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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549



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FORM 10-Q



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(MARK ONE)

|x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|- | ---------------------------------------------------------------------------------------

For the quarterly period ended September 30, 2006

OR



| ̈ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|- | ----------------------------------------------------------------------------------------

For the Transition Period from  to

Commission File Number 33-44202



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American Skandia Life Assurance
Corporation

(Exact Name of Registrant as Specified in its Charter)



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|                                                               |  |                                        
|-------------------------------------------------------------- |  | ---------------------------------------
|Connecticut                                                    |  | 06-1241288                             
|(State or Other Jurisdiction of Incorporation or Organization) |  | (I.R.S. Employer Identification Number)

One Corporate Drive

Shelton, Connecticut 06484

(203) 926-1888

(Address and Telephone Number of Registrants Principal Executive Offices)



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Indicate by check mark whether the
registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and
(2) has been subject to such filing requirements for the past 90 days.    Yes  x    No ̈

Indicate by check mark whether the registrant is a large accelerated
filer, an accelerated filer, or a non-accelerated filer. See definition of accelerated filer and large accelerated filer in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer ̈Accelerated filer ̈Non-accelerated filer  x

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange
Act).    Yes ̈No  x

As of November 13, 2006, 25,000 shares of the registrants Common Stock (par value $100) consisting of 100 voting shares and 24,900 non-voting
shares, were outstanding. As of such date, American Skandia, Inc., an indirect wholly owned subsidiary of Prudential Financial, Inc., a New Jersey corporation, owned all of the registrants Common Stock.

American Skandia Life Assurance Corporation meets the conditions set

forth in General Instruction (H) (1) (a) and (b) on Form 10-Q and

is therefore
filing this Form 10-Q in the reduced disclosure format.



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##### Table of Contents

TABLE OF CONTENTS



|                              |  |                                                                                                                                    |  |           
|----------------------------- |  | ---------------------------------------------------------------------------------------------------------------------------------- |  | ----------
|                              |  |                                                                                                                                    |  | PageNumber
|PART I
FINANCIAL INFORMATION  |  |                                                                                                                                   
|                              | 
|Item 1.
Financial Statements: |  |                                                                                                                                   
|                              |  |                                                                                                                                   
|                              |  | Unaudited Interim Statements of Financial Position As of September 30, 2006 and December 31, 2005                                  |  | 4         
|                              |  |                                                                                                                                   
|                              |  | Unaudited Interim Statements of Operations and Comprehensive Income Three Months and Nine Months Ended September 30, 2006 and 2005 |  | 5         
|                              |  |                                                                                                                                   
|                              |  | Unaudited Interim Statements of Stockholders Equity Nine Months Ended September 30, 2006                                          |  | 6         
|                              |  |                                                                                                                                   
|                              |  | Unaudited Interim Statements of Cash Flows Nine Months Ended September 30, 2006 and September 30, 2005                             |  | 7         
|                              |  |                                                                                                                                   
|                              |  | Notes to Unaudited Interim Financial Statements                                                                                    |  | 8         
|                              |  |                                                                                                                                   
|Item 2.                       |  | Managements Discussion and Analysis of Financial Condition and Results of Operations                                              |  | 12        
|                              |  |                                                                                                                                   
|Item 4.                       |  | Controls and Procedures                                                                                                            |  | 15        
|                              | 
|PART II
OTHER INFORMATION     |  |                                                                                                                                   
|                              |  |                                                                                                                                   
|Item 1.                       |  | Legal Proceedings                                                                                                                  |  | 16        
|                              |  |                                                                                                                                   
|Item 1A.                      |  | Risk Factors                                                                                                                       |  | 17        
|                              |  |                                                                                                                                   
|Item 5.                       |  | Other Information                                                                                                                  |  | 17        
|                              |  |                                                                                                                                   
|Item 6.                       |  | Exhibits                                                                                                                           |  | 17        
|                              | 
|SIGNATURES                    |  | 18                                                                                                                                



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FORWARD LOOKING STATEMENTS

Certain of the statements included in this Quarterly Report on Form 10-Q, including but not limited to those in Managements Discussion and Analysis of Financial Condition and Results of Operations, constitute
forward-looking statements within the meaning of the U.S. Private Securities Litigation Reform Act of 1995. Words such as expects, believes, anticipates, includes, plans,
assumes, estimates, projects, intends, should, will, shall or variations of such words are generally part of forward-looking statements. Forward-looking statements
are made based on managements current expectations and beliefs concerning future developments and their potential effects upon American Skandia Life Assurance Corporation. There can be no assurance that future developments affecting American
Skandia Life Assurance Corporation 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) general economic, market and political conditions, including the performance and
fluctuations of stock, real estate and other financial markets; (2) interest rate fluctuations; (3) reestimates of our reserves for future policy benefits and claims; (4) differences between actual experience regarding mortality,
morbidity, persistency, surrender experience, interest rates, or market returns and the assumptions we use in pricing our products, establishing liabilities and reserves or for other purposes; (5) changes in our assumptions related to deferred
policy acquisition costs, valuation of business acquired or goodwill; (6) changes in our claims-paying or credit ratings; (7) investment losses and defaults; (8) competition in our product lines and for personnel; (9) changes in
tax law; (10) regulatory or legislative changes; (11) adverse determinations in litigation or regulatory matters and our exposure to contingent liabilities; (12) domestic or international military actions, natural or man-made
disasters including terrorist activities or pandemic disease, or other events resulting in catastrophic loss of life; (13) ineffectiveness of risk management policies and procedures in identifying, monitoring and managing risks;
(14) effects of acquisitions, divestitures and restructurings, including possible difficulties in integrating and realizing the projected results of acquisitions; (15) changes in statutory or U.S. GAAP accounting principles, practices or
policies; and (16) changes in assumptions for retirement expense. American Skandia Life Assurance Corporation does not intend, and is under no obligation, to update any particular forward-looking statement included in this document. See
Risk Factors included in the Companys Annual Report on Form 10-K for the year ended December 31, 2005 for a discussion of certain risks relating to our business.



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PART I-FINANCIAL INFORMATION

ITEM 1.Financial Statements

American Skandia Life Assurance Corporation

Unaudited Interim Statements of Financial Position

As of September 30, 2006 and December 31, 2005 (in thousands)



