---

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549



---

FORM 10-K



---

(MARK ONE)

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

FOR THE FISCAL YEAR ENDED DECEMBER 31, 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 33-18053



---

Pruco Life Insurance Company of
New Jersey

(Exact Name of Registrant as Specified in its Charter)



---



|                                                               |  |                                        
|-------------------------------------------------------------- |  | ---------------------------------------
|New Jersey                                                     |  | 22-2426091                             
|(State or Other Jurisdiction of Incorporation or Organization) |  | (I.R.S. Employer Identification Number)

213 Washington Street

Newark, New Jersey 07102

(973) 802-6000

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

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

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



---

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

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

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 if disclosure of delinquent filers pursuant to Item 405 of
Regulation S-K is not contained herein, and will not be contained, to the best of registrants knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form
10-K.  x

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

State the
aggregate market value of the voting stock held by non-affiliates of the registrant: N/A

As of February 28, 2007, 400,000 shares of the
registrants common stock (par value $5), were outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

THE INFORMATION REQUIRED TO BE FURNISHED PURSUANT TO PART III OF THIS FORM 10-K IS SET FORTH IN, AND IS HEREBY INCORPORATED BY REFERENCE HEREIN FROM,
PRUDENTIAL FINANCIAL, INC.S DEFINITIVE PROXY STATEMENT FOR THE ANNUAL MEETING OF SHAREHOLDERS TO BE HELD ON MAY 8, 2007, TO BE FILED BY PRUDENTIAL FINANCIAL, INC. WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO REGULATION 14A NOT
LATER THAN 120 DAYS AFTER DECEMBER 31, 2006.

Pruco Life Insurance Company of New Jersey meets the conditions set

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

and is therefore filing this Form with reduced disclosure.



---



---

TABLE OF CONTENTS



|           |  |          |  |                                                                                                              |  |           
|---------- |  | -------- |  | ------------------------------------------------------------------------------------------------------------ |  | ----------
|           |  |          |  |                                                                                                              |  | PageNumber
|PART I     |  | Item 1.  |  | Business                                                                                                     |  | 2         
|           |  | Item 1A. |  | Risk Factors                                                                                                 |  | 5         
|           |  | Item 1B. |  | Unresolved Staff Comments                                                                                    |  | 9         
|           |  | Item 2.  |  | Properties                                                                                                   |  | 9         
|           |  | Item 3.  |  | Legal Proceedings                                                                                            |  | 9         
|PART II    |  | Item 5.  |  | Market for Registrants Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities |  | 10        
|           |  | Item 7.  |  | Managements Discussion and Analysis of Financial Condition and Results of Operations                        |  | 10        
|           |  | Item 7A. |  | Quantitative and Qualitative Disclosures About Market Risk                                                   |  | 15        
|           |  | Item 8.  |  | Financial Statements and Supplementary Data                                                                  |  | 18        
|           |  | Item 9.  |  | Changes In and Disagreements with Accountants on Accounting and Financial Disclosure                         |  | 18        
|           |  | Item 9A. |  | Controls and Procedures                                                                                      |  | 18        
|           |  | Item 9B. |  | Other Information                                                                                            |  | 18        
|           |  | Item 10. |  | Directors, Executive Officers and Corporate Governance                                                       |  | 18        
|PART III   |  | Item 14. |  | Principal Accounting Fees and Services                                                                       |  | 19        
|PART IV    |  | Item 15. |  | Exhibits and Financial Statement Schedules                                                                   |  | 19        
|SIGNATURES |  |          |  | 21                                                                                                          



---

Forward-Looking Statements

Some of the statements included in this Annual Report on Form 10-K, including but not limited to those in Managements Discussion and Analysis of Financial Condition and Results of Operations, may constitute forward-looking statements
within the meaning of the U.S. Private Securities Litigation Reform Act of 1995. Words such as expects, believes, anticipates, includes, plans, assumes, estimates,
projects, intends, should, will, shall or variations of such words are generally part of forward-looking statements. Forward-looking statements are made based on managements current
expectations and beliefs concerning future developments and their potential effects upon Pruco Life Insurance Company of New Jersey. There can be no assurance that future developments affecting Pruco Life Insurance Company of New Jersey will be
those anticipated by management. These forward-looking statements are not a guarantee of future performance and involve risks and uncertainties, and there are certain important factors that could cause actual results to differ, possibly materially,
from expectations or estimates reflected in such forward-looking statements, including, among others: (1) general economic, market and political conditions, including the performance and fluctuations of stock, real estate and other financial
markets; (2) interest rate fluctuations; (3) re-estimates 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 and valuation of business acquired;
(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. Pruco
Life Insurance Company of New Jersey does not intend, and is under no obligation, to update any particular forward-looking statement included in this document. See Risk Factors for discussion of certain risks relating to our businesses.



---

PART 1



|Item 1. | Business
|------- | --------

Overview

Pruco Life Insurance Company of New Jersey, or the Company is a life insurance company organized in 1982 under the laws of the state of New Jersey. The
Company is licensed to sell interest-sensitive individual life insurance and variable life insurance, term life insurance, and individual variable and fixed annuities, or the Contracts, only in New Jersey and New York.

The Company is a wholly owned subsidiary of Pruco Life Insurance Company or, Pruco Life, a life insurance company organized in 1971 under the laws of the
state of Arizona. Pruco Life, in turn, is a wholly owned subsidiary of The Prudential Insurance Company of America, or Prudential Insurance, an insurance company organized in 1875 under the laws of the state of New Jersey. On
December 18, 2001, the date of demutualization, Prudential Insurance converted from a mutual life insurance company to a stock life insurance company and became an indirect wholly owned subsidiary of Prudential Financial, Inc.,
Prudential Financial, The demutualization was completed in accordance with Prudential Insurances Plan of Reorganization, which was approved by the Commissioner of the New Jersey Department of Banking and Insurance in October 2001.

On June 1, 2006, Prudential Financial acquired the variable annuity business of The Allstate Corporation, or Allstate, through a
reinsurance transaction, increasing Prudential Financials scale and third party distribution capabilities in the U.S. Beginning in the third quarter of 2006, the products offered by the Company replaced the Allstate products previously sold
through certain third party distribution channels.

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 annuities. The following paragraphs describe the Companys products, marketing and distribution, and underwriting and pricing.

Products

Variable Life Insurance

The Company offers a number of individual variable life insurance products that provide a return linked to an underlying investment portfolio designated by the
policyholder while providing the policyholder with the flexibility to change both the death benefit and premium payments. Each product provides for the deduction of charges and expenses from the customers investment account. The Company also
offers variable life products targeted to the estate planning and corporate-owned life insurance markets.

Term Life Insurance

The Company offers a variety of term life insurance products. Most term products include a conversion feature that allows the policyholder to convert the policy into
permanent life insurance coverage.

Universal Life Insurance

The Company offers universal life insurance products that feature a market rate fixed interest investment account, flexible premiums and a choice of guarantees against lapse. The Company offers products that cover individual lives as well
as survivorship universal life, which covers two individuals on a single policy and provides for payment of a death benefit upon the death of the second insured individual.

Variable and Fixed Annuities

The Company offers variable annuities that provide customers with the opportunity to
invest in proprietary and non-proprietary mutual funds and fixed-rate options. The investments made by customers in the proprietary and non-proprietary mutual funds represent separate accounts for which the contractholder bears the investment risk.
The investments made in the fixed rate options are credited with interest at rates we determine, subject to certain minimums. Additionally, the Companys variable annuities products offer certain minimum death benefit and living benefit
guarantee options. The Company also offers fixed annuity products that provide a guarantee of principal and a guaranteed interest rate for a specified period of time.



2



---

Marketing and Distribution

Prudential Insurance Agents

Agents of Prudential Insurance distribute variable, term, and universal life insurance,
variable and fixed annuities, and investment and protection products with proprietary and non-proprietary investment options as well as selected insurance products manufactured by others.

Prudential Insurance Agents sell life insurance products primarily to customers in the U.S. mass and mass affluent markets, as well as small business owners. The
majority of Prudential Insurance Agents are multi-line agents. In addition to commissions, Prudential Insurance Agents receive the employee benefits that are provided to other Prudential Insurance employees generally, including medical and
disability insurance, an employee savings program and qualified retirement plans.

Third Party Distribution

Our individual life and annuity products are offered through a variety of third party channels, including independent brokers, general agencies, producer groups,
wirehouses, banks and broker-dealers. We focus on sales through intermediaries who provide life insurance solutions to protect individuals, families and businesses and support of estate and wealth transfer planning. The life insurance products
offered are generally the same as those available through Prudential Agents. Our third party efforts are supported by a network of internal and external wholesalers.

Underwriting and Pricing

Life Insurance

Our life insurance underwriters follow detailed and uniform policies and procedures to assess and quantify the risk of our individual life insurance products. We require the applicant to take a variety of underwriting
tests, such as medical examinations, electrocardiograms, blood tests, urine tests, chest x-rays and consumer investigative reports, depending on the age of the applicant and the amount of insurance requested. Our universal life insurance contracts
and the fixed component of our variable life insurance contracts feature crediting rates, which are periodically reset. In resetting these rates, we consider the returns on our portfolios supporting the interest-sensitive life insurance business,
current interest rates, the competitive environment and our profit objectives.

Annuities

We earn asset management fees based upon the average assets of the mutual funds in our variable annuity products and mortality and expense fees and other fees for various
insurance-related options and features based on average daily net assets value of the annuity separate accounts or the amount of guaranteed value. We price our fixed annuities as well as the fixed-rate options of our variable annuities based on
assumptions as to investment returns, expenses and persistency. Competition also influences our pricing. We seek to maintain a spread between the return on our general account invested assets and the interest we credit on our fixed annuities. To
encourage persistency, most of our variable and fixed annuities have declining surrender or withdrawal charges for a specified number of years.

Reserves

We establish reserve and policyholder fund liabilities to recognize our future benefit obligations for our in force life and
annuity policies, including the minimum death benefit and living benefit guarantee features of some of these policies. For variable and interest-sensitive life insurance and annuity contracts, we establish policyholder account balances that
represent cumulative gross premium payments plus credited interest and/or fund performance, less withdrawals, expenses and mortality charges.

Effective
January 1, 2004, we adopted SOP 03-1, Accounting and Reporting by Insurance Enterprises for Certain Nontraditional Long-Duration Contracts and for Separate Accounts, which requires us to record a liability for minimum guaranteed
death benefits as well as other changes. This is discussed in Item 7, Managements Discussion and Analysis and in Note 2 on new accounting pronouncements.

Reinsurance

During 2005, the Company entered into new reinsurance agreements with an affiliate as part of its risk
management and capital management strategies. Effective October 3, 2005, the Company entered into a new coinsurance agreement with



3



---

Pruco Re, Ltd. providing for the 100% reinsurance of its Lifetime Five benefit feature sold on new business after October 3, 2005.

Since 2000, we have reinsured the majority of the mortality risk we assume under our newly sold individual life insurance products with both affiliated and unaffiliated
companies. As of the end of 2006, all reinsurance arrangements were with affiliated companies and the maximum amount of individual life insurance we may retain on any life is $100,000 for more information related to these affiliated reinsurance
arrangements see Note 13 to the Financial Statements.

Regulatory Environment

In order to continue to market life insurance and annuity products, the Company must meet or exceed the statutory capital and surplus requirements of the insurance departments of the states in which it conducts
business. Statutory accounting practices differ from generally accepted accounting principles, or GAAP. First, under statutory accounting practices, the acquisition costs of new business are charged to expense, while under GAAP they are
initially deferred and amortized over a period of time. Second, under statutory accounting practices, the required additions to statutory reserves for new business in some cases may initially exceed the statutory revenues attributable to such
business. These practices result in a reduction of statutory income and surplus at the time of recording new business.

Insurance companies are subject to
Risk-Based Capital, or RBC, guidelines, monitored by insurance regulatory authorities, that measure the ratio of the Companys statutory surplus with certain adjustments, or Adjusted Capital, to its required capital,
based on the risk characteristics of its insurance liabilities and investments. Required capital is determined by statutory formulae that consider risks related to the type and quality of invested assets, insurance-related risks associated with the
Companys products, interest rate risks, and general business risks. The RBC calculations are intended to assist regulators in measuring the adequacy of the Companys statutory capitalization. The Company considers RBC implications in its
asset/liability management strategies.

Changes in statutory capital requirements for our variable annuity products under an NAIC initiative known as
C-3 Phase II became effective as of December 31, 2005. These changes improved the RBC ratios reducing the capital requirements associated with our variable annuity products.

The NAIC has developed a set of financial relationships or tests known as the Insurance Regulatory Information System, or IRIS, to assist state regulators in
monitoring the financial condition of insurance companies and identifying companies that require special attention or action by insurance regulatory authorities. Insurance companies generally submit data annually to the NAIC, which in turn analyzes
the data using prescribed financial data ratios, each with defined usual ranges. Generally, regulators will begin to investigate or monitor an insurance company if ratios fall outside the usual ranges for four or more of the ratios. If
an insurance company has insufficient capital, regulators may act to reduce the amount of insurance it can issue. The Company is not currently subject to regulatory scrutiny based on these ratios.

The Company is subject to the laws and regulations of the New Jersey Department of Banking and Insurance, or the Insurance Department. A detailed financial
statement in the prescribed from, or the Annual Statement, is filed with the Insurance Department each year covering the Companys operations for the preceding year and its financial position as of the end of that year. Regulation
by the Insurance Department includes periodic examination to verify the accuracy of contract liabilities and reserves. The Companys books and accounts are subject to review by the Insurance Department at all times. A full examination of the
Companys operations is conducted periodically by the Insurance Department and under the auspices of the NAIC.

The Company is subject to regulation
under the insurance laws of all jurisdictions in which it operates. The laws of the various jurisdictions establish supervisory agencies with broad administrative powers with respect to various matters, including licensing to transact business,
overseeing trade practices, licensing agents, approving contract forms, establishing reserve requirements, fixing maximum interest rates on life insurance contract loans and minimum rates for accumulation of surrender values, prescribing the form
and content of required financial statements and regulating the type and amounts of investments permitted. The Company is required to file the Annual Statement with supervisory agencies in each of the jurisdictions in which it does business, and its
operations and accounts are subject to examination by these agencies at regular intervals.

Our variable life insurance products, as well as our variable
annuity products, generally are securities within the meaning of federal securities laws, registered under the federal securities laws and subject to regulation by the SEC and the NASD. Federal and some state securities regulation affect
investment advice, sales and related activities with respect to these products. In addition, although the federal government does not comprehensively regulate the business of insurance, federal legislation and administrative policies in several
areas, including taxation, financial services regulation and pension and welfare benefits regulation, can significantly affect the insurance industry. Congress also periodically considers and is considering laws affecting privacy of information and
genetic testing that could significantly and adversely affect the insurance industry.



4



---

Market Conduct Regulation

State insurance laws and regulations include numerous provisions governing the marketplace activities of insurers, including provisions governing the form and content of disclosure to consumers, illustrations, advertising, sales practices
and complaint handling. State regulatory authorities generally enforce these provisions through periodic market conduct examinations.

State Securities
Regulation

In certain states, our variable annuity products are considered securities within the meaning of state securities laws. Sales
activities with respect to these products generally are subject to state securities regulation. Such regulation may affect investment advice, sales and related activities for these products.

USA Patriot Act

The USA Patriot Act of 2001, enacted in response to
the terrorist attacks on September 11, 2001, contains anti-money laundering and financial transparency laws and mandates the implementation of various new regulations applicable to broker-dealers and other financial services companies,
including insurance companies. The Patriot Act seeks to promote cooperation among financial institutions, regulators and law enforcement entities in identifying parties that may be involved in terrorism or money laundering. The increased obligations
of financial institutions to identify their customers, watch for and report suspicious transactions, respond to requests for information by regulatory authorities and law enforcement agencies, and share information with other financial institutions
require the implementation and maintenance of internal practices, procedures and controls.

Legislative and Regulatory Reforms

Federal and state regulators are devoting substantial attention to the variable annuity business. As a result of publicity relating to widespread perceptions of industry
abuses, numerous legislative and regulatory reforms have been proposed or adopted with respect to revenue sharing, market timing, late trading, and other issues. It is difficult to predict at this time whether changes resulting from new laws and
regulations will affect our product offerings and, if so, to what degree.

