		(365,401)
Deferred policy acquisition costs	(38,058)		(5,072)		(43,130)
Income taxes	23,831		(32,193)		(8,362)
Other, net	424		(103,404)		(102,980)
Cash flows from (used in) operating activities	$	10,784	$	0	$	10,784


	Year Ended December 31, 2021
IMPACTED LINES ONLY	As Originally Reported		Effect of Change		As Currently Reported
	(in thousands)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)	$	59,507	$	25,116	$	84,623
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Policy charges and fee income	(21,724)		28,429		6,705
Realized investment (gains) losses, net	(1,968)		1,453		(515)
Change in value of market risk benefits, net of related hedging (gains) losses	0		(39,670)		(39,670)
Change in:
Future policy benefits and other insurance liabilities	294,654		21,128		315,782
Reinsurance recoverables	(209,431)		93,400		(116,031)
Deferred policy acquisition costs	(58,421)		(6,105)		(64,526)
Income taxes	(2,127)		6,677		4,550
Other, net	7,329		(130,428)		(123,099)
Cash flows from (used in) operating activities	$	130,538	$	0	$	130,538

Table of Contents

PRUCO LIFE INSURANCE COMPANY OF NEW JERSEY

Notes to Financial Statements—(Continued)

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 (“MRBs”) 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").


	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.

Table of Contents

PRUCO LIFE INSURANCE COMPANY OF NEW JERSEY

Notes to Financial Statements—(Continued)


	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".


	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.

Table of Contents

PRUCO LIFE INSURANCE COMPANY OF NEW JERSEY

Notes to Financial Statements—(Continued)


	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) 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.


	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.

Table of Contents

PRUCO LIFE INSURANCE COMPANY OF NEW JERSEY

Notes to Financial Statements—(Continued)


	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.

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 future policy 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; 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.

Reclassifications

Certain amounts in prior periods have been reclassified for reasons unrelated to the adoption of ASU 2018-12 to conform to the current period presentation.

Out of Period Adjustments

During the three and twelve months ended December 31, 2023, the Company recorded out of period adjustments resulting in an aggregate net charge of $6 million and $11 million, respectively, to “Income (loss) from operations before income taxes”. These adjustments primarily relate to ceded reserves from certain affiliated reinsurance activity.

Management has evaluated the impact of all out of period adjustments, both individually and in the aggregate, and concluded that they are not material to any current or previously reported quarterly or annual financial statements.

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PRUCO LIFE INSURANCE COMPANY OF NEW JERSEY

Notes to Financial Statements—(Continued)

2. SIGNIFICANT ACCOUNTING POLICIES AND PRONOUNCEMENTS

ASSETS

Fixed maturities, available-for-sale, at fair value ("AFS debt securities") includes bonds, notes and redeemable preferred stock that are carried at fair value. See Note 5 for additional information regarding the determination of fair value. The purchased cost of fixed maturities is adjusted for amortization of premiums and accretion of discounts to maturity or, if applicable, call date.

AFS debt securities, where fair value is below amortized cost, are reviewed quarterly to determine whether the amortized cost basis of the security is recoverable. For mortgage-backed and asset-backed AFS debt securities, a credit impairment will be recognized in earnings as an allowance for credit losses and reported in “Realized investment gains (losses), net,” to the extent the amortized cost exceeds the net present value of projected future cash flows (the “net present value”) for the security. However, the credit impairment recorded cannot exceed the difference between the amortized cost and fair value of the respective security. The net present value used to measure a credit impairment is calculated by discounting the Company’s best estimate of projected future cash flows at the effective interest rate implicit in the AFS debt security at the date of acquisition. Once the Company has deemed all or a portion of the amortized cost uncollectible, the allowance is removed from the balance sheet by writing down the amortized cost basis of the AFS debt security. Any amount of an AFS debt security’s change in fair value not recorded as an allowance for credit losses will be recorded in Other Comprehensive Income (loss) (“OCI”).

For all other AFS debt securities, qualitative factors are first considered including, but not limited to, the extent of the decline and the reasons for the decline in value (e.g., credit events, currency or interest-rate related, including general credit spread widening), and the financial condition of the issuer. If analysis of these qualitative factors results in the security needing to be impaired, a credit impairment will be recognized and measured using the same process for mortgage-backed and asset-backed AFS debt securities.

When an AFS debt security's fair value is below amortized cost and the Company has the intent to sell the AFS debt security, or it is more likely than not the Company will be required to sell the AFS debt security before its anticipated recovery, the amortized cost basis of the AFS debt security is written down to fair value and any previously recognized allowance is reversed. The write-down is reported in "Realized investment gains (losses), net."

Interest income, including amortization of premium and accretion of discount, are included in “Net investment income” under the effective yield method. Prepayment premiums are also included in “Net investment income.”

For high credit quality mortgage-backed and asset-backed AFS debt securities (those rated AA or above), the amortized cost and effective yield of the securities are adjusted as necessary to reflect historical prepayment experience and changes in estimated future prepayments. The adjustments to amortized cost are recorded as a charge or credit to “Net investment income” in accordance with the retrospective method.

For mortgage-backed and asset-backed AFS debt securities rated below AA, the effective yield is adjusted prospectively for any changes in the estimated timing and amount of cash flows unless the investment is purchased with credit deterioration or an allowance is currently recorded for the respective security. If an investment is impaired, any changes in the estimated timing and amount of cash flows will be recorded as the credit impairment, as opposed to a yield adjustment. If the asset is purchased with credit deterioration (or previously impaired), the effective yield will be adjusted if there are favorable changes in cash flows subsequent to the allowance being reduced to zero.

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PRUCO LIFE INSURANCE COMPANY OF NEW JERSEY

Notes to Financial Statements—(Continued)

For mortgage-backed and asset-backed AFS debt securities, cash flow estimates consider the payment terms of the underlying assets backing a particular security, including interest rate and prepayment assumptions based on data from widely accepted third-party data sources or internal estimates. In addition to interest rate and prepayment assumptions, cash flow estimates also include other assumptions regarding the underlying collateral including default rates and recoveries, which vary based on the asset type and geographic location, as well as the vintage year of the security. These assumptions can significantly impact income recognition, unrealized gains and loss recorded in OCI, and the amount of impairment recognized in earnings. The payment priority of the respective security is also considered. For all other AFS debt securities, cash flow estimates are driven by assumptions regarding probability of default and estimates regarding timing and amount of recoveries associated with a default. The Company has developed these estimates using information based on its historical experience as well as using market observable data, such as industry analyst reports and forecasts, sector credit ratings and other data relevant to the collectability of a security, such as the general payment terms of the security and the security’s position within the capital structure of the issuer.

Fixed maturities, trading, at fair value ("Trading debt securities") includes debt securities that are carried at fair value. See Note 5 for additional information regarding the determination of fair value. Realized and unrealized gains and losses for these investments are reported in “Other income (loss),” and interest income from these investments is reported in “Net investment income”.

Equity securities, at fair value consists of common stock and mutual fund shares carried at fair value. Realized and unrealized gains and losses on these investments are reported in “Other income (loss),” and dividend income is reported in “Net investment income” on the ex-dividend date.

Policy loans represents funds loaned to policyholders up to the cash surrender value of the associated insurance policies and are carried at the unpaid principal balances due to the Company from the policyholders. Interest income on policy loans is recognized in “Net investment income” at the contract interest rate when earned. Policy loans are fully collateralized by the cash surrender value of the associated insurance policies.

Short-term investments primarily consists of highly liquid debt instruments with a maturity of twelve months or less and greater than three months when purchased. These investments are generally carried at fair value or amortized cost that approximates fair value and include certain money market investments, funds managed similar to regulated money market funds, short-term debt securities issued by government sponsored entities and other highly liquid debt instruments.

Commercial mortgage and other loans consist of commercial mortgage loans and agricultural property loans. Commercial mortgage and other loans held for investment are generally carried at unpaid principal balance, net of unamortized deferred loan origination fees and expenses and net of any current expected credit loss ("CECL") allowance. Certain off-balance sheet credit exposures (e.g., indemnification of serviced mortgage loans, and certain unfunded mortgage loan commitments where the Company cannot unconditionally cancel the commitment) are also subject to a CECL allowance. See Note 16 for additional information.

Commercial mortgage and other loans acquired, including those related to the acquisition of a business, are recorded at fair value when purchased, reflecting any premiums or discounts to unpaid principal balances. Interest income, and the amortization of the related premiums or discounts, are included in “Net investment income” under the effective yield method. Prepayment fees are also included in “Net investment income.”

The CECL allowance represents the Company’s best estimate of expected credit losses over the remaining life of the assets or off-balance sheet credit exposures. The determination of the allowance considers historical credit loss experience, current conditions, and reasonable and supportable forecasts.

The allowance is calculated separately for commercial mortgage loans, agricultural mortgage loans, other collateralized and uncollateralized loans. For commercial mortgage and agricultural mortgage loans, the allowance is calculated using an internally developed CECL model that pools together loans that share similar risk characteristics. Similar risk characteristics used to create the pools include, but are not limited to, vintage, maturity, credit rating, and collateral type.

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PRUCO LIFE INSURANCE COMPANY OF NEW JERSEY

Notes to Financial Statements—(Continued)

Key inputs to the CECL model include unpaid principal balances, internal credit ratings, annual expected loss factors, average lives of the loans adjusted for prepayment considerations, current and historical interest rate assumptions, and other factors influencing the Company’s view of the current stage of the economic cycle and future economic conditions. Subjective considerations include a review of whether historical loss experience is representative of current market conditions and the Company’s view of the credit cycle. Model assumptions and factors are reviewed and updated as appropriate. Information about certain key inputs is detailed below.

Key factors in determining the internal credit ratings for commercial mortgage and agricultural mortgage loans include loan-to-value and debt-service-coverage ratios. Other factors include amortization, loan term, and estimated market value growth rate and volatility for the property type and region. The loan-to-value ratio compares the carrying amount of the loan to the fair value of the underlying property or properties collateralizing the loan, and is commonly expressed as a percentage. Loan-to-value ratios greater than 100% indicate that the carrying amount of the loan exceeds the collateral value. A loan-to-value ratio less than 100% indicates an excess of collateral value over the carrying amount of the loan. The debt service coverage ratio is a property’s net operating income as a percentage of its debt service payments. Debt service coverage ratios less than 1.0 indicates that property operations do not generate enough income to cover the loan’s current debt payments. A debt service coverage ratio greater than 1.0 indicates an excess of net operating income over the debt service payments. The values utilized in calculating these ratios are developed as part of the Company’s periodic review of the commercial mortgage loan and agricultural property loan portfolios, which includes an internal appraisal of the underlying collateral value. The Company’s periodic review also includes a quality re-rating process, whereby the internal quality rating originally assigned at underwriting is updated based on current loan, property and market information using a proprietary quality rating system. See Note 3 for additional information related to the loan-to-value ratios and debt service coverage ratios related to the Company’s commercial mortgage and agricultural loan portfolios.

Annual expected loss rates are based on historical default and loss experience factors. Using average lives, the annual expected loss rates are converted into life-of-loan loss expectations.

When individual loans no longer have the credit risk characteristics of the commercial or agricultural mortgage loan pools, they are removed from the pools and are evaluated individually for an allowance. The allowance is determined based on the outstanding loan balance less the present value of expected future cash flows discounted at the loan’s effective interest rate or the fair value of the collateral if the loan is collateral dependent.

The CECL allowance on commercial mortgage and other loans can increase or decrease from period to period based on the factors noted above. The change in allowance is reported in “Realized investment gains (losses), net.” As it relates to unfunded commitments that are in scope of this guidance, the CECL allowance is reported in “Other liabilities,” and the change in the allowance is reported in “Realized investment gains (losses), net.”

The CECL allowance for other collateralized and uncollateralized loans (e.g., corporate loans) carried at amortized cost is determined based on probability of default and loss given default assumptions by sector, credit quality and average lives of the loans. Additions to or releases of the allowance are reported in “Realized investment gains (losses), net.”

Once the Company has deemed a portion of the amortized cost to be uncollectible, the uncollectible portion of allowance is removed from the balance sheet by writing down the amortized cost basis of the loan. The carrying amount of the loan is not adjusted for subsequent recoveries in value.

Interest received on loans that are past due is either applied against the principal or reported as net investment income based on the Company’s assessment as to the collectability of the principal. The Company defines “past due” as principal or interest not collected at least 30 days past the scheduled contractual due date. See Note 3 for additional information about the Company’s past due loans.

The Company discontinues accruing interest on loans after the loans become 90 days delinquent as to principal or interest payments, or earlier when the Company has doubts about collectability. When the Company discontinues accruing interest on a loan, any accrued but uncollectible interest on the loan and other loans backed by the same collateral, if any, is charged against interest income in the same period. Generally, a loan is restored to accrual status only after all delinquent interest and principal are brought current and, in the case of loans where the payment of interest has been interrupted for a substantial period, or the loan has been modified, a regular payment performance has been established.

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PRUCO LIFE INSURANCE COMPANY OF NEW JERSEY

Notes to Financial Statements—(Continued)

Commercial mortgage and other loans are occasionally restructured. These restructurings generally include one or more of the following: full or partial payoffs outside of the original contract terms; changes to interest rates; extensions of maturity; or additions or modifications to covenants. Additionally, the Company may accept assets in full or partial satisfaction of the debt. Effective January 1, 2023, the Company adopted ASU 2022-02, Financial Instruments – Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosure, on a prospective basis. This ASU eliminates the accounting guidance for Troubled Debt Restructurings (“TDR”) for creditors and requires all loan restructurings to follow the modification guidance in ASC 310-20.

Prior to the adoption of ASU 2022-02, when restructurings occurred, they were evaluated individually to determine whether the restructuring or modification constituted a TDR as defined by authoritative accounting guidance. If the borrower was experiencing financial difficulty and the Company granted a concession, the restructuring, including those that involved a partial payoff or the receipt of assets in full satisfaction of the debt was deemed to be a TDR. 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.

Post adoption of ASU 2022-02, all restructurings are evaluated under the modification guidance in ASC 310-20. When a loan is modified, the Company evaluates whether the restructuring results in a continuation of the existing loan or a new loan. For modifications that result in a continuation of the existing loan, the CECL allowance of the loan is remeasured using the modified terms, including the loan’s post-modification effective yield, and the allowance is adjusted accordingly.

For modifications that result in a new loan, any CECL allowance is reversed and a direct write-down of the loan is recorded for the amount of the allowance, and any additional loss, net of recoveries, or any gain is recorded for the difference between the fair value of the new loan and the recorded investment in the loan. The new loan is evaluated prospectively for credit impairment based on the CECL allowance process noted above.

Other invested assets consist of the Company’s non-coupon investments in limited partnerships and limited liability companies ("LPs/LLCs"), other than operating joint ventures, as well as derivative assets. LPs/LLCs interests are accounted for using either the equity method of accounting, or at fair value. 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 (loss)”.

Realized investment gains (losses) are computed using the specific identification method. Realized investment gains and losses are generated from numerous sources, including the sales of fixed maturity securities, investments in joint ventures and limited partnerships and other types of investments, as well as changes to the allowance for credit losses recognized in earnings. Realized investment gains and losses also reflect fair value changes on commercial mortgage loans carried at fair value, and fair value changes on embedded derivatives and free-standing derivatives that do not qualify for hedge accounting treatment. See “Derivative Financial Instruments” below for additional information regarding the accounting for derivatives.

Cash and cash equivalents includes cash on hand, amounts due from banks, certain money market investments, funds managed similar to regulated money market funds, other debt instruments with maturities of three months or less when purchased, other than cash equivalents that are included in "Fixed maturities, available-for-sale, at fair value,” and receivables related to securities purchased under agreements to resell (see also "Securities sold under agreements to purchase" below.) The Company also engages in overnight borrowing and lending of funds with Prudential Financial and affiliates which are considered cash and cash equivalents. These assets are generally carried at fair value or amortized cost which approximates fair value.

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”. Upon the adoption of ASU 2018-12, the carrying amount of DAC for long-duration contracts is no longer subject to recoverability testing.

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PRUCO LIFE INSURANCE COMPANY OF NEW JERSEY

Notes to Financial Statements—(Continued)

DAC for most long-duration contracts 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 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.

Accrued investment income primarily includes accruals of interest and dividend income from investments that have been earned but not yet received.

Reinsurance recoverables include corresponding receivables associated with reinsurance arrangements with affiliates and third-party reinsurers, and are 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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PRUCO LIFE INSURANCE COMPANY OF NEW JERSEY

Notes to Financial 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. For reinsurance of limited-payment contracts, the Company establishes a cost of reinsurance asset relating to the direct DPL and amortizes this balance through “Premiums” using the same methodology and assumptions used to amortize the direct DPL.

For reinsurance of existing in-force blocks of long-duration contracts that transfer significant insurance risk, the difference between the fair value of the net consideration exchanged and the net liabilities ceded related to the underlying reinsured contracts is considered the net cost of reinsurance at the inception of the reinsurance agreement. This initial net cost of reinsurance is deferred and amortized into income over the remaining life of the reinsured policies on a basis consistent with the methodologies and assumptions used for amortizing DAC. This initial net cost of reinsurance may result in a deferred reinsurance gain which is recorded in "Other liabilities" and amortized through "Other income (loss)", or a deferred reinsurance loss which is recorded in "Other assets" and amortized through "General, administrative and other expenses".

Consistent with direct contracts, reinsurance agreements may also include features that meet the definition of an MRB and, if so, are accounted for at fair value. The fair value of direct or assumed MRBs reflects the Company's NPR, while the fair value of ceded MRBs reflects the counterparty credit risk of the reinsurer. Changes in the fair value of ceded MRBs, including the impact of changes in counterparty credit risk, are recorded in net income in "Change in value of market risk benefits, net of related hedging gain (loss)".

Coinsurance arrangements contrast with the Company’s yearly renewable term ("YRT") 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 YRT 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 contractholders to the Company. As YRT 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 benefit assets represents MRBs in an asset position and are presented separately from MRBs in a liability position. See “Market risk benefit liabilities” below. MRB assets also reflect ceded MRBs resulting from reinsurance of the Company's Prudential Defined Income ("PDI") traditional variable annuity contracts. See Note 11 for additional information regarding the reinsurance of PDI.

Income tax assets primarily represents the net deferred tax asset and the Company’s estimated taxes receivable for the current year and open audit years.

The Company is a member of the federal income tax return of Prudential Financial and primarily files separate company state and local tax returns. Pursuant to the tax allocation arrangement with Prudential Financial, total federal income tax expense is determined on a separate company basis. Members record tax benefits to the extent tax losses or tax credits are recognized in the consolidated federal tax provision.