|                                                                                                         |  |                    |            |                  |   |            |  
|-------------------------------------------------------------------------------------------------------- |  | ------------------ | ---------- | ---------------- | - | ---------- | -
|                                                                                                         |  | September 30, 2006 |            | December 31,2005 |  
|ASSETS                                                                                                   |  |                    |            |                  |   |            |  
|Fixed maturities available for sale, at fair value (amortized cost  2006: $1,573,099; 2005: $1,567,777) |  | $                  | 1,588,514  |                  | $ | 1,554,569  |  
|Trading account assets, at fair value                                                                    |  |                    | 23,272     |                  |   | 30,778     |  
|Equity securities available for sale, at fair value (cost  2006: $18,487; 2005: $11,238)                |  |                    | 18,210     |                  |   | 19,098     |  
|Commercial loans                                                                                         |  |                    | 33,533     |                  |   | 6,000      |  
|Policy loans                                                                                             |  |                    | 12,039     |                  |   | 11,779     |  
|Short-term investments                                                                                   |  |                    | 130,038    |                  |   | 209,691    |  
|                                                                                                         |  |                    |            |                  |   |            |  
|Total investments                                                                                        |  |                    | 1,805,606  |                  |   | 1,831,915  |  
|Cash and cash equivalents                                                                                |  |                    | 3,911      |                  |   | 3,507      |  
|Deferred policy acquisition costs                                                                        |  |                    | 701,428    |                  |   | 528,899    |  
|Accrued investment income                                                                                |  |                    | 17,025     |                  |   | 16,847     |  
|Reinsurance recoverable                                                                                  |  |                    | 3          |                  |   | 4,271      |  
|Income taxes receivable                                                                                  |  |                    | 209,361    |                  |   | 229,802    |  
|Valuation of business acquired                                                                           |  |                    | 164,457    |                  |   | 196,023    |  
|Deferred sales inducements                                                                               |  |                    | 317,497    |                  |   | 227,415    |  
|Receivables from Parent and affiliates                                                                   |  |                    | 63,349     |                  |   | 6,170      |  
|Other assets                                                                                             |  |                    | 12,846     |                  |   | 67,432     |  
|Separate account assets                                                                                  |  |                    | 32,540,510 |                  |   | 29,786,393 |  
|                                                                                                         |  |                    |            |                  |   |            |  
|TOTAL ASSETS                                                                                             |  | $                  | 35,835,993 |                  | $ | 32,898,674 |  
|                                                                                                         |  |                    |            |                  |   |            |  
|                                                                                                         |  |                   
|LIABILITIES AND STOCKHOLDERS EQUITY                                                                     |  |                    |            |                  |   |            |  
|Liabilities                                                                                              |  |                    |            |                  |   |            |  
|Policyholders account balances                                                                          |  | $                  | 1,337,288  |                  | $ | 1,226,551  |  
|Future policy benefits and other policyholder liabilities                                                |  |                    | 102,799    |                  |   | 69,766     |  
|Payables to Parent and affiliates                                                                        |  |                    | 76,607     |                  |   | 50,218     |  
|Cash collateral for loaned securities                                                                    |  |                    | 112,922    |                  |   | 173,987    |  
|Securities sold under agreements to repurchase                                                           |  |                    |           |                  |   | 7,147      |  
|Short-term borrowing                                                                                     |  |                    | 451,856    |                  |   | 208,584    |  
|Long-term borrowing                                                                                      |  |                    | 105,000    |                  |   | 135,000    |  
|Future fees payable to American Skandia, Inc.                                                            |  |                    | 62,257     |                  |   | 113,151    |  
|Other liabilities                                                                                        |  |                    | 230,408    |                  |   | 304,971    |  
|Separate account liabilities                                                                             |  |                    | 32,540,510 |                  |   | 29,786,393 |  
|                                                                                                         |  |                    |            |                  |   |            |  
|Total liabilities                                                                                        |  |                    | 35,019,647 |                  |   | 32,075,768 |  
|                                                                                                         |  |                    |            |                  |   |            |  
|                                                                                                         |  |                   
|Commitments and Contingent Liabilities (See Note 3)                                                      |  |                    |            |                  |   |            |  
|                                                                                                         |  |                   
|Stockholders Equity                                                                                     |  |                    |            |                  |   |            |  
|Common stock, $100 par value; 25,000 shares, authorized, issued and outstanding                          |  |                    | 2,500      |                  |   | 2,500      |  
|Additional paid-in capital                                                                               |  |                    | 334,096    |                  |   | 484,096    |  
|Retained earnings                                                                                        |  |                    | 472,457    |                  |   | 339,182    |  
|Accumulated other comprehensive (loss)                                                                   |  |                    | 7,293      |                  |   | (2,872     | )
|                                                                                                         |  |                    |            |                  |   |            |  
|Total stockholders equity                                                                               |  |                    | 816,346    |                  |   | 822,906    |  
|                                                                                                         |  |                    |            |                  |   |            |  
|TOTAL LIABILITIES AND STOCKHOLDERS EQUITY                                                               |  | $                  | 35,835,993 |                  | $ | 32,898,674 |  
|                                                                                                         |  |                    |            |                  |   |            |  

See Notes to Unaudited Interim Financial Statements



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American Skandia Life Assurance Corporation

Unaudited Interim Statements of Operations and Comprehensive Income

Three and Nine Months Ended September 30, 2006 (in
thousands)



|                                                                     |  |                                 |         |   |                                |   |         |      |  |   |         |   |  |   |         |  
|-------------------------------------------------------------------- |  | ------------------------------- | ------- | - | ------------------------------ | - | ------- | ---- |  | - | ------- | - |  | - | ------- | -
|                                                                     |  | Three Months EndedSeptember 30, |         |   | Nine Months EndedSeptember 30, |  
|                                                                     |  | 2006                            |         |   | 2005                           |   |         | 2006 |  |   | 2005    |  
|REVENUES                                                             |  |                                 |         |   |                                |   |         |      |  |   |         |   |  |   |         |  
|Premiums                                                             |  | $                               | 16,790  |   |                                | $ | 4,987   |      |  | $ | 26,534  |   |  | $ | 15,339  |  
|Policy charges and fee income                                        |  |                                 | 140,902 |   |                                |   | 118,698 |      |  |   | 414,954 |   |  |   | 338,353 |  
|Net investment income                                                |  |                                 | 25,477  |   |                                |   | 22,503  |      |  |   | 66,785  |   |  |   | 68,299  |  
|Realized investment (losses), net                                    |  |                                 | (7,996  | ) |                                |   | (5,753  | )    |  |   | (44,423 | ) |  |   | (18,375 | )
|Asset management fees                                                |  |                                 | 41,917  |   |                                |   | 32,933  |      |  |   | 122,838 |   |  |   | 93,029  |  
|Other income                                                         |  |                                 | 214     |   |                                |   | 1,398   |      |  |   | 640     |   |  |   | 2,502   |  
|                                                                     |  |                                 |         |   |                                |   |         |      |  |   |         |   |  |   |         |  
|Total revenues                                                       |  |                                 | 217,304 |   |                                |   | 174,766 |      |  |   | 587,328 |   |  |   | 499,147 |  
|                                                                     |  |                                 |         |   |                                |   |         |      |  |   |         |   |  |   |         |  
|                                                                     |  |                                 |         |  
|BENEFITS AND EXPENSES                                                |  |                                 |         |   |                                |   |         |      |  |   |         |   |  |   |         |  
|Policyholders benefits                                              |  |                                 | 32,968  |   |                                |   | (728    | )    |  |   | 71,120  |   |  |   | 46,602  |  
|Interest credited to policyholders account balances                 |  |                                 | 22,799  |   |                                |   | 16,201  |      |  |   | 56,977  |   |  |   | 54,904  |  
|General, administrative and other expenses                           |  |                                 | 113,821 |   |                                |   | 91,932  |      |  |   | 312,354 |   |  |   | 246,352 |  
|                                                                     |  |                                 |         |   |                                |   |         |      |  |   |         |   |  |   |         |  
|Total benefits and expenses                                          |  |                                 | 169,589 |   |                                |   | 107,405 |      |  |   | 440,452 |   |  |   | 347,858 |  
|                                                                     |  |                                 |         |   |                                |   |         |      |  |   |         |   |  |   |         |  
|Income from operations before income taxes                           |  |                                 | 47,715  |   |                                |   | 67,361  |      |  |   | 146,876 |   |  |   | 151,289 |  
|Income tax expense                                                   |  |                                 | 6,545   |   |                                |   | 17,942  |      |  |   | 13,600  |   |  |   | 36,162  |  
|                                                                     |  |                                 |         |   |                                |   |         |      |  |   |         |   |  |   |         |  
|NET INCOME                                                           |  |                                 | 41,170  |   |                                |   | 49,419  |      |  |   | 133,276 |   |  |   | 115,127 |  
|                                                                     |  |                                 |         |   |                                |   |         |      |  |   |         |   |  |   |         |  
|Change in net unrealized investment gains (losses), net of taxes (1) |  |                                 | 17,210  |   |                                |   | (18,344 | )    |  |   | 10,165  |   |  |   | (20,776 | )
|                                                                     |  |                                 |         |   |                                |   |         |      |  |   |         |   |  |   |         |  
|COMPREHENSIVE INCOME                                                 |  | $                               | 58,380  |   |                                | $ | 31,075  |      |  | $ | 143,441 |   |  | $ | 94,351  |  
|                                                                     |  |                                 |         |   |                                |   |         |      |  |   |         |   |  |   |         |  

