PRUCO LIFE INSURANCE OF NEW JERSEY – 10-Q – Management's Discussion and Analysis of Financial Condition and Results of Operations

Management's Discussion and Analysis of Financial Condition and Results of
Operations ("MD&A") addresses the financial condition of Pruco Life Insurance
Company of New Jersey, or the "Company," as of September 30, 2021, compared with
December 31, 2020, and its results of operations for the three and nine months
ended September 30, 2021 and 2020. You should read the following analysis of our
financial condition and results of operations in conjunction with the MD&A, the
"Risk Factors" section, and the audited Financial Statements included in the
Company's Annual Report on Form 10-K for the year ended December 31, 2020, as
well as the statements under "Forward-Looking Statements", and the Unaudited
Interim Financial Statements included elsewhere in this Quarterly Report on Form
10-Q.

                                    Overview

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

COVID-19

Since the first quarter of 2020, the novel coronavirus ("COVID-19") has created
extreme stress and disruption in the global economy and financial markets and
has elevated mortality and morbidity experience for the global population. The
COVID-19 pandemic continues to impact our results of operations in the current
period and is expected to continue to impact our results of operations in future
periods. The COVID-19 pandemic has moved in localized waves, with its impact
worsening and then improving in different locations at different times in a
repetitive but unpredictable pattern. During the third quarter of 2021, the
mortality impacts to our businesses from COVID-19 increased compared to the
second quarter. The Company has taken several measures to manage the impacts of
this crisis. The actual and expected impacts of these events and other items are
included in the following update:
•Outlook. We expect COVID-19 to continue to contribute to elevated levels of
mortality, resulting in increased life insurance claims in the near-term. The
pandemic may also impact sales volumes.

•Results of Operations. For the three and nine months ended September 30, 2021
we reported a net income of $23 million and $53 million, respectively. See
"Results of Operations" for a discussion of results for the third quarter and
the first nine months of 2021.

•Risk Factors. The COVID-19 pandemic has adversely impacted our results of
operations, financial position, investment portfolio, new business opportunities
and operations, and these impacts are expected to continue. For additional
information on the risks to our business posed by the COVID-19 pandemic, see
"Risk Factors" included in the Company's Annual Report on Form 10-K for the year
ended December 31, 2020.

•Business Continuity. Throughout the COVID-19 pandemic, we have been executing
Prudential Financial Inc.'s ("Prudential Financial") and our business continuity
protocols to ensure our employees are safe and able to serve our customers. This
included effectively transitioning the vast majority of our employees to remote
work arrangements.

We believe we can sustain remote work and social distancing for an indefinite
period while ensuring that critical business operations are sustained. In
addition, we are managing COVID-19-related impacts on third-party provided
services, and do not anticipate significant interruption in critical operations.

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Impact of a Low Interest Rate Environment

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

•investment-related activity, including: investment income returns, net interest
margins, net investment spread results, new money rates, mortgage loan
prepayments and bond redemptions;
•hedging costs and other risk mitigation activities;
•insurance reserve levels, amortization of deferred policy acquisition costs
("DAC") and market experience true-ups;
•customer account values, including their impact on fee income;
•product offerings, design features, crediting rates and sales mix; and
•policyholder behavior, including surrender or withdrawal activity.

For more information on interest rate risks, see "Risk Factors-Market Risk"
included in our Annual Report on Form 10-K for the year ended December 31, 2020.

Revenues and Expenses

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

                      Accounting Policies & Pronouncements

Application of Critical Accounting Estimates

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

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

•DAC and other costs, including deferred sales inducements ("DSI");
•Policyholder liabilities;
•Valuation of investments, including derivatives, measurement of allowance for
credit losses, and recognition of other-than-temporary impairments;
•Reinsurance recoverables;
•Taxes on income; and
•Reserves for contingencies, including reserves for losses in connection with
unresolved legal matters.

