Administration’s Dialogue and Evaluation of Monetary Situation and Outcomes of
Operations (“MD&A”) addresses the monetary situation of Pruco Life Insurance coverage
Firm of New Jersey, or the “Firm,” as of September 30, 2021, in contrast with
December 31, 2020, and its outcomes of operations for the three and 9 months
ended September 30, 2021 and 2020. It is best to learn the next evaluation of our
monetary situation and outcomes of operations along with the MD&A, the
“Danger Elements” part, and the audited Monetary Statements included within the
Firm’s Annual Report on Kind 10-Ok for the 12 months ended December 31, 2020, as
effectively because the statements beneath “Ahead-Wanting Statements”, and the Unaudited
Interim Monetary Statements included elsewhere on this Quarterly Report on Kind
10-Q.

Overview

The Firm is licensed to promote variable annuities, common life insurance coverage,
variable life insurance coverage and time period life insurance coverage in New Jersey and New York. The
Firm solely sells such merchandise in New York primarily by means of affiliated and
unaffiliated distributors. As of December 31, 2020, the Firm discontinued the
gross sales of conventional variable annuities with assured residing profit riders.

COVID-19

Because the first quarter of 2020, the novel coronavirus (“COVID-19”) has created
excessive stress and disruption within the international economic system and monetary markets and
has elevated mortality and morbidity expertise for the worldwide inhabitants. The
COVID-19 pandemic continues to affect our outcomes of operations within the present
interval and is anticipated to proceed to affect our outcomes of operations in future
durations. The COVID-19 pandemic has moved in localized waves, with its affect
worsening after which bettering in numerous areas at completely different instances in a
repetitive however unpredictable sample. In the course of the third quarter of 2021, the
mortality impacts to our companies from COVID-19 elevated in comparison with the
second quarter. The Firm has taken a number of measures to handle the impacts of
this disaster. The precise and anticipated impacts of those occasions and different gadgets are
included within the following replace:
•Outlook. We anticipate COVID-19 to proceed to contribute to elevated ranges of
mortality, leading to elevated life insurance coverage claims within the near-term. The
pandemic may additionally affect gross sales volumes.

•Outcomes of Operations. For the three and 9 months ended September 30, 2021
we reported a web revenue of $23 million and $53 million, respectively. See
“Outcomes of Operations” for a dialogue of outcomes for the third quarter and
the primary 9 months of 2021.

•Danger Elements. The COVID-19 pandemic has adversely impacted our outcomes of
operations, monetary place, funding portfolio, new enterprise alternatives
and operations, and these impacts are anticipated to proceed. For extra
info on the dangers to our enterprise posed by the COVID-19 pandemic, see
“Danger Elements” included within the Firm’s Annual Report on Kind 10-Ok for the 12 months
ended December 31, 2020.

•Enterprise Continuity. All through the COVID-19 pandemic, we have now been executing
Prudential Monetary Inc.’s (“Prudential Monetary”) and our enterprise continuity
protocols to make sure our workers are protected and capable of serve our clients. This
included successfully transitioning the overwhelming majority of our workers to distant
work preparations.

We imagine we are able to maintain distant work and social distancing for an indefinite
interval whereas guaranteeing that important enterprise operations are sustained. In
addition, we’re managing COVID-19-related impacts on third-party supplied
providers, and don’t anticipate important interruption in important operations.

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Influence of a Low Curiosity Price Setting

As a monetary providers firm, market rates of interest are a key driver of our
outcomes of operations and monetary situation. Modifications in rates of interest can
have an effect on our outcomes of operations and/or our monetary situation in a number of methods,
together with favorable or antagonistic impacts to:

•investment-related exercise, together with: funding revenue returns, web curiosity
margins, web funding unfold outcomes, new cash charges, mortgage mortgage
prepayments and bond redemptions;
•hedging prices and different threat mitigation actions;
•insurance coverage reserve ranges, amortization of deferred coverage acquisition prices
(“DAC”) and market expertise true-ups;
•buyer account values, together with their affect on payment revenue;
•product choices, design options, crediting charges and gross sales combine; and
•policyholder habits, together with give up or withdrawal exercise.