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|(1) | Amounts are net of taxes of $(9.4) million and $10.0 million for the three months ended September 30, 2006 and 2005, respectively, and $(5.6) million and $11.4 million for the
nine months ended September 30, 2006 and 2005
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

See Notes to Unaudited Interim Financial Statements



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American Skandia Life Assurance Corporation

Unaudited Interim Statements of Stockholders Equity

Nine Months Ended September 30, 2006 (in thousands)



|                                         |  |             |       |                          |   |          |                  |  |                                     |         |  |                          |        |   |  |   |          |  
|---------------------------------------- |  | ----------- | ----- | ------------------------ | - | -------- | ---------------- |  | ----------------------------------- | ------- |  | ------------------------ | ------ | - |  | - | -------- | -
|                                         |  | CommonStock |       | Additionalpaid-incapital |   |          | Retainedearnings |  | Accumulatedothercomprehensiveincome |         |  | Totalstockholdersequity |       
|Balance, December 31, 2005               |  | $           | 2,500 |                          | $ | 484,096  |                  |  | $                                   | 339,182 |  | $                        | (2,872 | ) |  | $ | 822,906  |  
|                                         |  |             |       |                          |  
|Net income                               |  |             |       |                          |   |          |                  |  |                                     | 133,276 |  |                          |        |   |  |   | 133,276  |  
|Distribution to parent                   |  |             |       |                          |   | (150,000 | )                |  |                                     |         |  |                          |        |   |  |   | (150,000 | )
|Other comprehensive income, net of taxes |  |             |       |                          |   |          |                  |  |                                     |         |  |                          | 10,165 |   |  |   | 10,165   |  
|                                         |  |             |       |                          |   |          |                  |  |                                     |         |  |                          |        |   |  |   |          |  
|Balance, September 30, 2006              |  | $           | 2,500 |                          | $ | 334,096  |                  |  | $                                   | 472,457 |  | $                        | 7,293  |   |  | $ | 816,346  |  
|                                         |  |             |       |                          |   |          |                  |  |                                     |         |  |                          |        |   |  |   |          |  

See Notes to Unaudited Interim Financial Statements



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##### Table of Contents

American Skandia Life Assurance Corporation

Unaudited Interim Statements of Cash Flows

Nine Months Ended September 30, 2006 and 2005 (in thousands)



|                                                                                     |  |                                     |            |   |                                     |   |            |  
|------------------------------------------------------------------------------------ |  | ----------------------------------- | ---------- | - | ----------------------------------- | - | ---------- | -
|                                                                                     |  | Nine Months EndedSeptember 30, 2006 |            |   | Nine Months EndedSeptember 30, 2005 |  
|CASH FLOWS (USED IN) FROM OPERATING ACTIVITIES:                                      |  |                                     |            |   |                                     |   |            |  
|Net income                                                                           |  | $                                   | 133,276    |   |                                     | $ | 115,127    |  
|Adjustments to reconcile net income to net cash (used in) from operating activities: |  |                                     |            |   |                                     |   |            |  
|Realized investment losses, net                                                      |  |                                     | 44,423     |   |                                     |   | 18,375     |  
|Amortization and depreciation                                                        |  |                                     | 29,400     |   |                                     |   | 43,105     |  
|Interest credited to policyholders account balances                                 |  |                                     | 44,647     |   |                                     |   | 47,291     |  
|Change in:                                                                           |  |                                     |            |   |                                     |   |            |  
|Future policy benefits and other policyholder liabilities                            |  |                                     | 33,032     |   |                                     |   | 10,620     |  
|Accrued investment income                                                            |  |                                     | (177       | ) |                                     |   | 3,321      |  
|Trading account assets                                                               |  |                                     | 7,506      |   |                                     |   | 13,874     |  
|Net receivable to Parent and affiliates                                              |  |                                     | 19,662     |   |                                     |   | 75,068     |  
|Deferred Sales Inducements                                                           |  |                                     | (90,082    | ) |                                     |   | (51,137    | )
|Deferred policy acquisition costs                                                    |  |                                     | (174,973   | ) |                                     |   | (169,242   | )
|Income taxes payable                                                                 |  |                                     | 14,870     |   |                                     |   | 35,202     |  
|Other, net                                                                           |  |                                     | (93,895    | ) |                                     |   | (49,509    | )
|                                                                                     |  |                                     |            |   |                                     |   |            |  
|Cash Flows (Used in) From Operating Activities                                       |  |                                     | (32,313    | ) |                                     |   | 92,095     |  
|                                                                                     |  |                                     |            |   |                                     |   |            |  
|CASH FLOWS FROM INVESTING ACTIVITIES:                                                |  |                                     |            |   |                                     |   |            |  
|Proceeds from the sale/maturity of fixed maturities available for sale               |  |                                     | 3,155,396  |   |                                     |   | 1,393,465  |  
|Payments for the purchase of fixed maturities available for sale                     |  |                                     | (3,196,317 | ) |                                     |   | (1,309,441 | )
|Payments for the purchase of commercial loans                                        |  |                                     | (27,533    | ) |                                     |   |           |  
|Proceeds from the repayment of policy loans                                          |  |                                     | 1,351      |   |                                     |   | 425        |  
|Payments for the issuance of policy loans                                            |  |                                     | (1,611     | ) |                                     |   | (1,045     | )
|Other short-term investments, net                                                    |  |                                     | 79,653     |   |                                     |   | 168,298    |  
|                                                                                     |  |                                     |            |   |                                     |   |            |  
|Cash Flows From Investing Activities                                                 |  |                                     | 10,939     |   |                                     |   | 251,702    |  
|                                                                                     |  |                                     |            |   |                                     |   |            |  
|CASH FLOWS FROM (USED IN) FINANCING ACTIVITIES:                                      |  |                                     |            |   |                                     |   |            |  
|Decrease in future fees payable to ASI, net                                          |  |                                     | (50,893    | ) |                                     |   | (67,581    | )
|Cash collateral for loaned securities                                                |  |                                     | (61,065    | ) |                                     |   | (60,330    | )
|Securities sold under agreement to repurchase                                        |  |                                     | (7,147     | ) |                                     |   | (28,368    | )
|Proceeds from the issuance of debt (maturities longer than 90 days)                  |  |                                     |           |   |                                     |   |           |  
|Repayments of debt (maturities longer than 90 days)                                  |  |                                     | (30,000    | ) |                                     |   |           |  
|Net increase in short-term borrowings                                                |  |                                     | 243,272    |   |                                     |   | 19,349     |  
|Drafts outstanding                                                                   |  |                                     | 7,079      |   |                                     |   | (91,198    | )
|Distribution (to) parent                                                             |  |                                     | (150,000   | ) |                                     |   |           |  
|Policyholders account balances:                                                     |  |                                     |            |   |                                     |   |            |  
|Deposits                                                                             |  |                                     | 1,157,903  |   |                                     |   | 630,893    |  
|Withdrawals                                                                          |  |                                     | (1,087,371 | ) |                                     |   | (817,150   | )
|                                                                                     |  |                                     |            |   |                                     |   |            |  
|Cash Flows From (Used in) Financing Activities                                       |  |                                     | 21,778     |   |                                     |   | (414,384   | )
|                                                                                     |  |                                     |            |   |                                     |   |            |  
|Net increase (decrease) in cash and cash equivalents                                 |  |                                     | 404        |   |                                     |   | (70,588    | )
|Cash and cash equivalents, beginning of period                                       |  |                                     | 3,507      |   |                                     |   | 72,854     |  
|                                                                                     |  |                                     |            |   |                                     |   |            |  
|CASH AND CASH EQUIVALENTS, END OF PERIOD                                             |  | $                                   | 3,911      |   |                                     | $ | 2,266      |  
|                                                                                     |  |                                     |            |   |                                     |   |            |  
|Income taxes (received)                                                              |  | $                                   | (1,271     | ) |                                     | $ | (2,540     | )
|                                                                                     |  |                                     |            |   |                                     |   |            |  
|Interest paid                                                                        |  | $                                   | 35,251     |   |                                     | $ | 11,636     |  
|                                                                                     |  |                                     |            |   |                                     |   |            |  