Privacy Regulation

Federal and state law and regulation require financial institutions to protect the security and confidentiality of personal information, including health-related and
customer information and to notify customers and other individuals about their policies and practices relating to their collection and disclosure of health-related and customer information and their practices relating to protecting the security and
confidentiality of that information. State laws regulate use and disclosure of social security numbers and require notice to affected individuals, law enforcement, regulators and others if there is a breach of the security of certain personal
information, including social security numbers. Federal and state laws and regulations regulate the ability of financial institutions to make telemarketing calls and to send unsolicited e-mail messages to consumers and customers. Federal and state
governments and regulatory bodies may be expected to consider additional or more detailed regulation regarding these subjects and the privacy and security of personal information.



|Item 1A. | Risk Factors
|-------- | ------------

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 this Annual Report on Form 10-K.

Market fluctuations and general economic, market and political conditions may adversely affect our business and profitability.

Our insurance products and certain of our investment products, and our investment returns, are sensitive to stock, real estate and other market fluctuations and general
economic, market and political conditions and these fluctuations and changes could adversely affect our investment returns and results of operations, including in the following respects:



| |  |  | The profitability of many of our insurance products depends in part on the value of the separate accounts supporting these products, which may fluctuate
substantially depending on the foregoing conditions.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | A change in market conditions, including prolonged periods of high inflation, could cause a change in consumer sentiment adversely affecting sales and persistency
of our long-term savings and protection products.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Lapses of variable life and annuity products and withdrawals of assets from other investment products may increase
| | - |  | ------------------------------------------------------------------------------------------------------------------



5



---

| | if a market downturn, increased market volatility or other market conditions result in customers becoming dissatisfied with their products.
| | -------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | A market decline could result in guaranteed minimum benefits contained in many of our variable annuity products being higher than current account values or our
pricing assumptions would support, requiring us to materially increase reserves for such products.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Interest rate fluctuations could
adversely affect our businesses and profitability.

Our insurance products and certain of our investment products, and our investment returns, are
sensitive to interest rate fluctuations, and changes in interest rates could adversely affect our investment returns and results of operations, including in the following respects:



| |  |  | Some of our products expose us to the risk that changes in interest rates will reduce the spread between the amounts that we are required to pay under the contracts
and the rate of return we are able to earn on our general account investments supporting the contracts. When interest rates decline, we have to reinvest the cash income from our investments in lower yielding instruments. Since many of our policies
and contracts have guaranteed minimum interest or crediting rates or limit the resetting of interest rates, the spreads could decrease and potentially become negative. When interest rates rise, we may not be able to replace the assets in our general
account with the higher yielding assets needed to fund the higher crediting rates necessary to keep these products and contracts competitive.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Changes in interest rates may reduce our spreads or result in potential losses in our investment activities in which we borrow funds and purchase investments to
earn additional spread income on the borrowed funds. A decline in market interest rates could also reduce our returns from investment of equity.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | When interest rates rise, policy loans and surrenders and withdrawals of life insurance policies and annuity contracts may increase as policyholders seek to buy
products with perceived higher returns, requiring us to sell investment assets potentially resulting in realized investment losses, or requiring us to accelerate the amortization of DAC. (defined below).
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | A decline in interest rates accompanied by unexpected prepayments of certain investments could result in reduced investments and a decline in our profitability. An
increase in interest rates accompanied by unexpected extensions of certain lower yielding investments could result in a decline in our profitability.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Changes in the relationship between long-term and short-term interest rates could adversely affect the profitability of some of our products.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------

If our reserves for future policyholder benefits and claims are inadequate, we may be required to increase our reserves, which would
adversely affect our results of operations and financial condition.

We establish and carry reserves to pay future policyholder benefits and claims. Our
reserves do not represent an exact calculation of liability, but rather are actuarial or statistical estimates based on many assumptions and projections which are inherently uncertain and involve the exercise of significant judgment, including as to
the levels of and/or timing of receipt or payment of premiums, benefits, claims, expenses, interest credits, investment results, retirement, mortality, morbidity and persistency. We cannot determine with precision the ultimate amounts that we will
pay for, or the timing of payment of, actual benefits, claims and expenses or whether the assets supporting our policy liabilities, together with future premiums, will be sufficient for payment of benefits and claims. If we conclude that our
reserves, together with future premiums, are insufficient to cover future policy benefits and claims, we would be required to increase our reserves and incur income statement charges for the period in which we make the determination, which would
adversely affect our results of operations and financial condition.

Our profitability may decline if mortality rates, morbidity rates or persistency
rates differ significantly from our pricing expectations.

We set prices for many of our insurance and annuity products based upon expected claims and
payment patterns, using assumptions for mortality rates, or likelihood of death, and morbidity rates, or likelihood of sickness, of our policyholders. Pricing of our insurance and deferred annuity products are also based in part upon expected
persistency of these products, which is the probability that a policy or contract will remain in force from one period to the next. The development of a secondary market for life insurance, including life settlements or viaticals and
investor owned life insurance, could adversely affect the profitability of existing business and our pricing assumptions for new business. Significant deviations in actual experience from our pricing assumptions could have an adverse effect on the
profitability of our products. Although some of our products permit us to increase premiums or adjust other charges and credits during the life of the policy or contract, the adjustments permitted under the terms of the policies or contracts may not
be sufficient to maintain profitability. Many of our products do not permit us to increase premiums or adjust other charges and credits or limit those adjustments during the life of the policy or contract.



6



---

We may be required to accelerate the amortization of deferred policy acquisition costs, or DAC, which could adversely
affect our results of operations or financial condition.

Deferred policy acquisition costs, or DAC, represent the costs that vary with and are related
primarily to the acquisition of new and renewal insurance and annuity contracts, and we amortize these costs over the expected lives of the contracts. Management, on an ongoing basis, tests the DAC recorded on our balance sheet to determine if this
amount is recoverable under current assumptions. In addition, we regularly review the estimates and assumptions underlying DAC for those products for which we amortize DAC in proportion to gross profits or gross margins.

Given changes in facts and circumstances, these tests and reviews could lead to reductions in DAC that could have an adverse effect on the results of our operations and
our financial condition.

A downgrade or potential downgrade in our claims-paying or credit ratings could limit our ability to market products, increase
the number or value of policies being surrendered, increase our borrowing costs and/or hurt our relationships with creditors or trading counterparties.

Claims-paying ratings, which are sometimes referred to as financial strength ratings, represent the opinions of rating agencies regarding the financial ability of an insurance company to meet its obligations under an insurance
policy, and are important factors affecting public confidence in an insurer and its competitive position in marketing products. Credit ratings represent the opinions of rating agencies regarding an entitys ability to repay its indebtedness,
and credit ratings are important to our ability to raise capital through the issuance of debt and to the cost of such financing. A downgrade in our claims-paying or credit ratings could limit our ability to market products, reduce our
competitiveness, increase the number or value of policies being surrendered, increase our borrowing costs and/or hurt our relationships with creditors.

Losses due to defaults by others, including issuers of investment securities or reinsurance and derivative instrument counterparties, could adversely affect the value of our investments or reduce our profitability.

Issuers and borrowers whose securities or loans we hold, customers, trading counterparties, counterparties under swaps and other derivative contracts, reinsurers,
clearing agents, exchanges, clearing houses and other financial intermediaries and guarantors may default on their obligations to us due to bankruptcy, insolvency, lack of liquidity, adverse economic conditions, operational failure, fraud or other
reasons. Such defaults could have an adverse effect on our results of operations and financial condition.

Intense competition could adversely affect
our ability to maintain or increase our market share or profitability.

We face intense competition from domestic and foreign insurance companies, asset
managers and diversified financial institutions, both for the ultimate customers for our products and, in many businesses, for distribution through non-affiliated distribution channels. We compete based on a number of factors including brand
recognition, reputation, quality of service, investment performance of our products, product features, scope of distribution and distribution arrangements, price, perceived financial strength and claims-paying and credit ratings. A decline in our
competitive position as to one or more of these factors could adversely affect our profitability and assets under management. Many of our competitors are large and well capitalized and some have greater market share or breadth of distribution, offer
a broader range of products, services or features, assume a greater level of risk, have lower profitability expectations or have higher claims-paying or credit ratings than we do. The proliferation and growth of non-affiliated distribution channels
puts pressure on our captive sales channels to either increase their productivity or reduce their costs in order to remain competitive, and we run the risk that the marketplace will make a more significant or rapid shift to non-affiliated or direct
distribution alternatives than we anticipate or are able to achieve ourselves, potentially adversely affecting our market share and results of operations. Competition for personnel is intense. The loss of personnel could have an adverse effect on
our business and profitability.

Changes in U.S. federal income tax law or in the income tax laws of other jurisdictions in which we operate could make
some of our products less attractive to consumers and increase our tax costs.

Current U.S. federal income tax laws generally permit holders to defer
taxation on the build-up of value of annuities and life insurance products until payments are actually made to the policyholder or other beneficiary and to exclude from taxation the build-up of value which is paid as a death benefit under a life
insurance contract. Congress from time to time considers legislation that could make our products less attractive to consumers, including legislation that would reduce or eliminate the benefit of this deferral on some annuities and insurance
products, as well as other types of changes that could reduce or eliminate the attractiveness of annuities and life insurance products to consumers, such as repeal of the estate tax.

For example, the Economic Growth and Tax Relief Reconciliation Act of 2001 and the Jobs and Growth Tax Relief Reconciliation Act of 2003 generally provide for lower income tax, capital gains and dividend tax rates
that might have the effect of reducing the benefits of tax deferral on the build-up of value of annuities and life insurance products. The Bush Administration continues to propose that many of the rate reductions pursuant to these Acts be made
permanent as well as to propose several tax-favored savings initiatives. Proposed changes to the Social Security program would allow a portion of



7



---

an individuals Social Security contributions to be privately invested which, if enacted, could affect sales of some of our products. These changes or
other tax law changes might hinder our sales and result in the increased surrender of insurance and annuity products.

Congress, as well as foreign, state
and local governments, also considers from time to time legislation that could increase our tax costs. If such legislation is adopted, our net income could decline.

Our businesses are heavily regulated and changes in regulation may reduce our profitability.

Our businesses are
subject to comprehensive regulation and supervision. The purpose of this regulation is primarily to protect our customers and not our shareholder. Many of the laws and regulations to which we are subject are regularly re-examined, and existing or
future laws and regulations may become more restrictive or otherwise adversely affect our operations.

The Company is subject to the rules and regulations
of the SEC and the NYSE relating to public reporting and disclosure, securities trading, accounting and financial reporting, and corporate governance matters. The Sarbanes-Oxley Act of 2002 and rules and regulations adopted in furtherance of that
Act have substantially increased the requirements in these and other areas for SEC reporting companies.

Many insurance regulatory and other governmental
or self-regulatory bodies have the authority to review our products and business practices and those of our agents and employees and to bring regulatory or other legal actions against us if, in their view, our practices, or those of our agents or
employees, are improper. These actions can result in substantial fines, penalties or prohibitions or restrictions on our business activities and could adversely affect our business, reputation and results of operations or financial condition. For a
discussion of material pending litigation and regulatory matters, see Legal Proceedings.

The NAIC has adopted a Model Regulation entitled
Valuation of Life Insurance Policies, commonly known as Regulation XXX, and a supporting Guideline entitled The Application of the Valuation of Life Insurance Policies, commonly known as Guideline
AXXX. The Regulation and supporting Guideline require insurers to establish statutory reserves for term and universal life insurance policies with long-term premium guarantees that are consistent with the statutory reserves required for other
individual life insurance policies with similar guarantees. Many market participants believe that this level of reserves is excessive, and we have implemented reinsurance and capital management actions to mitigate the impact of Regulation XXX on our
term insurance business. However, we may not be able to implement actions to mitigate the impact of Regulation XXX and Guideline AXXX on future sales of term and universal life insurance products, thereby potentially requiring us to incur higher
operating costs than we currently anticipate, reduce our sales of these products or implement measures that may be disruptive to our business.

Insurance
regulators, as well as industry participants, have also begun to consider potentially significant changes in the way in which statutory reserves and statutory capital are determined, particularly for products with embedded options and guarantees.
New regulatory capital requirements have already gone into effect for variable annuity products. The timing of, and extent of, such changes to the statutory reporting framework are uncertain; however, the result could be increases to statutory
reserves and capital, and an adverse effect on our products, sales and operating costs.

Legal and regulatory actions are inherent in our businesses and
could adversely affect our results of operations or harm our businesses or reputation.

We are, and in the future may be, subject to legal and
regulatory actions in the ordinary course of our businesses. Some of these proceedings have been brought on behalf of various alleged classes of complainants. In certain of these matters, the plaintiffs are seeking large and/or indeterminate
amounts, including punitive or exemplary damages. Substantial legal liability in these or future legal or regulatory actions could have an adverse affect on us or cause us reputational harm, which in turn could harm our business prospects.

Material pending litigation and regulatory matters affecting us, and certain risks to our businesses presented by such matters, are discussed under
Legal Proceedings, Item 3 in Managements Discussion and Analysis.

Our litigation and regulatory matters are subject to many
uncertainties, and given the complexity and scope, the outcome cannot be predicted. Our reserves for litigation and regulatory matters may prove to be inadequate. 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 litigation and regulatory matters depending, in part, upon the results of operations or cash flow for such period.

The occurrence of natural or man-made disasters could adversely affect our results of operations and financial condition.



8



---

The occurrence of natural disasters, including hurricanes, floods, earthquakes, tornadoes, fires, explosions, pandemic
disease and man-made disasters, including acts of terrorism and military actions, could adversely affect our results of operations or financial condition, including in the following respects:



| |  |  | Catastrophic loss of life due to natural or man-made disasters could cause us to pay benefits at higher levels and/or materially earlier than anticipated and could
lead to unexpected changes in persistency rates.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | A natural or man-made disaster could result in losses in our investment portfolio or the failure of our counterparties to perform, or cause significant volatility
in global financial markets.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | A terrorist attack affecting financial institutions in the United States or elsewhere could negatively impact the financial services industry in general and our
business operations, investment portfolio and profitability in particular. As previously reported, in August 2004, the U.S. Department of Homeland Security identified our Newark, New Jersey facilities, along with those of several other financial
institutions in New York and Washington, D.C., as possible targets of a terrorist attack.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Pandemic disease, caused by a virus such as H5N1 (the Avian flu virus), could have a severe adverse effect on the Companys business. The potential
impact of such a pandemic on the Companys results of operations, liquidity and financial position is highly speculative, and would depend on numerous factors, including: the probability of the virus mutating to a form that can be passed from
human to human; the rate of contagion if and when that occurs; the regions of the world most affected; the effectiveness of treatment for the infected population; the rates of mortality and morbidity among various segments of the insured versus the
uninsured population; the collectibility of reinsurance; the possible macroeconomic effects of a pandemic on the Companys asset portfolio; the effect on lapses and surrenders of existing policies, as well as sales of new policies; and many
other variables.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

There can be no assurance that our business continuation plans and insurance coverages would be effective in mitigating
any negative effects on our operations or profitability in the event of a terrorist attack or other disaster.

Our risk management policies and
procedures may leave us exposed to unidentified or unanticipated risk, which could adversely affect our businesses or result in losses.

Our policies
and procedures to monitor and manage risks may not be fully effective and may leave us exposed to unidentified and unanticipated risks. Management of operational, legal and regulatory risks requires, among other things, policies and procedures to
record properly and verify a large number of transactions and events, and these policies and procedures may not be fully effective. Past or future employee misconduct could result in violations of law by us, regulatory sanctions and/or serious
reputational or financial harm and the precautions we take to prevent and detect this activity may not be effective in all cases. A failure of our computer systems or a compromise of their security could also subject us to regulatory sanctions or
other claims, harm our reputation, interrupt our operations and adversely affect our business, results of operations or financial condition.



|Item 1B. | Unresolved Staff Comments
|-------- | -------------------------

None.



|Item 2. | Properties
|------- | ----------

Office space is provided by Prudential
Insurance, as is described in the Notes to the Financial Statements.



|Item 3. | Legal Proceedings
|------- | -----------------

The Companys litigation and
regulatory matters are subject to legal and regulatory actions in the ordinary course of its businesses, which may include class action lawsuits. Pending legal and regulatory actions include proceedings relating to aspects of the businesses and
operations that are specific to the Company and that are typical of the businesses in which the Company operates. Class action and individual lawsuits may involve a variety of issues and/or allegations, which include sales practices, underwriting
practices, claims payment and procedures, premium charges, policy servicing and breach of fiduciary duties to customers. The Company may also be subject to litigation arising out of its general business activities, such as its investments and third
party contracts. In certain of these matters, the plaintiffs may seek large and/or indeterminate amounts, including punitive or exemplary damages.