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PRUCO LIFE INSURANCE COMPANY OF NEW JERSEY

Notes to Financial Statements—(Continued)

Items required by tax regulations to be included in the tax return may differ from the items reflected in the financial statements. As a result, the effective tax rate reflected in the financial statements may be different than the actual rate applied on the tax return. Some of these differences are permanent such as expenses that are not deductible in the Company’s tax return, and some differences are temporary, reversing over time, such as valuation of insurance reserves. Temporary differences create deferred tax assets and liabilities. Deferred tax assets generally represent items that can be used as a tax deduction or credit in future years for which the Company has already recorded the tax benefit in the Company’s Statements of Operations. Deferred tax liabilities generally represent tax expense recognized in the Company’s financial statements for which payment has been deferred, or expenditures for which the Company has already taken a deduction in the Company’s tax return but have not yet been recognized in the Company’s financial statements.

Deferred income taxes are recognized, based on enacted rates, when assets and liabilities have different values for financial statement and tax reporting purposes. The application of U.S. GAAP requires the Company to evaluate the recoverability of the Company’s deferred tax assets and establish a valuation allowance if necessary to reduce the Company’s deferred tax assets to an amount that is more likely than not expected to be realized. Considerable judgment is required in determining whether a valuation allowance is necessary, and if so, the amount of such valuation allowance. See Note 12 for a discussion of factors considered when evaluating the need for a valuation allowance.

U.S. GAAP prescribes a comprehensive model for how a company should recognize, measure, present, and disclose in its financial statements uncertain tax positions that a company has taken or expects to take on tax returns. The application of this guidance is a two-step process. First, the Company determines whether it is more likely than not, based on the technical merits, that the tax position will be sustained upon examination. If a tax position does not meet the more likely than not recognition threshold, the benefit of that position is not recognized in the financial statements. The second step is measurement. The Company measures the tax position as the largest amount of benefit that is greater than 50 percent likely to be realized upon ultimate resolution with a taxing authority that has full knowledge of all relevant information. This measurement considers the amounts and probabilities of the outcomes that could be realized upon ultimate settlement using the facts, circumstances, and information available at the reporting date.

The Company’s liability for income taxes includes a liability for unrecognized tax benefits, interest and penalties which relate to tax years still subject to review by the Internal Revenue Service (“IRS”) or other taxing jurisdictions. Audit periods remain open for review until the statute of limitations has passed. Generally, for tax years which produce net operating losses, capital losses or tax credit carryforwards (“tax attributes”), the statute of limitations does not close, to the extent of these tax attributes, until the expiration of the statute of limitations for the tax year in which they are fully utilized. The completion of review or the expiration of the statute of limitations for a given audit period could result in an adjustment to the liability for income taxes. The Company classifies all interest and penalties related to tax uncertainties as income tax expense. See Note 12 for additional information regarding income taxes.

Other assets consists primarily of premiums due and deferred loss on reinsurance 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.

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PRUCO LIFE INSURANCE COMPANY OF NEW JERSEY

Notes to Financial Statements—(Continued)

LIABILITIES

Future policy benefits primarily consists of the present value of expected future payments to or on behalf of policyholders, where the timing and amount of such payments depend 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.

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 in the second quarter of each year for future cash flow assumption updates during the Company’s annual assumptions review process unless a material change is observed in an interim period that is indicative of a long-term trend (see “Annual Assumptions Review” below), 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.

In addition, for limited-payment contracts, the liability for future policy benefits also includes a Deferred Profit Liability representing gross premiums received in excess of net premiums and is generally recognized in revenue in a constant relationship with insurance in force for life contracts or with the amount of expected future benefit payments for annuity contracts. The DPL is subject to a retrospective unlocking adjustment consistent with the liability for future policy benefits discussed above. The DPL 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”).

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 and DPL as described above.

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PRUCO LIFE INSURANCE COMPANY OF NEW JERSEY

Notes to Financial Statements—(Continued)

•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 on or 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.

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). Any adjustments to this liability related to net unrealized gains (losses) on securities classified as available-for-sale are included in AOCI.

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. To date, the Company has not recorded a PFL liability on any such contracts.

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.

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PRUCO LIFE INSURANCE COMPANY OF NEW JERSEY

Notes to Financial Statements—(Continued)

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.

Market risk benefit liabilities 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 benefits. 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 gain (loss)", 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.

Cash collateral for loaned securities represents liabilities to return cash proceeds from security lending transactions. Securities lending transactions are used primarily to earn spread income or to facilitate trading activity. As part of securities lending transactions, the Company transfers U.S. and foreign debt and equity securities, as well as U.S. government and government agency securities, and receives cash as collateral. Cash proceeds from securities lending transactions are primarily used to earn spread income, and are typically invested in cash equivalents, short-term investments or fixed maturities. Securities lending transactions are treated as financing arrangements and are recorded at the amount of cash received. The Company obtains collateral in an amount equal to 102% and 105% of the fair value of the domestic and foreign securities, respectively. The Company monitors the market value of the securities loaned on a daily basis with additional collateral obtained as necessary. Substantially all of the Company’s securities lending transactions are with large brokerage firms and large banks. Income and expenses associated with securities lending transactions used to earn spread income are reported as “Net investment income”.

Securities sold under agreements to repurchase represents liabilities associated with securities repurchase agreements that are used primarily to earn spread income. As part of securities repurchase agreements, the Company transfers U.S. government and government agency securities to a third-party, and receives cash as collateral. For securities repurchase agreements, the cash received is typically invested in cash equivalents, short-term investments or fixed maturities. Receivables associated with securities purchased under agreements to resell are generally reflected as cash equivalents. As part of securities resale agreements, the Company invests cash and receives as collateral U.S. government securities or other debt securities.

Securities repurchase and resale agreements that satisfy certain criteria are treated as secured borrowing or secured lending arrangements. These agreements are carried at the amounts at which the securities will be subsequently resold or reacquired, as specified in the respective transactions. For securities purchased under agreements to resell, the Company’s policy is to take possession or control of the securities either directly or through a third-party custodian. These securities are valued daily, and additional securities or cash collateral is received, or returned, when appropriate to protect against credit exposure. Securities to be resold are the same, or substantially the same, as the securities received. The majority of these transactions are with large brokerage firms and large banks. For securities sold under agreements to repurchase, the market value of the securities to be repurchased is monitored, and additional collateral is obtained where appropriate, to protect against credit exposure. The Company obtains collateral in an amount at least equal to 95% of the fair value of the securities sold. Securities to be repurchased are the same, or substantially the same, as those sold. The majority of these transactions are with highly rated money market funds. Income and expenses related to these transactions executed within the insurance companies used to earn spread income are reported as “Net investment income.”

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PRUCO LIFE INSURANCE COMPANY OF NEW JERSEY

Notes to Financial Statements—(Continued)

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.

Commitments and contingent liabilities are accrued if it is probable that a liability has been incurred and an amount is reasonably estimable. Management evaluates whether there are incremental legal or other costs directly associated with the ultimate resolution of the matter that are reasonably estimable and, if so, they are included in the accrual. These accruals are generally reported in “Other liabilities”.

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 policy benefits and non-level claim settlement 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 as described in "Future policy benefits" above.

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 as described in "Future policy benefits" above.

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 from policyholders 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.

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.

Asset administration fees primarily include asset administration fee income received on contractholders’ account balances invested in The Prudential Series Funds, which are a portfolio of mutual fund investments related to the Company’s separate account products. Also, the Company receives fee income calculated on contractholder separate account balances invested in the Advanced Series Trust ("AST") (see Note 15). In addition, the Company receives fees from contractholders’ account balances invested in funds managed by companies other than affiliates of Prudential Insurance. Asset administration fees are recognized as income when earned.

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PRUCO LIFE INSURANCE COMPANY OF NEW JERSEY

Notes to Financial Statements—(Continued)

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

Realized investment gains (losses), net includes realized gains or losses from sales and maturities of investments, changes to the allowance for credit losses, other impairments, fair value changes on mortgage loans where the fair value option has been elected, releases of Other Comprehensive Income and derivative gains or losses. The derivative gains or losses include the impact of maturities, terminations and changes in fair value of the derivative instruments, including embedded derivatives, and other hedging instruments.

OTHER ACCOUNTING POLICIES

Derivative Financial Instruments

Derivatives are financial instruments whose values are derived from interest rates, foreign exchange rates, financial indices, values of securities or commodities, credit spreads, market volatility, expected returns, and liquidity. Values can also be affected by changes in estimates and assumptions, including those related to counterparty behavior and NPR used in valuation models. Derivative financial instruments generally used by the Company include swaps, futures, forwards and options and may be exchange-traded or contracted in the over-the-counter (“OTC”) market. Certain of the Company’s OTC derivatives are cleared and settled through central clearing counterparties, while others are bilateral contracts between two counterparties. Derivative positions are carried at fair value, generally by obtaining quoted market prices or through the use of valuation models.

Derivatives are used to manage the interest rate and currency characteristics of assets or liabilities. Additionally, derivatives may be used to reduce exposure to risks such as interest rate, credit, foreign currency and equity associated with assets held or expected to be purchased or sold, and liabilities incurred or expected to be incurred. As discussed in detail below and in Note 4, all realized and unrealized changes in fair value of derivatives are recorded in current earnings, with the exception of cash flow hedges. Cash flows from derivatives are reported in the operating, investing or financing activities sections in the Statements of Cash Flows based on the nature and purpose of the derivative.

Derivatives are recorded either as assets, within "Other invested assets", or as liabilities, within “Payables to parent and affiliates”, except for embedded derivatives which are recorded with the associated host contract. The Company nets the fair value of all derivative financial instruments with counterparties for which a master netting arrangement has been executed.

The Company designates derivatives as either (1) a hedge of a forecasted transaction or of the variability of cash flows to be received or paid related to a recognized asset or liability (“cash flow” hedge); or (2) a derivative that does not qualify for hedge accounting.

To qualify for hedge accounting treatment, a derivative must be highly effective in mitigating the designated risk of the hedged item. Effectiveness of the hedge is formally assessed at inception and throughout the life of the hedging relationship.

The Company formally documents at inception all relationships between hedging instruments and hedged items, as well as its risk-management objective and strategy for undertaking various hedge transactions. This process includes linking all derivatives designated as cash flow hedges to specific assets and liabilities on the balance sheet or to specific firm commitments or forecasted transactions.

When a derivative is designated as a cash flow hedge and is determined to be highly effective, changes in its fair value are recorded in AOCI until earnings are affected by the variability of cash flows being hedged (e.g., when periodic settlements on a variable-rate asset or liability are recorded in earnings). At that time, the related portion of deferred gains or losses on the derivative instrument is reclassified and reported in the Statements of Operations line item associated with the hedged item.

If it is determined that a derivative no longer qualifies as an effective cash flow hedge or management removes the hedge designation, the derivative will continue to be carried on the balance sheet at its fair value, with changes in fair value recognized currently in “Realized investment gains (losses), net”. The component of AOCI related to discontinued cash flow hedges is reclassified to the Statements of Operations line associated with the hedged cash flows consistent with the earnings impact of the original hedged cash flows.

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PRUCO LIFE INSURANCE COMPANY OF NEW JERSEY

Notes to Financial Statements—(Continued)

When hedge accounting is discontinued because the hedged item no longer meets the definition of a firm commitment, or because it is probable that the forecasted transaction will not occur by the end of the specified time period, the derivative will continue to be carried on the balance sheet at its fair value, with changes in fair value recognized currently in “Realized investment gains (losses), net”. Any asset or liability that was recorded pursuant to recognition of the firm commitment is removed from the balance sheet and recognized currently in “Realized investment gains (losses), net”. Gains and losses that were in AOCI pursuant to the hedge of a forecasted transaction are recognized immediately in “Realized investment gains (losses), net”.

If a derivative does not qualify for hedge accounting, all changes in its fair value, including net receipts and payments, are included in “Realized investment gains (losses), net” without considering changes in the fair value of the economically associated assets or liabilities.

The Company is a party to financial instruments that contain derivative instruments that are “embedded” in the financial instruments. At inception, the Company assesses whether the economic characteristics of the embedded instrument are clearly and closely related to the economic characteristics of the remaining component of the financial instrument (i.e., the host contract) and whether a separate instrument with the same terms as the embedded instrument would meet the definition of a derivative instrument. When it is determined that (1) the embedded instrument possesses economic characteristics that are not clearly and closely related to the economic characteristics of the host contract, and (2) a separate instrument with the same terms would qualify as a derivative instrument, the embedded instrument qualifies as an embedded derivative that is separated from the host contract, carried at fair value, and changes in its fair value are included in “Realized investment gains (losses), net.” For certain financial instruments that contain an embedded derivative that otherwise would need to be bifurcated and reported at fair value, the Company may elect to carry the entire instrument at fair value and report it within “Other invested assets”, or as liabilities within “Payables to parent and affiliates” or "Other liabilities".

The Company sells variable annuity contracts that include optional living benefit features that may be treated from an accounting perspective as embedded derivatives. Effective April 1, 2016, the Company reinsured the variable annuity base contracts, along with the living benefit guarantees, to Prudential Insurance under a coinsurance and modified coinsurance agreement. See Note 11 for additional information. The embedded derivatives related to the living benefit features and the related reinsurance agreements are carried at fair value and included in “Future policy benefits” and “Reinsurance recoverables”. Changes in the fair value are determined using valuation models as described in Note 5 and are recorded in “Realized investment gains (losses), net”.

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. Assumptions include those that are economic and those that are insurance related. Insurance related 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 these 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 sufficiently credible. The Company sets mortality and morbidity assumptions that vary by major type of business. 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.

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PRUCO LIFE INSURANCE COMPANY OF NEW JERSEY

Notes to Financial Statements—(Continued)

As part of this review, the Company may update these assumptions and make refinements to its models based upon emerging experience, future expectations and other data, including any observable market data it feels is indicative of a long-term trend. These assumptions are generally updated annually, unless a material change is observed in an interim period that the Company feels is also 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, it expects such changes to be gradual over the long-term.

The Company also performs a comprehensive review of the economic assumptions, including long-term interest rate assumptions and equity return assumptions that impact reserve calculations. The Company generally utilizes relevant economic outlook information and industry surveys as the primary basis for these assumptions, which may be used to project future rates of return on investments.

RECENT ACCOUNTING PRONOUNCEMENTS

Changes to U.S. GAAP are established by the FASB in the form of 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 December 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.

Adoption of ASU 2018-12

Effective January 1, 2023, the Company adopted ASU 2018-12, Financial Services—Insurance (Topic 944): Targeted Improvements to the Accounting for Long-Duration Contracts. Adoption of this ASU impacted, at least to some extent, the accounting and disclosure requirements for all long-duration insurance and investment contracts issued by the Company and had a significant financial impact on the Financial Statements and disclosures. See Note 1 for additional information.

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PRUCO LIFE INSURANCE COMPANY OF NEW JERSEY

Notes to Financial Statements—(Continued)

The narrative description of the Company's significant accounting policies at the beginning of this Note reflects its policies as of December 31, 2023, including the policies associated with the adoption of ASU 2018-12. Outlined below are the key accounting policy changes effected by the ASU.

Key Accounting Policy Changes

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-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.

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 (the “transition date”). Under this method, the amendments to contracts in force were applied as of January 1, 2021 on the basis of their existing carrying amounts, adjusted for the removal of any related amounts in AOCI

The impact upon transition reflects the 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 date. As a result of the modified retrospective transition method, the vast majority of the impact of updating cash flow assumptions to best estimates as of the transition date will 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-payment insurance products

Requires discount rate assumptions to be based on upper-medium grade fixed income instrument 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, the guidance for the liability for future policy 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 this method, for balance sheet remeasurement purposes, the liability for future policy benefits is remeasured using discount rates as of January 1, 2021 with the impact recorded as a cumulative effect adjustment to AOCI.

Adoption of the 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. This adjustment largely reflects the difference between discount rates locked-in at contract inception versus current discount rates. 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.

Amortization of deferred acquisition costs and other balances

Requires DAC and other balances, such as URR and Deferred Sales Inducements ("DSI"), to be amortized on a constant level basis over the expected term of the related contract, independent of expected profitability.

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 this method, the amendments to contracts in force were applied as of January 1, 2021 on the basis of their existing carrying amounts, adjusted for the removal of any related amounts in AOCI.

Adoption of the ASU did not have a significant impact on DAC and other balances upon transition, 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 Financial Statements—(Continued)

Market Risk Benefits

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 attributable to changes in an entity’s NPR, which is recognized in OCI. 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.

Effective January 1, 2023 using the retrospective transition 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 ASU (e.g., guaranteed minimum death benefits on variable annuities) and a reclass of the cumulative effect of changes in NPR from retained earnings to 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 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 choose to apply this accounting policy election to any of its eligible sale or disposal transactions.

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PRUCO LIFE INSURANCE COMPANY OF NEW JERSEY

Notes to Financial Statements—(Continued)

Other ASUs adopted as of December 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 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. The narrative description of the Company's significant accounting policies at the beginning of this Note reflects its policies as of December 31, 2023, including the policies associated with the adoption of ASU 2022-02. Adoption of the ASU did not have a significant impact on the Company’s Financial Statements and Notes to the Financial Statements.

ASUs issued but not yet adopted as of December 31, 2023

Standard

Description

Effective date and method of adoption

Effect on the financial statements or other significant matters

ASU 2023-07 Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures

This ASU requires entities, including those with a single operating or reportable segment, to provide more detailed information about significant segment expenses that are regularly provided to the chief operating decision maker. The ASU also clarifies that all of the disclosures required in the guidance apply to all public entities, including those with a single operating or reportable segment.

Effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024, with early adoption permitted, using the retrospective method.

The Company is currently assessing the impact of the ASU on the Company's Financial Statements and Notes to the Financial Statements.

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:


	December 31, 2023
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Allowance for Credit Losses		Fair Value
	(in thousands)
Fixed maturities, available-for-sale:
U.S. Treasury securities and obligations of U.S. government authorities and agencies	$	52,196	$	0	$	1,154	$	0	$	51,042
Obligations of U.S. states and their political subdivisions	184,419		952		2,833		0		182,538
Foreign government bonds	95,189		248		14,693		0		80,744
U.S. public corporate securities	1,485,406		13,428		147,901		0		1,350,933
U.S. private corporate securities	227,342		1,978		8,884		0		220,436
Foreign public corporate securities	185,601		1,173		21,989		0		164,785
Foreign private corporate securities	190,545		5,102		14,791		0		180,856
Asset-backed securities(1)	19,440		40		969		0		18,511
Commercial mortgage-backed securities	104,055		0		7,356		0		96,699
Residential mortgage-backed securities(2)	15,780		195		420		4		15,551
Total fixed maturities, available-for-sale	$	2,559,973	$	23,116	$	220,990	$	4	$	2,362,095

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

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

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PRUCO LIFE INSURANCE COMPANY OF NEW JERSEY

Notes to Financial Statements—(Continued)


	December 31, 2022
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Allowance for Credit Losses		Fair Value
	(in thousands)
Fixed maturities, available-for-sale:
U.S. Treasury securities and obligations of U.S. government authorities and agencies	$	62,210	$	0	$	1,074	$	0	$	61,136
Obligations of U.S. states and their political subdivisions	165,109		421		6,315		0		159,215
Foreign government bonds	87,853		1		15,891		0		71,963
U.S. public corporate securities	1,062,342		1,943		180,880		0		883,405
U.S. private corporate securities	186,123		141		13,465		358		172,441
Foreign public corporate securities	138,717		28		25,783		0		112,962
Foreign private corporate securities	133,074		523		21,562		0		112,035
Asset-backed securities(1)	18,358		272		256		0		18,374
Commercial mortgage-backed securities	124,486		0		8,595		0		115,891
Residential mortgage-backed securities(2)	12,446		92		467		5		12,066
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.