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Market Performance - Equity and Interest Rate Assumptions

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

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

The weighted average rate of return assumptions used in developing estimated
market returns consider many factors specific to each product type, including
asset durations, asset allocations and other factors. With regard to equity
market assumptions, the near-term future rate of return assumption used in
evaluating DAC, other costs and liabilities for future policy benefits for
certain of our products, primarily our domestic variable annuity and variable
life insurance products, is generally updated each quarter and is derived using
a reversion to the mean approach, a common industry practice. Under this
approach, we consider historical equity returns and adjust projected equity
returns over an initial future period of five years (the "near-term") so that
equity returns converge to the long-term expected rate of return. If the
near-term projected future rate of return is greater than our near-term maximum
future rate of return of 15.0%, we use our maximum future rate of return. If the
near-term projected future rate of return is lower than our near-term minimum
future rate of return of 0%, we use our minimum future rate of return. As of
September 30, 2021, our variable annuities and variable life insurance
businesses assume an 8.0% long-term equity expected rate of return and a 0.4%
near-term mean reversion equity expected rate of return.

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

For a discussion of the impact that could result from changes in certain key
assumptions, see "Management's Discussion and Analysis of Financial Condition
and Results of Operations-Accounting Policies and Pronouncements-Sensitivities
for Insurance Assets and Liabilities" in our Annual Report on Form 10-K for the
year ended December 31, 2020.

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Future Adoption of New Accounting Pronouncements

ASU 2018-12, Financial Services - Insurance (Topic 944): Targeted Improvements
to the Accounting for Long-Duration Contracts, was issued by the Financial
Accounting Standards Board ("FASB") on August 15, 2018. In October 2019, the
FASB issued ASU 2019-09, Financial Services - Insurance (Topic 944): Effective
Date to affirm its decision to defer the effective date of ASU 2018-12 to
January 1, 2022 (with early adoption permitted), representing a one year
extension from the original effective date of January 1, 2021. As a result of
the COVID-19 pandemic, in November 2020 the FASB issued ASU 2020-11, Financial
Services-Insurance (Topic 944): Effective Date and Early Application to defer
for an additional one year the effective date of ASU 2018-12 from January 1,
2022 to January 1, 2023, and to provide transition relief to facilitate the
early adoption of the ASU. The transition relief would allow large calendar-year
public companies that early adopt ASU 2018-12 to apply the guidance either as of
January 1, 2020 or January 1, 2021 (and record transition adjustments as of
January 1, 2020 or January 1, 2021, respectively) in the 2022 financial
statements. Companies that do not early adopt ASU 2018-12 would apply the
guidance as of January 1, 2021 (and record transition adjustments as of January
1, 2021) in the 2023 financial statements. The Company currently intends to
adopt ASU 2018-12 effective January 1, 2023 using the modified retrospective
transition method where permitted.

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

                         Changes in Financial Position

Total assets increased $0.2 billion from $23.7 billion at December 31, 2020 to
$23.9 billion at September 30, 2021. Significant components were:
•Separate account assets increased $0.4 billion primarily driven by favorable
equity market performance, partially offset by net outflows and policy charges;
Partially offset by:
•Reinsurance recoverables decreased $0.3 billion primarily related to the
variable annuity reinsured living benefit liabilities resulting from rising
interest rates and favorable equity market performance.
Total liabilities increased $0.2 billion from $22.8 billion at December 31, 2020
to $23.0 billion at September 30, 2021. Significant components were:
•Separate account liabilities increased $0.4 billion, corresponding to the
increase in Separate account assets, as discussed above;
Partially offset by:
•Future policy benefits decreased $0.2 billion primarily driven by a decrease in
reserves related to our variable annuity living benefit liabilities, as
discussed above.
Total equity decreased $1 million from $865 million at December 31, 2020 to $864
million at September 30, 2021 primarily driven by unrealized losses on fixed
maturity investments driven by rising interest rates reflected in Accumulated
other comprehensive income (loss), partially offset by an after-tax net income
of $53 million.