The
Companys litigation and regulatory matters are subject to many uncertainties, and given the 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 litigation and regulatory



9



---

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.

PART II



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

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



|Item 7. | Managements Discussion and Analysis of Financial Condition and Results of Operations
|------- | -------------------------------------------------------------------------------------

Managements Discussion and Analysis of Financial Condition and Results of Operations (MD&A) addresses the financial condition of Pruco Life Insurance Company of New Jersey as of December 31,
2006, compared with December 31, 2005, and its results of operations for the years ended December 31, 2006 and 2005.

You should read the
following analysis of the Companys financial condition and results of operations in conjunction with the Forward-Looking Statements disclosure included below the Table of Contents, Risk Factors, and Financial statements included in
this Annual Report on Form 10-K.

Overview

The
Company sells individual interest-sensitive life insurance, variable life insurance, term insurance, and individual variable annuities in New Jersey and New York through Prudential Insurances sales force. These markets are subject to
regulatory oversight with particular emphasis placed on company solvency and sales practices. These markets are also subject to increasing competitive pressures as the legal barriers which have historically segregated the markets of the financial
services industry have been changed through both legislative and judicial processes. Regulatory changes have opened the insurance industry to competition from other financial institutions, particularly banks and mutual funds that are positioned to
deliver competing investment products through large, stable distribution channels.

Revenues and Expenses

The Company earns revenues principally from insurance premiums; mortality, expense, and asset management fees from insurance and investment products; and investment of
general account and other funds. The Company earns premiums primarily from the sale of individual life insurance. The Company earns mortality, expense, and asset management fees from the sale and servicing of separate account products including
variable life insurance and variable annuities. The Companys operating expenses principally consist of insurance benefits provided, general business expenses, commissions and other costs of selling and servicing the various products we sell
and interest credited on general account liabilities.

Profitability

The Companys profitability depends principally on its ability and Prudential Insurances ability to price and manage risk on insurance products, to attract and retain customer assets, and to manage
expenses. Specific drivers of our profitability include:



| |  |  | our ability to manufacture and distribute products and services and to introduce new products that gain market acceptance on a timely basis;
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | our ability to price our insurance products at a level that enables us to earn a margin over the cost of providing benefits and the expense of acquiring customers
and administering those products;
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | our mortality and morbidity experience on individual life insurance and annuity products;
| | - |  | -----------------------------------------------------------------------------------------



| |  |  | our persistency experience, which affects our ability to recover the cost of acquiring new business over the lives of the contracts;
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------



| |  |  | our cost of administering insurance contracts and providing asset management products and services;
| | - |  | ---------------------------------------------------------------------------------------------------



| |  |  | our returns on invested assets, net of the amounts we credit to policyholders accounts;
| | - |  | ----------------------------------------------------------------------------------------



| |  |  | the amount of our assets under management and changes in their fair value, which affect the amount of asset management fees we receive; and
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------



10



---

| |  |  | our ability to generate favorable investment results through asset/liability management and strategic and tactical asset allocation.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------

In addition, factors such as regulation, competition, interest rates, taxes and general economic conditions affect the Companys profitability.

See Risk Factors for a discussion of risks that could materially affect the business, results of operations or financial condition, or cause the actual
results to differ materially from those expected or those expressed in any forward looking statements made by or on behalf of the Company.

Application
of Critical Accounting Policies

The preparation of financial statements in conformity with accounting principles generally accepted in the United
States of America, or GAAP, requires the application of accounting policies that often involve a significant degree of judgment. Management, on an ongoing basis, reviews estimates and assumptions used in the preparation of financial
statements. If management determines that modifications in assumptions and estimates are appropriate given current facts and circumstances, results of operations and financial position as reported in the Financial Statements could change
significantly.

The following sections discuss the accounting policies applied in preparing our financial statements that management believes are most
dependent on the application of estimates and assumptions.

Valuation of Investments

As prescribed by GAAP, we present our fixed maturity investments classified as available for sale at fair value in the statements of financial position. The
fair values for our public fixed maturity securities are based on quoted market prices or estimates from independent pricing services. However, for our investments in private securities such as private placement fixed maturity securities, which
comprised 12% of our investments as of December 31, 2006, this information is not available. For these private fixed maturities, fair value is determined typically by using a discounted cash flow model, which relies upon the average of spread
surveys collected from private market intermediaries who are active in both primary and secondary transactions and takes into account, among other things, the credit quality of the issuer and the reduced liquidity associated with private placements.

For our fixed maturity investments classified as available for sale, the impact of changes in fair value is recorded as an unrealized gain or loss in
Accumulated other comprehensive income (loss), net of taxes, a separate component of equity. In addition, investments classified as available for sale are subject to our impairment review to identify when a decline in value is other than
temporary. Factors we consider in determining whether a decline in value is other than temporary include: the extent (generally if greater than 20%) and the duration (generally greater than six months) of the decline; the reasons for the decline in
value (credit event or interest rate related); our ability and intent to hold the investment for a period of time that will allow for a recovery of value; and the financial condition and near-term prospects of the issuer. When it is determined that
a decline in value is other than temporary, the carrying value of the security is reduced to its fair value, with a corresponding charge to earnings. This corresponding charge is referred to as an impairment and is reflected in Realized
investment (losses)/gains, net in the statements of operations. The level of impairment losses can be expected to increase when economic conditions worsen and decrease when economic conditions improve.

Commercial loans, which comprised nearly 4% of our investments as of December 31, 2006, are carried primarily at unpaid principal balances, net of unamortized
premiums or discounts and an allowance for losses. This allowance includes a loan specific portion as well as a portfolio reserve for probable incurred but not specifically identified losses. The loan specific portion is based on managements
judgment as to ultimate collectibility of loan principal. The portfolio reserve is based on a number of factors, such as historical experience and portfolio diversification. Adjustments to the allowance are reflected in Realized investment
gains (losses), net, in our statements of operations. Similar to impairment losses discussed above, the allowance for losses can be expected to increase when economic conditions worsen and decrease when economic conditions improve.

Future Policy Benefit Reserves

We establish reserves for
future policy benefit payments to or on behalf of policyholders in the same period in which the policy is issued. These reserves relate primarily to term life variable and universal life, and certain annuity products.

The future policy benefit reserves at December 31, 2006 represented 6% of our total liabilities and relate primarily to term life, variable, and universal products
and are determined in accordance with GAAP as the present value of expected future benefits to or on behalf of policyholders plus the present value of future expenses less the present value of future net premiums. The expected future benefits are
based on mortality, lapse, maintenance expense and interest rate assumptions. Reserves for new business are based on best estimate assumptions as of the date the policy is issued with provisions for the



11



---

risk of adverse deviation. After our reserves are initially established, we perform premium deficiency tests using best estimate assumptions as of the
testing date without provisions for adverse deviation. If reserves determined based on these best estimate assumptions are greater than the GAAP liabilities (i.e., reserves net of any DAC asset), the existing GAAP liabilities are adjusted to
the greater amount. Our best estimate mortality assumptions are generally based on the Companys historical experience or standard industry tables, as applicable; our expense assumptions are based on current levels of maintenance costs,
adjusted for the effects of inflation; and our interest rate assumptions are based on current and expected net investment returns. Generally, we do not expect our mortality trends to change significantly in the short-term and to the extent these
trends may change we expect such changes to be gradual over the long-term.

Deferred Policy Acquisition Costs

We capitalize costs that vary with and are related primarily to the acquisition of new and renewal insurance and annuity contracts. These costs include primarily
commissions, costs of policy issuance and underwriting, and variable field office expenses. We amortize these deferred policy acquisition costs, or DAC, over the expected lives of the contracts, based on the level and timing of either gross profits,
or gross premiums, depending on the type of contract. As of December 31, 2006, DAC in our life business was $208 million and DAC in our annuity business was $48 million.

DAC associated with the term life policies of our domestic individual life insurance business is amortized in proportion to gross premiums. We evaluate the recoverability of our DAC related to these policies as part
of our premium deficiency testing. If a premium deficiency exists, we reduce DAC by the amount of the deficiency or to zero through a charge to current period earnings. If the deficiency is more than the DAC balance, we then increase the reserve for
future policy benefits by the excess by means of a charge to current period earnings. Generally, we do not expect significant short-term deterioration in experience, and therefore do not expect significant adjustments to the related DAC.

DAC associated with the variable and universal life policies of our domestic individual life insurance and the variable and fixed annuity contracts of our individual
annuities business is amortized over the expected life of these policies in proportion to gross profits. In calculating gross profits, we consider mortality, persistency, and other elements as well as rates of return on investments associated with
these contracts. We regularly evaluate and adjust the related DAC balance with a corresponding charge or credit to current period earnings for the effects of our actual gross profits and changes in our assumptions regarding estimated future gross
profits. For the variable and universal life policies a significant portion of our gross profits is derived from mortality margins. As a result, our estimates of future gross profits are significantly influenced by our mortality assumptions. Our
mortality assumptions represent our expected claims experience over the life of these policies and are developed based on experience. We review and update our mortality assumptions annually and perform full actuarial studies every five years.
Updates to our mortality assumptions in future periods could have a significant adverse or favorable effect on our results of operations.

For variable
annuity contracts, DAC is more sensitive to the effects of changes in our estimates of gross profits due primarily to the significant portion of gross profits that is dependent upon the total rate of return on assets held in separate account
investment options, and the shorter average life of the contracts. This rate of return influences the fees we earn, costs we incur associated with minimum death benefit and other contractual guarantees specific to our variable annuity contracts, as
well as other sources of profit. This is also true, to a lesser degree, for our variable life policies.

Future rate of return assumptions used in
evaluating DAC for our domestic annuity and variable life insurance products, are derived using a reversion to the mean approach, a common industry practice. Under this approach, we consider actual returns over a period of time and project returns
for the future period so that the assets grow at the expected rate of return for the entire period. If the projected future rate of return is greater than our maximum future rate of return, we use our maximum reasonable future rate of return. As
part of our approach for variable annuity contracts, if the estimated gross profits under the previously projected rate of returns are greater than or less than a range of estimated gross profits determined by statistically generated rate of
returns, we change our future assumption to reflect the result of the reversion to the mean approach. For variable annuities products, our expected rate of return is 8% per annum, which reflects an expected rate of return of 8.9% per annum
for equity type assets. The future equity rate of return used varies by product, but was under 8.9% per annum for all of our variable annuity products for our evaluation of deferred policy acquisition costs as of December 31, 2006.

To demonstrate the sensitivity of our variable annuity DAC balance relative to our future rate of return, increasing or decreasing our future rate of
return by 100 basis points would have required us to consider adjustments, subject to the statistical approach described above, to that DAC balance as follows. The information provided in the table below considers only the effect of changes in our
future rate of return and not changes in any other assumptions such as persistency, mortality, or expenses included in our evaluation of DAC.



12



---

|                                                         |  |                            |    |  
|-------------------------------------------------------- |  | -------------------------- | -- | -
|                                                         |  | Increase/(Reduction)in DAC |   
|                                                         |  | (in millions)              |   
|Increase in projected rate of return by 100 basis points |  | $                          | 1  |  
|Decrease in projected rate of return by 100 basis points |  | $                          | (1 | )

See Results of Operations for a discussion of the impact of DAC amortization on our results of the
life and annuities products.

Taxes on Income

Our effective tax rate is based on income, non-taxable and non-deductible items, statutory tax rates and tax planning opportunities available in the various jurisdictions in which we operate. Inherent in determining our annual tax rate are
judgments regarding business plans, planning opportunities and expectations about future outcomes.

Tax regulations require items to be included in the tax
return at different times than the items reflected in the financial statements. As a result, the effective tax rate reflected in the financial statements is different than the actual rate applied on the tax return. Some of these differences are
permanent such as expenses that are not deductible in our tax return, and some differences are temporary, reversing over time, such as valuation of insurance reserves. Temporary differences create deferred tax assets and liabilities. Deferred tax
assets generally represent items that can be used as a tax deduction or credit in future years for which we have already recorded the tax benefit in our income statement. Deferred tax liabilities generally represent tax expense recognized in our
financial statements for which payment has been deferred, or expenditures for which we have already taken a deduction in our tax return but have not yet recognized in our financial statements. The application of GAAP requires us to evaluate the
recoverability of our deferred tax assets and establish a valuation allowance if necessary to reduce our deferred tax asset to an amount that is more likely than not to be realized. Realization of certain deferred tax assets is dependent upon
generating sufficient taxable income in the appropriate jurisdiction prior to the expiration of the carry-forward periods. Although realization is not assured, management believes it is more likely than not the deferred tax assets, net of valuation
allowances, will be realized.

Our accounting represents managements best estimate of future events that can be appropriately reflected in the
accounting estimates. Certain changes or future events, such as changes in tax legislation, geographic mix of earnings and completion of tax audits could have an impact on our estimates and effective tax rate.

An increase or decrease in our effective tax rate by one percent of income from operations before income taxes and cumulative effect of accounting change, would have
resulted in a decline or increase in income from continuing operations before cumulative effect of accounting change in 2006 of $0.5 million.

The amount
of income taxes paid by the Company is subject to ongoing audits in various jurisdictions. We reserve for our best estimate of potential payments/settlements to be made to the Internal Revenue Service (the Service) and other taxing
jurisdictions for audits ongoing or not yet commenced. In 2006, the Service completed all fieldwork with regards to its examination of the Companys federal income tax returns for tax years 2002-2003. The Company anticipates the final report
being submitted to the Joint Committee on Taxation for their review during the first quarter of 2007. The statute of limitations for the 2002-2003 tax years expires in 2008. In addition, in January 2007, the Service began an examination of tax years
2004 through 2006 in January 2007.

On January 26, 2006, the Service officially closed the audit of Prudential Financials consolidated federal
income tax returns for the 1997 to 2001 periods. As a result of certain favorable resolutions, the Companys statement of operations for the year ended December 31, 2005 includes an income tax benefit of $3 million, reflecting a reduction
in the Companys liability for income taxes.

For tax year 2007, the Company has chosen to participate in the Services new Compliance Assurance
Program (the CAP). Under CAP, the Service assigns an examination team to review completed transactions contemporaneously during the 2007 tax year in order to reach agreement with the Company on how they should be reported in the tax
return. If disagreements arise, accelerated resolutions programs are available to resolve the disagreements in a timely manner before the tax return is filed. It is managements expectation this new program will significantly shorten the time
period between when the Company files its federal income tax return and the Service completes its examination of the return.



13



---

Reserves for contingencies

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

Recently Issued Accounting Pronouncements

See Note 2 to the Financial Statements for a discussion of recently issued
accounting pronouncements.

Effective New Accounting Policies Adopted

See Note 2 to the Financial Statements for a discussion of new accounting policies adopted.

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

Changes in Financial Condition

2006 versus 2005

From December 31, 2005 to December 31,
2006, total assets increased by $317 million from $3.965 billion to $4.282 billion. Separate account assets increased by $332 million from $2.288 billion at December 31, 2005 to $2.620 billion at December 31, 2006 due to market performance
and sales net of surrenders, benefits and policy charges in 2006. Fixed maturities decreased by $71 million, from $992 million at December 31, 2005 to $921 million at December 31, 2006, this decrease was primarily driven by sales of fixed
maturities to fund the acquisition of commercial loans and to pay down investment-related borrowings. Cash and cash equivalents are lower by $56 million as cash used in financing activities exceeded cash provided from operating and investing
activities in 2006. Deferred policy acquisition costs increased by $30 million from $226 million at December 31, 2005, to $256 million at December 31, 2006, primarily driven by capitalization of acquisition costs from the continued growth
of sales in life products, partially offset by net amortization. Reinsurance recoverables increased by $43 million, as a result of continued growth in term in force under the PARCC coinsurance agreement

From December 31, 2005 to December 31, 2006, total liabilities increased by $275 million, from $3.620 billion to $3.895 billion. Corresponding with the asset
change, separate account liabilities increased by $332 million from $2.288 billion at December 31, 2005, as described above. The Companys short-term borrowings from an affiliate decreased by $28 million from $53 million at
December 31, 2005 due to repayments. Future policy benefits and other policyholder liabilities increased by $47 million, from $203 million at December 31, 2005 to $250 million at December 31, 2006, as a result of growth in the term
insurance business. Total securities lending position at December 31, 2006 decreased by $56 million from December 31, 2005. The relative amounts of cash collateral for loaned securities and securities sold under agreements to repurchase
decreased $58 million and increased $2 million, respectively.

Stockholders equity increased by $42 million, from $345 million at December 31,
2005, to $387 million at December 31, 2006, mainly as a result of higher net income.