The following tables set forth the fair value and gross unrealized losses on fixed maturity, available-for-sale 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:


	December 31, 2023
	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	$	49,081	$	936	$	1,962	$	218	$	51,043	$	1,154
Obligations of U.S. states and their political subdivisions	22,856		186		61,445		2,647		84,301		2,833
Foreign government bonds	5,656		91		69,066		14,602		74,722		14,693
U.S. public corporate securities	86,203		1,688		913,776		146,213		999,979		147,901
U.S. private corporate securities	27,883		366		117,409		8,518		145,292		8,884
Foreign public corporate securities	5,029		135		115,462		21,854		120,491		21,989
Foreign private corporate securities	5,007		51		98,159		14,740		103,166		14,791
Asset-backed securities	7,899		914		4,775		55		12,674		969
Commercial mortgage-backed securities	0		0		96,699		7,356		96,699		7,356
Residential mortgage-backed securities	146		2		10,722		418		10,868		420
Total fixed maturities, available-for-sale	$	209,760	$	4,369	$	1,489,475	$	216,621	$	1,699,235	$	220,990

Table of Contents

PRUCO LIFE INSURANCE COMPANY OF NEW JERSEY

Notes to Financial Statements—(Continued)


	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

As of December 31, 2023 and 2022, the gross unrealized losses on fixed maturity, available-for-sale securities without an allowance of $217.6 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 $3.4 million and $4.7 million, respectively, related to other than high or highest quality securities based on NAIC or equivalent rating. As of December 31, 2023, the $216.6 million of gross unrealized losses of twelve months or more were concentrated in the Company’s corporate securities within the utility, finance 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, the Company concluded that an adjustment to earnings for credit losses related to these fixed maturity securities was not warranted at December 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 and foreign currency exchange rate movements. As of December 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.

Table of Contents

PRUCO LIFE INSURANCE COMPANY OF NEW JERSEY

Notes to Financial Statements—(Continued)

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


	Years Ended December 31,
	Amortized Cost		Fair Value
	(in thousands)
Fixed maturities, available-for-sale:
Due in one year or less	$	39,542	$	38,324
Due after one year through five years	375,483		367,883
Due after five years through ten years	259,132		258,780
Due after ten years	1,746,541		1,566,347
Asset-backed securities	19,440		18,511
Commercial mortgage-backed securities	104,055		96,699
Residential mortgage-backed securities	15,780		15,551
Total fixed maturities, available-for-sale	$	2,559,973	$	2,362,095

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, available-for-sale for the periods indicated:


	Years Ended December 31,
	2023		2022		2021
	(in thousands)
Fixed maturities, available-for-sale:
Proceeds from sales(1)	$	11,103	$	37,605	$	49,835
Proceeds from maturities/prepayments	103,064		64,177		49,793
Gross investment gains from sales and maturities	86		224		708
Gross investment losses from sales and maturities	(2,014)		(5,451)		(1,024)
(Addition to) release of allowance for credit losses	359		1,195		(1,558)

(1)Excludes activity from non-cash related proceeds due to the timing of trade settlements of $0.1 million, $(0.1) million and $1.5 million for the years ended December 31, 2023, 2022 and 2021, respectively.

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


	Year Ended December 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
	(in thousands)
Fixed maturities, available-for-sale:
Balance, beginning of period	$	0	$	0	$	358	$	0	$	0	$	5	$	363
Reductions for securities sold during the period	0		0		(358)		0		0		0		(358)
Additions (reductions) on securities with previous allowance	0		0		0		0		0		(1)		(1)
Balance, end of period	$	0	$	0	$	0	$	0	$	0	$	4	$	4

Table of Contents

PRUCO LIFE INSURANCE COMPANY OF NEW JERSEY

Notes to Financial Statements—(Continued)


	Year Ended December 31, 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		(1,200)		0		0		1		(1,199)
Additions to allowance for credit losses not previously recorded	0		0		0		0		0		4		4
Balance, end of period	$	0	$	0	$	358	$	0	$	0	$	5	$	363


	Year Ended December 31, 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 to allowance for credit losses not previously recorded	0		0		1,558		0		0		0		1,558
Balance, end of period	$	0	$	0	$	1,558	$	0	$	0	$	0	$	1,558

See Note 2 for additional information about the Company’s methodology for developing our allowance and expected losses.

For the years ended December 31, 2023 and 2022, the net decrease in the allowance for credit losses on available-for-sale securities was primarily related to restructuring in the transportation sector within corporate securities.

The Company did not have any fixed maturity securities purchased with credit deterioration as of both December 31, 2023 and 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 $1.5 million, $(3.4) million and $(2.0) million during the years ended December 31, 2023, 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 $0.2 million, $(1.5) million and $(0.3) million during the years ended December 31, 2023, 2022 and 2021, respectively.

Table of Contents

PRUCO LIFE INSURANCE COMPANY OF NEW JERSEY

Notes to 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:


	December 31, 2023				December 31, 2022
	Amount (in thousands)		% of Total		Amount (in thousands)		% of Total
Commercial mortgage and agricultural property loans by property type:
Apartments/Multi-Family	$	71,289	29.6	%	$	62,434	42.0	%
Hospitality	14,070		5.8		12,996		8.7
Industrial	70,633		29.3		17,132		11.5
Office	8,122		3.4		10,568		7.1
Other	24,587		10.2		7,767		5.2
Retail	23,327		9.7		22,123		14.9
Total commercial mortgage loans	212,028		88.0		133,020		89.4
Agricultural property loans	28,763		12.0		15,567		10.6
Total commercial mortgage and agricultural property loans	240,791		100.0	%	148,587		100.0	%
Allowance for credit losses	(1,162)				(408)
Net commercial mortgage and agricultural property loans	$	239,629			$	148,179

As of December 31, 2023, the commercial mortgage and agricultural property loans were secured by properties geographically dispersed throughout the United States (with the largest concentrations in Texas (10%), Florida (9%), Washington (9%)) and included loans secured by properties in Europe (10%) and Mexico (2%).

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


	Commercial Mortgage Loans		Agricultural Property Loans		Total
	(in thousands)
Balance at December 31, 2020	$	440	$	0	$	440
Addition to (release of) allowance for expected losses	(194)		0		(194)
Balance at December 31, 2021	$	246	$	0	$	246
Addition to (release of) allowance for expected losses	159		3		162
Balance at December 31, 2022	$	405	$	3	$	408
Addition to (release of) allowance for expected losses	702		52		754
Balance at December 31, 2023	$	1,107	$	55	$	1,162

See Note 2 for additional information about the Company's methodology for developing our allowance and expected losses.

For the year ended December 31, 2023, the net increase in the allowance for credit losses on commercial mortgage and other loans was primarily related to loan originations and increases to the portfolio reserve to reflect declining market conditions within the office sector.

For the year ended December 31, 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 and loan originations.

Table of Contents

PRUCO LIFE INSURANCE COMPANY OF NEW JERSEY

Notes to Financial Statements—(Continued)

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:


	December 31, 2023
	Amortized Cost by Origination Year
	2023		2022		2021		2020		2019		Prior		Total
	(in thousands)
Commercial mortgage loans
Loan-to-Value Ratio:
0%-59.99%	$	9,444	$	19,879	$	772	$	0	$	17,239	$	42,159	$	89,493
60%-69.99%	37,809		15,000		1,962		2,198		15,091		5,836		77,896
70%-79.99%	32,105		0		0		0		3,885		1,595		37,585
80% or greater	0		0		0		0		1,007		6,047		7,054
Total	$	79,358	$	34,879	$	2,734	$	2,198	$	37,222	$	55,637	$	212,028
Debt Service Coverage Ratio:
Greater or Equal to 1.2x	$	76,929	$	34,879	$	2,734	$	2,198	$	36,293	$	48,677	$	201,710
1.0 - 1.2x	2,429		0		0		0		0		6,047		8,476
Less than 1.0x	0		0		0		0		929		913		1,842
Total	$	79,358	$	34,879	$	2,734	$	2,198	$	37,222	$	55,637	$	212,028
Agricultural property loans
Loan-to-Value Ratio:
0%-59.99%	$	11,358	$	1,035	$	1,047	$	0	$	0	$	978	$	14,418
60%-69.99%	2,000		12,345		0		0		0		0		14,345
70%-79.99%	0		0		0		0		0		0		0
80% or greater	0		0		0		0		0		0		0
Total	$	13,358	$	13,380	$	1,047	$	0	$	0	$	978	$	28,763
Debt Service Coverage Ratio:
Greater or Equal to 1.2x	$	13,358	$	13,380	$	1,047	$	0	$	0	$	978	$	28,763
1.0 - 1.2x	0		0		0		0		0		0		0
Less than 1.0x	0		0		0		0		0		0		0
Total	$	13,358	$	13,380	$	1,047	$	0	$	0	$	978	$	28,763

Table of Contents

PRUCO LIFE INSURANCE COMPANY OF NEW JERSEY

Notes to Financial Statements—(Continued)


	December 31, 2022
	Amortized Cost by Origination Year
	2022		2021		2020		2019		2018		Prior		Total
	(in thousands)
Commercial mortgage loans
Loan-to-Value Ratio:
0%-59.99%	$	20,000	$	792	$	0	$	9,993	$	1,387	$	48,812	$	80,984
60%-69.99%	15,000		1,615		2,198		18,982		0		1,016		38,811
70%-79.99%	0		347		0		3,855		0		7,213		11,415
80% or greater	0		0		0		0		0		1,810		1,810
Total	$	35,000	$	2,754	$	2,198	$	32,830	$	1,387	$	58,851	$	133,020
Debt Service Coverage Ratio:
Greater or Equal to 1.2x	$	35,000	$	2,754	$	2,198	$	27,697	$	1,387	$	40,285	$	109,321
1.0 - 1.2x	0		0		0		0		0		8,809		8,809
Less than 1.0x	0		0		0		5,133		0		9,757		14,890
Total	$	35,000	$	2,754	$	2,198	$	32,830	$	1,387	$	58,851	$	133,020
Agricultural property loans
Loan-to-Value Ratio:
0%-59.99%	$	1,078	$	1,092	$	0	$	0	$	0	$	1,052	$	3,222
60%-69.99%	12,345		0		0		0		0		0		12,345
70%-79.99%	0		0		0		0		0		0		0
80% or greater	0		0		0		0		0		0		0
Total	$	13,423	$	1,092	$	0	$	0	$	0	$	1,052	$	15,567
Debt Service Coverage Ratio:
Greater or Equal to 1.2x	$	13,423	$	1,092	$	0	$	0	$	0	$	1,052	$	15,567
1.0 - 1.2x	0		0		0		0		0		0		0
Less than 1.0x	0		0		0		0		0		0		0
Total	$	13,423	$	1,092	$	0	$	0	$	0	$	1,052	$	15,567

See Note 2 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:


	December 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)
	(in thousands)
Commercial mortgage loans	$	212,028	$	0	$	0	$	0	$	212,028	$	0
Agricultural property loans	28,763		0		0		0		28,763		0
Total	$	240,791	$	0	$	0	$	0	$	240,791	$	0

(1)As of December 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.

Table of Contents

PRUCO LIFE INSURANCE COMPANY OF NEW JERSEY

Notes to 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.

(2)For additional information regarding the Company’s policies for accruing interest on loans, see Note 2.

For the year ended December 31, 2023, 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 the year ended December 31, 2022, there were $3.4 million commercial mortgage and other loans acquired, other than those through direct origination, and there were $3.8 million commercial mortgage and other loans sold.

The Company did not have any commercial mortgage and other loans purchased with credit deterioration as of both December 31, 2023 and 2022.

Other Invested Assets

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


	December 31,
	2023		2022
	(in thousands)
LPs/LLCs:
Equity method:
Private equity	$	90,107	$	74,468
Hedge funds	48,488		42,472
Real estate-related	6,965		10,199
Subtotal equity method	145,560		127,139
Fair value:
Private equity	249		279
Hedge funds	19		55
Real estate-related	4,119		2,055
Subtotal fair value	4,387		2,389
Total LPs/LLCs	149,947		129,528

Other	3,938		0
Total other invested assets	$	153,885	$	129,528

Table of Contents

PRUCO LIFE INSURANCE COMPANY OF NEW JERSEY

Notes to Financial Statements—(Continued)

Equity Method Investments

The following tables set forth summarized combined financial information for significant LP/LLC interests accounted for under the equity method. Changes between periods in the tables below reflect changes in the activities within the LPs/LLCs, as well as changes in the Company’s level of investment in such entities.


	December 31,
	2023		2022
	(in thousands)
STATEMENTS OF FINANCIAL POSITION
Total assets(1)	$	5,661,409	$	2,012,092
Total liabilities	$	772,289	$	0
Partners’ capital	4,889,120		2,012,092
Total liabilities and partners’ capital	$	5,661,409	$	2,012,092
Total liabilities and partners’ capital included above	$	68,852	$	37,626
Equity in LP/LLC interests not included above	76,708		89,513
Carrying value	$	145,560	$	127,139

(1)Amount represents gross assets of each fund where the Company has a significant investment. These assets consist primarily of investments in securities and other miscellaneous assets.


	Years Ended December 31,
	2023		2022		2021
	(in thousands)
STATEMENTS OF OPERATIONS
Total revenue(1)	$	1,295,488	$	51,084	$	154,144
Total expenses	(259,435)		0		0
Net earnings (losses)	$	1,036,053	$	51,084	$	154,144
Equity in net earnings (losses) included above	$	10,278	$	955	$	2,898
Equity in net earnings (losses) of LP/LLC interests not included above	3,908		5,836		16,814
Total equity in net earnings (losses)	$	14,186	$	6,791	$	19,712

(1)Amount represents gross revenue of each fund where the Company has a significant investment. This revenue consists of income from investments in securities and other income.

Accrued Investment Income

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


	December 31,
	2023		2022
	(in thousands)
Fixed maturities	$	26,672	$	18,653
Equity securities	1		1
Commercial mortgage and other loans	948		352
Policy loans	25,675		5,612

Short-term investments and cash equivalents	610		604
Total accrued investment income	$	53,906	$	25,222

There were no significant write-downs on accrued investment income for both the years ended December 31, 2023 and 2022.

Table of Contents

PRUCO LIFE INSURANCE COMPANY OF NEW JERSEY

Notes to Financial Statements—(Continued)

Net Investment Income

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


	Years Ended December 31,
	2023		2022		2021
	(in thousands)
Fixed maturities, available-for-sale	$	101,605	$	73,656	$	65,882
Fixed maturities, trading	622		1,012		827
Equity securities	364		364		363
Commercial mortgage and other loans	8,746		4,609		5,654
Policy loans	36,027		10,427		11,414
Other invested assets	16,183		8,873		20,660
Short-term investments and cash equivalents	6,862		3,384		46
Gross investment income	170,409		102,325		104,846
Less: investment expenses	(4,385)		(3,933)		(4,355)
Net investment income	$	166,024	$	98,392	$	100,491

There were no non-income producing assets as of December 31, 2023. Non-income producing assets represent investments that had not produced income for the twelve months preceding December 31, 2023.

Realized Investment Gains (Losses), Net

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


	Years Ended December 31,
	2023		2022		2021
	(in thousands)
Fixed maturities(1)	$	(1,569)	$	(4,032)	$	(1,874)
Commercial mortgage and other loans	(746)		(153)		194
Other invested assets	(14)		(51)		625
Derivatives(2)	(42,046)		18,123		1,549
Short-term investments and cash equivalents	65		(52)		21
Realized investment gains (losses), net(2)	$	(44,310)	$	13,835	$	515

(1)Excludes fixed maturity securities classified as trading.

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

Net Unrealized Gains (Losses) on Investments within AOCI

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


	December 31,
	2023		2022		2021
	(in thousands)
Fixed maturity securities, available-for-sale without an allowance	$	(197,874)	$	(270,867)	$	174,945
Derivatives designated as cash flow hedges(1)	5,246		14,102		5,407
Affiliated notes	0		59		194
Other investments	357		122		260
Net unrealized gains (losses) on investments	$	(192,271)	$	(256,584)	$	180,806

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

Table of Contents

PRUCO LIFE INSURANCE COMPANY OF NEW JERSEY

Notes to Financial Statements—(Continued)

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 December 31, 2023 and 2022, the Company had no repurchase agreements.

Securities Pledged, Restricted Assets and Special Deposits

The Company pledges as collateral investment securities it owns to unaffiliated parties through certain transactions, including securities lending, securities sold under agreements to repurchase, collateralized borrowings and postings of collateral with derivative counterparties.

In the normal course of its business activities, the Company accepts collateral that can be sold or repledged. The primary sources of this collateral are securities purchased under agreements to resell. As of both December 31, 2023 and 2022, there were no collateral that could be sold or repledged.

As of December 31, 2023 and 2022, there were no available-for-sale fixed maturities, on deposit with governmental authorities or trustees as required by certain insurance laws.

4. DERIVATIVES AND HEDGING

Types of Derivative Instruments and Derivative Strategies

Interest Rate Contracts

Interest rate swaps are used by the Company to reduce risks from changes in interest rates, manage interest rate exposures arising from mismatches between assets and liabilities and to hedge against changes in their values it owns or anticipates acquiring or selling.

Swaps may be attributed to specific assets or liabilities or to a portfolio of assets or liabilities. Under interest rate swaps, the Company agrees with counterparties to exchange, at specified intervals, the difference between fixed-rate and floating-rate interest amounts calculated by reference to an agreed upon notional principal amount.

Equity Contracts

Equity options are used by the Company to manage its exposure to the equity markets which impacts the value of assets and liabilities it owns or anticipates acquiring or selling.

Equity index options are contracts which will settle in cash based on differentials in the underlying indices at the time of exercise and the strike price. The Company uses combinations of purchases and sales of equity index options to hedge the effects of adverse changes in equity indices within a predetermined range.

Foreign Exchange Contracts

Currency derivatives, including currency swaps and forwards, are used by the Company to reduce risks from changes in currency exchange rates with respect to investments denominated in foreign currencies that the Company either holds or intends to acquire or sell.

Under currency forwards, the Company agrees with counterparties to deliver a specified amount of an identified currency at a specified future date. Typically, the price is agreed upon at the time of the contract and payment for such a contract is made at the specified future date. The Company executes forward sales of the hedged currency in exchange for U.S. dollars at a specified exchange rate. The maturities of these forwards correspond with the future periods in which the non-U.S. dollar-denominated earnings are expected to be generated.

Under currency swaps, the Company agrees with counterparties to exchange, at specified intervals, the difference between one currency and another at an exchange rate and calculated by reference to an agreed principal amount. Generally, the principal amount of each currency is exchanged at the beginning and termination of the currency swap by each party.