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                             Results of Operations

Income (loss) from Operations before Income Taxes

Three Months Comparison

Income (loss) from operations before income taxes increased $5 million from
income of $20 million for the three months ended September 30, 2020 to income of
$25 million for the three months ended September 30, 2021 primarily driven by:
•Higher Net investment income on non-coupon investments, partially offset by
lower reinvestment yields; and
•Higher Realized investment gains (losses), net due to favorable currency swap
gains, partially offset by losses on interest rate swaps from rising rates.
Nine Months Comparison
Income (loss) from operations before income taxes increased $19 million from
income of $38 million for the nine months ended September 30, 2020 to income of
$57 million for the nine months ended September 30, 2021. This includes an
unfavorable comparative net loss of $3 million from our annual reviews and
update of assumptions and other refinements, as mentioned above. Excluding the
impact of our annual reviews and update of assumptions and other refinements,
income (loss) from operations increased $22 million primarily driven by:
•Higher Net investment income due to income on non-coupon investments and higher
invested assets from the retained life business, partially offset by lower
reinvestment yields;
•Higher Policy charges and fee income due to favorable equity markets driving
increased variable life account values and higher amortization from unearned
revenue reserves due to business growth; and
•Higher Premiums from growth in term policies retained by the Company.
Revenues, Benefits and Expenses

Three Months Comparison

Revenues increased $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 driven by:
•Higher Net investment income on non-coupon investments, partially offset by
lower reinvestment yields; and
•Higher Realized investment gains (losses), net due to currency swap gains,
partially offset by losses on interest rate swaps from rising rates.
Benefits and expenses were flat at $31 million for the three months ended
September 30, 2020 to $31 million for the three months ended September 30, 2021.
Nine Months Comparison
Revenues increased $24 million from a gain of $150 million for the nine months
ended September 30, 2020 to a gain of $174 million for the nine months ended
September 30, 2021. This includes an unfavorable comparative net decrease of $4
million from our annual reviews and update of assumptions and other refinements,
as mentioned above. Excluding the impact of our annual reviews and update of
assumptions and other refinements, Revenues increased $28 million primarily
driven by:
•Higher Net investment income due to income on non-coupon investments and higher
invested assets from the retained life business, partially offset by lower
reinvestment yields;
•Higher Policy charges and fee income due to favorable equity markets driving
increased variable life account values and higher amortization from unearned
revenue reserves due to business growth; and
•Higher Premiums from growth in term policies retained by the Company.

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Benefits and expenses increased $6 million from an expense of $111 million for
the nine months ended September 30, 2020 to an expense of $117 million for the
nine months ended September 30, 2021. This includes a favorable comparative net
decrease of $1 million from our annual reviews and update of assumptions and
other refinements, as mentioned above. Excluding the impact of our annual
reviews and update of assumptions and other refinements, Benefits and expenses
increased $7 million primarily driven by:
•Higher General, administrative and other expenses driven by an unfavorable
comparative impact from commission and expense allowance ceded due to lower
sales, partially offset by lower expenses due to company initiatives; and
•Higher Amortization of deferred policy acquisition costs driven by business
growth primarily from variable life.
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 were
discontinued as of December 31, 2020.
Product Design Features:
A portion of the variable annuity contracts that we offered include an asset
transfer feature. This feature is implemented at the contract level, and
transfers assets between certain variable investment sub-accounts selected by
the annuity contractholder and, depending on the benefit feature, a fixed-rate
account in the general account or a bond fund sub-account within the separate
account. The objective of the asset transfer feature is to reduce our exposure
to equity market risk and market volatility. The asset transfer feature
associated with highest daily living benefit products uses a designated bond
fund sub-account within the separate account. The transfers are based on a
static mathematical formula used with the particular benefit which considers a
number of factors, including, but not limited to, the impact of investment
performance on the contractholder's total account value. Other product design
features we utilize include, among others, asset allocation restrictions,
minimum issuance age requirements and certain limitations on the amount of
contractholder purchase payments, as well as a required minimum allocation to
our general account for certain of our products.
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):
Prudential Insurance employs an ALM strategy that utilizes a combination of both
traditional fixed income instruments and derivatives to meet expected
liabilities associated with our variable annuity living benefit guarantees. The
economic liability we manage with this ALM strategy consists of expected living
benefit claims under less severe market conditions, which are managed using
fixed income instruments, derivatives, or a combination thereof, and potential
living benefit claims resulting from more severe market conditions, which are
hedged using derivative instruments. For our Prudential Defined Income variable
annuity, we utilize fixed income instruments to meet expected liabilities. For
the portion of our ALM strategy executed with derivatives, Prudential Insurance
enters into a range of exchange-traded and over-the-counter equity and interest
rate derivatives, including, but not limited to: equity and treasury futures;
total return 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. Since the ALM strategy is conducted in Prudential Insurance,
the results of the strategy do not directly impact the Company's results of
operations or financial condition.
                                  Income Taxes