See Notes to Unaudited Interim Financial Statements



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##### Table of Contents

American Skandia Life Assurance Corporation

Notes to Unaudited Interim Financial Statements

1. BUSINESS

American Skandia Life Assurance Corporation, (the Company), with its principal offices in Shelton, Connecticut, is an indirect wholly owned subsidiary of
Prudential Financial, Inc., (Prudential Financial), a New Jersey corporation. The Company is a wholly owned subsidiary of American Skandia, Inc. (ASI), which in turn is an indirect wholly owned subsidiary of Prudential
Financial. On December 19, 2002, Skandia Insurance Company Ltd. (publ), (Skandia), an insurance company organized under the laws of the Kingdom of Sweden, and the ultimate parent company of the Company prior to May 1, 2003,
entered into a definitive purchase agreement with Prudential Financial whereby Prudential Financial would acquire the Company and certain of its affiliates (the Acquisition) and would be authorized to use the American Skandia name
through April, 2008. On May 1, 2003, the initial phase of the Acquisition was consummated. Thus, the Company now is an indirect wholly owned subsidiary of Prudential Financial.

The Company develops long-term savings and retirement products, that are distributed through its affiliated broker-dealer company, American Skandia Marketing, Incorporated. The Company currently issues variable and
fixed deferred and immediate annuities for individuals and groups in the United States of America and its territories.

The Company is engaged in a
business that is highly competitive because of the large number of stock and mutual life insurance companies and other entities engaged in marketing insurance products, and individual and group annuities.

2. BASIS OF PRESENTATION

The unaudited interim financial statements
have been prepared in accordance with accounting principles generally accepted in the United States of America (U.S. GAAP) and on a basis consistent with reporting interim financial information in accordance with the instructions to Form
10-Q and Article 10 of Regulation S-X of the U.S. Securities and Exchange Commission (the SEC). These interim financial statements are unaudited but reflect all adjustments that, in the opinion of management, are necessary to provide a
fair presentation of the results of operations and financial condition of the Company for the interim periods presented. All such adjustments are of a normal recurring nature. The results of operations for any interim period are not necessarily
indicative of results for a full year. These unaudited interim financial statements should be read in conjunction with the financial statements and notes thereto contained in the Companys Annual Report on Form 10-K for the year ended
December 31, 2005.

Use of Estimates

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

The most significant estimates include those used in determining deferred policy acquisition costs, valuation of business acquired, investments, future policy benefits, provision for income taxes, reserves for contingent liabilities and
reserves for losses in connection with unresolved legal matters.

Reclassifications

Certain amounts in the Companys prior year financial statements have been reclassified to conform with the current year presentation.

3. CONTINGENT LIABILITIES AND LITIGATION

Contingent Liabilities

On an ongoing basis, our internal supervisory and control functions review the quality of our sales, marketing, administration and servicing, and other customer interface
procedures and practices and may recommend modifications or enhancements. From time to time, this review process results in the discovery of administration, servicing or other errors, including errors relating to the timing or amount of payments or
contract values due to customers. In these cases, we may offer customers appropriate remediation and may incur charges and expenses, including the costs of such remediation, administrative costs and regulatory fines.

During the third quarter of 2004, the Company identified a system-generated calculation error in its annuity contract administration system that existed prior to the
Acquisition. This error related to the calculation of amounts due to customers for certain transactions subject to a market value adjustment upon the surrender or transfer of monies out of their annuity contracts fixed allocation options. The
error resulted in an underpayment to policyholders, as well as additional anticipated costs to the Company associated with remediation, breakage and other costs Recently, the Company retained a consultant to assist it with the systems modifications
needed to implement the remediation plan currently in place. The Company has advised Skandia that a portion of the remediation and related administrative costs are subject to the indemnification provisions of the Acquisition agreement.

It is possible that the results of operations or the cash flow 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, depending, in part, upon the results of operations or cash flow for that period. Management believes, however, that the ultimate payments in connection with currently pending matters, after
consideration of applicable reserves and indemnification, should not have a material adverse effect on the Companys financial position.



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Litigation and Regulatory Matters

We are subject to legal and regulatory actions in the ordinary course of our business, including class action lawsuits. Our pending legal and regulatory actions include proceedings specific to the Company and
proceedings generally applicable to business practices in the industry in which we operate. We are subject to class action lawsuits and other litigation alleging, among other things, that we made improper or inadequate disclosures in connection with
the sale of annuity products or charged excessive or impermissible fees on these products, recommended unsuitable products to customers, mishandled customer accounts or breached fiduciary duties to customers. We are also subject to litigation
arising out of our general business activities, such as our 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 some of our pending legal and regulatory actions, parties are seeking large and/or indeterminate amounts, including punitive or exemplary damages. Finally, we are periodically subject to examinations and audits by
federal and state regulators, and also on occasion receive and address complaints from customers. The following is a summary of certain pending proceedings.

The Company commenced a remediation program to correct errors in the administration of approximately 11,000 annuity contracts issued by the Company. The owners of these contracts did not receive notification that the contracts were
approaching or past their designated annuitization date or default annuitization date (both dates referred to as the contractual annuity date) and the contracts were not annuitized at their contractual annuity dates. Some of these
contracts also were affected by data integrity errors resulting in incorrect contractual annuity dates. The lack of notice and the data integrity errors, as reflected on the annuities administrative system, all occurred before the Acquisition. The
remediation and administrative costs of the remediation program are subject to the indemnification provisions of the Acquisition agreement.