For extra info on rate of interest dangers, see “Danger Elements-Market Danger”
included in our Annual Report on Kind 10-Ok for the 12 months ended December 31, 2020.

Revenues and Bills

The Firm earns revenues principally from insurance coverage premiums, mortality and
expense charges, asset administration charges from insurance coverage and funding merchandise,
and from web funding revenue on the funding of normal account and different
funds. The Firm receives premiums primarily from the sale of particular person life
insurance coverage and annuity merchandise. The Firm earns mortality and expense charges,
and asset administration charges, primarily from the sale and servicing of
common life insurance coverage and separate account merchandise together with variable life
insurance coverage and variable annuities. The Firm’s working bills principally
encompass insurance coverage advantages supplied and reserves established for anticipated
future insurance coverage advantages, normal enterprise bills, reinsurance premiums,
commissions and different prices of promoting and servicing the assorted merchandise bought
and curiosity credited on normal account liabilities.

Accounting Insurance policies & Pronouncements

Software of Essential Accounting Estimates

The preparation of economic statements in conformity with U.S. GAAP requires
the applying of accounting insurance policies that usually contain a major diploma
of judgment. Administration, on an ongoing foundation, opinions estimates and assumptions
used within the preparation of economic statements. If administration determines that
modifications in assumptions and estimates are applicable given present information
and circumstances, the Firm’s outcomes of operations and monetary place as
reported within the Unaudited Interim Monetary Statements might change
considerably.

Administration believes the accounting insurance policies referring to the next areas are
most depending on the applying of estimates and assumptions and require
administration’s most tough, subjective, or advanced judgments:

•DAC and different prices, together with deferred gross sales inducements (“DSI”);
•Policyholder liabilities;
•Valuation of investments, together with derivatives, measurement of allowance for
credit score losses, and recognition of other-than-temporary impairments;
•Reinsurance recoverables;
•Taxes on revenue; and
•Reserves for contingencies, together with reserves for losses in reference to
unresolved authorized issues.

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Market Efficiency – Fairness and Curiosity Price Assumptions

DAC and different prices related to the variable and common life insurance policies and
the variable and glued annuity contracts are typically amortized over the
anticipated lives of those insurance policies in proportion to complete gross income. Whole
gross income embody each precise gross income and estimates of gross income
for future durations. The quarterly changes for market efficiency mirror the
affect of modifications to our estimate of complete gross income to mirror precise fund
efficiency and market circumstances. A good portion of gross income for
our variable annuity contracts and, to a lesser diploma, our variable life
contracts are dependent upon the overall price of return on property held in separate
account funding choices. This price of return influences the charges we earn on
variable annuity and variable life contracts, prices we incur related to the
assured minimal demise and assured minimal revenue profit options associated
to our variable annuity contracts and anticipated claims to be paid on variable
life contracts, in addition to different sources of revenue. Returns which are larger than
our expectations for a given interval produce larger than anticipated account
balances, which improve the longer term charges we anticipate to earn on variable annuity
and variable life contracts and reduce the longer term prices we anticipate to incur
related to the assured minimal demise and assured minimal revenue
profit options associated to our variable annuity contracts and anticipated claims
to be paid on variable life contracts. The alternative happens when returns are
decrease than our expectations. The modifications in future anticipated gross income are
used to acknowledge a cumulative adjustment to all prior durations’ amortization.

Moreover, the calculation of the estimated legal responsibility for future coverage
advantages associated to sure insurance coverage merchandise contains an estimate of
related revenues and bills which are depending on each historic market
efficiency in addition to estimates of market efficiency sooner or later. Just like
DAC and different prices described above, these liabilities are topic to quarterly
changes for expertise together with market efficiency, along with annual
changes ensuing from our annual opinions of assumptions.