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PRUCO LIFE INSURANCE COMPANY OF NEW JERSEY

Notes to Financial Statements—(Continued)

Credit Contracts

The Company writes credit protection to gain exposure similar to investment in public fixed maturity cash instruments. With these credit derivatives the Company sells credit protection on a single name reference, or certain index reference, and in return receives a quarterly premium. This premium or credit spread generally corresponds to the difference between the yield on the referenced name (or an index’s referenced names) public fixed maturity cash instruments and swap rates, at the time the agreement is executed. If there is an event of default by the referenced name or one of the referenced names in the index, as defined by the agreement, then the Company is obligated to pay the referenced amount of the contract to the counterparty and receive in return the referenced defaulted security or similar security or (in the case of a credit default index) pay the referenced amount less the auction recovery rate.

In addition to selling credit protection, the Company purchases credit protection using credit derivatives in order to hedge specific credit exposures in the Company’s investment portfolio.

Embedded Derivatives

The Company offers certain products (for example, index-linked universal life), which may include features that are accounted for as embedded derivatives. Related to certain of these derivatives, the Company has entered into reinsurance agreements with an affiliate, Prudential Insurance, effective April 1, 2016. See Note 11 for additional information on the reinsurance agreements.

These embedded derivatives and reinsurance agreements, also accounted for as derivatives, are carried at fair value and marked to market through “Realized investment gains (losses), net” based on the change in value of the underlying contractual guarantees, which are determined using valuation models, as described in Note 5.

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PRUCO LIFE INSURANCE COMPANY OF NEW JERSEY

Notes to 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.


	December 31, 2023						December 31, 2022
Primary Underlying Risk/Instrument Type	Gross Notional		Fair Value				Gross Notional		Fair Value
			Assets		Liabilities				Assets		Liabilities
	(in thousands)
Derivatives Designated as Hedge Accounting Instruments:
Currency/Interest Rate
Foreign Currency Swaps	$	169,101	$	7,865	$	(4,257)	$	117,015	$	14,281	$	(516)
Total Derivatives Designated as Hedge Accounting Instruments:	$	169,101	$	7,865	$	(4,257)	$	117,015	$	14,281	$	(516)
Derivatives Not Qualifying as Hedge Accounting Instruments:
Interest Rate
Interest Rate Swaps	$	88,200	$	36	$	(2,063)	$	30,200	$	0	$	(383)
Credit
Credit Default Swaps	0		0		0		0		0		0
Currency/Interest Rate
Foreign Currency Swaps	39,965		1,563		(597)		24,035		2,957		0
Foreign Currency
Foreign Currency Forwards	9,550		7		(290)		7,520		3		(368)
Equity
Equity Options	1,288,555		30,679		(43,354)		509,200		555		(20,562)
Total Derivatives Not Qualifying as Hedge Accounting Instruments:	$	1,426,270	$	32,285	$	(46,304)	$	570,955	$	3,515	$	(21,313)
Total Derivatives(1)(2)	$	1,595,371	$	40,150	$	(50,561)	$	687,970	$	17,796	$	(21,829)

(1)Excludes embedded derivatives which contain multiple underlying risks. The fair value of these embedded derivatives was a net liability of $168 million and $108 million as of December 31, 2023 and 2022, respectively included in “Policyholders’ account balances" and "Reinsurance recoverables".

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

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PRUCO LIFE INSURANCE COMPANY OF NEW JERSEY

Notes to 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 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 Statements of Financial Position.


	December 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
	(in thousands)
Offsetting of Financial Assets:
Derivatives	$	40,150	$	(40,150)	$	0	$	0	$	0
Securities purchased under agreements to resell	0		0		0		0		0
Total Assets	$	40,150	$	(40,150)	$	0	$	0	$	0
Offsetting of Financial Liabilities:
Derivatives	$	50,561	$	(42,247)	$	8,314	$	(8,314)	$	0
Securities sold under agreements to repurchase	0		0		0		0		0
Total Liabilities	$	50,561	$	(42,247)	$	8,314	$	(8,314)	$	0


	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
	(in thousands)
Offsetting of Financial Assets:
Derivatives	$	17,796	$	(17,796)	$	0	$	0	$	0
Securities purchased under agreements to resell	0		0		0		0		0
Total Assets	$	17,796	$	(17,796)	$	0	$	0	$	0
Offsetting of Financial Liabilities:
Derivatives	$	21,829	$	(17,796)	$	4,033	$	(4,033)	$	0
Securities sold under agreements to repurchase	0		0		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 15. For securities purchased under agreements to resell and securities sold under agreements to repurchase, the Company monitors the value of the securities and maintains collateral, as appropriate, to protect against credit exposure. Where the Company has entered into repurchase and resale agreements with the same counterparty, in the event of default, the Company would generally be permitted to exercise rights of offset. For additional information on the Company’s accounting policy for securities repurchase and resale agreements, see Note 2 to the Financial Statements.

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.

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PRUCO LIFE INSURANCE COMPANY OF NEW JERSEY

Notes to Financial Statements—(Continued)

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.


	Year Ended December 31, 2023
	Realized Investment Gains (Losses)		Change in Value of Market Risk Benefits, Net of Related Hedging Gain (Loss)		Net Investment Income		Other Income (Loss)		Change in AOCI
	(in thousands)
Derivatives Designated as Hedge Accounting Instruments:
Cash flow hedges
Currency/Interest Rate	$	(6)	$	0	$	1,878	$	(697)	$	(8,856)
Total cash flow hedges	(6)		0		1,878		(697)		(8,856)
Derivatives Not Qualifying as Hedge Accounting Instruments:
Interest Rate	(2,236)		0		0		0		0
Currency	(120)		0		0		0		0
Currency/Interest Rate	(1,622)		0		0		(18)		0
Credit	0		0		0		0		0
Equity	23,279		0		0		0		0
Embedded Derivatives	(61,341)		0		0		0		0
Total Derivatives Not Qualifying as Hedge Accounting Instruments	(42,040)		0		0		(18)		0
Total	$	(42,046)	$	0	$	1,878	$	(715)	$	(8,856)


	Year Ended December 31, 2022
	Realized Investment Gains (Losses) (1)		Change in Value of Market Risk Benefits, Net of Related Hedging Gain (Loss) (1)		Net Investment Income		Other Income (Loss)		Change in AOCI
	(in thousands)
Derivatives Designated as Hedge Accounting Instruments:
Cash flow hedges
Currency/Interest Rate	$	1,802	$	0	$	1,891	$	1,202	$	8,695
Total cash flow hedges	1,802		0		1,891		1,202		8,695
Derivatives Not Qualifying as Hedge Accounting Instruments:
Interest Rate	(2,666)		0		0		0		0
Currency	493		0		0		0		0
Currency/Interest Rate	2,100		0		0		35		0
Credit	0		0		0		0		0
Equity	(13,420)		0		0		0		0
Embedded Derivatives	29,814		0		0		0		0
Total Derivatives Not Qualifying as Hedge Accounting Instruments	16,321		0		0		35		0
Total	$	18,123	$	0	$	1,891	$	1,237	$	8,695

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PRUCO LIFE INSURANCE COMPANY OF NEW JERSEY

Notes to Financial Statements—(Continued)


	Year Ended December 31, 2021
	Realized Investment Gains (Losses) (1)		Change in Value of Market Risk Benefits, Net of Related Hedging Gain (Loss) (1)		Net Investment Income		Other Income (Loss)		Change in AOCI
	(in thousands)
Derivatives Designated as Hedge Accounting Instruments:
Cash flow hedges
Currency/Interest Rate	$	245	$	0	$	1,583	$	464	$	8,405
Total cash flow hedges	245		0		1,583		464		8,405
Derivatives Not Qualifying as Hedge Accounting Instruments:
Interest Rate	(815)		0		0		0		0
Currency	252		0		0		0		0
Currency/Interest Rate	2,519		0		0		6		0
Credit	(4)		0		0		0		0
Equity	8,334		0		0		0		0
Embedded Derivatives	(8,982)		0		0		0		0
Total Derivatives Not Qualifying as Hedge Accounting Instruments	1,304		0		0		6		0
Total	$	1,549	$	0	$	1,583	$	470	$	8,405

(1)Amounts reflect the implementation of ASU 2018-12: Targeted Improvements to the Accounting for Long-Duration Contracts.

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PRUCO LIFE INSURANCE COMPANY OF NEW JERSEY

Notes to Financial Statements—(Continued)

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


	(in thousands)
Balance, December 31, 2020	$	(2,998)
Amount recorded in AOCI


Currency/Interest Rate	10,697
Total amount recorded in AOCI	10,697
Amount reclassified from AOCI to income


Currency/Interest Rate	(2,292)
Total amount reclassified from AOCI to income	(2,292)
Balance, December 31, 2021	$	5,407
Amount recorded in AOCI


Currency/Interest Rate	13,590
Total amount recorded in AOCI	13,590
Amount reclassified from AOCI to income


Currency/Interest Rate	(4,895)
Total amount reclassified from AOCI to income	(4,895)
Balance, December 31, 2022	$	14,102
Amount recorded in AOCI


Currency/Interest Rate	(7,681)
Total amount recorded in AOCI	(7,681)
Amount reclassified from AOCI to income


Currency/Interest Rate	(1,175)
Total amount reclassified from AOCI to income	(1,175)
Balance, December 31, 2023	$	5,246

The changes in fair value of cash flow hedges are deferred in AOCI and are included in “Net unrealized investment gains (losses)” in the Statements of Operations and Comprehensive Income (Loss); these amounts are then reclassified to earnings when the hedged item affects earnings. Using December 31, 2023 values, it is estimated that a pre-tax gain of $1.6 million is expected to be reclassified from AOCI to earnings during the subsequent twelve months ending December 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.

Credit Derivatives

The Company has no exposure from credit derivative positions where it has written or purchased credit protection as of December 31, 2023 and 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 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.

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PRUCO LIFE INSURANCE COMPANY OF NEW JERSEY

Notes to Financial Statements—(Continued)

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. The Company’s Level 1 assets and liabilities primarily include cash equivalents.

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 prices in active markets for similar assets and liabilities, quoted prices in markets that are not active for identical or similar assets or liabilities, and other market observable inputs. The Company’s Level 2 assets and liabilities include: fixed maturities (corporate public and private bonds, most government securities, certain asset-backed and mortgage-backed securities, etc.), certain equity securities (mutual funds, which do not trade in active markets because they are not publicly available), certain cash equivalents (primarily commercial paper), short-term investments and certain OTC derivatives.

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. The Company’s Level 3 assets and liabilities primarily include: certain private fixed maturities and equity securities, certain manually priced public equity securities, certain highly structured OTC derivative contracts, contracts or contract features pertaining to living benefit features (market risk benefits) of the Company's variable annuity contracts and embedded derivatives associated with the index-linked features of certain universal life and annuity products.

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PRUCO LIFE INSURANCE COMPANY OF NEW JERSEY

Notes to 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.


	December 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	$	51,042	$	0	$		$	51,042
Obligations of U.S. states and their political subdivisions	0		182,538		0				182,538
Foreign government bonds	0		80,744		0				80,744
U.S. corporate public securities	0		1,350,933		0				1,350,933
U.S. corporate private securities	0		205,814		14,622				220,436
Foreign corporate public securities	0		164,785		0				164,785
Foreign corporate private securities	0		175,849		5,007				180,856
Asset-backed securities(2)	0		18,511		0				18,511
Commercial mortgage-backed securities	0		77,495		19,204				96,699
Residential mortgage-backed securities	0		15,551		0				15,551
Subtotal	0		2,323,262		38,833				2,362,095
Market risk benefit assets	0		0		537,659				537,659
Fixed maturities, trading	0		23,440		0				23,440
Equity securities	0		74		4,541				4,615
Short-term investments	0		3,459		0				3,459

Cash equivalents	24,928		160,330		0				185,258
Other invested assets(3)	0		40,150		0		(40,150)		0
Reinsurance recoverables	0		0		69,745				69,745

Subtotal excluding separate account assets	24,928		2,550,715		650,778		(40,150)		3,186,271
Separate account assets(4)(5)	0		12,914,412		0				12,914,412
Total assets	$	24,928	$	15,465,127	$	650,778	$	(40,150)	$	16,100,683
Market risk benefit liabilities	$	0	$	0	$	537,659	$		$	537,659
Policyholders' account balances	0		0		237,316				237,316
Payables to parent and affiliates	0		50,561		0		(42,247)		8,314
Total liabilities	$	0	$	50,561	$	774,975	$	(42,247)	$	783,289

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PRUCO LIFE INSURANCE COMPANY OF NEW JERSEY

Notes to 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(6)	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

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(6)	$	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 $(2) million and $0 million as of December 31, 2023 and 2022, respectively.

(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. At December 31, 2023 and 2022, the fair values of such investments were $4.4 million and $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 December 31, 2023 and 2022, the fair value of such investments was $1,163 million and $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 Statements of Financial Position.

(6)Amounts reflect the implementation of ASU 2018-12: Targeted Improvements to the Accounting for Long-Duration Contracts.

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PRUCO LIFE INSURANCE COMPANY OF NEW JERSEY

Notes to Financial Statements—(Continued)

The methods and assumptions the Company uses to estimate the fair value of assets and liabilities measured at fair value on a recurring basis are summarized below.

Fixed Maturity Securities – The fair values of the Company’s public fixed maturity securities are generally based on prices obtained from independent pricing services. Prices for each security are generally sourced from multiple pricing vendors, and a vendor hierarchy is maintained by asset type based on historical pricing experience and vendor expertise. The Company ultimately uses the price from the pricing service highest in the vendor hierarchy based on the respective asset type. The pricing hierarchy is updated for new financial products and recent pricing experience with various vendors. Consistent with the fair value hierarchy described above, securities with validated quotes from pricing services are generally reflected within Level 2, as they are primarily based on observable pricing for similar assets and/or other market observable inputs. Typical inputs used by these pricing services include but are not limited to, reported trades, benchmark yields, issuer spreads, bids, offers, and/or estimated cash flow, prepayment speeds, and default rates. If the pricing information received from third-party pricing services is deemed not reflective of market activity or other inputs observable in the market, the Company may challenge the price through a formal process with the pricing service or classify the securities as Level 3. If the pricing service updates the price to be more consistent with the presented market observations, the security remains within Level 2.

Internally-developed valuations or indicative broker quotes are also used to determine fair value in circumstances where vendor pricing is not available, or where the Company ultimately concludes that pricing information received from the independent pricing services is not reflective of market activity. If the Company concludes the values from both pricing services and brokers are not reflective of market activity, it may override the information with an internally-developed valuation. As of December 31, 2023 and 2022, overrides on a net basis were not material. Pricing service overrides, internally-developed valuations and indicative broker quotes are generally included in Level 3 in the fair value hierarchy.

The Company conducts several specific price monitoring activities. Daily analyses identify price changes over predetermined thresholds defined at the financial instrument level. Various pricing integrity reports are reviewed on a daily and monthly basis to determine if pricing is reflective of market activity or if it would warrant any adjustments. Other procedures performed include, but are not limited to, reviews of third-party pricing services methodologies, reviews of pricing trends and back testing.

The fair values of private fixed maturities, which are originated by internal private asset managers, are primarily determined using discounted cash flow models. These models primarily use observable inputs that include Treasury or similar base rates plus estimated credit spreads to value each security. The credit spreads are obtained through a survey of private market intermediaries who are active in both primary and secondary transactions, and consider, among other factors, the credit quality and the reduced liquidity associated with private placements. Internal adjustments are made to reflect variation in observed sector spreads. Since most private placements are valued using standard market observable inputs and inputs derived from, or corroborated by, market observable data including, but not limited to observed prices and spreads for similar publicly or privately traded issues, they have been reflected within Level 2. For certain private fixed maturities, the discounted cash flow model may incorporate significant unobservable inputs, which reflect the Company’s own assumptions about the inputs that market participants would use in pricing the asset. To the extent management determines that such unobservable inputs are significant to the price of a security, a Level 3 classification is made.

Equity Securities – Equity securities consist principally of investments in common and preferred stock of publicly traded companies, privately traded securities, as well as mutual fund shares. The fair values of most publicly traded equity securities are based on quoted market prices in active markets for identical assets and are classified within Level 1 in the fair value hierarchy. Estimated fair values for most privately traded equity securities are determined using discounted cash flow, earnings multiple and other valuation models that require a substantial level of judgment around inputs and therefore are classified within Level 3. The fair values of mutual fund shares that transact regularly (but do not trade in active markets because they are not publicly available) are based on transaction prices of identical fund shares and are classified within Level 2 in the fair value hierarchy.

Derivative Instruments – Derivatives are recorded at fair value either as assets within “Other invested assets”, or as liabilities within “Payables to parent and affiliates”, except for embedded derivatives which are recorded with the associated host contract. The fair values of derivative contracts can be affected by changes in interest rates, foreign exchange rates, credit spreads, market volatility, expected returns, NPR, liquidity and other factors.

The Company's exchange-traded futures and options include treasury and equity futures. Exchange-traded futures and options are valued using quoted prices in active markets and are classified within Level 1 in the fair value hierarchy.

100

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PRUCO LIFE INSURANCE COMPANY OF NEW JERSEY

Notes to Financial Statements—(Continued)

The majority of the Company’s derivative positions are traded in the OTC derivative market and are classified within Level 2 in the fair value hierarchy. OTC derivatives classified within Level 2 are valued using models that utilize actively quoted or observable market inputs from external market data providers, third-party pricing vendors and/or recent trading activity. The Company’s policy is to use mid-market pricing in determining its best estimate of fair value. The fair values of most OTC derivatives, including interest rate and cross-currency swaps, currency forward contracts and credit default swaps are determined using discounted cash flow models. The fair values of European style option contracts are determined using Black-Scholes option pricing models. These models’ key inputs include the contractual terms of the respective contract, along with significant observable inputs, including interest rates, currency rates, credit spreads, equity prices, index dividend yields, NPR, volatility and other factors.

The Company’s cleared interest rate swaps and credit derivatives linked to an index are valued using models that utilize actively quoted or observable market inputs, including the secured overnight financing rate ("SOFR"), obtained from external market data providers, third-party pricing vendors and/or recent trading activity. These derivatives are classified as Level 2 in the fair value hierarchy.

Cash Equivalents and Short-Term Investments – Cash equivalents and short-term investments include money market instruments, commercial paper and other highly liquid debt instruments. Certain money market instruments are valued using unadjusted quoted prices in active markets that are accessible for identical assets and are primarily classified as Level 1. The remaining instruments in this category are generally fair valued based on market observable inputs, and these investments have primarily been classified within Level 2.

Separate Account Assets – Separate account assets include fixed maturity securities, treasuries, equity securities, real estate, mutual funds and commercial mortgage loans for which values are determined consistent with similar instruments described above under “Fixed Maturity Securities” and “Equity Securities”.