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

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                        Liquidity and Capital Resources
This section supplements and should be read in conjunction with "Management's
Discussion and Analysis of Financial Condition and Results of
Operations-Liquidity and Capital Resources" included in our Annual Report on
Form 10-K for the year ended December 31, 2020.
Overview
Liquidity refers to the ability to generate sufficient cash resources to meet
the payment obligations of the Company. Capital refers to the long-term
financial resources available to support the operations of our business, fund
business growth, and provide a cushion to withstand adverse circumstances. Our
ability to generate and maintain sufficient liquidity and capital depends on the
profitability of our business, general economic conditions, our ability to
borrow from affiliates and our access to the capital markets through affiliates
as described herein.
Effective and prudent liquidity and capital management is a priority across the
organization. Management monitors the liquidity of the Company on a daily basis
and projects borrowing and capital needs over a multi-year time horizon. We use
a Risk Appetite Framework ("RAF") to ensure that all risks taken by the Company
aligns with our capacity and willingness to take those risks. The RAF provides a
dynamic assessment of capital and liquidity stress impacts, including scenarios
similar to, and more severe than, those occurring due to COVID-19, and is
intended to ensure that sufficient resources are available to absorb those
impacts. We believe that our capital and liquidity resources are sufficient to
satisfy the capital and liquidity requirements of the Company.
Our businesses are subject to comprehensive regulation and supervision by
domestic and international regulators. These regulations currently include
requirements (many of which are the subject of ongoing rule-making) relating to
capital, leverage, liquidity, stress-testing, overall risk management, credit
exposure reporting and credit concentration. For information on these regulatory
initiatives and their potential impact on us, see "Business-Regulation" and
"Risk Factors" included in our Annual Report on Form 10-K for the year ended
December 31, 2020.
Capital
We manage the Company to regulatory capital levels consistent with our "AA"
ratings targets. We utilize the risk-based capital ("RBC") ratio as a primary
measure of capital adequacy. RBC is calculated based on statutory financial
statements and risk formulas consistent with the practices of the National
Association of Insurance Commissioners ("NAIC"). RBC considers, among other
things, risks related to the type and quality of the invested assets,
insurance-related risks associated with an insurer's products and liabilities,
interest rate risks and general business risks. RBC ratio calculations are
intended to assist insurance regulators in measuring an insurer's solvency and
ability to pay future claims. The reporting of RBC measures is not intended for
the purpose of ranking any insurance company or for use in connection with any
marketing, advertising or promotional activities, but is available to the
public. The Company's capital levels substantially exceed the minimum level
required by applicable insurance regulations. Our regulatory capital levels may
be affected in the future by changes to the applicable regulations, proposals
for which are currently under consideration by both domestic and international
insurance regulators.
The regulatory capital level of the Company can be materially impacted by
interest rate and equity market fluctuations, changes in the values of
derivatives, the level of impairments recorded, and credit quality migration of
the investment portfolio, among other items. In addition, the reinsurance of
business or the recapture of business subject to reinsurance arrangements due to
defaults by, or credit quality migration affecting, the reinsurers or for other
reasons could negatively impact regulatory capital levels. The Company's
regulatory capital level is also affected by statutory accounting rules, which
are subject to change by each applicable insurance regulator.
Captive Reinsurance Companies:
See "Management's Discussion and Analysis of Financial Condition and Results of
Operations-Liquidity and Capital Resources-Capital-Affiliated Captive
Reinsurance Companies" included in our Annual Report on Form 10-K for the year
ended December 31, 2020, for a discussion of our use of captive reinsurance
companies.
Liquidity
Our liquidity is managed to ensure stable, reliable and cost-effective sources
of cash flows to meet all of our obligations. Liquidity is provided by a variety
of sources, as described more fully below, including portfolios of liquid
assets. Our investment portfolios are integral to the overall liquidity of the
Company. We use a projection process for cash flows from operations to ensure
sufficient liquidity to meet projected cash outflows, including claims. The
impact of Prudential Funding, LLC's ("Prudential Funding"), a wholly-owned
subsidiary of Prudential Insurance, financing capacity on liquidity is
considered in the internal liquidity measures of the Company.
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Liquidity is measured against internally-developed benchmarks that take into
account the characteristics of both the asset portfolio and the liabilities that
they support. We consider attributes of the various categories of liquid assets
(for example, type of asset and credit quality) in calculating internal
liquidity measures to evaluate our liquidity under various stress scenarios,
including company-specific and market-wide events. We continue to believe that
cash generated by ongoing operations and the liquidity profile of our assets
provide sufficient liquidity under reasonably foreseeable stress scenarios.
The principal sources of the Company's liquidity are premiums and certain
annuity considerations, investment and fee income, investment maturities, sales
of investments and internal borrowings. The principal uses of that liquidity
include benefits, claims, and payments to policyholders and contractholders in
connection with surrenders, withdrawals and net policy loan activity. Other uses
of liquidity include commissions, general and administrative expenses, purchases
of investments, the payment of dividends and returns of capital to the parent
company, hedging and reinsurance activity and payments in connection with
financing activities.
In managing liquidity, we consider the risk of policyholder and contractholder
withdrawals of funds earlier than our assumptions when selecting assets to
support these contractual obligations. We use surrender charges and other
contract provisions to mitigate the extent, timing and profitability impact of
withdrawals of funds by customers.
Liquid Assets
Liquid assets include cash and cash equivalents, short-term investments, U.S.
Treasury fixed maturities, and fixed maturities that are not designated as
held-to-maturity and public equity securities. As of September 30, 2021 and
December 31, 2020, the Company had liquid assets of $1,987 million and $1,988
million, respectively. The portion of liquid assets comprised cash and cash
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 fixed maturity investments in the Company's general account
portfolios, were rated high or highest quality based on NAIC or equivalent
rating.