The weighted common price of return assumptions utilized in creating estimated
market returns think about many components particular to every product sort, together with
asset durations, asset allocations and different components. With regard to fairness
market assumptions, the near-term future price of return assumption utilized in
evaluating DAC, different prices and liabilities for future coverage advantages for
sure of our merchandise, primarily our home variable annuity and variable
life insurance coverage merchandise, is mostly up to date every quarter and is derived utilizing
a reversion to the imply strategy, a standard trade observe. Below this
strategy, we think about historic fairness returns and modify projected fairness
returns over an preliminary future interval of 5 years (the “near-term”) in order that
fairness returns converge to the long-term anticipated price of return. If the
near-term projected future price of return is bigger than our near-term most
future price of return of 15.0%, we use our most future price of return. If the
near-term projected future price of return is decrease than our near-term minimal
future price of return of 0%, we use our minimal future price of return. As of
September 30, 2021, our variable annuities and variable life insurance coverage
companies assume an 8.0% long-term fairness anticipated price of return and a 0.4%
near-term imply reversion fairness anticipated price of return.

With regard to rate of interest assumptions utilized in evaluating DAC, DSI and
liabilities for future coverage advantages for sure of our merchandise, we typically
replace the long-term and near-term future charges used to mission fastened revenue
returns yearly and quarterly, respectively. On account of our 2021 annual
opinions and replace of assumptions and different refinements, we stored our long-term
expectation of the 10-year U.S. Treasury price unchanged and proceed to grade to
a price of three.25% over ten years. As a part of our quarterly market expertise
updates, we replace our near-term projections of rates of interest to mirror
modifications in present charges.

For a dialogue of the affect that would outcome from modifications in sure key
assumptions, see “Administration’s Dialogue and Evaluation of Monetary Situation
and Outcomes of Operations-Accounting Insurance policies and Pronouncements-Sensitivities
for Insurance coverage Belongings and Liabilities” in our Annual Report on Kind 10-Ok for the
12 months ended December 31, 2020.

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Future Adoption of New Accounting Pronouncements

ASU 2018-12, Monetary Providers – Insurance coverage (Subject 944): Focused Enhancements
to the Accounting for Lengthy-Length Contracts, was issued by the Monetary
Accounting Requirements Board (“FASB”) on August 15, 2018. In October 2019, the
FASB issued ASU 2019-09, Monetary Providers – Insurance coverage (Subject 944): Efficient
Date to affirm its choice to defer the efficient date of ASU 2018-12 to
January 1, 2022 (with early adoption permitted), representing a one 12 months
extension from the unique efficient date of January 1, 2021. On account of
the COVID-19 pandemic, in November 2020 the FASB issued ASU 2020-11, Monetary
Providers-Insurance coverage (Subject 944): Efficient Date and Early Software to defer
for a further one 12 months the efficient date of ASU 2018-12 from January 1,
2022 to January 1, 2023, and to offer transition reduction to facilitate the
early adoption of the ASU. The transition reduction would enable giant calendar-year
public firms that early undertake ASU 2018-12 to use the steering both as of
January 1, 2020 or January 1, 2021 (and file transition changes as of
January 1, 2020 or January 1, 2021, respectively) within the 2022 monetary
statements. Firms that don’t early undertake ASU 2018-12 would apply the
steering as of January 1, 2021 (and file transition changes as of January
1, 2021) within the 2023 monetary statements. The Firm at the moment intends to
undertake ASU 2018-12 efficient January 1, 2023 utilizing the modified retrospective
transition methodology the place permitted.

ASU 2018-12 will affect, not less than to some extent, the accounting and disclosure
necessities for all long-duration insurance coverage and funding contracts issued by
the Firm. The Firm expects the usual to have a major monetary
affect on the Monetary Statements and can considerably improve disclosures.
Along with important impacts to the steadiness sheet upon adoption, the
Firm additionally expects an affect to the sample of earnings emergence following
the transition date. See Word 2 to the Unaudited Interim Monetary Statements
for a extra detailed dialogue of ASU 2018-12, in addition to different accounting
pronouncements issued however not but adopted and newly adopted accounting
pronouncements.