Results of Operations

2006 to 2005 Annual Comparison

Net Income

Net income of $39 million in 2006 was relatively unchanged from the prior year. A detailed discussion of the results of operation follows below.

Revenues

Revenues decreased by $9 million, from $138 million in 2005
to $129 million in 2006. Realized investment losses of $14 million in 2006 increased as a result of losses from sales of fixed maturities in a rising interest rate environment. Partially offsetting this realized loss was an increase in investment
income of $5 million primarily due to higher yields resulting from investment activities in a rising interest rate environment compared to 2005. Policy charges and fee income decreased $1 million from the prior year, driven by lower amortization of
unearned policy charges and fee income, partially offset by higher fees of $2 million from higher assets under management as a result of market appreciation.



14



---

Benefits and Expenses

Total benefits and expenses decreased by $6 million, from $85 million in 2005 to $79 million in 2006.

General, administrative and other expenses
decreased by $8 million from $40 million in 2005 to $32 million in 2006 primarily driven by lower operating expenses, net of applicable capitalization. Operating expenses include reinsurance expense allowances that are part of the PARCC coinsurance
agreement (see Note 13 to the Financial Statements). These allowances are reflected as a reduction of operating expenses and were $4 million higher in 2006 due to higher term life sales.

DAC amortization in 2006 was relatively unchanged from 2005. Lower amortization resulting from favorable fund performance was offset by a lower current year benefit from an increased estimate of total gross profits
used as a basis for amortizing deferred policy acquisitions and other costs.

Tax expense in 2006 decreased $3 million, from $14 million in 2005 to $11
million in 2006. The decrease was primarily due to a lower effective tax rate in 2006 and lower income before taxes. These benefits were offset by a favorable adjustment of $3 million in 2005 of substantially all issues relating to the
IRS examination of the federal income tax returns for the 1997 to 2001 periods.



|Item 7a. | Quantitative and Qualitative Disclosures About Market Risk
|-------- | ----------------------------------------------------------

Risk
Management, Market Risk and Derivative Instruments

Risk management includes the identification and measurement of various forms of risk, the
establishment of risk thresholds and the creation of processes intended to maintain risks within these thresholds while optimizing returns on the underlying assets or liabilities. We consider risk management an integral part of managing our core
businesses.

Market risk is the risk of change in the value of financial instruments as a result of absolute or relative changes in interest rates, foreign
currency exchange rates or equity or commodity prices. To varying degrees, the investment and trading activities supporting all of our products and services generate exposure to market risk. The market risk incurred and our strategies for managing
this risk vary by product.

With respect to non-variable life insurance products, fixed rate annuities and the fixed rate options in our variable life
insurance and annuity products, we incur market risk primarily in the form of interest rate risk. We manage this risk through asset/liability management strategies that seek to match the interest rate sensitivity of the assets to that of the
underlying liabilities. Our overall objective in these strategies is to limit the net change in value of assets and liabilities arising from interest rate movements. While it is more difficult to measure the interest sensitivity of our insurance
liabilities than that of the related assets, to the extent that we can measure such sensitivities we believe that interest rate movements will generate asset value changes that substantially offset changes in the value of the liabilities relating to
the underlying products.

For variable annuities and variable life insurance products, excluding the fixed rate options in these products, and most
separate accounts, our main exposure to the market is the risk that asset management fees decrease as a result of declines in assets under management due to changes in prices of securities. We also run the risk that asset management fees calculated
by reference to performance could be lower. For variable annuity and variable life insurance products with minimum guaranteed death and other benefits, we also face the risk that declines in the value of underlying investments as a result of changes
in prices of securities may increase our net exposure to these death and other benefits under these contracts. See Managements Discussion and Analysis of Financial Condition and Results of OperationsResult of Operations for a
discussion of the effects of death and other benefit provisions on the results of the Company.

We manage our exposure to equity price risk relating to our
general account primarily by seeking to match the risk profile of equity investments against risk-adjusted equity market benchmarks. We measure benchmark risk levels in terms of price volatility in relation to the market in general. The Company is
also limited to equity risk relating to certain living benefits offered in our variable annuity products as a result of the 100% coinsurance agreements with affiliates.

The source of our exposure to market risk is related to other than trading activities conducted in our insurance and annuity operations. As part of our management of other than trading market
risks, we use a variety of risk management tools and techniques. These include sensitivity and Value-at-Risk, or VaR, measures, position and other limits based on type of risk, and various hedging methods.



15



---

Other Than Trading Activities

We hold the majority of our assets for other than trading activities in our insurance and annuities products operations. We incorporate asset/liability management techniques and other risk management
policies and limits into the process of investing our assets. We use derivatives for hedging purposes in the asset/liability management process.

Insurance and Annuities Products Asset/Liability Management

We seek to maintain interest rate and equity exposures within
established ranges, which we periodically adjust based on market conditions and the design of related products sold to customers. Our risk managers establish investment risk limits for exposures to any issuer, geographic region, type of security or
industry sector and oversee efforts to manage risk within policy constraints set by management and approved by the Investment Committee of Prudential Financial and the Board of Directors.

We use duration and convexity analyses to measure price sensitivity to interest rate changes. Duration measures the relative sensitivity of the fair value of a financial
instrument to changes in interest rates. Convexity measures the rate of change of duration with respect to changes in interest rates. We seek to manage our interest rate exposure by legal entity by matching the relative sensitivity of asset and
liability values to interest rate changes, or controlling duration mismatch of assets and liabilities. We have target duration mismatch constraints for each entity. As of December 31, 2006 and 2005, the difference between the
duration of assets and the target duration of liabilities in our duration-managed portfolios was within our constraint limits. We consider risk-based capital implications in our asset/liability management strategies.

We also perform portfolio stress testing as part of our regulatory cash flow testing. In this testing, we evaluate the impact of altering our interest-sensitive
assumptions under various moderately adverse interest rate environments. These interest-sensitive assumptions relate to the timing and amount of redemptions and prepayments of fixed-income securities and lapses and surrenders of insurance products
and the potential impact of any guaranteed minimum interest rates. We evaluate any shortfalls that this cash flow testing reveals to determine if we need to increase statutory reserves or adjust portfolio management strategies.

Market Risk Related to Interest Rates

Our other than
trading assets that subject us to interest rate risk include primarily fixed maturity securities, commercial loans and policy loans. In the aggregate, the carrying value of these assets represented 68% of our assets, other than assets that we
held in separate accounts, as of December 31, 2006 and 70% as of December 31, 2005 respectively.

With respect to other than trading
liabilities, we are exposed to interest rate risk through policyholders account balances relating to interest-sensitive life insurance, annuity and other investment-type contracts, collectively referred to as investment contracts, and through
outstanding short-term debt.

We assess interest rate sensitivity for other than trading financial assets, financial liabilities and
derivatives using hypothetical test scenarios that assume either upward or downward 100 basis point parallel shifts in the yield curve from prevailing interest rates. The following tables set forth the net estimated potential loss in fair value from
a hypothetical 100 basis point upward shift as of December 31, 2006 and 2005, because this scenario results in the greatest net exposure to interest rate risk of the hypothetical scenarios tested at those dates. While the test scenario is for
illustrative purposes only and does not reflect our expectations regarding future interest rates or the performance of fixed-income markets, it is a near-term, reasonably possible hypothetical change that illustrates the potential impact of such
events. These test scenarios do not measure the changes in value that could result from non-parallel shifts in the yield curve, which we would expect to produce different changes in discount rates for different maturities. As a result, the actual
loss in fair value from a 100 basis point change in interest rates could be different from that indicated by these calculations.



16



---

|                                          |  |                               |   |  |            |     |                                                                           |   |                                   |  |   |     |  
|----------------------------------------- |  | ----------------------------- | - |  | ---------- | --- | ------------------------------------------------------------------------- | - | --------------------------------- |  | - | --- | -
|                                          |  | December 31, 2006             |  
|                                          |  | Notional Value of Derivatives |   |  | Fair Value |     | HypotheticalFair Value After + 100 Basis
Point Parallel Yield Curve Shift |   | Hypothetical Change in Fair
Value | 
|                                          |  | (In millions)                 |  
|Financial Assets with Interest Rate Risk: |  |                               |   |  |            |     |                                                                           |   |                                   |  |   |     |  
|Financial Assets:                         |  |                               |   |  |            |     |                                                                           |   |                                   |  |   |     |  
|Fixed maturities, available for sale      |  |                               |   |  | $          | 921 |                                                                           | $ | 886                               |  | $ | (35 | )
|Policy loans                              |  |                               |   |  |            | 172 |                                                                           |   | 159                               |  |   | (13 | )
|Commercial loans                          |  |                               |   |  |            | 49  |                                                                           |   | 46                                |  |   | (3  | )
|                                          |  |                               |   | 
|Financial Assets with Equity Risk:        |  |                               |   |  |            |     |                                                                           |   |                                   |  |   |     |  
|Equity Securities                         |  |                               |   |  |            | 4   |                                                                           |   | 4                                 |  |   |    |  
|                                          |  |                               |   | 
|Derivatives:                              |  |                               |   |  |            |     |                                                                           |   |                                   |  |   |     |  
|Futures                                   |  | (12                           | ) |  |            |    |                                                                           |   | 1                                 |  |   | 1   |  
|Swaps                                     |  | 23                            |   |  |            |    |                                                                           |   |                                  |  |   |    |  
|Financial Liabilities:                    |  |                               |   |  |            |     |                                                                           |   |                                   |  |   |     |  
|Investment Contracts                      |  |                               |   |  |            | 358 |                                                                           |   | 358                               |  |   |    |  
|                                          |  |                               |   |  |            |     |                                                                           |   |                                   |  |   |     |  
|Total Estimated Potential Loss            |  |                               |   |  |            |     |                                                                           |   |                                   |  | $ | (50 | )
|                                          |  |                               |   |  |            |     |                                                                           |   |                                   |  |   |     |  



|                                          |  |                               |   |  |            |     |                                                                           |   |                                   |  |   |     |  
|----------------------------------------- |  | ----------------------------- | - |  | ---------- | --- | ------------------------------------------------------------------------- | - | --------------------------------- |  | - | --- | -
|                                          |  | December 31, 2005             |  
|                                          |  | Notional Value of Derivatives |   |  | Fair Value |     | HypotheticalFair Value After + 100 Basis
Point Parallel Yield Curve Shift |   | Hypothetical Change in Fair
Value | 
|                                          |  | (In millions)                 |  
|Financial Assets with Interest Rate Risk: |  |                               |   |  |            |     |                                                                           |   |                                   |  |   |     |  
|Financial Assets:                         |  |                               |   |  |            |     |                                                                           |   |                                   |  |   |     |  
|Fixed maturities, available for sale      |  |                               |   |  | $          | 992 |                                                                           | $ | 952                               |  | $ | (40 | )
|Policy loans                              |  |                               |   |  |            | 171 |                                                                           |   | 159                               |  |   | (12 | )
|Commercial loans                          |  |                               |   |  |            | 20  |                                                                           |   | 19                                |  |   | (1  | )
|                                          |  |                               |   | 
|Financial Assets with Equity Risk:        |  |                               |   |  |            |     |                                                                           |   |                                   |  |   |     |  
|Equity Securities                         |  |                               |   |  |            | 4   |                                                                           |   | 4                                 |  |   |    |  
|                                          |  |                               |   | 
|Derivatives:                              |  |                               |   |  |            |     |                                                                           |   |                                   |  |   |     |  
|Futures                                   |  | (32                           | ) |  |            |    |                                                                           |   | 2                                 |  |   | 2   |  
|                                          |  |                               |   | 
|Financial Liabilities:                    |  |                               |   |  |            |     |                                                                           |   |                                   |  |   |     |  
|Investment Contracts                      |  |                               |   |  |            | 386 |                                                                           |   | 386                               |  |   |    |  
|                                          |  |                               |   |  |            |     |                                                                           |   |                                   |  |   |     |  
|Total Estimated Potential Loss            |  |                               |   |  |            |     |                                                                           |   |                                   |  | $ | (51 | )
|                                          |  |                               |   |  |            |     |                                                                           |   |                                   |  |   |     |  

The tables above do not include approximately $729 million and $659 million of insurance reserves and deposit
liabilities at December 31, 2006 and 2005, respectively. The Company believes that the interest rate sensitivities of these insurance liabilities offset, in large measure, the interest rate risk of the financial assets set forth in the above
tables.



17



---

The estimated changes in fair values of the financial assets shown above relate to assets invested in support of the
Companys insurance liabilities, but do not include assets associated with products for which investment risk is borne primarily by the contractholders rather than the Company.

Market Risk Related to Foreign Currency Exchange Rates

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

Derivatives

Derivatives are financial instruments whose values are derived from interest rates, foreign exchange rates, financial indices, or the prices of securities or commodities. Derivative financial instruments may be exchange-traded or contracted
in the over-the-counter market and include swaps, futures, options and forward contracts. See Note 11 to the Financial Statements for a description of our derivative activities as of December 31, 2006 and 2005. Under insurance statutes, our
insurance companies may use derivative financial instruments to hedge actual or anticipated changes in their assets or liabilities, to replicate cash market instruments or for certain income-generating activities. These statutes generally prohibit
the use of derivatives for speculative purposes. We use derivative financial instruments primarily to seek to reduce market risk from changes in interest rates, foreign currency exchange rates and to alter interest rate or foreign currency exposures
arising from mismatches between assets and liabilities.

Limitations of VaR Models

Although VaR models are a recognized tool for risk management, they have inherent limitations, including reliance on historical data that may not be indicative of future
market conditions or trading patterns. Accordingly, VaR models should not be viewed as a predictor of future results. We may incur losses that could be materially in excess of the amounts indicated by the models on a particular trading day or over a
period of time, and there have been instances when results have fallen outside the values generated by our VaR models. A VaR model does not estimate the greatest possible loss. The results of these models and analysis thereof are subject to the
judgment of our risk management personnel.



|Item 8. | Financial Statements and Supplementary Data
|------- | -------------------------------------------

Information
required with respect to this Item 8 regarding Financial Statements and Supplementary Data is set forth commencing on page F-3 hereof. See Index to Financial Statements elsewhere in this Annual Report on Form 10-K.



|Item 9. | Changes in and Disagreements with Independent Accountants on Accounting and Financial Disclosure
|------- | ------------------------------------------------------------------------------------------------

None.



|Item 9A. | Controls and Procedures
|-------- | -----------------------

In order to ensure that the
information we must disclose in our filings with the Securities Exchange Commission, or 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 Exchange Act Rule 13a-15(e) and 15d-15(e), as of December 31, 2006. Based on such evaluation, the Chief Executive
Officer and Chief Financial Officer have concluded that, as of December 31, 2006, our disclosure controls and procedures were effective. No change in the Companys internal control over financial reporting, as defined in Exchange Act Rule
13a - 15(f) and 15d - 15(f), occurred during the quarter ended December 31, 2006 that has materially affected or is reasonably likely to materially affect our internal control over financial reporting. These conclusions are not affected by the
misclassifications in the Companys Statements of Cash Flows discussed in the following paragraph, which were identified subsequent to the filing of the Companys Quarterly Report on Form 10-Q for the quarter ended June 30, 2006.



|Item 9B. | Other Information
|-------- | -----------------

None.



|Item 10. | Directors and Executive Officers of the Registrant
|-------- | --------------------------------------------------

We have
adopted a code of business conduct and ethics, known as Making the Right Choices, which applies to our Chief Executive Officer, Chief Financial Officer and Accounting Officer, as well as to our directors and all other employees. Making
the Right Choices is posted on our website at www.investor.prudential.com. Our code of business conduct and ethics, any amendments and any waiver granted to any of our directors or executive officers are available free of charge on our
website at www.investor.prudential.com.



18



---

PART III



|Item 14. | Principal Accounting Fees and Services
|-------- | --------------------------------------

The Audit Committee
of the Board of Directors of Prudential Financial has appointed PricewaterhouseCoopers LLP as the independent auditor of Prudential Financial and certain of its domestic and international subsidiaries, including the Registrant. The Audit Committee
has established a policy requiring its pre-approval of all audit and permissible non-audit services provided by the independent auditor. The specific information called for by this item is hereby incorporated by reference to the section entitled
Item 2 - Ratification of the Appointment of Independent Registered Public Accounting Firm in Prudential Financials definitive proxy statement for the Annual Meeting of Shareholders to be held on May 8, 2007 to be filed with
the Securities and Exchange Commission pursuant to Regulation 14A within 120 days after the year ended December 31, 2006.