Commencing in
2003, the Company received formal requests for information from the SEC and the New York Attorney General (NYAG) relating to market timing in variable annuities by the Company and certain affiliated companies. In connection with these
investigations, with the approval of Skandia an offer was made by the Company to the authorities investigating its companies, the SEC and NYAG to settle these matters by paying restitution and a civil penalty of $95 million in the aggregate. While
not assured, the Company believes these discussions are likely to lead to settlements with these authorities. Any regulatory settlement involving the Company and certain affiliates would be subject to the indemnification provisions of the
acquisition agreement pursuant to which Prudential Financial purchased the Company and certain affiliates in May 2003 from Skandia. If achieved, settlement of the matters relating to the Company and certain affiliates also could involve continuing
monitoring, changes to and/or supervision of business practices, findings that may adversely affect existing or cause additional litigation, adverse publicity and other adverse impacts to the Companys businesses.

The Companys litigation and regulatory matters are subject to many uncertainties, and given their complexity and scope, the outcomes cannot be predicted. It is
possible that the results of operations or the cash flow of the Company 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 flow for such period. Management believes, however, that the ultimate outcome of all pending litigation and regulatory matters, after consideration of applicable reserves and rights to indemnification, should
not have a material adverse effect on the Companys financial position.

It should be noted that the judgments, settlements and expenses associated
with many of these lawsuits, administrative and regulatory matters, and contingencies, including certain claims described above, may, in whole or in part, after satisfaction of certain retention requirements, fall within Skandias
indemnification obligations to Prudential Financial and its subsidiaries under the terms of the Acquisition. Those obligations of Skandia provide for indemnification of certain judgments, settlements, and costs and expenses associated with lawsuits
and other claims against the Company (matters), and apply only to matters, or groups of related matters, for which the costs and expenses exceed $25,000 individually. Additionally, those obligations only apply to such otherwise
indemnifiable costs and expenses that exceed $10 million in the aggregate, subject to reduction for insurance proceeds, certain accruals and any realized tax benefit applicable to such amounts, and those obligations do not apply to the extent that
such aggregate exceeds $1 billion. We are in discussions with Skandia regarding the satisfaction of the $10 million deductible.

See the Companys
Annual Report on Form 10-K for the year ended December 31, 2005 for additional discussion of the Companys litigation and regulatory matters.

4. RELATED PARTY TRANSACTIONS

The Company is a party to numerous transactions and relationships with its affiliate, The Prudential
Insurance Company of America (Prudential Insurance), and other affiliates. It is possible that the terms of these transactions are not the same as those that would result from transactions among wholly unrelated parties.

Expense Charges and Allocations

Many of the Companys expenses are allocations or charges from Prudential Insurance or other affiliates.



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The Companys general and administrative expenses are charged to the Company using allocation methodologies based on
business 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. Since 2003, general and administrative expenses also include allocations of stock compensation expenses related to a stock option program
and a deferred compensation program sponsored by Prudential Financial.

The Company is charged for its share of employee benefits expenses. These expenses
include costs for funded and non-funded contributory and non-contributory defined benefit pension plans. Some of these benefits are based on earnings and length of service. Other benefits are based on an account balance, which takes into
consideration age, service and earnings during career.

The Companys share of net expense for the pension plans was $3.2 million and $2.3 million for
the nine months ended September 30, 2006 and 2005, respectively.

Prudential Insurance sponsors voluntary savings plans for the Companys
employees (401(k) plans). The 401(k) plans provide for salary reduction contributions by employees and matching contributions by the Company of up to 4% of annual salary. The expense charged the Company for the matching contribution to
the 401k plans was $1.1 million and $1.0 million for the nine months ended September 30, 2006 and 2005, respectively.

Debt Agreements

On March 12, 2004, the Company entered into a $45 million loan from Prudential Funding, LLC (Prudential Funding), a wholly owned
subsidiary of Prudential Insurance. This loan matures on March 12, 2007 and has an interest rate of 5.71%. The proceeds were used to support working capital needs.

On March 23, 2005, the Company entered into a $30 million loan from Prudential Funding, . This loan has an interest rate of 5.71% and matures on March 12, 2007.

On March 23, 2005, the Company entered into a $30 million loan from Prudential Funding. This loan has an interest rate of 5.77% and matures on March 11, 2008.

On May 1, 2004, the Company entered into a $500 million credit facility agreement with Prudential Funding. Effective December 1, 2004, the
credit facility agreement was increased to $750 million. As of September 30, 2006, $451.9 million was outstanding under this credit facility.

Reinsurance Agreements

During 2005 and 2006, the Company entered into new reinsurance agreements with affiliates as part of its risk
management and capital management strategies. Effective May 6, 2005, the Company entered into a coinsurance agreement with Prudential Insurance providing for the 100% reinsurance of its Lifetime Five benefit feature sold on new business prior
to May 6, 2005. Effective July 1, 2005, the Company entered into a new coinsurance agreement with Pruco Re, Ltd. (Pruco Re) providing for the 100% reinsurance of its Lifetime Five benefit feature sold on new business after
May 5, 2005 as well as for riders issued from March 15, 2005 forward on business in-force before March 15, 2005. Effective March 20, 2006, the Company entered into a new coinsurance agreement with Pruco Re providing for the 100%
reinsurance of its Spousal Lifetime Five benefit feature.

5. NEW ACCOUNTING POLICIES AND ACCOUNTING PRONOUNCEMENTS

Accounting Pronouncements Adopted

In November 2005, the Financial
Accounting Standards Board (FASB) issued FASB Staff Position (FSP) FAS 115-1 and FAS 124-1, The Meaning of Other-Than-Temporary Impairment and its Application to Certain Investments. This FSP provides impairment
models for determining whether to record impairment losses associated with investments in certain equity and debt securities, primarily by referencing existing accounting guidance. It also requires income to be accrued on a level-yield basis
following an impairment of debt securities, where reasonable estimates of the timing and amount of future cash flows can be made. The Company adopted this guidance effective January 1, 2006, but it did not have a material effect on the
Companys consolidated results of operations.

Recent Accounting Pronouncements

In September 2006, the staff of the SEC issued Staff Accounting Bulletin (SAB) No. 108, Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year
Financial Statements. The interpretations in this SAB express the Staffs views regarding the process of quantifying financial statement misstatements. Specifically, the SEC Staff believes that registrants must quantify the impact on
current period financial statements of correcting all misstatements, including both those occurring in the current period and the effect of reversing those that have accumulated from prior periods. The SAB should be applied beginning with the first
fiscal year ending after November 15, 2006, with early adoption encouraged. Since the Companys method for quantifying financial statement misstatements already considers those occurring in the current period and the effect of reversing
those that have accumulated from prior periods, the adoption of SAB No. 108 should have no effect to the financial position and results of operations of the Company.



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In September 2006, the FASB issued SFAS No. 157, Fair Value Measurements. This Statement defines fair
value, establishes a framework for measuring fair value in generally accepted accounting principles, and requires additional disclosures about fair value measurements. This Statement does not require any new fair value measurements, but the
application of this Statement could change current practices in determining fair value. The Company plans to adopt this guidance effective January 1, 2008. The Company is currently assessing the impact of SFAS No. 157 on the Companys
consolidated financial position and results of operations.

In July 2006, the FASB issued FASB Interpretation (FIN) No. 48,
Accounting for Uncertainty in Income Taxes, an interpretation of FASB Statement No. 109. FIN No.48 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 a tax return. This Interpretation is effective for fiscal years beginning after December 15, 2006. The Company will adopt FIN No. 48 on January 1, 2007. The
Company is currently assessing the impact of FIN No. 48 on the Companys financial position and results of operations and notes to financial statements.