Modifications in Monetary Place

Whole property elevated $0.2 billion from $23.7 billion at December 31, 2020 to
$23.9 billion at September 30, 2021. Important parts had been:
•Separate account property elevated $0.4 billion primarily pushed by favorable
fairness market efficiency, partially offset by web outflows and coverage prices;
Partially offset by:
•Reinsurance recoverables decreased $0.3 billion primarily associated to the
variable annuity reinsured residing profit liabilities ensuing from rising
rates of interest and favorable fairness market efficiency.
Whole liabilities elevated $0.2 billion from $22.8 billion at December 31, 2020
to $23.0 billion at September 30, 2021. Important parts had been:
•Separate account liabilities elevated $0.4 billion, equivalent to the
improve in Separate account property, as mentioned above;
Partially offset by:
•Future coverage advantages decreased $0.2 billion primarily pushed by a lower in
reserves associated to our variable annuity residing profit liabilities, as
mentioned above.
Whole fairness decreased $1 million from $865 million at December 31, 2020 to $864
million at September 30, 2021 primarily pushed by unrealized losses on fastened
maturity investments pushed by rising rates of interest mirrored in Collected
different complete revenue (loss), partially offset by an after-tax web revenue
of $53 million.

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Outcomes of Operations

Revenue (loss) from Operations earlier than Revenue Taxes

Three Months Comparability

Revenue (loss) from operations earlier than revenue taxes elevated $5 million from
revenue of $20 million for the three months ended September 30, 2020 to revenue of
$25 million for the three months ended September 30, 2021 primarily pushed by:
•Larger Web funding revenue on non-coupon investments, partially offset by
decrease reinvestment yields; and
•Larger Realized funding good points (losses), web on account of favorable foreign money swap
good points, partially offset by losses on rate of interest swaps from rising charges.
9 Months Comparability
Revenue (loss) from operations earlier than revenue taxes elevated $19 million from
revenue of $38 million for the 9 months ended September 30, 2020 to revenue of
$57 million for the 9 months ended September 30, 2021. This contains an
unfavorable comparative web lack of $3 million from our annual opinions and
replace of assumptions and different refinements, as talked about above. Excluding the
affect of our annual opinions and replace of assumptions and different refinements,
revenue (loss) from operations elevated $22 million primarily pushed by:
•Larger Web funding revenue on account of revenue on non-coupon investments and better
invested property from the retained life enterprise, partially offset by decrease
reinvestment yields;
•Larger Coverage prices and payment revenue on account of favorable fairness markets driving
elevated variable life account values and better amortization from unearned
income reserves on account of enterprise development; and
•Larger Premiums from development in time period insurance policies retained by the Firm.
Revenues, Advantages and Bills

Three Months Comparability

Revenues elevated $5 million from $51 million for the three months ended
September 30, 2020 to $56 million for the three months ended September 30, 2021
primarily pushed by:
•Larger Web funding revenue on non-coupon investments, partially offset by
decrease reinvestment yields; and
•Larger Realized funding good points (losses), web on account of foreign money swap good points,
partially offset by losses on rate of interest swaps from rising charges.
Advantages and bills had been flat at $31 million for the three months ended
September 30, 2020 to $31 million for the three months ended September 30, 2021.
9 Months Comparability
Revenues elevated $24 million from a achieve of $150 million for the 9 months
ended September 30, 2020 to a achieve of $174 million for the 9 months ended
September 30, 2021. This contains an unfavorable comparative web lower of $4
million from our annual opinions and replace of assumptions and different refinements,
as talked about above. Excluding the affect of our annual opinions and replace of
assumptions and different refinements, Revenues elevated $28 million primarily
pushed by:
•Larger Web funding revenue on account of revenue on non-coupon investments and better
invested property from the retained life enterprise, partially offset by decrease
reinvestment yields;
•Larger Coverage prices and payment revenue on account of favorable fairness markets driving
elevated variable life account values and better amortization from unearned
income reserves on account of enterprise development; and
•Larger Premiums from development in time period insurance policies retained by the Firm.