PART IV



|Item 15. | Exhibits and Financial Statement Schedules
|-------- | ------------------------------------------



|                                                                                                                                                                          |  |                                                                                                                                                                                                                                                                                                                                                                      
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(a) (1) and (2) Financial Statements of Registrant are listed in the accompanying Index to Financial Statements on page F-1 hereofand are filed as
part of this Report.
|                                                                                                                                                                         
|(a) (3) Exhibits                                                                                                                                                         
|                                                                                                                                                                          | 
|2.                                                                                                                                                                        |  | Not applicable.                                                                                                                                                                                                                                                                                                                                                      
|                                                                                                                                                                          | 
|3(i)(a)                                                                                                                                                                   |  | The Articles of Incorporation of Pruco Life Insurance Company of New Jersey (as amended through March 11, 1983) are incorporated by reference to Post-effective Amendment No. 26 to
the Registration Statement on Form S-6 of Pruco Life of New Jersey Variable Appreciable Account as filed April 28, 1997, Registration No. 2-89780.                               
|                                                                                                                                                                          | 
|3(i)(b)                                                                                                                                                                   |  | Certificate of Amendment to the Articles of Incorporation of Pruco Life Insurance Company of New Jersey dated February 12, 1998 is incorporated by reference to Post-Effective Amendment
No. 12 to the Registration Statement on Form S-1, of Pruco Life of New Jersey Variable Contract Real Property Account as filed on April 16, 1999, Registration No. 33-20018.
|                                                                                                                                                                          | 
|3(ii)                                                                                                                                                                     |  | By-Laws if Pruco Life Insurance Company of New Jersey (as amended through August 4, 1999) are incorporated by reference to Form S-6 of Pruco Life of New Jersey Variable Appreciable Account
filed August 13, 1999, Registration No. 333-85117.                                                                                                                      
|                                                                                                                                                                          | 
|4.                                                                                                                                                                        |  | Exhibits                                                                                                                                                                                                                                                                                                                                                             
|                                                                                                                                                                          | 
|4(a)                                                                                                                                                                      |  | Market-Value Adjustment Annuity Contract (Discovery Select variable annuity) is incorporated by reference to Form S-1, Registration No. 333-18053, filed December 17, 1996, on behalf of
the Pruco Life of New Jersey Flexible Premium Variable Annuity Account.                                                                                                     
|                                                                                                                                                                          | 
|4(b)                                                                                                                                                                      |  | Market-Value Adjustment Annuity Contract (Strategic Partners Select variable annuity) is incorporated by reference to the Registrants Pre-Effective Amendment No. 1 to Form S-3,
Registration No. 333-62246, filed November 27, 2001.                                                                                                                               
|                                                                                                                                                                          | 
|4(c)                                                                                                                                                                      |  | Market-Value Adjustment Annuity Contract (Strategic Partners Horizon annuity) is incorporated by reference to the Registrants Form S-3, Registration No. 333-100713, filed
October 24, 2002.                                                                                                                                                                        
|                                                                                                                                                                          | 
|4(d)                                                                                                                                                                      |  | Market-Value Adjustment Annuity Contract Endorsement (Strategic Partners Annuity One variable annuity) is incorporated by reference to the Registrants registration statement on Form S-3,
Registration No. 333-103473, filed February 27, 2003.                                                                                                                    
|                                                                                                                                                                          | 
|9.                                                                                                                                                                        |  | None.                                                                                                                                                                                                                                                                                                                                                                
|                                                                                                                                                                          | 
|10.                                                                                                                                                                       |  | None.                                                                                                                                                                                                                                                                                                                                                                
|                                                                                                                                                                          | 
|11.                                                                                                                                                                       |  | Not applicable.                                                                                                                                                                                                                                                                                                                                                      
|                                                                                                                                                                          | 
|12.                                                                                                                                                                       |  | Not applicable.                                                                                                                                                                                                                                                                                                                                                      
|                                                                                                                                                                          | 
|13.                                                                                                                                                                       |  | Not applicable.                                                                                                                                                                                                                                                                                                                                                      



19



---

|     |  |                                                           
|---- |  | ----------------------------------------------------------
|     | 
|16.  |  | Not applicable.                                           
|     | 
|18.  |  | None.                                                     
|     | 
|22.  |  | None.                                                     
|     | 
|23.  |  | Not applicable.                                           
|     | 
|24.  |  | Powers of Attorney.                                       
|     | 
|31.1 |  | Section 302 Certification of the Chief Executive Officer. 
|     | 
|31.2 |  | Section 302 Certification of the Chief Accounting Officer.
|     | 
|32.1 |  | Section 906 Certification of the Chief Executive Officer. 
|     | 
|32.2 |  | Section 906 Certification of the Chief Accounting Officer.



20



---

SIGNATURES

Pursuant to the requirements of Section 13 or 15 (d) of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Newark, and State of New Jersey, on the 23rd day of March 2007.



PRUCO LIFE INSURANCE COMPANY OF NEWJERSEY(Registrant)By:

/s/ Scott D. KaplanScott D. KaplanChief Executive Officer(Principal Executive Officer)


Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by
the following persons on behalf of the Registrant and in the capacities indicated on March 23, 2007.



|                       |  |  |  |                                             
|---------------------- |  |  |  | --------------------------------------------
|Signature              |  |  |  | Title                                       
|                       |  | 
|James J. Avery *       |  |  |  | Director                                    
|James J. Avery         |  |  |  |                                             
|                       |  | 
|/s/ Scott D. Kaplan    |  |  |  | Chief Executive Officer,                    
|Scott D. Kaplan        |  |  |  | Director and President                      
|                       |  | 
|Ronald P. Joelson*     |  |  |  | Director                                    
|Ronald P. Joelson      |  |  |  |                                             
|                       |  | 
|Bernard J. Jacob*      |  |  |  | Director                                    
|Bernard J. Jacob       |  |  |  |                                             
|                       |  | 
|Helen M. Galt*         |  |  |  | Director                                    
|Helen M. Galt          |  |  |  |                                             
|                       |  | 
|David R. Odenath, Jr.* |  |  |  | Director                                    
|David R. Odenath, Jr.  |  |  |  |                                             
|                       |  | 
|/s/ Tucker I. Marr     |  |  |  | Chief Financial and Accounting Officer      
|Tucker I. Marr         |  |  |  | (Principal Accounting and Financial Officer)



* By:

/s/ Thomas C. CastanoThomas C. Castano(Attorney-in-Fact)




21



---

PRUCO LIFE INSURANCE COMPANY OF NEW JERSEY

Financial Statements and

Report of Independent Registered Public Accounting
Firm

December 31, 2006 and 2005



---

PRUCO LIFE INSURANCE COMPANY OF NEW JERSEY

INDEX TO FINANCIAL STATEMENTS



|                                                                                               |  |         
|---------------------------------------------------------------------------------------------- |  | --------
|Financial Statements                                                                           |  | Page No.
|                                                                                               | 
|Report of Independent Registered Public Accounting Firm                                        |  | F-2     
|                                                                                               | 
|Financial Statements:                                                                          |  |         
|                                                                                               | 
|Statements of Financial Position - December 31, 2006 and 2005                                  |  | F-3     
|                                                                                               | 
|Statements of Operations and Comprehensive Income Years Ended December 31, 2006, 2005 and 2004 |  | F-4     
|                                                                                               | 
|Statements of Stockholders Equity Years Ended December 31, 2006, 2005 and 2004                |  | F-5     
|                                                                                               | 
|Statements of Cash Flows Years Ended December 31, 2006, 2005 and 2004                          |  | F-6     
|                                                                                               | 
|Notes to Financial Statements                                                                  |  | F-7     



F - 1



---

Report of Independent Registered Public Accounting Firm

To the Board of Directors and Stockholder of

Pruco Life Insurance Company of New Jersey

In our opinion, the accompanying
financial statements listed in the accompanying index present fairly, in all material respects, the financial position of Pruco Life Insurance Company of New Jersey (an indirect, wholly owned subsidiary of The Prudential Insurance Company of
America) at December 31, 2006 and December 31, 2005 and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2006 in conformity with accounting principles generally accepted in
the United States of America. These financial statements are the responsibility of the Companys management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these
statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

As described in Note 2 of
the financial statements, the Company adopted American Institute of Certified Public Accountants Statement of Position 03-1, Accounting and Reporting by Insurance Enterprises for Certain Nontraditional Long-Duration Contracts and for Separate
Accounts as of January 1, 2004.

PricewaterhouseCoopers LLP (signed)

New York, New York

March 23, 2007



F - 2



---

Pruco Life Insurance Company of New Jersey

Statements of Financial Position

As of December 31, 2006 and December 31, 2005 (in thousands, except share amounts)

---



|                                                                                                       |  |      |           |      |   |          
|------------------------------------------------------------------------------------------------------ |  | ---- | --------- | ---- | - | ---------
|                                                                                                       |  | 2006 |           | 2005
|ASSETS                                                                                                 |  |      |           |      |   |          
|Fixed maturities available for sale, at fair value (amortized cost, 2006 - $912,692 ; 2005 - $990,717) |  | $    | 920,925   |      | $ | 991,575  
|Policy loans                                                                                           |  |      | 160,614   |      |   | 155,705  
|Short-term investments                                                                                 |  |      | 11,259    |      |   | 23,501   
|Commercial loans                                                                                       |  |      | 48,979    |      |   | 20,353   
|Other long-term investments                                                                            |  |      | 9,446     |      |   | 7,087    
|                                                                                                       |  |      |           |      |   |          
|Total investments                                                                                      |  |      | 1,151,223 |      |   | 1,198,221
|Cash and cash equivalents                                                                              |  |      | 59,543    |      |   | 116,040  
|Deferred policy acquisition costs                                                                      |  |      | 255,849   |      |   | 225,572  
|Accrued investment income                                                                              |  |      | 13,599    |      |   | 16,585   
|Reinsurance recoverables                                                                               |  |      | 135,010   |      |   | 92,277   
|Receivables from parent and affiliates                                                                 |  |      | 19,437    |      |   | 11,898   
|Deferred sales inducements                                                                             |  |      | 19,013    |      |   | 13,616   
|Other assets                                                                                           |  |      | 8,618     |      |   | 2,669    
|Separate account assets                                                                                |  |      | 2,619,586 |      |   | 2,287,786
|                                                                                                       |  |      |           |      |   |          
|TOTAL ASSETS                                                                                           |  |      | 4,281,878 |      |   | 3,964,664
|                                                                                                       |  |      |           |      |   |          
|LIABILITIES AND STOCKHOLDERS EQUITY                                                                   |  |      |           |      |   |          
|LIABILITIES                                                                                            |  |      |           |      |   |          
|Policyholders account balances                                                                        |  |      | 836,980   |      |   | 841,822  
|Future policy benefits and other policyholder liabilities                                              |  |      | 250,053   |      |   | 203,422  
|Cash collateral for loaned securities                                                                  |  |      | 28,212    |      |   | 86,530   
|Securities sold under agreement to repurchase                                                          |  |      | 4,005     |      |   | 1,708    
|Income taxes payable                                                                                   |  |      | 87,478    |      |   | 73,050   
|Short term debt from affiliates                                                                        |  |      | 25,348    |      |   | 52,994   
|Payables to parent and affiliates                                                                      |  |      | 2,377     |      |   | 2,865    
|Other liabilities                                                                                      |  |      | 40,601    |      |   | 69,379   
|Separate account liabilities                                                                           |  |      | 2,619,586 |      |   | 2,287,786
|                                                                                                       |  |      |           |      |   |          
|Total liabilities                                                                                      |  |      | 3,894,640 |      |   | 3,619,556
|                                                                                                       |  |      |           |      |   |          
|COMMITMENTS AND CONTINGENT LIABILITIES (See Note 12)                                                   |  |      |           |      |   |          
|                                                                                                       |  |     
|STOCKHOLDERS EQUITY                                                                                   |  |      |           |      |   |          
|Common stock, ($5 par value; 400,000 shares, authorized; issued and outstanding;)                      |  |      | 2,000     |      |   | 2,000    
|Additional Paid-in capital                                                                             |  |      | 168,689   |      |   | 168,689  
|Retained earnings                                                                                      |  |      | 212,518   |      |   | 173,584  
|Accumulated other comprehensive income                                                                 |  |      | 4,031     |      |   | 835      
|                                                                                                       |  |      |           |      |   |          
|Total stockholders equity                                                                             |  |      | 387,238   |      |   | 345,108  
|                                                                                                       |  |      |           |      |   |          
|TOTAL LIABILITIES AND STOCKHOLDERS EQUITY                                                             |  | $    | 4,281,878 |      | $ | 3,964,664
|                                                                                                       |  |      |           |      |   |          

See Notes to Financial Statements



F - 3



---

Pruco Life Insurance Company of New Jersey

Statements of Operations and Comprehensive Income

Years Ended December 31, 2006, 2005 and 2004 (in thousands)

---



|                                                                                      |  |      |         |   |      |   |         |      |  |   |         |  
|------------------------------------------------------------------------------------- |  | ---- | ------- | - | ---- | - | ------- | ---- |  | - | ------- | -
|                                                                                      |  | 2006 |         |   | 2005 |   |         | 2004 | 
|REVENUES                                                                              |  |      |         |   |      |   |         |      |  |   |         |  
|Premiums                                                                              |  | $    | 8,947   |   |      | $ | 8,356   |      |  | $ | 29,335  |  
|Policy charges and fee income                                                         |  |      | 59,650  |   |      |   | 60,400  |      |  |   | 75,340  |  
|Net investment income                                                                 |  |      | 65,628  |   |      |   | 60,197  |      |  |   | 52,499  |  
|Realized investment (losses)/ gains, net                                              |  |      | (13,900 | ) |      |   | (329    | )    |  |   | 1,885   |  
|Asset management fees                                                                 |  |      | 6,086   |   |      |   | 7,018   |      |  |   | 4,976   |  
|Other income                                                                          |  |      | 3,079   |   |      |   | 2,148   |      |  |   | 1,947   |  
|                                                                                      |  |      |         |   |      |   |         |      |  |   |         |  
|Total revenues                                                                        |  |      | 129,490 |   |      |   | 137,790 |      |  |   | 165,982 |  
|                                                                                      |  |      |         |   |      |   |         |      |  |   |         |  
|BENEFITS AND EXPENSES                                                                 |  |      |         |   |      |   |         |      |  |   |         |  
|Policyholders benefits                                                               |  |      | 16,900  |   |      |   | 15,009  |      |  |   | 39,949  |  
|Interest credited to policyholders account balances                                  |  |      | 30,394  |   |      |   | 29,819  |      |  |   | 29,324  |  
|General, administrative and other expenses                                            |  |      | 31,785  |   |      |   | 40,145  |      |  |   | 60,742  |  
|                                                                                      |  |      |         |   |      |   |         |      |  |   |         |  
|Total benefits and expenses                                                           |  |      | 79,079  |   |      |   | 84,973  |      |  |   | 130,015 |  
|                                                                                      |  |      |         |   |      |   |         |      |  |   |         |  
|Income from operations before income taxes and cumulative effect of accounting change |  |      | 50,411  |   |      |   | 52,817  |      |  |   | 35,967  |  
|                                                                                      |  |      |         |   |      |   |         |      |  |   |         |  
|Income taxes:                                                                         |  |      |         |   |      |   |         |      |  |   |         |  
|Current                                                                               |  |      | (596    | ) |      |   | 6,441   |      |  |   | 14,584  |  
|Deferred                                                                              |  |      | 12,073  |   |      |   | 7,151   |      |  |   | (4,216  | )
|                                                                                      |  |      |         |   |      |   |         |      |  |   |         |  
|Total income tax expense                                                              |  |      | 11,477  |   |      |   | 13,592  |      |  |   | 10,368  |  
|                                                                                      |  |      |         |   |      |   |         |      |  |   |         |  
|Income from Operations Before Cumulative Effect of Accounting Change                  |  |      | 38,934  |   |      |   | 39,225  |      |  |   | 25,599  |  
|Cumulative effect of accounting change, net of taxes                                  |  |      |        |   |      |   |        |      |  |   | (184    | )
|                                                                                      |  |      |         |   |      |   |         |      |  |   |         |  
|NET INCOME                                                                            |  |      | 38,934  |   |      |   | 39,225  |      |  |   | 25,415  |  
|                                                                                      |  |      |         |   |      |   |         |      |  |   |         |  
|Change in net unrealized investment gains/(loss), net of taxes                        |  |      | 3,196   |   |      |   | (12,411 | )    |  |   | (479    | )
|Cumulative effect of accounting change, net of taxes                                  |  |      |        |   |      |   |        |      |  |   | 547     |  
|                                                                                      |  |      |         |   |      |   |         |      |  |   |         |  
|Accumulated other comprehensive income gain/(loss), net of taxes                      |  |      | 3,196   |   |      |   | (12,411 | )    |  |   | 68      |  
|                                                                                      |  |      |         |   |      |   |         |      |  |   |         |  
|COMPREHENSIVE INCOME                                                                  |  | $    | 42,130  |   |      | $ | 26,814  |      |  | $ | 25,483  |  
|                                                                                      |  |      |         |   |      |   |         |      |  |   |         |  