Receivables from Parent and Affiliates – Receivables from parent and affiliates carried at fair value include affiliated bonds within the Company’s legal entity where fair value is determined consistent with similar securities described above under “Fixed Maturity Securities” managed by affiliated asset managers.

Reinsurance Recoverables – Reinsurance recoverables primarily includes an embedded derivative associated with receivables from modified coinsurance arrangements.

Market Risk Benefits – 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 expose the insurance entity to other than nominal capital market risk, primarily related to deferred annuities with guaranteed minimum benefits in the annuities products including GMDB, GMIB, GMAB, GMWB and GMIWB. The benefits are bundled together and accounted for as single compound market risk benefits using a fair value measurement framework.

The fair value of these 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 benefits. 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.

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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.

Policyholders' Account Balances – The liability for policyholders’ account balances is related to certain embedded derivative instruments associated with certain universal life and annuity products that provide policyholders with index-linked interest credited over contract specified term periods. The fair values of these liabilities are determined using discounted cash flow models which include capital market assumptions such as interest rates and equity index volatility assumptions, the Company’s market-perceived NPR and actuarially determined assumptions for mortality, lapses and projected hedge costs.

As there is no observable active market for these liabilities, the fair value is determined as the present value of account balances paid to policyholders in excess of contractually guaranteed minimums using option pricing techniques for index term periods that contain deposits as of the valuation date, and the expected option cost for future index term periods, where the terms of index crediting rates have not yet been declared by the Company. Premiums for risks inherent in valuation techniques, inputs, and the general uncertainty around the timing and amount of future cash flows are also incorporated in the fair value of these liabilities. Since the valuation of these liabilities require the use of management’s judgment to determine these risk premiums and the use of unobservable inputs, these liabilities are reflected within Level 3 in the fair value hierarchy.

Capital market inputs, including interest rates and equity markets volatility, and actual policyholders’ account values are updated each quarter. Actuarial assumptions are reviewed at least annually and updated based upon emerging experience, future expectations and other data, including any observable market data. Aside from these annual updates, assumptions are generally updated only if a material change is observed in an interim period that the Company believes is indicative of a long-term trend.

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Notes to Financial Statements—(Continued)

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


	December 31, 2023
	Fair Value		Valuation Techniques	Unobservable Inputs	Minimum		Maximum		Weighted Average	Impact of Increase in Input on Fair Value(1)
	(in thousands)
Assets:


Commercial mortgage-backed securities	$	19,204	Discounted cash flow	Liquidity premium	0.60	%	0.75	%	0.69%	Decrease
Market risk benefit assets(3)	$	537,659	Discounted cash flow	Lapse rate(4)	1	%	20	%		Increase
				Spread over SOFR(5)	0.41	%	1.91	%		Increase
				Utilization rate(6)	38	%	95	%		Decrease
				Withdrawal rate	See table footnote (7) below.
				Mortality rate(8)	0	%	15	%		Increase
				Equity volatility curve	15	%	25	%		Decrease
Liabilities:
Market risk benefit liabilities(3)	$	537,659	Discounted cash flow	Lapse rate(4)	1	%	20	%		Decrease
				Spread over SOFR(5)	0.41	%	1.91	%		Decrease
				Utilization rate(6)	38	%	95	%		Increase
				Withdrawal rate	See table footnote (7) below.
				Mortality rate(8)	0	%	15	%		Decrease
				Equity volatility curve	15	%	25	%		Increase
Policyholders' account balances(9)	$	237,316	Discounted cash flow	Lapse rate(4)	1	%	80	%		Decrease
				Spread over SOFR(5)	0.41	%	1.85	%		Decrease
				Mortality rate(8)	0	%	23	%		Decrease
				Equity volatility curve	10	%	25	%		Increase
				Option budget(10)	(1)	%	7	%		Increase

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	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)(11)	$	558,624	Discounted cash flow	Lapse rate(4)	1	%	20	%			Increase
				Spread over SOFR(5)	0.50	%	2.20	%			Increase
				Utilization rate(6)	38	%	95	%			Decrease
				Withdrawal rate	See table footnote (7) below.
				Mortality rate(8)	0	%	15	%			Increase
				Equity volatility curve	18	%	26	%			Decrease
Liabilities:
Market risk benefit liabilities(3)(11)	$	558,624	Discounted cash flow	Lapse rate(4)	1	%	20	%			Decrease
				Spread over SOFR(5)	0.50	%	2.20	%			Decrease
				Utilization rate(6)	38	%	95	%			Increase
				Withdrawal rate	See table footnote (7) below.
				Mortality rate(8)	0	%	15	%			Decrease
				Equity volatility curve	18	%	26	%			Increase
Policyholders' account balances(9)	$	108,144	Discounted cash flow	Lapse rate(4)	1	%	6	%			Decrease
				Spread over SOFR(5)	0.53	%	2.26	%			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)Market risk benefits primarily represent fair value for all living benefit guarantees including accumulation, 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)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 balances.

(5)The spread over the 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 December 31, 2023 and 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 are insurance liabilities and are therefore senior to debt.

(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.

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Notes to 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 December 31, 2023 and 2022, the minimum withdrawal rate assumption is 81% and 77%, respectively. As of December 31, 2023 and 2022, 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%.

(8)The range reflects the mortality rates for the vast majority of business with living benefits and other contracts, with policyholders ranging from 50 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 budget determines future costs of the options, which impacts the growth in account value and the valuation of embedded derivatives.

(11)Amounts reflect the implementation of ASU 2018-12: Targeted Improvements to the Accounting for Long-Duration Contracts.

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.

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 be 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.

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Notes to Financial Statements—(Continued)

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 (excluding MRBs disclosed in Note 10). 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.


	Year Ended December 31, 2023(5)(6)
	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)	$	3,803	$	(43)	$	18,146	$	0	$	0	$	(4,064)	$	0	$	5,550	$	(3,763)	$	19,629	$	(86)
Structured securities(3)	20,701		(1,057)		0		(9)		0		(431)		0		0		0		19,204		(1,022)
Other assets:

Equity securities	4,291		219		31		0		0		0		0		0		0		4,541		219



Reinsurance recoverables(4)	0		(3,034)		75,143		0		0		0		(2,364)		0		0		69,745		(3,034)

Liabilities:
Policyholders' account balances(4)	(108,144)		(56,368)		0		0		(72,804)		0		0		0		0		(237,316)		(32,218)


	Year Ended December 31, 2023(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	$	7	$	0	$	(1,072)	$	(35)		$	0	$	0	$	(1,108)
Other assets:

Equity securities	0		219		0		0			0		219		0



Reinsurance recoverables	(3,034)		0		0		0			(3,034)		0		0

Liabilities:
Policyholders' account balances	(56,368)		0		0		0			(32,218)		0		0

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Notes to Financial Statements—(Continued)


	Year Ended December 31, 2022(5)(6)
	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	$	(1,665)	$	0	$	0	$	0	$	(632)	$	0	$	0	$	(18,219)	$	3,803	$	(1,622)
Structured securities(3)	27,274		(6,168)		320		0		0		(405)		0		0		(320)		20,701		(6,144)
Other assets:

Equity securities	5,812		(1,521)		0		0		0		0		0		0		0		4,291		(1,522)





Liabilities:
Policyholders' account balances(4)	(153,127)		29,130		0		0		15,853		0		0		0		0		(108,144)		24,845


	Year Ended December 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	$	1,198	$	0	$	(9,008)	$	(23)		$	1,200	$	0	$	(8,966)
Other assets:

Equity securities	0		(1,521)		0		0			0		(1,522)		0





Liabilities:
Policyholders' account balances	29,130		0		0		0			24,845		0		0


	Year Ended December 31, 2021(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	$	(1,404)	$	0	$	(783)	$	(11)		$	(1,557)	$	0	$	(636)
Other assets:

Equity securities	0		(283)		0		0			0		(283)		0





Liabilities:
Policyholders' account balances	(8,983)		0		0		0			(11)		0		0

(1)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.

(2)Includes U.S. corporate private securities and foreign corporate private securities.

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

(4)Purchases/issuances and settlements for Policyholders' account balances and Reinsurance recoverables 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 now reported as Market Risk Benefits. See Note 10 for additional information.

(6)Excludes MRB assets of $538 million and $559 million and MRB liabilities of $538 million and $559 million as of December 31, 2023 and 2022, respectively. See Note 10 for additional information.

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Fair Value of Financial Instruments

The tables below 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 Statements of Financial Position. In some cases, as described below, the carrying amount equals or approximates fair value.


	December 31, 2023
	Fair Value								Carrying Amount(1)
	Level 1		Level 2		Level 3		Total		Total
	(in thousands)
Assets:

Commercial mortgage and other loans	$	0	$	0	$	237,993	$	237,993	$	239,629
Policy loans	0		0		1,115,096		1,115,096		1,115,096

Short-term investments	2,500		0		0		2,500		2,500
Cash and cash equivalents	1,125		0		0		1,125		1,125
Accrued investment income	0		53,906		0		53,906		53,906
Reinsurance recoverables	0		0		22,155		22,155		23,537
Receivables from parent and affiliates	0		24,502		0		24,502		24,502
Other assets	0		4,363		0		4,363		4,363
Total assets	$	3,625	$	82,771	$	1,375,244	$	1,461,640	$	1,464,658
Liabilities:
Policyholders’ account balances - investment contracts	$	0	$	148,542	$	30,945	$	179,487	$	180,868






Payables to parent and affiliates	0		1,066		0		1,066		1,066
Other liabilities	0		52,027		0		52,027		52,027
Total liabilities	$	0	$	201,635	$	30,945	$	232,580	$	233,961

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	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






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 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.

The fair values presented above have been determined by using available market information and by applying market valuation methodologies, as described in more detail below.

Commercial Mortgage and Other Loans

The fair value of most commercial mortgage loans is based upon the present value of the expected future cash flows discounted at the appropriate U.S. Treasury rate or foreign government bond rate (for non-U.S. dollar-denominated loans) plus an appropriate credit spread for loans of similar quality, average life, and currency. The quality ratings for these loans, a primary determinant of the credit spreads and a significant component of the pricing process, are based on an internally-developed methodology. Certain commercial mortgage loans are valued incorporating other factors, including the terms of the loans, the relative strength of the underlying collateral, the principal exit strategies for the loans, prevailing interest rates and credit risk.

Policy Loans

The Company's valuation technique for policy loans is to discount cash flows at the current policy loan coupon rate. Policy loans are fully collateralized by the cash surrender value of underlying insurance policies. As a result, the carrying value of the policy loans approximates the fair value.

Short-Term Investments, Cash and Cash Equivalents, Accrued Investment Income, Receivables from Parent and Affiliates and Other Assets

The Company believes that due to the short-term nature of certain assets, the carrying value approximates fair value. These assets include: certain short-term investments, which are not securities, recorded at amortized cost; cash and cash equivalent instruments; accrued investment income; and other assets that meet the definition of financial instruments, including receivables, unsettled trades and accounts receivable.

Reinsurance Recoverables

Reinsurance recoverables include corresponding receivables associated with modified coinsurance arrangements and other reinsurance arrangements between the Company and related parties. See Note 11 for additional information about the Company's reinsurance arrangements.

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Policyholders’ Account Balances - Investment Contracts

Only the portion of policyholders’ account balances related to products that are investment contracts (those without significant mortality or morbidity risk) are reflected in the table above. For fixed deferred annuities, payout annuities and other similar contracts without life contingencies, fair values are generally derived using discounted projected cash flows based on interest rates that are representative of the Company’s financial strength ratings, and hence reflect the Company’s NPR. For those balances that can be withdrawn by the customer at any time without prior notice or penalty, the fair value is the amount estimated to be payable to the customer as of the reporting date, which is generally the carrying value.

Cash Collateral for Loaned Securities

Cash collateral for loaned securities represents the collateral received or paid in connection with loaning or borrowing securities. Due to the short-term nature of these transactions, the carrying value approximates fair value.

Other Liabilities and Payables to Parent and Affiliates

Other liabilities and payables to parent and affiliates are primarily payables, such as unsettled trades, drafts, escrow deposits and accrued expense payables. Due to the short term until settlement of most of these liabilities, the Company believes that carrying value approximates fair value.

6. DEFERRED POLICY ACQUISITION COSTS AND DEFERRED REINSURANCE

Deferred Policy Acquisition Costs

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


	Term Life		Variable / Universal Life		Total
	(in thousands)
Balance, January 1, 2021	$	51,527	$	192,691	$	244,218
Capitalization	17,427		65,297		82,724
Amortization expense	(6,863)		(11,335)		(18,198)
Other	0		0		0
Balance, December 31, 2021	62,091		246,653		308,744
Capitalization	14,911		47,531		62,442
Amortization expense	(6,737)		(12,553)		(19,290)
Other	(52)		30		(22)
Balance, December 31, 2022	70,213		281,661		351,874
Capitalization	19,004		42,833		61,837
Amortization expense	(7,209)		(13,363)		(20,572)
Other	0		0		0
Balance, December 31, 2023	$	82,008	$	311,131	$	393,139

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Notes to Financial Statements—(Continued)

Deferred Reinsurance Losses

The following table shows 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:



	Variable Annuities
	(in thousands)
Balance, January 1, 2021	$	20,632

Amortization expense	(1,655)

Balance, December 31, 2021	18,977
Amortization expense	(1,547)
Other	(5)
Balance, December 31, 2022	17,425
Amortization expense	(1,456)
Other	(1)
Balance, December 31, 2023	$	15,968

7. SEPARATE ACCOUNTS

The Company issues variable annuity and variable life insurance 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 variable annuity and variable life insurance contracts are offered with both separate and general account options. See Note 9 for additional information.

The assets supporting the variable portion of variable annuity and variable life insurance 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:


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







Mutual funds:
Equity	$	8,299,099	$	7,430,452
Fixed Income	3,901,137		3,973,001
Other	714,176		611,170


Other invested assets	1,162,691		1,912,335


Total	$	14,077,103	$	13,926,958

For the periods ended December 31, 2023, 2022 and 2021, there were no transfers of assets, other than cash, from the general account to a separate account; therefore, no gains or losses were recorded.

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Notes to Financial Statements—(Continued)

Separate Account Liabilities

The balances of and changes in separate account liabilities as of and for the periods indicated are as follows:


	Year Ended December 31, 2023
	Variable Annuities		Variable Life		Total
	(in thousands)
Balance, beginning of period	$	8,928,568	$	4,998,390	$	13,926,958
Deposits	43,211		199,895		243,106
Investment performance	1,180,443		875,388		2,055,831

Policy charges	(218,915)		(103,013)		(321,928)
Surrenders and withdrawals	(855,504)		(54,781)		(910,285)
Benefit payments	(5,986)		(41,615)		(47,601)
Net transfers (to) from general account(1)	(8,826)		(886,762)		(895,588)

Other	1,186		25,424		26,610
Balance, end of period	$	9,064,177	$	5,012,926	$	14,077,103

Cash surrender value(2)	$	8,929,016	$	4,902,698	$	13,831,714


	Year Ended December 31, 2022
	Variable Annuities		Variable Life		Total
	(in thousands)
Balance, beginning of period	$	11,982,322	$	5,940,045	$	17,922,367
Deposits	67,216		200,686		267,902
Investment performance	(2,113,606)		(925,970)		(3,039,576)

Policy charges	(238,173)		(100,968)		(339,141)
Surrenders and withdrawals	(764,069)		(42,118)		(806,187)
Benefit payments	(5,622)		(42,934)		(48,556)
Net transfers (to) from general account	(895)		(37,577)		(38,472)

Other	1,395		7,226		8,621
Balance, end of period	$	8,928,568	$	4,998,390	$	13,926,958

Cash surrender value(2)	$	8,747,915	$	4,897,409	$	13,645,324

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Notes to Financial Statements—(Continued)


	Year Ended December 31, 2021
	Variable Annuities		Variable Life		Total
	(in thousands)
Balance, beginning of period	$	11,963,399	$	5,154,111	$	17,117,510
Deposits	99,941		236,158		336,099
Investment performance	1,171,547		797,051		1,968,598

Policy charges	(277,346)		(98,839)		(376,185)
Surrenders and withdrawals	(972,834)		(58,845)		(1,031,679)
Benefit payments	(7,378)		(61,608)		(68,986)
Net transfers (to) from general account	4,108		(33,480)		(29,372)

Other	885		5,497		6,382
Balance, end of period	$	11,982,322	$	5,940,045	$	17,922,367

Cash surrender value(2)	$	11,749,197	$	5,850,808	$	17,600,005

(1)Variable life includes $900 million of funding for a policy loan to an affiliated irrevocable trust. See Note 15 for additional information.

(2)Represents the amount of the contractholder's account balances distributable at the balance sheet date less certain surrender charges.

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

In 2023, the Company recognized an immaterial impact to net income attributable to the actuarial assumption update for direct and assumed benefit reserves. Additionally, the Company recognized an unfavorable impact to net income attributable to the actuarial assumption update and other refinements for direct and assumed additional insurance reserves, primarily due to unfavorable model refinements, partially offset by favorable updates to economic assumptions, including expected future rates of returns on investments on universal life policies with secondary guarantees.

In 2022, the Company recognized an unfavorable impact to net income attributable to the actuarial assumption update for direct and assumed benefit reserves, primarily due to updates to mortality assumptions on individual term life insurance. Additionally, the Company recognized an unfavorable impact to net income attributable to the actuarial assumption update and other refinements for direct and assumed additional insurance reserves, primarily due to updates to policyholder behavior assumptions on universal life policies with secondary guarantees.

In 2021, the actuarial assumption update for direct and assumed benefit reserves and additional insurance reserves was immaterial.

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Notes to Financial Statements—(Continued)

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.