On February 16, 2006, the FASB issued SFAS No. 155, Accounting for Certain Hybrid Instruments. SFAS No. 155 provides an election, on an instrument by instrument basis, to measure at fair value an entire hybrid
financial instrument that contains an embedded derivative requiring bifurcation, rather than measuring only the embedded derivative on a fair value basis. This statement also removes an exception from the requirement to bifurcate an embedded
derivative feature from a beneficial interest in securitized financial assets. The Company has used this exception for investments the Company has made in securitized financial assets in the normal course of operations, and thus has not previously
had to consider whether such investments contain an embedded derivative. The new requirement to identify embedded derivatives in beneficial interest will be applied on a prospective basis only to beneficial interest acquired, issued, or subject to
certain remeasurement conditions after the adoption date of the new guidance. The Company plans to adopt SFAS No. 155 effective January 1, 2007. The Company is in the process of determining whether there are any hybrid instruments for
which the Company will elect the fair value option.

In September 2005, the Accounting Standards Executive Committee of the American Institute of Certified
Public Accountants issued Statement of Position (SOP) 05-1, Accounting by Insurance Enterprises for Deferred Acquisition Costs in Connection With Modifications or Exchanges of Insurance Contracts. SOP 05-1 provides guidance
on accounting by insurance enterprises for deferred acquisition costs on internal replacements of insurance and investment contracts other than those specifically described in SFAS No. 97. SOP 05-1 defines an internal replacement as a
modification in product benefits, features, rights, or coverages that occurs by the exchange of 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. SOP
05-1 is effective for internal replacements occurring in fiscal years beginning after December 15, 2006. The Company will adopt SOP 05-1 on January 1, 2007. The Company is currently assessing the impact of SOP 05-1 on the Companys
consolidated financial position and results of operations.



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American Skandia Life Assurance Corporation

Notes to Unaudited Interim Financial Statements

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

American Skandia
Life Assurance Corporation meets the conditions set forth in General Instruction H(1)(a) and (b) on Form 10-Q and is therefore filing this form with the reduced disclosure format.

Managements Discussion and Analysis of Financial Condition and Results of Operations (MD&A) addresses the financial condition of American Skandia
Life Assurance Corporation (the Company) as of September 30, 2006 compared with December 31, 2005 and its results of operations for the three month periods ended September 30, 2006 and 2005 and the nine month periods ended
September 30, 2006 and 2005. You should read the following analysis of our financial condition and results of operations in conjunction with the Companys MD&A and audited Financial Statements included in the Companys Annual
Report on Form 10-K for the year ended December 31, 2005 and the Interim Financial Statements included elsewhere in this Quarterly Report on

Form
10-Q.

General

The Company was established in 1988 and
is a significant provider of variable annuity contracts for the individual market in the United States of America and its territories. The Companys products are sold primarily to individuals to provide for long-term savings and retirement and
to address the economic impact of premature death, estate planning concerns and supplemental retirement needs. The investment performance of the registered investment companies supporting the variable annuity contracts, which is principally
correlated to equity market performance, can significantly impact the market for the Companys products.

Products

The Company offers a wide array of annuities, including (1) deferred and immediate variable annuities that are registered with the SEC, including fixed interest rate
allocation options that are offered in certain of our variable annuities and are registered because of their market value adjustment feature and (2) fixed rate allocation options in certain of our variable and fixed annuities that are not
registered with the SEC. In addition, the Company has in force a relatively small block of variable life insurance policies, but it no longer actively sells such policies.

Annuity contracts represent the insurers contractual obligation to make payments over a given period of time, often measured by the life of the recipient, in return for a single deposit or a series of scheduled
or flexible deposits. The insurers obligation to pay may commence immediately or be deferred. If the insurers payments are deferred, the insurer generally incurs an obligation to make a surrender value available during the deferral
period based on an account value, and guarantees as applicable. The account value consists of the deposits and may earn interest, or may vary with the performance of investments in the funds selected by the insurer and made available for election by
contract holders. Gains on deposits made by the contract holder, before distribution, generally are tax deferred for the contract holder. Distributions are taxed as ordinary income to the contract holder. For immediate annuities and annuitized
deferred annuities, a portion of each distribution may be treated as a return of the contractholders investment in the contract.

Marketing and
Distribution

The Company sells its wide array of annuity products through multiple distribution channels, including (1) independent financial
planners; (2) broker-dealers that generally are members of the New York Stock Exchange, including wirehouse and regional broker-dealer firms; and (3) broker-dealers affiliated with banks or that specialize in marketing to
customers of banks. Although the Company is active in each of those distribution channels, the majority of the Companys sales have come from independent financial planners. The Company has selling agreements with approximately eleven hundred
broker-dealer firms and financial institutions. On June 1, 2006, Prudential Insurance acquired the variable annuity business of The Allstate Corporation (Allstate) which included access to the Allstate affiliated broker-dealer. The
Company began selling variable annuities through the Allstate affiliated broker-dealer registered representatives in the third quarter of 2006.

Although
many of the Companys competitors have acquired or are seeking to acquire their distribution channels as a means of securing sales, the Company typically does not follow that model. Instead, the Company believes that its success is dependent on
its ability to enhance its relationships with both the selling firms and the firms registered representatives. In cooperation with its affiliated broker-dealer, American Skandia Marketing, Incorporated, the Company uses wholesalers to provide
support to its primary distribution channels. In addition, the Company also offers a number of private label and proprietary products distributed by select large distributors.

The Companys Changes in Financial Position and Results of Operations are described below.



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Changes in Financial Position

Assets increased by $2,937 million, from $32.9 billion at December 31, 2005 to $35.8 billion at September 30, 2006. Separate account assets increased by $2,754 million driven by positive net flows and market appreciation during
the current year. Deferred policy acquisition costs (DAC) and deferred sales inducements also increased $172.5 million and $90.1 million, respectively, due to increased sales driving an increase in capitalized costs. Partially offsetting
these increases was a decrease in the valuation of business acquired of $31.6 million driven by amortization and $20.4 million in lower income taxes receivable.

During the period, total liabilities increased by $2,944 million, from $32.1 billion at December 31, 2005 to $35.0 billion at September 30, 2006. Separate account liabilities increased by $2,754 million driven by positive net
flows and market appreciation during the current year. Additionally, there was an increase in policyholders account balances of $110.7 million primarily due to transfers of customer account values from the separate account mutual fund options
to the market value adjustment options. Also, borrowings increased $213.3 million in order to fund the growth of the business. Partially offsetting these increases was a decrease in other liabilities of $74.5 million, driven by lower suspense
balances due to the settlement of transactions and a decrease in the remediation liability as a result of payments to customers in the current year, decreased cash collateral for loaned securities of $61.6 million due to lower levels of corporate
securities on loan, and decreased future fees payable to ASI of $50.8 million during the period due to amortization.

Results of Operations

2006 to 2005 Three Month Comparison

Net Income

Net income decreased by $8.2 million, from $49.4 million for the three months ended September 30, 2005 to $41.2 million for the three months ended
September 30, 2006. Net income for the third quarter of 2005 included a $23.9 million benefit related to a decrease in our reserve for the guaranteed minimum death benefit feature of our variable annuity product, due to decreased cost of actual
and expected death claims and modeling refinements implemented, based on an annual review. Policy charges and fee income increased by $22.2 million and asset management fees increased by $9.0 million, in the third quarter of 2006 over the same
period in 2005, driven by an increase in the inforce business and market appreciation. Additionally, reserves, net of claims, for the guaranteed minimum death benefit feature included within policyholder benefits decreased by $2.7 million due to
decreased costs of actual and expected claims and improved market conditions. Income tax expense also decreased by $11.3 million, as a result of an increase in the projected amount of nontaxable investment income earned by the Company. These
favorable variances were partially offset by $21.6 million of higher general, administrative and other expenses and $6.6 million of higher interest credited to policyholder account balances. Further details regarding the components of revenues and
expenses are described below.