See Notes to Financial Statements



F - 4



---

Pruco Life Insurance Company of New Jersey

Statements of Stockholders Equity

Periods Ended December 31, 2006, 2005 and 2004 (in thousands)



|                                                                 |  |             |       |                           |   |         |                      |  |   |                  |   |                                               |   |                                        |  |   |                                                  |  |   |                           |   |  |   |         |   |  |   |         |  
|---------------------------------------------------------------- |  | ----------- | ----- | ------------------------- | - | ------- | -------------------- |  | - | ---------------- | - | --------------------------------------------- | - | -------------------------------------- |  | - | ------------------------------------------------ |  | - | ------------------------- | - |  | - | ------- | - |  | - | ------- | -
|                                                                 |  |             |       |                           |   |         |                      |  |   |                  |   | Accumulated Other Comprehensive Income (Loss) |   |                                        |  |  
|                                                                 |  | CommonStock |       | Additional PaidinCapital |   |         | DeferredCompensation |  |   | RetainedEarnings |   | Foreign Currency Translation
Adjustments      |   | Net Unrealized Investment
Gains (Loss) |  |   | Total AccumulatedOtherComprehensiveIncome (Loss) |  |   | TotalStockholders Equity |  
|Balance, January 1, 2004                                         |  | $           | 2,000 |                           | $ | 168,742 |                      |  | $ | (108             | ) |                                               | $ | 108,943                                |  | $ |                                                 |  | $ | 13,178                    |   |  | $ | 13,178  |   |  | $ | 292,755 |  
|Net income                                                       |  |             |      |                           |   |        |                      |  |   |                 |   |                                               |   | 25,415                                 |  |   |                                                 |  |   |                          |   |  |   |        |   |  |   | 25,415  |  
|Stock-based compensation programs                                |  |             |      |                           |   | 68      |                      |  |   | (44              | ) |                                               |   |                                       |  |   |                                                 |  |   |                          |   |  |   |        |   |  |   | 24      |  
|Cumulative effect of accounting change, net of taxes             |  |             |      |                           |   |        |                      |  |   |                 |   |                                               |   |                                       |  |   |                                                 |  |   | 547                       |   |  |   | 547     |   |  |   | 547     |  
|Change in net unrealized investment gains (losses), net of taxes |  |             |      |                           |   |        |                      |  |   |                 |   |                                               |   |                                       |  |   |                                                 |  |   | (479                      | ) |  |   | (479    | ) |  |   | (479    | )
|                                                                 |  |             |       |                           |   |         |                      |  |   |                  |   |                                               |   |                                        |  |   |                                                  |  |   |                           |   |  |   |         |   |  |   |         |  
|Balance, December 31, 2004                                       |  |             | 2,000 |                           |   | 168,810 |                      |  |   | (152             | ) |                                               |   | 134,358                                |  |   |                                                 |  |   | 13,246                    |   |  |   | 13,246  |   |  |   | 318,262 |  
|Net income                                                       |  |             |      |                           |   |        |                      |  |   |                 |   |                                               |   | 39,226                                 |  |   |                                                 |  |   |                          |   |  |   |        |   |  |   | 39,226  |  
|Stock-based compensation programs                                |  |             |      |                           |   | (121    | )                    |  |   | 152              |   |                                               |   |                                       |  |   |                                                 |  |   |                          |   |  |   |        |   |  |   | 31      |  
|Cumulative effect of accounting change, net of taxes             |  |             |      |                           |   |        |                      |  |   |                 |   |                                               |   |                                       |  |   |                                                 |  |   |                          |   |  |   |        |   |  |   |        |  
|Change in net unrealized investment gains (losses), net of taxes |  |             |      |                           |   |        |                      |  |   |                 |   |                                               |   |                                       |  |   |                                                 |  |   | (12,411                   | ) |  |   | (12,411 | ) |  |   | (12,411 | )
|                                                                 |  |             |       |                           |   |         |                      |  |   |                  |   |                                               |   |                                        |  |   |                                                  |  |   |                           |   |  |   |         |   |  |   |         |  
|Balance, December 31, 2005                                       |  |             | 2,000 |                           |   | 168,689 |                      |  |   |                 |   |                                               |   | 173,584                                |  |   |                                                 |  |   | 835                       |   |  |   | 835     |   |  |   | 345,108 |  
|Net income                                                       |  |             |      |                           |   |        |                      |  |   |                 |   |                                               |   | 38,934                                 |  |   |                                                 |  |   |                          |   |  |   |        |   |  |   | 38,934  |  
|Stock-based compensation programs                                |  |             |      |                           |   |        |                      |  |   |                 |   |                                               |   |                                       |  |   |                                                 |  |   |                          |   |  |   |        |   |  |   |        |  
|Cumulative effect of accounting change, net of taxes             |  |             |      |                           |   |        |                      |  |   |                 |   |                                               |   |                                       |  |   |                                                 |  |   |                          |   |  |   |        |   |  |   |        |  
|Change in foreign currency translation adjustments, net of taxes |  |             |      |                           |   |        |                      |  |   |                 |   |                                               |   |                                       |  |   | 29                                               |  |   |                          |   |  |   | 29      |   |  |   | 29      |  
|Change in net unrealized investment gains (losses), net of taxes |  |             |      |                           |   |        |                      |  |   |                 |   |                                               |   |                                       |  |   |                                                 |  |   | 3,167                     |   |  |   | 3,167   |   |  |   | 3,167   |  
|                                                                 |  |             |       |                           |   |         |                      |  |   |                  |   |                                               |   |                                        |  |   |                                                  |  |   |                           |   |  |   |         |   |  |   |         |  
|Balance, December 31, 2006                                       |  | $           | 2,000 |                           | $ | 168,689 |                      |  |   |                 |   |                                               | $ | 212,518                                |  | $ | 29                                               |  | $ | 4,002                     |   |  | $ | 4,031   |   |  | $ | 387,238 |  
|                                                                 |  |             |       |                           |   |         |                      |  |   |                  |   |                                               |   |                                        |  |   |                                                  |  |   |                           |   |  |   |         |   |  |   |         |  

See Notes to Financial Statements



F - 5



---

Pruco Life Insurance Company of New Jersey

Statements of Cash Flows

Years Ended December 31, 2006, 2005 and 2004 (in thousands)

---



|                                                                                                           |  |      |           |   |      |   |          |      |  |   |          |  
|---------------------------------------------------------------------------------------------------------- |  | ---- | --------- | - | ---- | - | -------- | ---- |  | - | -------- | -
|                                                                                                           |  | 2006 |           |   | 2005 |   |          | 2004 | 
|CASH FLOWS FROM OPERATING ACTIVITIES:                                                                      |  |      |           |   |      |   |          |      |  |   |          |  
|Net income                                                                                                 |  | $    | 38,934    |   |      | $ | 39,225   |      |  | $ | 25,415   |  
|Adjustments to reconcile net income to net cash (used in) provided by operating activities:                |  |      |           |   |      |   |          |      |  |   |          |  
|Policy charges and fee income                                                                              |  |      | (12,012   | ) |      |   | (11,739  | )    |  |   | (16,862  | )
|Interest credited to policyholders account balances                                                       |  |      | 30,394    |   |      |   | 29,819   |      |  |   | 29,324   |  
|Realized investment losses (gains), net                                                                    |  |      | 13,900    |   |      |   | 329      |      |  |   | (1,885   | )
|Amortization and other non-cash items                                                                      |  |      | 874       |   |      |   | 3,937    |      |  |   | 8,743    |  
|Cumulative effect of accounting change                                                                     |  |      |          |   |      |   |         |      |  |   | 184      |  
|Change in:                                                                                                 |  |      |           |   |      |   |          |      |  |   |          |  
|Future policy benefits and other insurance liabilities                                                     |  |      | 46,631    |   |      |   | 33,677   |      |  |   | 30,691   |  
|Reinsurance recoverable                                                                                    |  |      | (42,733   | ) |      |   | (24,866  | )    |  |   | (49,561  | )
|Accrued investment income                                                                                  |  |      | 2,986     |   |      |   | (1,540   | )    |  |   | (784     | )
|Receivables from parent and affiliates                                                                     |  |      | 2,459     |   |      |   | 5,254    |      |  |   | 21       |  
|Payable to parent and affiliates                                                                           |  |      | (487      | ) |      |   | 2,331    |      |  |   | 431      |  
|Deferred policy acquisition costs                                                                          |  |      | (33,979   | ) |      |   | (30,393  | )    |  |   | 1,773    |  
|Income taxes payable                                                                                       |  |      | 12,707    |   |      |   | 2,855    |      |  |   | 25,877   |  
|Deferred sales inducements                                                                                 |  |      | (5,395    | ) |      |   | (2,501   | )    |  |   | (3,245   | )
|Other, net                                                                                                 |  |      | 6,950     |   |      |   | (9,237   | )    |  |   | 3,958    |  
|                                                                                                           |  |      |           |   |      |   |          |      |  |   |          |  
|Cash Flows From Operating Activities                                                                       |  |      | 61,229    |   |      |   | 37,151   |      |  |   | 54,080   |  
|                                                                                                           |  |      |           |   |      |   |          |      |  |   |          |  
|CASH FLOWS FROM INVESTING ACTIVITIES:                                                                      |  |      |           |   |      |   |          |      |  |   |          |  
|Proceeds from the sale/maturity/prepayment of:                                                             |  |      |           |   |      |   |          |      |  |   |          |  
|Fixed maturities available for sale                                                                        |  |      | 1,038,341 |   |      |   | 777,293  |      |  |   | 449,427  |  
|Policy loans                                                                                               |  |      | 17,070    |   |      |   | 17,487   |      |  |   | 19,023   |  
|Commercial loans                                                                                           |  |      | 633       |   |      |   | 89       |      |  |   |         |  
|Payments for the purchase of:                                                                              |  |      |           |   |      |   |          |      |  |   |          |  
|Fixed maturities available for sale                                                                        |  |      | (981,995  | ) |      |   | (901,755 | )    |  |   | (550,489 | )
|Policy loans                                                                                               |  |      | (15,012   | ) |      |   | (13,004  | )    |  |   | (10,994  | )
|Commercial loans                                                                                           |  |      | (29,360   | ) |      |   | (20,442  | )    |  |   |         |  
|Notes from parent and affiliates, net                                                                      |  |      | (9,927    | ) |      |   |         |      |  |   |         |  
|Other long-term investments, net                                                                           |  |      | (1,786    | ) |      |   | (852     | )    |  |   | (86      | )
|Short term investments, net                                                                                |  |      | 12,258    |   |      |   | 18,005   |      |  |   | 5,712    |  
|                                                                                                           |  |      |           |   |      |   |          |      |  |   |          |  
|Cash Flows From (Used In) Investing Activities                                                             |  |      | 30,222    |   |      |   | (123,179 | )    |  |   | (87,407  | )
|                                                                                                           |  |      |           |   |      |   |          |      |  |   |          |  
|CASH FLOWS FROM FINANCING ACTIVITIES:                                                                      |  |      |           |   |      |   |          |      |  |   |          |  
|Policyholders account deposits                                                                            |  |      | 237,496   |   |      |   | 179,705  |      |  |   | 222,751  |  
|Policyholders account withdrawals                                                                         |  |      | (259,645  | ) |      |   | (175,324 | )    |  |   | (159,664 | )
|Net change in securities sold under agreement to repurchase and cash collateral for loaned securities, net |  |      | (56,022   | ) |      |   | (11,043  | )    |  |   | 5,943    |  
|Net change in financing arrangements (maturities 90 days or less)                                          |  |      | (69,777   | ) |      |   | 100,613  |      |  |   | (133     | )
|                                                                                                           |  |      |           |   |      |   |          |      |  |   |          |  
|Cash Flows (Used In) From Financing Activities                                                             |  |      | (147,948  | ) |      |   | 93,951   |      |  |   | 68,897   |  
|                                                                                                           |  |      |           |   |      |   |          |      |  |   |          |  
|Net (decrease) increase in cash and cash equivalents                                                       |  |      | (56,497   | ) |      |   | 7,923    |      |  |   | 35,570   |  
|Cash and cash equivalents, beginning of year                                                               |  |      | 116,040   |   |      |   | 108,117  |      |  |   | 72,547   |  
|                                                                                                           |  |      |           |   |      |   |          |      |  |   |          |  
|CASH AND CASH EQUIVALENTS, END OF YEAR                                                                     |  | $    | 59,543    |   |      | $ | 116,040  |      |  | $ | 108,117  |  
|                                                                                                           |  |      |           |   |      |   |          |      |  |   |          |  
|SUPPLEMENTAL CASH FLOW INFORMATION                                                                         |  |      |           |   |      |   |          |      |  |   |          |  
|Income taxes (received) paid                                                                               |  | $    | (1,230    | ) |      | $ | 10,737   |      |  | $ | (15,510  | )
|                                                                                                           |  |      |           |   |      |   |          |      |  |   |          |  
|Interest paid (received)                                                                                   |  | $    | 1,077     |   |      | $ | 1,017    |      |  | $ |         |  
|                                                                                                           |  |      |           |   |      |   |          |      |  |   |          |  

See Notes to Financial Statements



F - 6



---

Pruco Life Insurance Company of New Jersey

Notes to Financial Statements

---



1. BUSINESS

Pruco Life Insurance Company of New Jersey, or the Company, is a stock life insurance company organized in 1982 under the laws of the state of New Jersey. The Company is licensed to sell interest-sensitive individual life
insurance, variable life insurance, term insurance, variable annuities, and fixed annuities contracts only in the states of New Jersey and New York.

The
Company is a wholly owned subsidiary of Pruco Life Insurance Company, or Pruco Life, a stock life insurance company organized in 1971 under the laws of the state of Arizona. Pruco Life, in turn, is a wholly owned subsidiary of The
Prudential Insurance Company of America, or Prudential Insurance, an insurance company founded in 1875 under the laws of the state of New Jersey. On December 18, 2001, (the date of demutualization), Prudential Insurance
converted from a mutual life insurance company to a stock life insurance company and became an indirect wholly owned subsidiary of Prudential Financial, Inc., or Prudential Financial.

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 annuities.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The financial statements have been
prepared in accordance with accounting principles generally accepted in the United States of America, or GAAP. The Company has extensive transactions and relationships with Prudential Insurance and other affiliates, as more fully
described (in Note 13 to the Financial Statements). Due to these relationships, it is possible that the terms of these transactions are not the same as those that would result from transactions among wholly unrelated parties.

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 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, investments, future policy benefits, provision for income taxes, reserves of contingent liabilities and reserves for losses in connection with unresolved legal matters.

Investments

Fixed maturities classified as available
for sale are carried at fair value. The amortized cost of fixed maturities is written down to fair value if a decline in value is considered to be other than temporary. See the discussion below on realized gains and losses for a description of
the accounting for impairment adjustments. Unrealized gains and losses on fixed maturities available for sale, including the effect on deferred policy acquisition costs and policyholders account balances that would result from the
realization of unrealized gains and losses are included in Accumulated other comprehensive income (loss).

Policy loans are carried at unpaid
principal balances.



F - 7



---

Pruco Life Insurance Company of New Jersey

Notes to Financial Statements

---

2. SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES (continued)



Commercial loans are carried at unpaid principal balances, net of an allowance for losses. The allowance for losses
includes a portfolio reserve for probable incurred but not specifically identified losses. This reserve considers the Companys past loan loss experience, the current credit composition of the portfolio, historical credit migration, property
type diversification, default and loss severity statistics and other relevant factors. The gains and losses from the sale of loans, which are recognized when the Company relinquishes control over the loans, as well as changes in the allowance for
loan losses, are reported in Realized investment gains (losses), net. Interest income and prepayment fees are included in Net investment income.

Securities repurchase and resale agreements and securities loaned transactions are used to earn spread income, to borrow funds, or to facilitate trading activity. Securities repurchase and resale agreements are
generally short-term in nature, and therefore, the carrying amounts of these instruments approximate fair value. Securities repurchase and resale agreements are collateralized by cash, U.S. government and government agency securities. Securities
loaned are collateralized principally by cash and U.S. government securities. For securities repurchase agreements and securities loaned transactions used to earn spread income, the cash received is typically invested in cash equivalents, short-term
investments or fixed maturities.