	Year Ended December 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 assumption update	(152)		0		(152)
Effect of actual variances from expected experience and other activity	(62,690)		(554)		(63,244)
Adjusted balance, beginning of period	1,427,528		(554)		1,426,974
Issuances	88,929		2,998		91,927
Net premiums / considerations collected	(165,337)		(2,444)		(167,781)
Interest accrual	67,614		0		67,614

Balance at original discount rate, end of period	1,418,734		0		1,418,734
Effect of cumulative changes in discount rate assumptions, end of period	(29,313)		0		(29,313)
Balance, end of period	$	1,389,421	$	0	$	1,389,421


	Year Ended December 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 assumption update	(202)		0		(202)
Effect of actual variances from expected experience and other activity	(82,200)		482		(81,718)
Adjusted balance, beginning of period	2,606,751		18,841		2,625,592
Issuances	88,929		2,998		91,927
Interest accrual	129,375		673		130,048
Benefit payments	(160,052)		(2,463)		(162,515)
Other adjustments	(1,112)		(50)		(1,162)
Balance at original discount rate, end of period	2,663,891		19,999		2,683,890
Effect of cumulative changes in discount rate assumptions, end of period	(44,322)		(1,510)		(45,832)
Balance, end of period	$	2,619,569	$	18,489	$	2,638,058

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Notes to Financial Statements—(Continued)


	Year Ended December 31, 2023
	Net Liability for Future Policy Benefits (Benefit Reserves)
	Term Life		Fixed Annuities		Total
	(in thousands)
Balance, end of period, pre-flooring	$	1,230,148	$	18,489	$	1,248,637
Flooring impact, end of period	0		0		0
Balance, end of period, post-flooring	1,230,148		18,489		1,248,637
Less: Reinsurance recoverable	1,054,226		18,489		1,072,715
Balance after reinsurance recoverable, end of period, post-flooring	$	175,922	$	0	$	175,922


	Year Ended December 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 assumption update	174,263		0		174,263
Effect of actual variances from expected experience and other activity	(29,416)		(746)		(30,162)
Adjusted balance, beginning of period	1,533,028		(746)		1,532,282
Issuances	58,215		2,110		60,325
Net premiums / considerations collected	(170,297)		(1,364)		(171,661)
Interest accrual	69,424		0		69,424

Balance at original discount rate, end of period	1,490,370		0		1,490,370
Effect of cumulative changes in discount rate assumptions, end of period	(73,563)		0		(73,563)
Balance, end of period	$	1,416,807	$	0	$	1,416,807


	Year Ended December 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 assumption update	255,336		0		255,336
Effect of actual variances from expected experience and other activity	(60,049)		149		(59,900)
Adjusted balance, beginning of period	2,675,394		18,004		2,693,398
Issuances	58,215		2,111		60,326
Interest accrual	129,657		627		130,284
Benefit payments	(173,998)		(2,308)		(176,306)
Other adjustments	(115)		(75)		(190)
Balance at original discount rate, end of period	2,689,153		18,359		2,707,512
Effect of cumulative changes in discount rate assumptions, end of period	(137,962)		(1,899)		(139,861)
Balance, end of period	$	2,551,191	$	16,460	$	2,567,651

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Notes to Financial Statements—(Continued)


	Year Ended December 31, 2022
	Net Liability for Future Policy Benefits (Benefit Reserves)
	Term Life		Fixed Annuities		Total
	(in thousands)
Balance, end of period, pre-flooring	$	1,134,384	$	16,460	$	1,150,844
Flooring impact, end of period	0		0		0
Balance, end of period, post-flooring	1,134,384		16,460		1,150,844
Less: Reinsurance recoverable	1,002,277		16,460		1,018,737
Balance after reinsurance recoverable, end of period, post-flooring	$	132,107	$	0	$	132,107


	Year Ended December 31, 2021
	Present Value of Expected Net Premiums
	Term Life		Fixed Annuities		Total
	(in thousands)
Balance, beginning of period	$	1,762,111	$	0	$	1,762,111
Effect of cumulative changes in discount rate assumptions, beginning of period	(352,891)		0		(352,891)
Balance at original discount rate, beginning of period	1,409,220		0		1,409,220

Effect of assumption update	5,651		0		5,651
Effect of actual variances from expected experience and other activity	(13,285)		0		(13,285)
Adjusted balance, beginning of period	1,401,586		0		1,401,586
Issuances	75,944		3,763		79,707
Net premiums / considerations collected	(155,282)		(3,763)		(159,045)
Interest accrual	65,933		0		65,933

Balance at original discount rate, end of period	1,388,181		0		1,388,181
Effect of cumulative changes in discount rate assumptions, end of period	253,752		0		253,752
Balance, end of period	$	1,641,933	$	0	$	1,641,933


	Year Ended December 31, 2021
	Present Value of Expected Future Policy Benefits
	Term Life		Fixed Annuities		Total
	(in thousands)
Balance, beginning of period	$	3,212,658	$	17,969	$	3,230,627
Effect of cumulative changes in discount rate assumptions, beginning of period	(753,963)		(2,188)		(756,151)
Balance at original discount rate, beginning of period	2,458,695		15,781		2,474,476

Effect of assumption update	5,817		0		5,817
Effect of actual variances from expected experience and other activity	(9,219)		(297)		(9,516)
Adjusted balance, beginning of period	2,455,293		15,484		2,470,777
Issuances	75,944		3,763		79,707
Interest accrual	120,981		620		121,601
Benefit payments	(171,572)		(2,012)		(173,584)
Other adjustments	(539)		0		(539)
Balance at original discount rate, end of period	2,480,107		17,855		2,497,962
Effect of cumulative changes in discount rate assumptions, end of period	561,455		1,459		562,914
Balance, end of period	$	3,041,562	$	19,314	$	3,060,876

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Notes to Financial Statements—(Continued)


	Year Ended December 31, 2021
	Net Liability for Future Policy Benefits (Benefit Reserves)
	Term Life		Fixed Annuities		Total
	(in thousands)
Balance, end of period, pre-flooring	$	1,399,629	$	19,314	$	1,418,943
Flooring impact, end of period	899		0		899
Balance, end of period, post-flooring	1,400,528		19,314		1,419,842
Less: Reinsurance recoverable	1,216,756		19,314		1,236,070
Balance after reinsurance recoverable, end of period, post-flooring	$	183,772	$	0	$	183,772

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:


	Year Ended December 31, 2023
	Term Life			Fixed Annuities
	($ in thousands)
Undiscounted expected future gross premiums	$	3,017,106		$	0
Discounted expected future gross premiums (at original discount rate)	$	2,021,858		$	0
Discounted expected future gross premiums (at current discount rate)	$	1,988,469		$	0
Undiscounted expected future benefits and expenses	$	4,298,438		$	25,823
Interest accrual	$	61,760		$	673
Gross premiums	$	236,148		$	2,974
Weighted-average duration of the liability in years (at original discount rate)	10			6
Weighted-average duration of the liability in years (at current discount rate)	10			6
Weighted-average interest rate (at original discount rate)	5.27		%	3.59		%
Weighted-average interest rate (at current discount rate)	5.00		%	4.90		%


	Year Ended December 31, 2022
	Term Life			Fixed Annuities
	($ in thousands)
Undiscounted expected future gross premiums	$	3,073,048		$	0
Discounted expected future gross premiums (at original discount rate)	$	2,069,441		$	0
Discounted expected future gross premiums (at current discount rate)	$	1,973,031		$	0
Undiscounted expected future benefits and expenses	$	4,352,500		$	24,056
Interest accrual	$	60,233		$	627
Gross premiums	$	242,406		$	1,700
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)	5.33		%	3.56		%
Weighted-average interest rate (at current discount rate)	5.40		%	5.30		%

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Notes to Financial Statements—(Continued)


	Year Ended December 31, 2021
	Term Life			Fixed Annuities
	($ in thousands)
Undiscounted expected future gross premiums	$	3,309,037		$	0
Discounted expected future gross premiums (at original discount rate)	$	2,185,726		$	0
Discounted expected future gross premiums (at current discount rate)	$	2,597,734		$	0
Undiscounted expected future benefits and expenses	$	4,023,185		$	23,747
Interest accrual	$	55,048		$	620
Gross premiums	$	241,783		$	4,553
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)	11			7
Weighted-average interest rate (at original discount rate)	5.37		%	3.56		%
Weighted-average interest rate (at current discount rate)	2.54		%	2.48		%

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

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 2023, there was a $3 million gain in to net income for non-participating traditional and limited-payment products, where net premiums exceeded gross premiums for certain issue-year cohorts, which was offset by a $3 million charge, reflecting the impact of ceded reinsurance on the affected cohorts.

In 2022, there was an $11 million charge to net income for non-participating traditional and limited-payment products, where net premiums exceeded gross premiums for certain issue-year cohorts, mostly offset by a $10 million gain, reflecting the impact of ceded reinsurance on the affected cohorts.

In 2021, there was a $6 million charge to net income for non-participating traditional and limited-payment products, where net premiums exceeded gross premiums for certain issue-year cohorts, mostly offset by a $5 million gain, reflecting the impact of ceded reinsurance on the affected cohorts.

Deferred Profit Liability

The balances of and changes in Deferred Profit Liability for the years ended December 31, are as follows:


	2023		2022		2021
	Fixed Annuities
	(in thousands)


Balance, beginning of period	$	1,684	$	1,726	$	984


Effect of actual variances from expected experience and other activity	(681)		(169)		98
Adjusted balance, beginning of period	1,003		1,557		1,082
Profits deferred	511		309		771
Interest accrual	49		60		60
Amortization	(196)		(222)		(187)

Other adjustments	(2)		(20)		0
Balance, end of period	1,365		1,684		1,726


Less: Reinsurance recoverable	1,365		1,684		1,726
Balance after reinsurance recoverable	$	0	$	0	$	0

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Notes to Financial Statements—(Continued)

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, for the years ended December 31,:


	2023		2022		2021
	Fixed Annuities
	(in thousands)
Revenue(1)	$	319	$	42	$	(742)
Interest accrual	49		60		60

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

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 years ended December 31,:


	2023		2022		2021

	(in thousands)


Balance including amounts in AOCI, beginning of period, post-flooring	$	827,478	$	703,968	$	642,514
Flooring impact and amounts in AOCI	91,115		(71,467)		(95,331)

Balance, excluding amounts in AOCI, beginning of period, pre-flooring	918,593		632,501		547,183



Effect of assumption update	9,713		180,404		369
Effect of actual variances from expected experience and other activity	(8,234)		(39,475)		8,089
Adjusted balance, beginning of period	920,072		773,430		555,641
Assessments collected(1)	99,311		134,822		62,891
Interest accrual	32,814		27,479		20,039
Benefits paid	(9,544)		(17,138)		(6,070)
Balance, excluding amounts in AOCI, end of period, pre-flooring	1,042,653		918,593		632,501



Flooring impact and amounts in AOCI	(56,487)		(91,115)		71,467


Balance, including amounts in AOCI, end of period, post-flooring	986,166		827,478		703,968
Less: Reinsurance recoverable	943,991		793,577		666,813
Balance after reinsurance recoverable, including amounts in AOCI, end of period	$	42,175	$	33,901	$	37,155

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


	2023			2022			2021

	($ in thousands)
Interest accrual	$	32,814		$	27,479		$	20,039
Gross assessments	$	245,024		$	303,979		$	215,741
Weighted-average duration of the liability in years (at original discount rate)	27			28			26
Weighted-average interest rate (at original discount rate)	3.40		%	3.41		%	3.44		%

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Notes to Financial Statements—(Continued)

Future Policy Benefits Reconciliation

The following table presents the reconciliation of the ending balances from the above rollforwards, Benefit Reserves, Deferred Profit Liability and Additional Insurance Reserves including other liabilities, gross of related reinsurance recoverables, to the total liability for Future Policy Benefits as reported on the Company's Statements of Financial Position for the years ended December 31,:


	2023		2022		2021

	(in thousands)
Benefit reserves, end of period, post-flooring	$	1,248,637	$	1,150,844	$	1,419,842
Deferred profit liability, end of period, post-flooring	1,365		1,684		1,726
Additional insurance reserves, including amounts in AOCI, end of period, post-flooring	986,166		827,478		703,968
Subtotal of amounts disclosed above	2,236,168		1,980,006		2,125,536
Other Future policy benefits reserves(1)	162,275		150,036		235,587
Total Future policy benefits	$	2,398,443	$	2,130,042	$	2,361,123

(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, Deferred Profit Liability and Additional Insurance Reserves, 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:


	Year Ended December 31, 2023
	Revenues(1)
	Fixed Annuities		Term Life		Variable and Universal Life		Total
	(in thousands)
Benefit reserves	$	2,974	$	236,148	$	0	$	239,122
Deferred profit liability	319		0		0		319
Additional insurance reserves	0		0		245,024		245,024
Total	$	3,293	$	236,148	$	245,024	$	484,465


	Year Ended December 31, 2022
	Revenues(1)
	Fixed Annuities		Term Life		Variable and Universal Life		Total
	(in thousands)
Benefit reserves	$	1,700	$	242,406	$	0	$	244,106
Deferred profit liability	42		0		0		42
Additional insurance reserves	0		0		303,979		303,979
Total	$	1,742	$	242,406	$	303,979	$	548,127

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PRUCO LIFE INSURANCE COMPANY OF NEW JERSEY

Notes to Financial Statements—(Continued)


	Year Ended December 31, 2021
	Revenues(1)
	Fixed Annuities		Term Life		Variable and Universal Life		Total
	(in thousands)
Benefit reserves	$	4,553	$	241,783	$	0	$	246,336
Deferred profit liability	(742)		0		0		(742)
Additional insurance reserves	0		0		215,741		215,741
Total	$	3,811	$	241,783	$	215,741	$	461,335

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


	Year Ended December 31, 2023
	Interest Expense
	Fixed Annuities		Term Life		Variable and Universal Life		Total
	(in thousands)
Benefit reserves	$	673	$	61,760	$	0	$	62,433
Deferred profit liability	49		0		0		49
Additional insurance reserves	0		0		32,814		32,814
Total	$	722	$	61,760	$	32,814	$	95,296


	Year Ended December 31, 2022
	Interest Expense
	Fixed Annuities		Term Life		Variable and Universal Life		Total
	(in thousands)
Benefit reserves	$	627	$	60,233	$	0	$	60,860
Deferred profit liability	60		0		0		60
Additional insurance reserves	0		0		27,479		27,479
Total	$	687	$	60,233	$	27,479	$	88,399


	Year Ended December 31, 2021
	Interest Expense
	Fixed Annuities		Term Life		Variable and Universal Life		Total
	(in thousands)
Benefit reserves	$	620	$	55,048	$	0	$	55,668
Deferred profit liability	60		0		0		60
Additional insurance reserves	0		0		20,039		20,039
Total	$	680	$	55,048	$	20,039	$	75,767

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PRUCO LIFE INSURANCE COMPANY OF NEW JERSEY

Notes to Financial Statements—(Continued)

9. POLICYHOLDERS' ACCOUNT BALANCES

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


	Year Ended December 31, 2023

	Fixed Annuities			Variable Annuities			Variable Life / Universal Life			Total
	($ in thousands)
Balance, beginning of period	$	39,406		$	327,124		$	2,084,680		$	2,451,210
Deposits	3,326			267,216			218,774			489,316
Interest credited	953			9,057			59,335			69,345

Policy charges	(58)			(146)			(145,551)			(145,755)
Surrenders and withdrawals	(7,670)			(36,703)			(111,973)			(156,346)
Benefit payments	(932)			(2,488)			45			(3,375)
Net transfers (to) from separate account(1)	0			8,826			886,762			895,588
Change in market value and other adjustments(2)	0			19,695			36,674			56,369

Balance, end of period	35,025			592,581			3,028,746			3,656,352
Less: Reinsurance recoverables(3)	4,746			569,844			780,512			1,355,102
Policyholders' account balance net of reinsurance recoverables	$	30,279		$	22,737		$	2,248,234		$	2,301,250

Unearned revenue reserve										370,258
Other										9,574
Total Policyholders' account balance										$	4,036,184

Weighted-average crediting rate	2.56		%	1.97		%	2.32		%	2.27		%
Net amount at risk(4)	$	0		$	0		$	34,400,806		$	34,400,806
Cash surrender value(5)	$	8,413		$	573,787		$	2,691,933		$	3,274,133


	Year Ended December 31, 2022

	Fixed Annuities(6)			Variable Annuities			Variable Life / Universal Life			Total
	($ in thousands)
Balance, beginning of period	$	42,070		$	344,945		$	2,052,065		$	2,439,080
Deposits	4,414			1,066			227,017			232,497
Interest credited	1,111			6,174			64,979			72,264

Policy charges	(62)			(234)			(145,194)			(145,490)
Surrenders and withdrawals	(829)			(22,412)			(125,011)			(148,252)
Benefit payments	(7,298)			(3,310)			2,378			(8,230)
Net transfers (to) from separate account	0			895			37,577			38,472
Change in market value and other adjustments(2)	0			0			(29,131)			(29,131)

Balance, end of period	39,406			327,124			2,084,680			2,451,210
Less: Reinsurance recoverables(3)	5,724			323,981			759,273			1,088,978
Policyholders' account balance net of reinsurance recoverables	$	33,682		$	3,143		$	1,325,407		$	1,362,232

Unearned revenue reserve										313,710
Other(6)										9,395
Total Policyholders' account balance										$	2,774,315

Weighted-average crediting rate	2.73		%	1.84		%	3.14		%	2.96		%
Net amount at risk(4)	$	0		$	0		$	33,702,745		$	33,702,745
Cash surrender value(5)	$	11,112		$	305,239		$	1,750,451		$	2,066,802

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PRUCO LIFE INSURANCE COMPANY OF NEW JERSEY

Notes to Financial Statements—(Continued)


	Year Ended December 31, 2021

	Fixed Annuities(6)			Variable Annuities			Variable Life / Universal Life			Total
	($ in thousands)
Balance, beginning of period	$	40,866		$	365,751		$	2,023,030		$	2,429,647
Deposits	8,469			1,610			279,102			289,181
Interest credited	1,181			6,524			55,457			63,162

Policy charges	(70)			(169)			(141,977)			(142,216)
Surrenders and withdrawals	(630)			(18,111)			(133,669)			(152,410)
Benefit payments	(7,746)			(6,552)			(72,340)			(86,638)
Net transfers (to) from separate account	0			(4,108)			33,480			29,372
Change in market value and other adjustments(2)	0			0			8,982			8,982

Balance, end of period	42,070			344,945			2,052,065			2,439,080
Less: Reinsurance recoverables(3)	7,066			340,527			732,293			1,079,886
Policyholders' account balance net of reinsurance recoverables	$	35,004		$	4,418		$	1,319,772		$	1,359,194

Unearned revenue reserve										251,573
Other(6)										9,281
Total Policyholders' account balance										$	2,699,934

Weighted-average crediting rate	2.85		%	1.84		%	2.72		%	2.59		%
Net amount at risk(4)	$	0		$	0		$	32,380,414		$	32,380,414
Cash surrender value(5)	$	12,370		$	323,406		$	1,676,529		$	2,012,305

(1)Variable life includes $900 million of funding for a policy loan to an affiliated irrevocable trust. See Note 15 for additional information.

(2)Primarily relates to changes in the value of embedded derivative instruments associated with the indexed options of certain products.

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

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

(5)Represents the amount of the contractholder's account balances distributable at the balance sheet date less certain surrender charges.

(6)Prior period amounts have been updated to conform to current period presentation.

The Company issues variable life and universal life insurance contracts which may also include a “no-lapse guarantee” where the Company contractually guarantees to the contractholder a death benefit even when the account value drops to zero, as long as the “no-lapse guarantee” premium is paid.

The net amount at risk is generally defined as the current 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 contractholder mortality, contract lapses, and premium pattern, as well as interest rate and equity market returns.

The Company also issues annuity contracts that provide certain death benefit and/or living benefit guarantees and are accounted for as MRBs. See Note 10 for additional information, including the net amount at risk associated with these guarantees.