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Advantages and bills elevated $6 million from an expense of $111 million for
the 9 months ended September 30, 2020 to an expense of $117 million for the
9 months ended September 30, 2021. This features a favorable comparative web
lower of $1 million from our annual opinions and replace of assumptions and
different refinements, as talked about above. Excluding the affect of our annual
opinions and replace of assumptions and different refinements, Advantages and bills
elevated $7 million primarily pushed by:
•Larger Basic, administrative and different bills pushed by an unfavorable
comparative affect from fee and expense allowance ceded on account of decrease
gross sales, partially offset by decrease bills on account of firm initiatives; and
•Larger Amortization of deferred coverage acquisition prices pushed by enterprise
development primarily from variable life.
Dangers and Danger Mitigants
Variable Annuity Dangers and Danger Mitigants:
The first threat exposures of our variable annuity contracts relate to precise
deviations from, or modifications to, the assumptions used within the unique pricing of
these merchandise, together with capital markets assumptions reminiscent of fairness market
returns, rates of interest and market volatility, together with actuarial assumptions
reminiscent of contractholder mortality, the timing and quantity of annuitization and
withdrawals, and contract lapses. For these threat exposures, achievement of our
anticipated returns is topic to the chance that precise expertise will differ from
the assumptions used within the unique pricing of those merchandise. Prudential
Monetary manages our publicity to sure dangers pushed by fluctuations in
capital markets primarily by means of a mix of Product Design Options and
an Asset Legal responsibility Administration Technique (“ALM”), as mentioned under. Gross sales of
conventional variable annuities with assured residing profit riders had been
discontinued as of December 31, 2020.
Product Design Options:
A portion of the variable annuity contracts that we supplied embody an asset
switch characteristic. This characteristic is applied on the contract stage, and
transfers property between sure variable funding sub-accounts chosen by
the annuity contractholder and, relying on the profit characteristic, a fixed-rate
account within the normal account or a bond fund sub-account inside the separate
account. The target of the asset switch characteristic is to scale back our publicity
to fairness market threat and market volatility. The asset switch characteristic
related to highest day by day residing profit merchandise makes use of a chosen bond
fund sub-account inside the separate account. The transfers are primarily based on a
static mathematical system used with the actual profit which considers a
variety of components, together with, however not restricted to, the affect of funding
efficiency on the contractholder’s complete account worth. Different product design
options we make the most of embody, amongst others, asset allocation restrictions,
minimal issuance age necessities and sure limitations on the quantity of
contractholder buy funds, in addition to a required minimal allocation to
our normal account for sure of our merchandise.
As well as, there may be variety in our payment preparations, as sure charges are
based totally on the profit assure quantity, the contractholder account
worth and/or premiums, which helps protect sure income streams when market
fluctuations trigger account values to say no.
Asset Legal responsibility Administration Technique (together with fastened revenue devices and
derivatives):
Prudential Insurance coverage employs an ALM technique that makes use of a mix of each
conventional fastened revenue devices and derivatives to satisfy anticipated
liabilities related to our variable annuity residing profit ensures. The
financial legal responsibility we handle with this ALM technique consists of anticipated residing
profit claims beneath much less extreme market circumstances, that are managed utilizing
fastened revenue devices, derivatives, or a mix thereof, and potential
residing profit claims ensuing from extra extreme market circumstances, that are
hedged utilizing by-product devices. For our Prudential Outlined Revenue variable
annuity, we make the most of fastened revenue devices to satisfy anticipated liabilities. For
the portion of our ALM technique executed with derivatives, Prudential Insurance coverage
enters into a variety of exchange-traded and over-the-counter fairness and curiosity
price derivatives, together with, however not restricted to: fairness and treasury futures;
complete return and rate of interest swaps; and choices together with fairness choices,
swaptions, and flooring and caps. The intent of this technique is to extra
effectively handle the capital and liquidity related to these merchandise
whereas persevering with to mitigate fluctuations in web revenue on account of actions in
capital markets. Because the ALM technique is performed in Prudential Insurance coverage,
the outcomes of the technique don’t straight affect the Firm’s outcomes of
operations or monetary situation.
Revenue Taxes

For info relating to revenue taxes, see Word 7 to the Unaudited Interim
Monetary Statements.