Securities repurchase and resale agreements that satisfy certain criteria are treated as collateralized financing
arrangements. These agreements are carried at the amounts at which the securities will be subsequently resold or reacquired, as specified in the respective agreements. For securities purchased under agreements to resell, the Companys policy is
to take possession or control of the securities and to value the securities daily. Securities to be resold are the same, or substantially the same, as the securities received. For securities sold under agreements to repurchase, the market value of
the securities to be repurchased is monitored, and additional collateral is obtained where appropriate, to protect against credit exposure. Securities to be repurchased are the same, or substantially the same as those sold. Income and expenses
related to these transactions executed within the insurance subsidiary used to earn spread income are reported as Net investment income, however, for transactions used to borrow funds, the associated borrowing cost is reported as
interest expense (included in General and administrative expenses).

Securities loaned transactions are treated as financing arrangements and
are recorded at the amount of cash received. The Company obtains collateral in an amount equal to 102% and 105% of the fair value of the domestic and foreign securities, respectively. The Company monitors the market value of the securities loaned on
a daily basis with additional collateral obtained as necessary. Substantially all of the Companys securities loaned transactions are with large brokerage firms. Income and expenses associated with securities loaned transactions used to earn
spread income are generally reported as Net investment income; however, for securities loaned transactions used for funding purposes the associated rebate is reported as interest expense (included in General and administrative
expenses).

Short-term investments consist of highly liquid debt instruments with a maturity of greater than three months and less than twelve months
when purchased. These investments are carried at amortized cost, which because of their short-term nature approximates fair value.

Other long-term
investments consist of the Companys investments in joint ventures and limited partnerships in which the Company does not exercise control, as well as investments in the Companys own separate accounts, which are carried at fair value, and
investment real estate. Joint venture and partnership interests are generally accounted for using the equity method of accounting, except in instances in which the Companys interest is so minor that it exercises virtually no influence over
operating and financial policies. In such instances, the Company applies the cost method of accounting. The Companys share of net income from investments in joint ventures and partnerships is generally included in Net investment
income.

Realized investment gains (losses), net are computed using the specific identification method. Adjustments to the cost of fixed maturities
and equity securities for temporary impairments are included in Realized investment losses, net. In evaluating whether a decline in value is other than temporary, the Company considers several factors including, but not limited to the
following: (1) the extent (generally if greater than 20%) and the duration (generally if greater than six months); (2) the reasons for the decline in value (credit event, interest related or market fluctuation); (3) the Companys
ability and intent to hold the investments for a period of time to allow for a recovery of value; and (4) the financial condition of and near-term prospects of the issuer. Realized investment gains (losses) are generated from numerous sources,
including the sale of fixed maturity securities, equity securities, real estate investments, investments in joint ventures and limited partnerships and other types of investments, as well as adjustments to the cost of investments for other than
temporary impairments. Realized investment gains (losses), net. also include prepayment premiums received on private fixed maturity securities, recoveries of principal on previously impaired securities, provisions for losses on
commercial loans, fair value changes on embedded derivatives and derivatives that do not qualify for hedge accounting treatment.

There are a number of
significant risks and uncertainties inherent in the process of monitoring impairments and determining if impairment is other than temporary. These risks and uncertainties include, but are not limited to: (1) the risk that our assessment of



F - 8



---

Pruco Life Insurance Company of New Jersey

Notes to Financial Statements

---

2. SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES (continued)



an issuers ability to meet its obligations could change, (2) the risk that the economic outlook could be worse than expected or have more of an
impact on the issuer than anticipated, (3) the risk that we are making decisions based on fraudulent or misstated information in the financial statements provided by issuers and (4) the risk that new information obtained by us or changes
in other facts and circumstances, including those not related to the issuer, could lead us to change our intent to hold the security to maturity or until it recovers in value. Any of these situations could result in a change in our impairment
determination, and hence a charge to earnings in a future period.

Cash and cash equivalents

Cash and cash equivalents include cash on hand, amounts due from banks, money market instruments, and other debt issues with maturities of three months or less when
purchased. The Company also engages in overnight borrowing and lending of funds with Prudential Financial and affiliates which are considered cash and cash equivalent.

Deferred Policy Acquisition Costs

The Company is charged distribution expenses from Prudential
Insurances agency network for both its domestic life and annuity products through a transfer pricing agreement, which is intended to reflect a market based pricing arrangement. These costs include commissions and variable field office
expenses. The Company is also allocated costs of policy issuance and underwriting from Prudential Insurances general and administrative expense allocation system. The Company also is charged commissions from third parties, which are primarily
capitalized as deferred acquisition costs (DAC).

The costs that vary with and that are related primarily to the production of new insurance and
annuity business are deferred to the extent such costs are deemed recoverable from future profits. For annuity products, the entire sales-based transfer pricing fee is deemed to be related to the production of new annuity business and is deferred.
For life products, there is a look-through into the expenses incurred by Prudential Insurances agency network and expenses that are considered to be related to the production of new insurance business are deferred. The cost of policy issuance
and underwriting are also considered to be related primarily to the production of new insurance and annuity business and are fully deferred.

DAC is subject
to recoverability testing at the end of each accounting period. DAC, for applicable products, is adjusted for the impact of unrealized gains or losses on investments as if these gains or losses had been realized, with corresponding credits or
charges included in Accumulated other comprehensive income (loss).

Policy acquisition costs related to interest-sensitive and variable life
products and certain investment-type products are deferred and amortized over the expected life of the contracts (the periods range from 25 to 99 years) in proportion to estimated gross profits arising principally from investment results, mortality
and expense margins, and surrender charges based on historical and anticipated future experience, which is updated periodically. The effect of changes to estimated gross profits on unamortized DAC is reflected in General, administrative and
other expenses in the period such estimated gross profits are revised. DAC related to non-participating term insurance are amortized over the expected life of the contracts in proportion to premium income.

DAC related to term insurance is amortized over the expected life of the contracts in proportion to premium income.

The Company and Prudential Insurance have offered programs under which policyholders, for a selected product or group of products, can exchange an existing policy or
contract issued by the Company or Prudential Insurance for another form of policy or contract. These transactions are known as internal replacements. If policyholders surrender traditional life insurance policies in exchange for life insurance
policies that do not have fixed and guaranteed terms, the Company immediately charges to expense an estimate of the remaining unamortized DAC on the surrendered policies. For other internal replacement transactions, the unamortized DAC on the
surrendered policies is immediately charged to expense if the terms of the new policies are not substantially similar to those of the former policies. If the new policies have terms that are substantially similar to those of the earlier policies,
the DAC is retained with respect to the new policies and amortized over the expected life of the new policies. The Company expects to adopt Statement of Position (SOP) 05-1 Accounting by Insurance Enterprises for Deferred
Acquisition Costs in Connection with Modifications or Exchanges of Insurance Contracts on January 1, 2007. See New Accounting Pronouncements.

Reinsurance recoverables

Reinsurance recoverables include corresponding payables and receivables associated
with reinsurance arrangements with affiliates. For additional information about these arrangements see Note 13 to the Financial Statements.



F - 9



---

Pruco Life Insurance Company of New Jersey

Notes to Financial Statements

---

2. SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES (continued)



Separate account assets and liabilities

Separate account assets and liabilities are reported at fair value and represent segregated funds that are invested for certain policyholders, and other customers. The assets consist of equity securities, fixed
maturities, real estate related investments, real estate mortgage loans and short-term investments. The assets of each account are legally segregated and are generally not subject to claims that arise out of any other business of the Company.
Investment risks associated with market value changes are borne by the customers, except to the extent of minimum guarantees made by the Company with respect to certain accounts. See Note 8 to the Financial Statements for additional information
regarding separate account arrangements with contractual guarantees. The investment income and gains or losses for separate accounts generally accrue to the policyholders and are not included in the Statements of Operations. Mortality, policy
administration and surrender charges assessed against the accounts are included in Policy charges and fee income. Asset management fees charged to the accounts are included in Asset management fees.

Defered Sales inducements

The Company provides sales
inducements to contractholders, which primarily include an up-front bonus added to the contractholders initial deposit for certain annuity contracts. These costs are deferred and recognized on the statement of financial position in other
assets. They are amortized using the same methodology and assumptions used to amortized deferred policy acquisition costs. The amortization expense is included as a component of interest credited to policyholders account balances. As of
December 31, 2006 and 2005, deferred sales inducement costs were $19 million and $14 million, respectively.

Other assets and other liabilities

Other assets consist primarily of premiums due, certain restricted assets, and receivables resulting from sales of securities that had not yet
settled at the balance sheet date. Other liabilities consist primarily of accrued expenses, technical overdrafts, and payables resulting from purchases of securities that had not yet been settled at the balance sheet date.

Policyholders Account Balances

The Companys
liability for policyholders account balances represents the contract value that has accrued to the benefit of the policyholder as of the balance sheet date. This liability is generally equal to the accumulated account deposits plus interest
credited less policyholder withdrawals and other charges assessed against the account balance. These policyholders account balances also include provision for benefits under non-life contingent payout annuities.

Future Policy Benefits

The Companys liability for future
policy benefits is primarily comprised of the present value of estimated future payments to or on behalf of policyholders, where the timing and amount of payment depends on policyholder mortality, less the present value of future net premiums. For
life insurance, expected mortality is generally based on the Companys historical experience or standard industry tables. Interest rate assumptions are based on factors such as market conditions and expected investment returns. Although
mortality and interest rate assumptions are locked-in upon the issuance of new insurance or annuity business with fixed and guaranteed terms, significant changes in experience or assumptions may require us to provide for expected future
losses on a product by establishing premium deficiency reserves. The Companys liability for future policy benefits is also inclusive of liabilities for guarantee benefits related to certain non-traditional long duration life and annuity
contracts, which are discussed more fully in Note 8. Premium deficiency reserves, if required, are determined based on assumptions at the time the premium deficiency reserve is established and do not include a provision for the risk of adverse
deviation.

Unpaid Claims

Unpaid claims include
estimates of claims that the Company believes have been incurred, but have not yet been reported (IBNR) as of the balance sheet date and is an estimate of the amount of loss will ultimately incur on reported claims. Consistent with
industry accounting practice, we do not establish loss reserves until a loss has occurred. These IBNR estimates, and estimates of the amounts of loss we will ultimately incur on reported claims net of reinsurance, are based in part on our historical
experience, and are regularly adjusted to reflect actual claims experience. When actual experience differs from our previous estimate, the resulting difference, net of reinsurance will be included in our reported results for the period of the change
in estimate in the Policyholders benefits caption in our statements of operations. On an ongoing basis, trends in actual experience are a significant factor in the determination of claim reserve levels.

Contingent Liabilities

Amounts related to contingencies are
accrued if it is probable that a liability has been incurred and an amount is reasonably estimable. Management evaluates whether there are incremental legal or other costs directly associated with the ultimate resolution of the matter that are
reasonably estimable and, if so, they are included in the accrual.



F - 10



---

Pruco Life Insurance Company of New Jersey

Notes to Financial Statements

---

2. SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES (continued)



Insurance Revenue and Expense Recognition

Premiums from term life insurance policies are recognized when due and a liability for future policy benefits is recorded when premiums are recognized using the net level premium method. Benefits are recorded as an
expense when they are incurred. Amounts received as payment for variable and universal life and deferred annuities are reported as deposits to Policyholders account balances, and variable life and annuity premiums are reported as
deposits to separate account liabilities. Revenues from these contracts reflected as Policy charges and fee income consist primarily of fees assessed during the period against the policyholders account balances and separate account
balances for mortality charges, policy administration charges and surrender charges. Benefits and expenses for these products include claims in excess of related account balances, expenses of contract administration, interest credited to
policyholders account balances and amortization of DAC.

Premiums, benefits and expenses are stated net of reinsurance ceded to other companies.
Estimated reinsurance recoverables and the cost of reinsurance are recognized over the life of the reinsured policies using assumptions consistent with those used to account for the underlying policies.

Asset Management Fees

The Company receives in accordance with
a servicing agreement with Prudential Investments LLC, asset management fee income from policyholder account balances invested in The Prudential Series Funds (PSF). The PSF are a portfolio of mutual fund investments related to the
Companys separate account products (see Note 13 to the Financial Statements). In addition, the Company receives fees from policyholders account balances invested in funds managed by companies other than Prudential Insurance. Asset
management fees are recognized as income when earned.

Derivative Financial Instruments

Derivatives are financial instruments whose values are derived from interest rates, foreign exchange rates, financial indices, or the value of securities or commodities.
Derivative financial instruments used by the Company, and may be exchange-traded or contracted in the over-the-counter market. Derivative positions are carried at fair value, generally by obtaining quoted market prices or through the use of pricing
models. Values can be affected by changes in interest rates, foreign exchange rates, credit spreads, market volatility, expected returns and liquidity. Values can also be affected by changes in estimates and assumptions including those related to
counterparty behavior used in pricing models.

Derivatives are used to manage the characteristics of the Companys asset/liability mix, manage the
interest rate and currency characteristics of assets or liabilities. Additionally, derivatives may be used to seek to reduce exposure to interest rate and foreign currency risks associated with assets held or expected to be purchased or sold, and
liabilities incurred or expected to be incurred.

Derivatives are recorded as assets, within Other long-term investments, or as liabilities,
within Other liabilities, in the Statement of Financial Position except for embedded derivatives, which are recorded in the Statement of Financial Position with the associated host contract. As discussed in detail below and in Note 11,
all realized and unrealized changes in fair value of derivatives, with the exception of the effective portion of cash flow hedges, are recorded in current earnings. Cash flows from these derivatives are reported in the operating or investing
activities section in the Statements of Cash Flows.

The Company designates derivatives as either (1) a hedge of the fair value of a recognized asset
or liability or unrecognized firm commitment (fair value hedge), (2) a hedge of a forecasted transaction or the variability of cash flows to be received or paid related to a recognized asset or liability (cash flow
hedge), (3) a foreign currency fair value or cash flow hedge (foreign currency hedge), (4) a hedge of a net investment in a foreign operation, or (5) a derivative entered into as an economic hedge that does not qualify for
hedge accounting. During the years ended December 31, 2006, 2005 and 2004 none of the Companys derivatives qualify for hedge accounting treatment.

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

The Company is a party to financial instruments that may contain derivative instruments that are
embedded in the financial instruments. At inception, the Company assesses whether the economic characteristics of the embedded derivative are clearly and closely related to the economic characteristics of the remaining component of the
financial instrument (i.e., the host contract) and whether a separate instrument with the same terms as the embedded instrument would meet the definition of a derivative instrument.



F - 11



---

Pruco Life Insurance Company of New Jersey

Notes to Financial Statements

---

2. SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES (continued)



When it is determined that (1) the embedded derivative possesses economic characteristics that are not clearly
and closely related to the economic characteristics of the host contract, and (2) a separate instrument with the same terms would qualify as a derivative instrument, the embedded derivative is separated from the host contract, carried at fair
value, and changes in its fair value are included in Realized investment gains (losses), net.

Income Taxes

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

Deferred income taxes are recognized, based on enacted rates, when assets and liabilities have different values for financial statement and tax reporting
purposes. A valuation allowance is recorded to reduce a deferred tax asset to the amount expected to be realized.

New Accounting Pronouncements

In February 2007, the Financial Accounting Standards Board (FASB) issued SFAS No. 159, The Fair Value Option for Financial
Assets and Financial Liabilities, including an amendment of FASB Statement No. 115. This statement provides companies with an option to report selected financial assets and liabilities at fair value. This statement is effective for fiscal
years beginning after November 15, 2007 with early adoption permitted. The Company is currently assessing the impact of SFAS No. 159 on its financial position and results of operations.

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. This 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 had no effect to the financial position and result of operations of the Company.

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. This Interpretation 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. FIN No. 48 is effective for fiscal years beginning after December 15, 2006. The Company expects to adopt FIN No. 48 on January 1, 2007. The Companys adoption of this guidance will not have a
material effect on the Companys consolidated financial position and results of operations.

On February 16, 2006, the FASB issued SFAS
No. 155, Accounting for Certain Hybrid Instruments. This statement 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 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 this guidance effective January 1, 2007. The Companys adoption of this guidance is not expected to have a material effect on the Companys consolidated financial position or results of
operations.



F - 12



---

Pruco Life Insurance Company of New Jersey

Notes to Financial Statements

---

2. SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES (continued)



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, and it did not have a material effect on the Companys consolidated results of operations.