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PRUCO LIFE INSURANCE COMPANY OF NEW JERSEY

Notes to Financial Statements—(Continued)

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:


	December 31, 2023
Range of Guaranteed Minimum Crediting Rate(1)	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)
Fixed Annuities
Less than 1.00%	$	0	$	0	$	0	$	0	$	0
1.00%- 1.99%	1,034		0		0		0		1,034
2.00%- 2.99%	18,552		0		0		0		18,552
3.00% - 4.00%	7,756		0		0		0		7,756
Greater than 4.00%	0		0		0		0		0
Total	$	27,342	$	0	$	0	$	0	$	27,342
Variable Annuities
Less than 1.00%	$	1,490	$	0	$	0	$	0	$	1,490
1.00% - 1.99%	177,730		1,576		0		0		179,306
2.00% - 2.99%	1,462		0		0		0		1,462
3.00% - 4.00%	113,616		1,180		0		0		114,796
Greater than 4.00%	130		0		0		0		130
Total	$	294,428	$	2,756	$	0	$	0	$	297,184
Variable Life / Universal Life
Less than 1.00%	$	0	$	0	$	0	$	30,597	$	30,597
1.00% - 1.99%	21,709		0		409,406		53,613		484,728
2.00% - 2.99%	3,958		157,256		184,475		28,519		374,208
3.00% - 4.00%	244,318		248,808		917,572		0		1,410,698
Greater than 4.00%	371,165		0		0		0		371,165
Total	$	641,150	$	406,064	$	1,511,453	$	112,729	$	2,671,396

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PRUCO LIFE INSURANCE COMPANY OF NEW JERSEY

Notes to Financial Statements—(Continued)


	December 31, 2022
Range of Guaranteed Minimum Crediting Rate(1)	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)
Fixed Annuities(2)
Less than 1.00%	$	0	$	0	$	0	$	0	$	0
1.00% - 1.99%	1,277		0		0		0		1,277
2.00%- 2.99%	21,208		0		0		0		21,208
3.00% - 4.00%	10,342		0		0		0		10,342
Greater than 4.00%	0		0		0		0		0
Total	$	32,827	$	0	$	0	$	0	$	32,827
Variable Annuities
Less than 1.00%	$	0	$	0	$	0	$	0	$	0
1.00% - 1.99%	192,551		1,593		0		0		194,144
2.00% - 2.99%	1,812		0		0		0		1,812
3.00% - 4.00%	132,969		231		0		0		133,200
Greater than 4.00%	125		0		0		0		125
Total	$	327,457	$	1,824	$	0	$	0	$	329,281
Variable Life / Universal Life
Less than 1.00%	$	705	$	0	$	0	$	0	$	705
1.00% - 1.99%	56,396		0		105,883		286,496		448,775
2.00% - 2.99%	4,433		15,602		203,101		136,109		359,245
3.00% - 4.00%	156,567		633		435,220		0		592,420
Greater than 4.00%	377,674		0		0		0		377,674
Total	$	595,775	$	16,235	$	744,204	$	422,605	$	1,778,819

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PRUCO LIFE INSURANCE COMPANY OF NEW JERSEY

Notes to Financial Statements—(Continued)


	December 31, 2021
Range of Guaranteed Minimum Crediting Rate(1)	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)
Fixed Annuities(2)
Less than 1.00%	$	0	$	0	$	0	$	0	$	0
1.00% - 1.99%	1,573		0		0		0		1,573
2.00%- 2.99%	21,438		0		0		0		21,438
3.00% - 4.00%	10,436		0		0		0		10,436
Greater than 4.00%	0		0		0		0		0
Total	$	33,447	$	0	$	0	$	0	$	33,447
Variable Annuities
Less than 1.00%	$	0	$	0	$	0	$	0	$	0
1.00% - 1.99%	202,917		1,627		0		0		204,544
2.00% - 2.99%	1,901		0		0		0		1,901
3.00% - 4.00%	142,452		0		0		0		142,452
Greater than 4.00%	120		0		0		0		120
Total	$	347,390	$	1,627	$	0	$	0	$	349,017
Variable Life / Universal Life
Less than 1.00%	$	1,143	$	0	$	0	$	0	$	1,143
1.00% - 1.99%	48,298		0		0		362,043		410,341
2.00% - 2.99%	679		0		288,371		53,031		342,081
3.00% - 4.00%	142,942		390,853		62,559		0		596,354
Greater than 4.00%	362,150		0		0		0		362,150
Total	$	555,212	$	390,853	$	350,930	$	415,074	$	1,712,069

(1)Excludes contracts without minimum guaranteed crediting rates, such as funds with indexed-linked crediting options.

(2)Prior period amounts have been updated to conform to current period presentation.

Unearned Revenue Reserve

The balances of and changes in URR as of and for the periods ended are as follows:


	Years Ended December 31,
	2023		2022		2021
	Variable Life / Universal Life
	(in thousands)


Balance, beginning of period	$	313,710	$	251,573	$	186,582
Unearned revenue	72,640		75,757		76,179
Amortization expense	(16,092)		(13,681)		(11,188)
Other adjustments	0		61		0

Balance, end of period	370,258		313,710		251,573
Less: Reinsurance recoverables	95,496		81,256		63,830
Unearned revenue reserve net of reinsurance recoverables	$	274,762	$	232,454	$	187,743

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PRUCO LIFE INSURANCE COMPANY OF NEW JERSEY

Notes to 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:


	Year Ended December 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	107,951		(107,951)		0
Claims paid	(5,336)		5,336		0
Interest accrual	25,736		(25,736)		0
Actual in force different from expected	6,889		(6,889)		0
Effect of changes in interest rates	(156,526)		156,526		0
Effect of changes in equity markets	(158,653)		158,653		0
Effect of assumption update	30,269		(30,269)		0
Issuances	(9,499)		9,499		0
Other adjustments	(106)		106		0
Effect of changes in current period counterparty non-performance risk	0		(62,792)		(62,792)
Balance, end of period, before effect of changes in non-performance risk	402,148		(301,771)		100,377
Effect of cumulative changes in non-performance risk	(100,377)		0		(100,377)
Balance, end of period	$	301,771	$	(301,771)	$	0


	Year Ended December 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	117,867		(117,867)		0
Claims paid	(3,456)		3,456		0
Interest accrual	12,950		(12,950)		0
Actual in force different from expected	10,199		(10,199)		0
Effect of changes in interest rates	(642,920)		642,920		0
Effect of changes in equity markets	266,177		(266,177)		0
Effect of assumption update	(17,430)		17,430		0

Effect of changes in current period counterparty non-performance risk	0		142,046		142,046
Balance, end of period, before effect of changes in non-performance risk	561,423		(398,254)		163,169
Effect of cumulative changes in non-performance risk	(163,169)		0		(163,169)
Balance, end of period	$	398,254	$	(398,254)	$	0

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PRUCO LIFE INSURANCE COMPANY OF NEW JERSEY

Notes to Financial Statements—(Continued)


	Year Ended December 31, 2021
	Variable Annuities		Less: Reinsured Market Risk Benefits		Total, Net of Reinsurance
	(in thousands)
Balance, beginning of period	$	1,205,571	$	(1,205,571)	$	0
Effect of cumulative changes in non-performance risk	60,792		0		60,792
Balance, beginning of period, before effect of changes in non-performance risk	1,266,363		(1,205,571)		60,792
Attributed fees collected	129,583		(129,583)		0
Claims paid	(199)		199		0
Interest accrual	2,200		(2,200)		0
Actual in force different from expected	934		(934)		0
Effect of changes in interest rates	(324,926)		324,926		0
Effect of changes in equity markets	(235,734)		235,734		0
Effect of assumption update	(20,185)		20,185		0

Effect of changes in current period counterparty non-performance risk	0		(39,669)		(39,669)
Balance, end of period, before effect of changes in non-performance risk	818,036		(796,913)		21,123
Effect of cumulative changes in non-performance risk	(21,123)		0		(21,123)
Balance, end of period	$	796,913	$	(796,913)	$	0

In 2023, the Company recognized an unfavorable impact to net income attributable to the actuarial assumption update for direct MRBs, primarily due to updates to policyholder behavior assumptions on certain variable annuities.

In 2022, the Company recognized a favorable impact to net income attributable to the actuarial assumption update for direct MRBs, primarily due to updates to mortality and policyholder behavior assumptions on certain variable annuities.

In 2021, the Company recognized a favorable impact to net income attributable to the actuarial assumption update for direct MRBs, primarily due to updates to long-term asset mix assumptions supporting claims on certain variable annuities.

The Company issues certain variable annuity insurance contracts where the Company 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 anniversary 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 Company also issues indexed variable annuity contracts for which the return is tied to the return of specific indices 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 upon death. In certain of these indexed variable annuity contracts, the Company also contractually guarantees to the contractholder withdrawal benefits payable during specific periods.

For 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.

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PRUCO LIFE INSURANCE COMPANY OF NEW JERSEY

Notes to Financial Statements—(Continued)

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.

The following table presents accompanying information to the rollforward table above.


	December 31, 2023		December 31, 2022		December 31, 2021
	Variable Annuities
	($ in thousands)
Net amount at risk(1)	$	739,353	$	1,050,063	$	128,292
Weighted-average attained age of contractholders	69		68		65

(1)For contracts with multiple benefit features, the highest net amount at risk for each contract is included.

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


	December 31, 2023		December 31, 2022		December 31, 2021
	Variable Annuities
	(in thousands)
Market risk benefit assets	$	537,659	$	558,624	$	940,706
Market risk benefit liabilities	537,659		558,624		940,706
Net balance	$	0	$	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 YRT 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.

"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 market risk benefits and have been accounted for in the same manner.

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PRUCO LIFE INSURANCE COMPANY OF NEW JERSEY

Notes to Financial Statements—(Continued)

Reinsurance amounts included in the Company’s Statements of Financial Position as of December 31, were as follows:


	2023		2022
	(in thousands)
Reinsurance recoverables(1)	$	3,603,225	$	3,098,248
Policy loans	(24,518)		(22,999)
Deferred policy acquisition costs(1)	(620,878)		(646,737)
Deferred sales inducements(1)	(35,313)		(38,146)
Market risk benefit assets(1)	419,715		478,439
Other assets(1)	40,267		42,265
Market risk benefit liabilities(1)	117,944		80,185
Other liabilities(1)	412,919		115,351

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

Reinsurance recoverables by counterparty as of December 31, are broken out below:


	2023		2022
	(in thousands)
Prudential Insurance(1)	$	724,297	$	456,633
PAR U(1)	1,725,753		1,575,260
PARCC(1)	432,554		464,142
PAR Term(1)	279,990		258,169
Term Re(1)	275,721		232,796
DART(1)	102,611		73,702
Pruco Life(1)	57,509		34,720
Unaffiliated	4,790		2,826
Total reinsurance recoverables(1)	$	3,603,225	$	3,098,248

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

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Notes to Financial Statements—(Continued)

Reinsurance amounts, included in the Company’s Statements of Operations and Comprehensive Income (Loss) for the years ended December 31, were as follows:


	2023		2022		2021
	(in thousands)
Premiums:
Direct(1)	$	240,044	$	245,525	$	249,162
Ceded(1)	(200,491)		(211,817)		(220,413)
Net premiums(1)	39,553		33,708		28,749
Policy charges and fee income:
Direct(1)	349,046		370,855		395,576

Ceded(1)(2)	(289,367)		(313,121)		(323,414)
Net policy charges and fee income(1)	59,679		57,734		72,162
Net investment income:
Direct	166,850		99,164		101,279
Ceded	(826)		(772)		(788)
Net investment income	166,024		98,392		100,491
Asset administration fees:
Direct	35,744		38,061		44,882
Ceded	(26,597)		(29,581)		(36,007)
Net asset administration fees	9,147		8,480		8,875
Realized investment gains (losses), net:
Direct(1)	(39,823)		12,855		465
Ceded(1)	(4,487)		980		50
Realized investment gains (losses), net(1)	(44,310)		13,835		515
Change in value of market risk benefits, net of related hedging gain (loss):
Direct(1)	266,390		256,613		448,327
Ceded(1)	(203,598)		(398,659)		(408,657)
Net change in value of market risk benefits, net of related hedging gain (loss)(1)	62,792		(142,046)		39,670
Policyholders’ benefits (including change in reserves):
Direct(1)	451,981		472,033		391,308
Ceded(1)(3)	(396,478)		(443,844)		(350,529)
Net policyholders’ benefits (including change in reserves)(1)	55,503		28,189		40,779
Change in estimates of liability for future policy benefits:
Direct(1)	(17,014)		208,188		14,590
Ceded(1)	14,899		(191,557)		(11,771)
Net change in estimates of liability for future policy benefits(1)	(2,115)		16,631		2,819
Interest credited to policyholders’ account balances:
Direct(1)	98,807		82,469		73,809
Ceded(1)	(34,672)		(34,891)		(30,805)
Net interest credited to policyholders’ account balances	64,135		47,578		43,004
Reinsurance expense allowances and general and administrative expenses, net of capitalization and amortization(1)	(130,475)		(128,013)		(135,863)

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

(2)Includes $(5) million of unaffiliated activity for each of the years ended December 31, 2023, 2022 and 2021.

(3)Includes $(2) million, $2 million and $(2) million of unaffiliated activity for the years ended December 31, 2023, 2022 and 2021, respectively.

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PRUCO LIFE INSURANCE COMPANY OF NEW JERSEY

Notes to Financial Statements—(Continued)

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


	2023		2022		2021
	(in thousands)
Direct gross life insurance face amount in force	$	154,561,817	$	154,382,891	$	156,103,597
Reinsurance ceded	(141,002,931)		(140,370,532)		(140,856,353)
Net life insurance face amount in force	$	13,558,886	$	14,012,359	$	15,247,244

Significant Affiliated Reinsurance Agreements

Prudential Insurance

The Company has a YRT 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 YRT 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 YRT 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.

Pruco Life

Effective July 1, 2017, the Company entered into a YRT reinsurance agreement with Pruco Life for new business, primarily covering universal life policies. Effective January 1, 2020, the Company entered in a similar YRT 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.

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Notes to Financial Statements—(Continued)

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.

12. INCOME TAXES

The following schedule discloses significant components of income tax expense (benefit) for each year presented:


	Years Ended December 31,
	2023		2022		2021
	(in thousands)
Current tax expense (benefit):
U.S. federal	$	22,608	$	(22,713)	$	10,969
State and local	0		(103)		137
Total	22,608		(22,816)		11,106
Deferred tax expense (benefit):
U.S. federal(1)	(10,738)		(7,958)		(13)
Total	(10,738)		(7,958)		(13)
Income tax expense (benefit) from operations	11,870		(30,774)		11,093
Income tax expense (benefit) reported in equity related to:
Other comprehensive income (loss)(1)	(3,014)		(36,731)		(19,694)
Total income tax expense (benefit)	$	8,856	$	(67,505)	$	(8,601)

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

Reconciliation of Expected Tax at Statutory Rates to Reported Income Tax Expense (Benefit)


	Years Ended December 31,
	2023			2022			2021
	($ in thousands)
Expected federal income tax expense (benefit)(1)	$	22,591		$	(21,126)		$	20,100
Non-taxable investment income	(6,452)			(6,259)			(6,371)
Tax credits	(4,301)			(3,393)			(3,478)
Changes in tax law	0			0			67

Other	32			4			775
Reported income tax expense (benefit)	$	11,870		$	(30,774)		$	11,093
Effective tax rate(1)	11.0		%	30.6		%	11.6		%

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

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PRUCO LIFE INSURANCE COMPANY OF NEW JERSEY

Notes to Financial Statements—(Continued)

The effective tax rate is the ratio of “Income tax expense (benefit)” divided by “Income (loss) from operations before income taxes.” The Company’s effective tax rate for fiscal years 2023, 2022 and 2021 was 11.0%, 30.6% and 11.6%, respectively. The following is a description of items that had a significant impact on the difference between the Company’s statutory U.S. federal income tax rate of 21% applicable for 2023, 2022 and 2021, and the Company's effective tax rate during the periods presented:

Non-Taxable Investment Income. The U.S. Dividends Received Deduction (“DRD”) reduces the amount of dividend income subject to U.S. tax and is included in the non-taxable investment income shown in the table above. More specifically, the U.S. DRD constitutes $6 million of the total $6 million of 2023 non-taxable investment income, $5 million of the total $6 million of 2022 non-taxable investment income, and $6 million of the total $6 million of 2021 non-taxable investment income. The DRD for the current period was estimated using information from 2022, current year investment results, and current year’s equity market performance. The actual current year DRD can vary based on factors such as, but not limited to, changes in the amount of dividends received that are eligible for the DRD, changes in the amount of distributions received from fund investments, changes in the account balances of variable life and annuity contracts, and the Company’s taxable income before the DRD.

Tax credits. These amounts primarily represent tax credits relating to foreign taxes withheld on the Company’s separate account investments.

Other. This line item represents reconciling items that are individually less than 5% of the computed expected federal income tax expense (benefit) and have therefore been aggregated for purposes of this reconciliation in accordance with relevant disclosure guidance.

Schedule of Deferred Tax Assets and Deferred Tax Liabilities


	December 31,
	2023		2022
	(in thousands)
Deferred tax assets:
Insurance reserves(1)	$	32,685	$	1,677


Net unrealized loss on securities	41,482		56,805
Other	1,766		465
Deferred tax assets	75,933		58,947
Deferred tax liabilities:
Deferred policy acquisition cost(1)	21,540		15,078

Investments(1)	1,054		4,149


Deferred tax liabilities	22,594		19,227
Net deferred tax asset (liability)	$	53,339	$	39,720

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

The application of U.S. GAAP requires the Company to evaluate the recoverability of deferred tax assets and establish a valuation allowance if necessary to reduce the deferred tax asset to an amount that is more likely than not expected to be realized. Considerable judgment is required in determining whether a valuation allowance is necessary, and if so, the amount of such valuation allowance. In evaluating the need for a valuation allowance, the Company considers many factors, including: (1) the nature of the deferred tax assets and liabilities; (2) whether they are ordinary or capital; (3) in which tax jurisdictions they were generated and the timing of their reversal; (4) taxable income in prior carryback years as well as projected taxable earnings exclusive of reversing temporary differences and carryforwards; (5) the length of time that carryovers can be utilized in the various taxing jurisdictions; (6) any unique tax rules that would impact the utilization of the deferred tax assets; and (7) any tax planning strategies that the Company would employ to avoid a tax benefit from expiring unused. Although realization is not assured, management believes it is more likely than not that the deferred tax assets, net of valuation allowances, will be realized.

Changes in market conditions, including the significant rise in interest rates since the beginning of 2022, resulted in the recording of deferred tax assets related to net unrealized tax capital losses in the Company. When assessing recoverability of these deferred tax assets, the Company considers its ability and intent to hold the underlying securities to recovery in value, if necessary, as well as other factors as noted above. As of December 31, 2023, based on all available evidence, including capital loss carryback capacity, the Company concluded that the deferred tax assets related to the unrealized tax capital losses on the available-for-sale securities portfolios are, more likely than not, expected to be realized.

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Notes to Financial Statements—(Continued)

The Company had no valuation allowance as of December 31, 2023, and 2022. Adjustments to the valuation allowance will be made if there is a change in management’s assessment of the amount of deferred tax asset that is realizable.