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Liquidity and Capital Assets
This part dietary supplements and must be learn along with “Administration’s
Dialogue and Evaluation of Monetary Situation and Outcomes of
Operations-Liquidity and Capital Assets” included in our Annual Report on
Kind 10-Ok for the 12 months ended December 31, 2020.
Overview
Liquidity refers back to the means to generate ample money sources to satisfy
the fee obligations of the Firm. Capital refers back to the long-term
monetary sources obtainable to assist the operations of our enterprise, fund
enterprise development, and supply a cushion to resist antagonistic circumstances. Our
means to generate and keep ample liquidity and capital relies on the
profitability of our enterprise, normal financial circumstances, our means to
borrow from associates and our entry to the capital markets by means of associates
as described herein.
Efficient and prudent liquidity and capital administration is a precedence throughout the
group. Administration screens the liquidity of the Firm every day
and initiatives borrowing and capital wants over a multi-year time horizon. We use
a Danger Urge for food Framework (“RAF”) to make sure that all dangers taken by the Firm
aligns with our capability and willingness to take these dangers. The RAF offers a
dynamic evaluation of capital and liquidity stress impacts, together with eventualities
much like, and extra extreme than, these occurring on account of COVID-19, and is
meant to make sure that ample sources can be found to soak up these
impacts. We imagine that our capital and liquidity sources are ample to
fulfill the capital and liquidity necessities of the Firm.
Our companies are topic to complete regulation and supervision by
home and worldwide regulators. These laws at the moment embody
necessities (lots of that are the topic of ongoing rule-making) referring to
capital, leverage, liquidity, stress-testing, total threat administration, credit score
publicity reporting and credit score focus. For info on these regulatory
initiatives and their potential affect on us, see “Enterprise-Regulation” and
“Danger Elements” included in our Annual Report on Kind 10-Ok for the 12 months ended
December 31, 2020.
Capital
We handle the Firm to regulatory capital ranges per our “AA”
scores targets. We make the most of the risk-based capital (“RBC”) ratio as a major
measure of capital adequacy. RBC is calculated primarily based on statutory monetary
statements and threat formulation per the practices of the Nationwide
Affiliation of Insurance coverage Commissioners (“NAIC”). RBC considers, amongst different
issues, dangers associated to the kind and high quality of the invested property,
insurance-related dangers related to an insurer’s merchandise and liabilities,
rate of interest dangers and normal enterprise dangers. RBC ratio calculations are
meant to help insurance coverage regulators in measuring an insurer’s solvency and
means to pay future claims. The reporting of RBC measures shouldn’t be meant for
the aim of rating any insurance coverage firm or to be used in reference to any
advertising, promoting or promotional actions, however is obtainable to the
public. The Firm’s capital ranges considerably exceed the minimal stage
required by relevant insurance coverage laws. Our regulatory capital ranges could
be affected sooner or later by modifications to the relevant laws, proposals
for that are at the moment into account by each home and worldwide
insurance coverage regulators.
The regulatory capital stage of the Firm could be materially impacted by
rate of interest and fairness market fluctuations, modifications within the values of
derivatives, the extent of impairments recorded, and credit score high quality migration of
the funding portfolio, amongst different gadgets. As well as, the reinsurance of
enterprise or the recapture of enterprise topic to reinsurance preparations on account of
defaults by, or credit score high quality migration affecting, the reinsurers or for different
causes might negatively affect regulatory capital ranges. The Firm’s
regulatory capital stage can also be affected by statutory accounting guidelines, which
are topic to alter by every relevant insurance coverage regulator.
Captive Reinsurance Firms:
See “Administration’s Dialogue and Evaluation of Monetary Situation and Outcomes of
Operations-Liquidity and Capital Assets-Capital-Affiliated Captive
Reinsurance Firms” included in our Annual Report on Kind 10-Ok for the 12 months
ended December 31, 2020, for a dialogue of our use of captive reinsurance
firms.
Liquidity
Our liquidity is managed to make sure steady, dependable and cost-effective sources
of money flows to satisfy all of our obligations. Liquidity is supplied by a spread
of sources, as described extra absolutely under, together with portfolios of liquid
property. Our funding portfolios are integral to the general liquidity of the
Firm. We use a projection course of for money flows from operations to make sure
ample liquidity to satisfy projected money outflows, together with claims. The
affect of Prudential Funding, LLC’s (“Prudential Funding”), a wholly-owned
subsidiary of Prudential Insurance coverage, financing capability on liquidity is
thought of within the inner liquidity measures of the Firm.
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Liquidity is measured in opposition to internally-developed benchmarks that take into
account the traits of each the asset portfolio and the liabilities that
they assist. We think about attributes of the assorted classes of liquid property
(for instance, sort of asset and credit score high quality) in calculating inner
liquidity measures to guage our liquidity beneath varied stress eventualities,
together with company-specific and market-wide occasions. We proceed to imagine that
money generated by ongoing operations and the liquidity profile of our property
present ample liquidity beneath moderately foreseeable stress eventualities.
The principal sources of the Firm’s liquidity are premiums and sure
annuity issues, funding and payment revenue, funding maturities, gross sales
of investments and inner borrowings. The principal makes use of of that liquidity
embody advantages, claims, and funds to policyholders and contractholders in
reference to surrenders, withdrawals and web coverage mortgage exercise. Different makes use of
of liquidity embody commissions, normal and administrative bills, purchases
of investments, the fee of dividends and returns of capital to the dad or mum
firm, hedging and reinsurance exercise and funds in reference to
financing actions.
In managing liquidity, we think about the chance of policyholder and contractholder
withdrawals of funds sooner than our assumptions when deciding on property to
assist these contractual obligations. We use give up prices and different
contract provisions to mitigate the extent, timing and profitability affect of
withdrawals of funds by clients.
Liquid Belongings
Liquid property embody money and money equivalents, short-term investments, U.S.
Treasury fastened maturities, and glued maturities that aren’t designated as
held-to-maturity and public fairness securities. As of September 30, 2021 and
December 31, 2020, the Firm had liquid property of $1,987 million and $1,988
million, respectively. The portion of liquid property comprised money and money
equivalents was $20 million and $69 million as of September 30, 2021 and
December 31, 2020, respectively. As of September 30, 2021, $1,750 million, or
96%, of the fastened maturity investments within the Firm’s normal account
portfolios, had been rated excessive or highest high quality primarily based on NAIC or equal
score.