Revenues

Revenues
increased by $42.5 million, from $174.8 million for the three months ended September 30, 2005 to $217.3 million in the same period in 2006. Premiums of $16.8 million increased by $11.8 million, from $5.0 million for the three months ended
September 30, 2005, reflecting an increase in funds from customers entering into the payout phase of their annuity contracts driven by settlements in the current quarter related to the annuitization remediation program.

Policy charges and fee income increased by $22.2 million, from $118.7 million for the three months ended September 30, 2005 to $140.9 million in the same period in
2006. Mortality and expense (M&E) charges increased by $14.3 million as a result of the increase in the inforce business and market appreciation. Generally, fees are mainly asset-based fees, which are dependent on fund balances.
Average annuity separate account fund balances have increased over the past twelve months as a result of market appreciation and positive net flows, resulting in an increase in policy charges and fee income. Optional benefit charges on our living
and death benefit features increased $3.4 million primarily driven by the sales of our Lifetime Five and Spousal Lifetime Five benefit features. This increase is primarily offset in realized investment losses, net as these features are reinsured
with affiliates. Additionally, the change in realized market value adjustments related to the Companys fixed, market value adjusted investment (MVA) option was $4.3 million higher than the prior year quarter.

Realized investment losses, net, increased $2.2 million from a loss of $5.8 million for the three months ended September 30, 2005 to a loss of $8.0 million in the
same period in 2006. This is driven by increased investment losses on our MVA portfolio due to dispositions of fixed maturities in a rising rate environment to fund outflows. Also contributing to increased losses was a change in the value of our
embedded derivatives related to our living benefit features. This is offset in policy charges and fee income as discussed in the preceding paragraph.

Asset management fees increased by $9.0 million, from $32.9 million for the three months ended September 30, 2005 to $41.9 million in the current quarter, as a result of higher average assets under management compared to the prior year
period due to increased net inflows and market appreciation. Asset management fees are asset-based fees, which are dependent on the value of assets under management.



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Benefits and Expenses

Policyholders benefits increased by $33.7 million, from $(0.7) million for the three months ended September 30, 2005 to $33.0 million for the three months ended September 30, 2006. The prior period includes a $23.9 million
decrease in reserves for the guaranteed minimum death benefit feature of our variable annuity products due to decreased costs of actual and expected death claims as described previously under Net Income. Also contributing to the increase
was an $11.4 million increase in change in reserves due to increased funds from customers entering into the payout phase of their annuity contracts. This was offset by higher premium revenue as discussed. Partially offsetting these increases was a
$2.7 million decrease in reserves, net of claims, for the guaranteed minimum death benefit feature due to decreased costs of actual and expected claims and improved market conditions.

Interest credited to policyholders account balances increased $6.6 million, from $16.2 million for the three months ended September 30, 2005 to $22.8 million for the three months ended September 30,
2006. This was primarily driven by increased amortization of deferred sales inducements driven by increased gross profits used as a basis for amortizing these costs.

General, administrative, and other expenses increased by $21.9 million, from $91.9 million for the three months ended September 30, 2005 to $113.8 million for the three months ended September 30, 2006. The
increase was primarily due to an increase in the amortization of DAC and valuation of business acquired of $13.9 million driven by a higher level of actual gross profits driven by increased fee income previously discussed. In addition, commissions,
net of capitalization, increased $5.0 million driven by increased trail commissions caused by growth in separate account assets. The remaining increase in general expenses is primarily the result of higher interest expense as a result of increased
borrowings and increased benefit and salary expenses.

2006 to 2005 Nine Month Comparison

Net Income

Net income increased by $18.2 million, from $115.1 million
for the nine months ended September 30, 2005 to $133.3 million for the nine months ended September 30, 2006. Net income for 2005 included a $23.9 million benefit related to a decrease in our reserve for the guaranteed minimum death benefit
feature of our variable annuity product, due to decreased cost of actual and expected death claims and modeling refinements implemented, based on an annual review. Policy charges and fee income increased by $76.6 million and asset management fees
increased by $29.8 million, in the nine months of 2006 over the same period in 2005, driven by an increase in the inforce business and market appreciation. Additionally, income tax expense decreased by $22.6 million, from $36.2 million for the nine
months ended September 30, 2005 to $13.6 million for the same period in 2006 as a result of an increase in the projected amount of nontaxable investment income earned by the Company. Also, reserves, net of claims, for the guaranteed minimum
death benefit feature decreased by $5.0 million due to decreased costs of actual and expected claims included within policyholder benefits. These favorable variances were partially offset by a $65.7 million increase in general, administrative and
other expenses and an increase of $26.0 million in realized investment losses, net. Further details regarding the components of revenues and expenses are described below.

Revenues

Revenues increased by $88.2 million, from $499.1 million for the nine months ended September 30, 2005
to $587.3 million in the same period in 2006. Premiums of $26.5 million increased by $11.2 million, from $15.3 million for the nine months ended September 30, 2005, reflecting an increase in funds from customers entering into the payout phase
of their annuity contracts driven by settlements in the current year related to the annuitization remediation program.

Policy charges and fee income
increased by $76.6 million, from $338.4 million for the nine months ended September 30, 2005 to $415.0 million in the same period in 2006. Mortality and expense (M&E) charges increased by $53.8 million as a result of the
increase in the inforce business and market appreciation. Generally, fees are mainly asset-based fees, which are dependent on fund balances. Average annuity separate account fund balances have increased as a result of market appreciation and
positive net flows, resulting in an increase in policy charges and fee income. Optional benefit charges on our living and death benefit features increased $10.5 million primarily driven by the sales of our Lifetime Five and Spousal Lifetime Five
benefit features. This increase was primarily offset by realized investment losses, net as these features are reinsured with affiliates. Additionally, the change in realized market value adjustments related to the Companys fixed, market value
adjusted investment (MVA) option was $15.3 million higher than the prior year.

Realized investment losses, net, increased by $26.0 million
from a loss of $18.4 million for the nine months ended September 30, 2005 to a loss of $44.4 million in the same period in 2006. This was driven by increased investment losses on our MVA portfolio due to dispositions of fixed maturities in a
rising rate environment to fund outflows. Also contributing to the increased losses was a change in the value of our embedded derivatives related to our living benefit features. This was offset in policy charges and fee income as discussed in the
preceding paragraph.

Asset management fees increased by $29.8 million, from $93.0 million for the nine months ended September 30, 2005 to $122.8
million in the same period in 2006, as a result of higher average assets under management compared to the prior year period due to increased net inflows and market appreciation. Asset management fees are asset-based fees, which are dependent on the
value of assets under management.



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Benefits and Expenses

Policyholders benefits increased by $24.5 million, from $46.6 million for the nine months ended September 30, 2005 to $71.1 million for the nine months ended September 30, 2006. The prior year includes a $23.9 million
decrease in reserves for the guaranteed minimum death benefit feature of our variable annuity products due to decreased costs of actual and expected death claims as described previously.