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

As of September 30, 2021, the affiliated captive reinsurance companies have
entered into agreements with external counterparties providing for the issuance
of up to an aggregate of $14,700 million of surplus notes by our affiliated
captive reinsurers in return for the receipt of credit-linked notes
("Credit-Linked Note Structures"), of which $12,746 million of surplus notes was
outstanding, compared to an aggregate issuance capacity of $14,825 million, of
which $12,919 million was outstanding as of December 31, 2020. Under the
agreements, the affiliated captive receives in exchange for the surplus notes
one or more credit-linked notes issued by a special-purpose affiliate of the
Company with an aggregate principal amount equal to the surplus notes
outstanding. The affiliated captive holds the credit-linked notes as assets
supporting Regulation XXX or Guideline AXXX non-economic reserves, as
applicable. For more information on our Credit-Linked Note Structures, see
"Management's Discussion and Analysis of Financial Condition and Results of
Operation-Liquidity and Capital Resources-Financing Activities" in the Annual
Report on Form 10-K for the year ended December 31, 2020.

As of September 30, 2021, our affiliated captive reinsurance companies had
outstanding an aggregate of $2,775 million of debt issued for the purpose of
financing Regulation XXX and Guideline AXXX non-economic reserves, of which
approximately $1,175 million relates to Regulation XXX reserves and
approximately $1,600 million relates to Guideline AXXX reserves. In addition, as
of September 30, 2021, for purposes of financing Guideline AXXX reserves, one of
our affiliated captives had approximately $3,982 million of surplus notes
outstanding that were issued to affiliates.

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

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PRUCO LIFE INSURANCE COMPANY OF NEW JERSEY

Notes to Unaudited Interim Financial Statements-(Continued)