Time period and Common Life Reserve Financing
The Firm makes use of affiliated captive reinsurance subsidiaries to finance the
portion of the statutory reserves required to be held beneath Regulation XXX and
Guideline AXXX that’s thought of to be non-economic. The financing preparations
contain the reinsurance of time period and common life enterprise to our affiliated
captive reinsurers and the issuance of surplus notes by these affiliated
captives which are handled as capital for statutory functions. These surplus notes
are subordinated to policyholder obligations, and the fee of principal and
curiosity on the excess notes can solely be made with prior insurance coverage regulatory
approval.

As of September 30, 2021, the affiliated captive reinsurance firms have
entered into agreements with exterior counterparties offering for the issuance
of as much as an mixture of $14,700 million of surplus notes by our affiliated
captive reinsurers in return for the receipt of credit-linked notes
(“Credit score-Linked Word Constructions”), of which $12,746 million of surplus notes was
excellent, in comparison with an mixture issuance capability of $14,825 million, of
which $12,919 million was excellent as of December 31, 2020. Below the
agreements, the affiliated captive receives in change for the excess notes
a number of credit-linked notes issued by a special-purpose affiliate of the
Firm with an mixture principal quantity equal to the excess notes
excellent. The affiliated captive holds the credit-linked notes as property
supporting Regulation XXX or Guideline AXXX non-economic reserves, as
relevant. For extra info on our Credit score-Linked Word Constructions, see
“Administration’s Dialogue and Evaluation of Monetary Situation and Outcomes of
Operation-Liquidity and Capital Assets-Financing Actions” within the Annual
Report on Kind 10-Ok for the 12 months ended December 31, 2020.

As of September 30, 2021, our affiliated captive reinsurance firms had
excellent an mixture of $2,775 million of debt issued for the aim of
financing Regulation XXX and Guideline AXXX non-economic reserves, of which
roughly $1,175 million pertains to Regulation XXX reserves and
roughly $1,600 million pertains to Guideline AXXX reserves. As well as, as
of September 30, 2021, for functions of financing Guideline AXXX reserves, one in all
our affiliated captives had roughly $3,982 million of surplus notes
excellent that had been issued to associates.

The Firm has launched up to date variations of its particular person life merchandise in
conjunction with the requirement to undertake principle-based reserving by January
1, 2020. These up to date merchandise are at the moment priced to assist the
principle-based statutory reserve stage with out the necessity for reserve financing.

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PRUCO LIFE INSURANCE COMPANY OF NEW JERSEY

Notes to Unaudited Interim Monetary Statements-(Continued)

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