General, administrative, and other expenses increased by $65.6 million, from $246.4 million for the nine months ended September 30, 2005 to $312.0 million for the nine months ended September 30, 2006. The
increase was primarily due to an increase in the amortization of DAC and valuation of business acquired of $31.4 million driven by a higher level of actual gross profits driven by increased fee income, as discussed above. In addition, commissions,
net of capitalization, increased $15.5 million driven by increased asset based commissions due to growth in separate account assets. The remaining increase of $18.8 million in general expenses was primarily the result of higher interest expense as a
result of increased borrowings and increased benefit and salary expenses.

Significant Accounting Policies

For information on the Companys significant accounting policies, see Item 7. Managements Discussion and Analysis of Financial Condition and Results
of Operations of the Companys Annual Report on Form 10-K for the year ended December 31, 2005.

Item 4. Controls and Procedures

In order to ensure that the information we must disclose in our filings with the SEC
is recorded, processed, summarized and reported on a timely basis, the Companys management, including our Chief Executive Officer and Chief Financial Officer, have reviewed and evaluated the effectiveness of our disclosure controls and
procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Securities and Exchange Act of 1934, as amended, or the Exchange Act, as of September 30, 2006. Based on such evaluation, the Chief Executive Officer and Chief
Financial Officer have concluded that, as of September 30, 2006, our disclosure controls and procedures were effective. No change in our internal control over financial reporting, as defined in Exchange Act Rules 13a-15(f) and 15d-15(f),
occurred during the quarter ended September 30, 2006 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.



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PART II OTHER INFORMATION

Item 1. Legal Proceedings

We are subject to legal and regulatory actions in the ordinary course of our business,
including class action lawsuits. Our pending legal and regulatory actions include proceedings specific to the Company and proceedings generally applicable to business practices in the industry in which we operate. We are subject to class action
lawsuits and other litigation alleging, among other things, that we made improper or inadequate disclosures in connection with the sale of annuity products or charged excessive or impermissible fees on these products, recommended unsuitable products
to customers, mishandled customer accounts or breached fiduciary duties to customers. We are also subject to litigation arising out of our general business activities, such as our 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 some of our pending legal and regulatory actions, parties are seeking large and/or
indeterminate amounts, including punitive or exemplary damages. Finally, we are periodically subject to examinations and audits by federal and state regulators, and also on occasion receive and address complaints from customers. The following is a
summary of certain pending proceedings.

The Company commenced a remediation program to correct errors in the administration of approximately 11,000
annuity contracts issued by the Company. The owners of these contracts did not receive notification that the contracts were approaching or past their designated annuitization date or default annuitization date (both dates referred to as the
contractual annuity date) and the contracts were not annuitized at their contractual annuity dates. Some of these contracts also were affected by data integrity errors resulting in incorrect contractual annuity dates. The lack of notice
and the data integrity errors, as reflected on the administrative system, all occurred before the Acquisition. The remediation and administrative costs of the remediation program are subject to the indemnification provisions of the Acquisition
agreement.

Commencing in 2003, the Company received formal requests for information from the SEC and the New York Attorney General
(NYAG)relating to market timing in variable annuities by the Company and certain affiliated companies. In connection with these investigations, with the approval of Skandia an offer was made by the Company to the authorities
investigating its companies, the SEC and NYAG to settle these matters by paying restitution and a civil penalty of $95 million in the aggregate. While not assured, the Company believes these discussions are likely to lead to settlements with these
authorities. Any regulatory settlement involving the Company and certain affiliates would be subject to the indemnification provisions of the acquisition agreement pursuant to which Prudential Financial purchased the Company and certain affiliates
in May 2003 from Skandia. If achieved, settlement of the matters relating to the Company and certain affiliates also could involve continuing monitoring, changes to and/or supervision of business practices, findings that may adversely affect
existing or cause additional litigation, adverse publicity and other adverse impacts to the Companys businesses.

During the third quarter of 2004,
the Company identified a system-generated calculation error in its annuity contract administration system that existed prior to the Acquisition. This error related to the calculation of amounts due to customers for certain transactions subject to a
market value adjustment upon the surrender or transfer of monies out of their annuity contracts fixed allocation options. The error resulted in an underpayment to policyholders, as well as additional anticipated costs to the Company associated
with remediation, breakage and other costs. Recently, the Company retained a consultant to assist it with the systems modifications needed to implement the remediation plan. The Company has advised Skandia that a portion of the remediation and
related administrative costs are subject to the indemnification provisions of the Acquisition agreement.

The Companys litigation and regulatory
matters are subject to many uncertainties, and given their complexity and scope, the outcomes cannot be predicted. It is possible that the results of operations or the cash flow of the Company 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 flow for such period. Management believes, however, that the ultimate outcome of all
pending litigation and regulatory matters, after consideration of applicable reserves and rights to indemnification, should not have a material adverse effect on the Companys financial position.

It should be noted that the judgments, settlements and expenses associated with many of these lawsuits, administrative and regulatory matters, and contingencies,
including certain claims described above, may, in whole or in part, after satisfaction of certain retention requirements, fall within Skandias indemnification obligations to Prudential Financial and its subsidiaries under the terms of the
Acquisition. Those obligations of Skandia provide for indemnification of certain judgments, settlements, and costs and expenses associated with lawsuits and other claims against the Company (matters), and apply only to matters, or groups
of related matters, for which the costs and expenses exceed $25,000 individually. Additionally, those obligations only apply to such otherwise indemnifiable costs and expenses that exceed $10 million in the aggregate, subject to reduction for
insurance proceeds, certain accruals and any realized tax benefit applicable to such amounts, and those obligations do not apply to the extent that such aggregate exceeds $1 billion. We are in discussions with Skandia regarding the satisfaction of
the $10 million deductible.

See the Companys Annual Report on Form 10-K for the year ended December 31, 2005 for additional discussion of the
Companys litigation and regulatory matters.



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Item 1A. Risk Factors

You should carefully consider the risks described under Risk Factors in our Annual
Report on Form 10-K for the year ended December 31, 2005. These risks could materially affect our business, results of operations or financial condition, or cause our actual results to differ materially from those expected or those expressed in
any forward looking statements made by or on behalf of the Company. These risks are not exclusive, and additional risks to which we are subject include, but are not limited to, the factors mentioned under Forward-Looking Statements above
and the risks of our businesses described elsewhere in our Annual Report on Form 10-K and this Quarterly Report on Form 10-Q.

Item 5. Other Information

The bulk of the Companys occupied real estate consists of office space located at One
Corporate Drive, Shelton, Connecticut under a lease (the Lease) that until recently was scheduled to expire on November 30, 2009. During the quarter, the Company entered into an agreement with the landlord, under which (a) the
term of the Lease was extended until November 30, 2014 (b) additional office space was included as part of the leased premises and (c) additional rent, in the amount of $1.3 million annually, is payable under the Lease. The
Companys obligation to pay this additional rent is not expected to have a material impact on its financial results.

Item 6. Exhibits



|     |  |                                                          
|---- |  | ---------------------------------------------------------
|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.

Schedules are omitted because they are either inapplicable or the information required therein is included in the
notes to the Unaudited Interim Financial Statements included herein.



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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to
be signed on its behalf by the undersigned, thereunto duly authorized.





AMERICAN SKANDIA LIFE ASSURANCE CORPORATIONBy:

/s/ Michael A. BohmMichael A. Bohm Executive Vice President and Chief
Financial Officer (Principal Financial Officer and Principal Accounting Officer)


November 13, 2006



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Exhibit Index

Exhibit Number and Description



|     |  |                                                          
|---- |  | ---------------------------------------------------------
|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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