The Company’s "Income (loss) from operations before income taxes" includes income from domestic operations of $108 million, $(101) million and $96 million for the years ended December 31, 2023, 2022 and 2021, respectively.

Tax Audit and Unrecognized Tax Benefits

The Company’s liability for income taxes includes the liability for unrecognized tax benefits and interest that relate to tax years still subject to review by the IRS or other taxing authorities. The completion of review or the expiration of the Federal statute of limitations for a given audit period could result in an adjustment to the liability for income taxes.

The Company had no unrecognized tax benefits as of December 31, 2023, 2022, and 2021. The Company does not anticipate any significant changes within the next twelve months to its total unrecognized tax benefits related to tax years for which the statute of limitations has not expired.

The Company classifies all interest and penalties related to tax uncertainties as income tax expense (benefit). The Company did not recognize tax related interest and penalties.

At December 31, 2023, the Company remains subject to examination in the U.S. for tax years 2014 through 2023.

The Company participates in the IRS’s Compliance Assurance Program. Under this program, the IRS assigns an examination team to review completed transactions as they occur in order to reach agreement with the Company on how they should be reported in the relevant tax returns. If disagreements arise, accelerated resolutions programs are available to resolve the disagreements in a timely manner.

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Notes to Financial Statements—(Continued)

13. EQUITY

Accumulated Other Comprehensive Income (Loss)

AOCI represents the cumulative OCI items that are reported separate from net income and detailed on the Statements of Operations and Comprehensive Income (Loss). Net unrealized investment gains (losses) are described in further detail in Note 2, Note 8 (Interest rate remeasurement of Liability for Future Policy Benefits) and Note 10 (Gains (losses) from Changes in Nonperformance Risk on Market Risk Benefits). The balance of and changes in each component of AOCI as of and for the years ended December 31, are as follows:


	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, 2020	$	(783)	$	186,190	$	0	$	0	$	185,407
Cumulative effect of adoption of ASU 2018-12	0		(11,979)		(45,378)		48,028		(9,329)
Change in OCI before reclassifications(2)	(259)		(66,843)		13,404		(39,669)		(93,367)
Amounts reclassified from AOCI	0		(418)		0		0		(418)
Income tax benefit (expense)(2)	54		14,125		(2,814)		8,329		19,694


Balance, December 31, 2021	(988)		121,075		(34,788)		16,688		101,987

Change in OCI before reclassifications(2)	(336)		(375,622)		59,865		142,048		(174,045)
Amounts reclassified from AOCI	0		(863)		0		0		(863)
Income tax benefit (expense)(2)	110		79,024		(12,573)		(29,830)		36,731
Balance, December 31, 2022	(1,214)		(176,386)		12,504		128,906		(36,190)
Change in OCI before reclassifications	225		58,121		(10,299)		(62,792)		(14,745)
Amounts reclassified from AOCI	0		394		0		0		394
Income tax benefit (expense)	(90)		(12,246)		2,164		13,186		3,014


Balance, December 31, 2023	$	(1,079)	$	(130,117)	$	4,369	$	79,300	$	(47,527)

(1)Includes cash flow hedges of $5 million, $14 million and $5 million as of December 31, 2023, 2022 and 2021, respectively.

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

Reclassifications out of Accumulated Other Comprehensive Income (Loss)


	Years Ended December 31,
	2023		2022		2021
	(in thousands)
Amounts reclassified from AOCI(1)(2):









Net unrealized investment gains (losses):
Cash flow hedges - Currency/Interest rate(3)	$	1,175	$	4,895	$	2,292
Net unrealized investment gains (losses) on available-for-sale securities	(1,569)		(4,032)		(1,874)
Total net unrealized investment gains (losses)(4)	(394)		863		418
Total reclassifications for the period	$	(394)	$	863	$	418

(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 future policy benefits, policyholders’ account balances and other liabilities.

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Notes to 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 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 (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 December 31, 2023. The amounts for the periods indicated below represent all other net unrealized investment gains (losses), are as follows:


		Net Unrealized Gains (Losses) on All Other 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)
	(in thousands)
Balance, December 31, 2020		$	255,724	$	28,241	$	(48,283)	$	(49,492)	$	186,190
Cumulative effect of adoption of ASU 2018-12		0		59,506		(74,668)		3,183		(11,979)

Net investment gains (losses) on investments arising during the period		(74,500)		0		0		15,644		(58,856)
Reclassification adjustment for (gains) losses included in net income		(418)		0		0		88		(330)

Impact of net unrealized investment (gains) losses(4)		0		(22,975)		30,632		(1,607)		6,050


Balance, December 31, 2021		180,806		64,772		(92,319)		(32,184)		121,075

Net investment gains (losses) on investments arising during the period		(436,527)		0		0		91,638		(344,889)
Reclassification adjustment for (gains) losses included in net income		(863)		0		0		181		(682)

Impact of net unrealized investment (gains) losses(4)		0		(148,484)		209,389		(12,795)		48,110
Balance, December 31, 2022		(256,584)		(83,712)		117,070		46,840		(176,386)

Net investment gains (losses) on investments arising during the period		63,919		0		0		(13,381)		50,538
Reclassification adjustment for (gains) losses included in net income		394		0		0		(82)		312

Impact of net unrealized investment (gains) losses		0		31,446		(37,244)		1,217		(4,581)


Balance, December 31, 2023		$	(192,271)	$	(52,266)	$	79,826	$	34,594	$	(130,117)

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

(2)"Other costs" primarily includes reinsurance recoverables.

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

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

14. STATUTORY NET INCOME AND SURPLUS AND DIVIDEND RESTRICTIONS

The Company is required to prepare statutory financial statements in accordance with accounting practices prescribed or permitted by the New Jersey Department of Insurance and Banking. Statutory accounting practices primarily differ from U.S. GAAP by charging policy acquisition costs to expense as incurred, establishing future policy benefit liabilities using different actuarial assumptions and valuing investments, deferred taxes, and certain assets on a different basis.

The following table summarizes certain statutory financial information for the Company for the periods indicated:


	Years Ended December 31,
	2023		2022		2021
	(in millions)
Statutory net income (loss)	$	152	$	(134)	$	52
Statutory capital and surplus	1,080		851		592

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Notes to Financial Statements—(Continued)

The Company does not utilize prescribed or permitted practices that vary materially from the statutory accounting practices prescribed by the NAIC.

The Company is subject to New Jersey law, which limits the amount of dividends that insurance companies can pay to stockholders without approval of the New Jersey Department of Banking and Insurance. The maximum dividend, which may be paid in any twelve-month period without notification or approval, is limited to the greater of 10% of statutory surplus as of December 31 of the preceding year or the net gain from operations of the preceding calendar year. Cash dividends may only be paid out of surplus derived from realized net profits. Based on these limitations, there is a capacity to pay a dividend of $143 million in 2024 without prior approval. The Company did not pay dividends to Pruco Life in 2023, 2022, and 2021.

15. 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 for each of the years ended December 31, 2023, 2022 and 2021. The expense charged to the Company for the deferred compensation program was $0.5 million, $0.4 million and $0.4 million for the years ended December 31, 2023, 2022 and 2021, respectively.

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 $1 million for each of the years ended December 31, 2023, 2022 and 2021.

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 $1 million for each of the years ended December 31, 2023, 2022 and 2021.

Prudential Insurance sponsors voluntary savings plans for its employee 401(k) plans. The plans provide for salary reduction contributions by employees and matching contributions by the Company of up to 4% of annual salary. The Company’s expense for its share of the voluntary savings plan was $0.6 million, $0.5 million and $0.5 million for the years ended December 31, 2023, 2022 and 2021, respectively.

The Company is charged distribution expenses from 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 $42 million, $29 million and $37 million for the years ended December 31, 2023, 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 $16 million, $12 million and $10 million for the years ended December 31, 2023, 2022 and 2021, respectively.

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Notes to Financial Statements—(Continued)

Corporate-Owned Life Insurance

The Company has sold three COLI policies to Prudential Insurance and one to Prudential Financial. The cash surrender value included in separate accounts for these COLI policies was $2,452 million and $2,946 million as of December 31, 2023 and 2022, respectively. Fees related to these COLI policies were $25 million, $27 million and $30 million for the years ended December 31, 2023, 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.

In May 2023, the Company funded a policy loan from the Prudential Financial COLI policy noted above in an amount of $900 million to an affiliated irrevocable trust, commonly referred to as a “rabbi trust”, which Prudential Financial created to support certain non-qualified retirement plans. The outstanding balance of the policy loan with the rabbi trust was $898 million as of December 31, 2023. Interest income related to the policy loan was $26 million for the year ended December 31, 2023.

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 $3 million for each of the years ended December 31, 2023, 2022 and 2021. These expenses are recorded as “Net investment income” in the Statements of Operations and Comprehensive Income.

Derivative Trades

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

Joint Ventures

The Company has made investments in joint ventures with certain subsidiaries of Prudential Financial. "Other invested assets" includes $58 million and $51 million of investments in joint ventures as of December 31, 2023 and 2022, respectively. "Net investment income" related to these ventures includes gains(losses) of $2 million, $2 million and $4 million for the years ended December 31, 2023, 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 $27 million, $30 million and $36 million for the years ended December 31, 2023, 2022 and 2021, respectively. These revenues are recorded as “Asset administration fees” in the Statements of Operations and Comprehensive Income.

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 $8 million, $7 million and $8 million for the years ended December 31, 2023, 2022 and 2021, respectively. These revenues are recorded as “Asset administration fees” in the Statements of Operations and Comprehensive Income.

Affiliated Notes Receivable

Affiliated notes receivable included in “Receivables from parent and affiliates” at December 31, were as follows:


	Maturity Dates	Interest Rates					2023			2022
								(in thousands)

U.S. dollar fixed rate notes	2027		0.00%	-	14.85	%		$	0		$	688
Total notes receivable - affiliated(1)								$	0		$	688

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

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

There was no accrued interest receivable related to these loans as of December 31, 2023 and 2022. Revenues were $0.0 million for each of the years ended December 31, 2023, 2022 and 2021, and are included in “Other income (loss).”

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PRUCO LIFE INSURANCE COMPANY OF NEW JERSEY

Notes to Financial Statements—(Continued)

Affiliated Asset Transfers

The Company participates in affiliated asset trades with parent and sister companies. Book and market value differences for trades with a parent and sister are recognized within "Additional paid-in capital" ("APIC") and "Realized investment gains (losses), net," respectively. The table below shows affiliated asset trades for the years ended December 31, 2023 and 2022:


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)	$	0
Prudential Insurance	June 2023	Purchase	Fixed Maturities	$	14,452	$	15,086	$	501	$	0
Prudential Insurance	December 2023	Sale	Commercial Mortgage and Other Loans	$	762	$	754	$	0	$	8

Debt Agreements

The Company is authorized to borrow funds up to $250 million from affiliates to meet its capital and other funding needs. There was no debt outstanding for both 2023 and 2022.

The total interest expense to the Company related to loans payable to affiliates was $0.2 million, $0.0 million and $0.0 million for the years ended December 31, 2023, 2022 and 2021, respectively.

Contributed Capital and Dividends

In February and December 2023, the Company received capital contributions in the amount of $175 million and $82 million from Pruco Life, respectively. In February, March, September and December 2022, the Company received capital contributions in the amount of $100 million, $2 million, $100 million and $125 million from Pruco Life, respectively. In March and December 2021, the Company received capital contributions in the amounts of $1 million and $100 million from Pruco, respectively.

There was no return of capital in 2023, 2022 and 2021.

The Company did not pay any dividends in 2023, 2022 and 2021.

Reinsurance with Affiliates

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

16. COMMITMENTS AND CONTINGENT LIABILITIES

Commitments

The Company has made commitments to fund commercial mortgage loans. As of December 31, 2023 and 2022, the outstanding balances on these commitments were $20 million and $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 December 31, 2023 or 2022. There was no change in allowance for credit losses for both the years ended December 31, 2023 and 2022. The Company also made commitments to purchase or fund investments, mostly fund investments and private fixed maturities, some of which are contingent upon events or circumstances not under the Company’s control, including those at the discretion of the Company’s counterparties. The Company anticipates a portion of these commitments will ultimately be funded from its separate accounts. As of December 31, 2023 and 2022, $135 million and $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 both the years ended December 31, 2023 and 2022.

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PRUCO LIFE INSURANCE COMPANY OF NEW JERSEY

Notes to Financial Statements—(Continued)

Contingent Liabilities

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

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

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

Litigation and Regulatory Matters

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

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 December 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.

Regulatory

Variable Products

The Company has received regulatory inquiries and requests for information from state and federal regulators, including subpoenas from the U.S. Securities and Exchange Commission, concerning the appropriateness of variable product sales and replacement activity. The Company is cooperating with regulators and may become subject to additional regulatory inquiries and other actions related to this matter.

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PRUCO LIFE INSURANCE COMPANY OF NEW JERSEY

Notes to Financial Statements—(Continued)

Summary

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

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Item 9. Changes in and Disagreements with Independent Accountants on Accounting and Financial Disclosure

None.

Item 9A. Controls and Procedures

Management’s Annual Report on Internal Control Over Financial Reporting on the effectiveness of internal control over financial reporting as of December 31, 2023 is included in Part II, Item 8 of this Annual Report on Form 10-K.

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 December 31, 2023. Based on such evaluation, the Chief Executive Officer and Chief Financial Officer have concluded that, as of December 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 December 31, 2023, that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

Item 9B. Other Information

None.

Item 9C. Disclosure Regarding Foreign Jurisdictions That Prevent Inspections

Not applicable.

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PART III

Item 10. Directors, Executive Officers and Corporate Governance

Omitted pursuant to General Instruction I(2)(c) of Form 10-K.

Item 14. Principal Accountant Fees and Services

The information called for by this item is hereby incorporated herein by reference to the relevant portions of Prudential Financial's Definitive Proxy Statement for the Annual Meeting of Shareholders to be held on May 14, 2024.

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PART IV

Item 15. Exhibits and Financial Statement Schedules

The following documents are filed as part of this report:


		Page
(a) (1)	Financial Statements-Item 8. Financial Statements and Supplementary Data	45
(2)	Financial Statement Schedules:
	Schedule I—Summary of Investments Other Than Investments in Related Parties as of December 31, 2022	147
	Any remaining schedules provided for in the applicable SEC regulations are omitted because they are either inapplicable or the relevant information is provided elsewhere within this Form 10-K.

(3) Exhibits


3.1			The Certificate of Incorporation of Pruco Life Insurance Company of New Jersey (as amended through March 11,1983) is incorporated by reference to Post-Effective Amendment No. 40 to Registration Statement 002-89780, filed April 21, 2009 on behalf of the Pruco Life of New Jersey Variable Appreciable Account.

3.1(b)			Certificate of Amendment to the Certificate of Incorporation of Pruco Life Insurance Company of New Jersey dated February 12, 1998 is incorporated by reference to Post-Effective Amendment No. 40 to Registration Statement 002-89780, filed April 21, 2009 on behalf of the Pruco Life of New Jersey Variable Appreciable Account.

3.1(c)			Certificate of Amendment to the Certificate of Incorporation of Pruco Life Insurance Company of New Jersey dated October 1, 2012 is incorporated by reference to Post-Effective Amendment No. 47 to Registration Statement 002-89780, filed April 10, 2015 on behalf of the Pruco Life of New Jersey Variable Appreciable Account.

3.1(d)			Certificate of Amendment to the Certificate of Incorporation of Pruco Life Insurance Company of New Jersey dated September 3, 2019 is incorporated by reference to the Annual Report of Form 10-K for the year ended December 31, 2019 , Registration No. 333-18053 filed March 5, 2020, on behalf of Pruco Life Insurance Company of New Jersey.

3.2			By-Laws of Pruco Life Insurance Company of New Jersey (as amended through August 4, 1999) incorporated by reference to Post-Effective Amendment No. 40 to Registration Statement 002-89780, filed April 21, 2009 on behalf of the Pruco Life of New Jersey Variable Appreciable Account.

23.1 Consent of PricewaterhouseCoopers LLP.

24. Powers of Attorney.

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.

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

101.SCH			-XBRL Taxonomy Extension Schema Document.

101.CAL			-XBRL Taxonomy Extension Calculation Linkbase Document.

101.LAB			-XBRL Taxonomy Extension Label Linkbase Document.

101.PRE			-XBRL Taxonomy Extension Presentation Linkbase Document.

101.DEF			-XBRL Taxonomy Extension Definition Linkbase Document.

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

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PRUCO LIFE INSURANCE COMPANY OF NEW JERSEY

Schedule I

Summary of Investments Other Than Investments in Related Parties

December 31, 2023

(in thousands)


Type of Investment	Amortized Cost or Cost		Fair Value		Amount Shown in the Balance Sheet
Fixed maturities, available-for-sale:
Bonds:
U.S. Treasury securities and obligations of U.S. government authorities and agencies	$	52,196	$	51,042	$	51,042
Obligations of U.S. states and their political subdivisions	184,419		182,538		182,538
Foreign governments	95,189		80,744		80,744
Asset-backed securities	19,440		18,511		18,511
Commercial mortgage-backed securities	104,055		96,699		96,699
Residential mortgage-backed securities	15,780		15,551		15,551
Public utilities	425,152		384,954		384,954
All other corporate bonds	1,663,742		1,532,056		1,532,056
Total fixed maturities, available-for-sale	$	2,559,973	$	2,362,095	$	2,362,095
Equity securities:
Common stocks:
Other common stocks	$	31	$	0	$	0
Mutual funds	62		74		74
Perpetual preferred stocks	4,560		4,541		4,541
Total equity securities, at fair value	$	4,653	$	4,615	$	4,615
Fixed maturities, trading	$	25,745	$	23,440	$	23,440
Commercial mortgage and other loans	239,629				239,629
Policy loans	1,115,096				1,115,096
Short-term investments	5,959				5,959
Other invested assets	153,885				153,885
Total investments	$	4,104,940			$	3,904,719

Item 16. Form 10-K Summary

None.

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SIGNATURES

Pursuant to the requirements of Section 13 or 15 (d) 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, on the 20th day of March 2024.


PRUCO LIFE INSURANCE COMPANY OF NEW JERSEY (Registrant)

By:						/s/ Dylan J. Tyson
						Dylan J. Tyson
						President and Chief Executive Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities indicated on March 20, 2024.


Signature						Title

/s/ Dylan J. Tyson						President,
Dylan J. Tyson						Chief Executive Officer and Director

/s/ Elizabeth Dietrich						Chief Financial Officer, Chief Accounting Officer
Elizabeth Dietrich						and Director

*Alan M. Finkelstein						Director
Alan M. Finkelstein

*Scott E. Gaul						Director
Scott E. Gaul

*Salene Hitchcock-Gear						Director
Salene Hitchcock-Gear

*Markus Coombs						Director
Markus Coombs

*Bradley O. Harris						Director
Bradley O. Harris


* By:						/s/ Michael Pignatella
						Michael Pignatella
						(Attorney-in-Fact)

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