In September 2005, the Accounting Standards Executive Committee (AcSEC) of the American Institute of Certified Public Accountants (AICPA) 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. The SOP 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. This SOP 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, and it will not have a material effect on the Companys consolidated results of operations.

In December 2003, the FASB issued FIN No. 46(R), Consolidation of Variable Interest Entities, which revised the original FIN No. 46 guidance issued
in January 2003. FIN No. 46(R) addresses whether certain types of entities, referred to as variable interest entities (VIEs), should be consolidated in a companys financial statements. A VIE is an entity that either
(1) has equity investors that lack certain essential characteristics of a controlling financial interest (including the ability to control the entity, the obligation to absorb the entitys expected losses and the right to receive the
entitys expected residual returns) or (2) lacks sufficient equity to finance its own activities without financial support provided by other entities, which in turn would be expected to absorb at least some of the expected losses of the
VIE. An entity should consolidate a VIE if, as the primary beneficiary, it stands to absorb a majority of the VIEs expected losses or to receive a majority of the VIEs expected residual returns. On December 31, 2003, the Company
adopted FIN No. 46(R) for all special purpose entities (SPEs) and for relationships with all VIEs that began on or after February 1, 2003. On March 31, 2004, the Company implemented FIN No. 46(R) for relationships
with potential VIEs that are not SPEs. The transition to FIN No. 46(R) did not have a material effect on the Companys financial position or results of operations.

In July 2003, the Accounting Standards Executive Committee (AcSEC) of the American Institute of Certified Public Accountants (AICPA) issued Statement of Position (SOP) 03-1,
Accounting and Reporting by Insurance Enterprises for Certain Nontraditional Long-Duration Contracts and for Separate Accounts. AcSEC issued this SOP to address the need for interpretive guidance in three areas: separate account
presentation and valuation; the classification and valuation of certain long-duration contract liabilities; and the accounting recognition given sales inducements (bonus interest, bonus credits and persistency bonuses).

The effect of adopting SOP 03-1 was a charge of $0.2 million, net of $0.1 million of taxes, which was reported as a Cumulative effect of accounting change, net of
taxes in the results of operations for the year ended December 31, 2004. This charge reflects the net impact of converting certain individual market value adjusted annuity contracts from separate account accounting treatment to general
account accounting treatment, including carrying the related liabilities at accreted value, and the effect of establishing reserves for guaranteed minimum death benefit provisions of the Companys variable annuity and variable life contracts.
The Company also recognized a cumulative effect of accounting change related to unrealized investment gains within Accumulated other comprehensive income, net of taxes of $0.5 million, net of $0.3 million of taxes, for the year ended
December 31, 2005. Upon adoption of SOP 03-1, approximately $40 million in Separate account assets were reclassified resulting in an increase in Fixed maturities, available for sale, as well as changes in other
non-separate account assets. Similarly, upon adoption, approximately $40 million in Separate account liabilities were reclassified resulting in increases in Policyholders account balances as well as changes in other
non-separate account liabilities.

In June 2004, the FASB issued FSP No. 97-1, Situations in Which Paragraphs 17(b) and 20 of FASB Statement
No. 97, Accounting and Reporting by Insurance Enterprises for Certain Long-Duration Contracts and for Realized Gains and Losses from the Sale of Investments, Permit or Require Accrual of an Unearned Revenue Liability. FSP 97-1 clarifies
the accounting for unearned revenue liabilities of certain universal-life type contracts under SOP 03-1. The Companys adoption of FSP 97-1 on July 1, 2004 did not change its accounting for unearned revenue liabilities and, therefore, had no
impact on the Companys financial position or results of operations. In September 2004, the AICPA SOP 03-1 Implementation Task Force issued a Technical Practice Aid (TPA) to clarify certain aspects of SOP 03-1. The implementation of
this TPA during the third quarter of 2004 had no impact on the Companys financial position or results of operations.



F - 13



---

Pruco Life Insurance Company of New Jersey

Notes to Financial Statements

---

2. SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES (continued)



Reclassifications

Certain amounts in the prior years have been reclassified to conform to the current year presentation.



F - 14



---

Pruco Life Insurance Company of New Jersey

Notes to Financial Statements

---



3. INVESTMENTS

Fixed Maturities

The following tables provide additional information relating to fixed maturities as of December 31:



|                                                                                      |  |               |         |                      |   |                       |  |            |       |  |   |        
|------------------------------------------------------------------------------------- |  | ------------- | ------- | -------------------- | - | --------------------- |  | ---------- | ----- |  | - | -------
|                                                                                      |  | 2006         
|                                                                                      |  | AmortizedCost |         | GrossUnrealizedGains |   | GrossUnrealizedLosses |  | Fair Value
|                                                                                      |  |               |         | (in thousands)       |   |                      
|Fixed maturities, available for sale                                                  |  |               |         |                      |   |                       |  |            |       |  |   |        
|U.S. Treasury securities and obligations of U.S. Government corporations and agencies |  | $             | 10,857  |                      | $ | 94                    |  | $          | 54    |  | $ | 10,897 
|Foreign government bonds                                                              |  |               | 9,657   |                      |   | 820                   |  |            |      |  |   | 10,477 
|Corporate securities                                                                  |  |               | 763,158 |                      |   | 11,091                |  |            | 4,903 |  |   | 769,346
|Mortgage-backed securities                                                            |  |               | 129,020 |                      |   | 1,296                 |  |            | 111   |  |   | 130,205
|                                                                                      |  |               |         |                      |   |                       |  |            |       |  |   |        
|Total fixed maturities, available for sale                                            |  | $             | 912,692 |                      | $ | 13,301                |  | $          | 5,068 |  | $ | 920,925
|                                                                                      |  |               |         |                      |   |                       |  |            |       |  |   |        



|                                                                                      |  |                |         |                      |   |                       |  |            |        |  |   |        
|------------------------------------------------------------------------------------- |  | -------------- | ------- | -------------------- | - | --------------------- |  | ---------- | ------ |  | - | -------
|                                                                                      |  | 2005          
|                                                                                      |  | AmortizedCost  |         | GrossUnrealizedGains |   | GrossUnrealizedLosses |  | Fair Value
|                                                                                      |  | (in thousands)
|Fixed maturities, available for sale                                                  |  |                |         |                      |   |                       |  |            |        |  |   |        
|U.S. Treasury securities and obligations of U.S. Government corporations and agencies |  | $              | 14,767  |                      | $ | 158                   |  | $          | 45     |  | $ | 14,880 
|Foreign government bonds                                                              |  |                | 9,776   |                      |   | 544                   |  |            |       |  |   | 10,320 
|Corporate securities                                                                  |  |                | 845,983 |                      |   | 11,868                |  |            | 10,068 |  |   | 847,783
|Mortgage-backed securities                                                            |  |                | 120,191 |                      |   | 87                    |  |            | 1,686  |  |   | 118,592
|                                                                                      |  |                |         |                      |   |                       |  |            |        |  |   |        
|Total fixed maturities, available for sale                                            |  | $              | 990,717 |                      | $ | 12,657                |  | $          | 11,799 |  | $ | 991,575
|                                                                                      |  |                |         |                      |   |                       |  |            |        |  |   |        



F - 15



---

Pruco Life Insurance Company of New Jersey

Notes to Financial Statements

---

3. INVESTMENTS (continued)



The amortized cost and estimated fair value of fixed maturities, by contractual maturities at December 31, 2006,
is shown below:



|                                       |  |                    |         |            |   |        
|-------------------------------------- |  | ------------------ | ------- | ---------- | - | -------
|                                       |  | Available for Sale
|                                       |  | AmortizedCost      |         | Fair Value
|                                       |  | (in thousands)    
|Due in one year or less                |  | $                  | 30,500  |            | $ | 30,526 
|Due after one year through five years  |  |                    | 288,978 |            |   | 291,969
|Due after five years through ten years |  |                    | 261,837 |            |   | 263,251
|Due after ten years                    |  |                    | 202,357 |            |   | 204,974
|Mortgage-backed securities             |  |                    | 129,020 |            |   | 130,205
|                                       |  |                    |         |            |   |        
|Total                                  |  | $                  | 912,692 |            | $ | 920,925
|                                       |  |                    |         |            |   |        

Actual maturities may differ from contractual maturities because issuers have the right to call or prepay
obligations.

Proceeds from the sale of fixed maturities available for sale during 2006, 2005, and 2004 were $949 million, $649 million, and $394 million,
respectively. Gross gains of $1 million, $4 million, and $6 million, and gross losses of $15 million, $5 million, and $4 million were realized on those sales during 2006, 2005, and 2004, respectively. Proceeds from maturities of fixed maturities
available for sale during 2006, 2005, and 2004 were $96 million, and $128 million, and $56 million, respectively.

The writedowns for impairments that were
deemed to be other than temporary for fixed maturities for the years 2006, 2005 and 2004 are less than $1 million respectively.

Investment Income and
Investment Gains and Losses

Net investment incomearose from the following sources for the years ended December 31:



|                                            |  |                |        |   |      |   |        |      |  |   |        |  
|------------------------------------------- |  | -------------- | ------ | - | ---- | - | ------ | ---- |  | - | ------ | -
|                                            |  | 2006           |        |   | 2005 |   |        | 2004 | 
|                                            |  | (in thousands) |       
|Fixed maturities, available for sale        |  | $              | 55,625 |   |      | $ | 52,085 |      |  | $ | 44,375 |  
|Policy loans                                |  |                | 8,632  |   |      |   | 8,523  |      |  |   | 8,443  |  
|Commercial loans                            |  |                | 1,789  |   |      |   | 415    |      |  |   |       |  
|Short-term investments and cash equivalents |  |                | 4,082  |   |      |   | 3,660  |      |  |   | 1,733  |  
|Other                                       |  |                | 599    |   |      |   | 625    |      |  |   | 272    |  
|                                            |  |                |        |   |      |   |        |      |  |   |        |  
|Gross investment income                     |  |                | 70,727 |   |      |   | 65,308 |      |  |   | 54,823 |  
|Less: investment expenses                   |  |                | (5,099 | ) |      |   | (5,111 | )    |  |   | (2,324 | )
|                                            |  |                |        |   |      |   |        |      |  |   |        |  
|Net investment income                       |  | $              | 65,628 |   |      | $ | 60,197 |      |  | $ | 52,499 |  
|                                            |  |                |        |   |      |   |        |      |  |   |        |  

Realized investment (losses)/ gains, net, including charges for other than temporary
reductions in value, for the years ended December 31, were from the following sources:



|                                     |  |                |         |   |      |   |      |      |  |   |       |  
|------------------------------------ |  | -------------- | ------- | - | ---- | - | ---- | ---- |  | - | ----- | -
|                                     |  | 2006           |         |   | 2005 |   |      | 2004 | 
|                                     |  | (in thousands) |        
|Fixed maturities, available for sale |  | $              | (14,374 | ) |      | $ | (316 | )    |  | $ | 2,024 |  
|Derivatives and other                |  |                | 474     |   |      |   | (13  | )    |  |   | (139  | )
|                                     |  |                |         |   |      |   |      |      |  |   |       |  
|Realized investment losses, net      |  | $              | (13,900 | ) |      | $ | (329 | )    |  | $ | 1,885 |  
|                                     |  |                |         |   |      |   |      |      |  |   |       |  



F - 16



---

Pruco Life Insurance Company of New Jersey

Notes to Financial Statements

---

3. INVESTMENTS (continued)



Commercial Loans

The Companys commercial loans are comprised as follows as at December 31:



|                                      |  |                      |        |   |           |       |   |                      |   |           |  |       |  
|------------------------------------- |  | -------------------- | ------ | - | --------- | ----- | - | -------------------- | - | --------- |  | ----- | -
|                                      |  | 2006                 |        |   | 2005      |      
|                                      |  | Amount(in thousands) |        |   | % ofTotal |       |   | Amount(in thousands) |   | % ofTotal | 
|Collateralized loans by property type |  |                      |        |   |           |       |   |                      |   |           |  |       |  
|Apartment complexes                   |  | $                    | 12,315 |   |           | 25.1  | % |                      | $ | 9,671     |  | 47.5  | %
|Agricultural properties               |  |                      | 8,084  |   |           | 16.5  | % |                      |   | 5,200     |  | 25.5  | %
|Industrial buildings                  |  |                      | 7,348  |   |           | 15.0  | % |                      |   | 4,490     |  | 22.1  | %
|Retail stores                         |  |                      | 8,940  |   |           | 18.2  | % |                      |   |          |  |      | %
|Office buildings                      |  |                      | 5,363  |   |           | 10.9  | % |                      |   | 992       |  | 4.9   | %
|Other                                 |  |                      | 7,031  |   |           | 14.3  | % |                      |   |          |  |      | %
|                                      |  |                      |        |   |           |       |   |                      |   |           |  |       |  
|Total collateralized loans            |  |                      | 49,081 |   |           | 100.0 | % |                      |   | 20,353    |  | 100.0 | %
|                                      |  |                      |        |   |           |       |   |                      |   |           |  |       |  
|Valuation allowance                   |  |                      | (102   | ) |           |       |   |                      |   |          |  |       |  
|                                      |  |                      |        |   |           |       |   |                      |   |           |  |       |  
|Total net collateralized loans        |  |                      | 48,979 |   |           |       |   |                      |   | 20,353    |  |       |  
|                                      |  |                      |        |   |           |       |   |                      |   |           |  |       |  
|Total commercial loans                |  | $                    | 48,979 |   |           |       |   |                      | $ | 20,353    |  |       |  
|                                      |  |                      |        |   |           |       |   |                      |   |           |  |       |  

The commercial loans are geographically dispersed throughout the United States with the largest concentrations in
New Jersey (16%) and Minnesota (14%) at December 31, 2006.

Activity in the allowance for losses for all commercial loans, for the years ended
December 31, is as follows:



|                                           |  |      |     |                |   |      |  |   |  
|------------------------------------------ |  | ---- | --- | -------------- | - | ---- |  | - | -
|                                           |  | 2006 |     | 2005           |   | 2004
|                                           |  |      |     | (in thousands) |   |     
|Allowance for losses, beginning of year    |  | $    |    |                | $ |     |  | $ | 
|Addition (release) of allowance for losses |  |      | 102 |                |   |     |  |   | 
|Charge-offs, net of recoveries             |  |      |    |                |   |     |  |   | 
|Change in foreign exchange                 |  |      |    |                |   |     |  |   | 
|                                           |  |      |     |                |   |      |  |   |  
|Allowance for losses, end of year          |  | $    | 102 |                | $ |     |  | $ | 
|                                           |  |      |     |                |   |      |  |   |  



F - 17



---

Pruco Life Insurance Company of New Jersey

Notes to Financial Statements

---

3. INVESTMENTS (continued)



Net Unrealized Investment Gains (Losses)

Net unrealized investment gains on fixed maturities available for sale are included in the Statements of Financial Position as a component of Accumulated other comprehensive income. Changes in these
amounts include adjustments to exclude from Accumulated other comprehensive income (loss) those items that are included as part of net income for a period that also had been part of Accumulated other comprehensive
income (loss) in earlier periods. The amounts for the years ended December 31, net of tax, are as follows:



|                                                                                        |  |                                            |         |   |                                   |   |         |                                 |  |   |                                       |   |  |                                                                                              |        |   |  |   |         |  
|--------------------------------------------------------------------------------------- |  | ------------------------------------------ | ------- | - | --------------------------------- | - | ------- | ------------------------------- |  | - | ------------------------------------- | - |  | -------------------------------------------------------------------------------------------- | ------ | - |  | - | ------- | -
|                                                                                        |  | Net UnrealizedGains (Losses)on Investments |         |   | Deferred policy Acquisition Costs |   |         | Policyholders Account Balances |  |   | Deferred Income Tax(Liability)Benefit |   |  | Accumulated otherComprehensiveIncome
(Loss)Related to NetUnrealizedInvestment Gains (Losses) |       
|                                                                                        |  | (in thousands)                             |        
|Balance, January 1, 2004                                                                |  | $                                          | 36,318  |   |                                   | $ | (19,924 | )                               |  | $ | 4,196                                 |   |  | $                                                                                            | (7,412 | ) |  | $ | 13,178  |  
|Net investment gains (losses) on investments arising during the period                  |  |                                            | (4,798  | ) |                                   |   |        |                                 |  |   |                                      |   |  |                                                                                              | 2,043  |   |  |   | (2,755  | )
|Reclassification adjustment for gains (losses) included in net income                   |  |                                            | (2,024  | ) |                                   |   |        |                                 |  |   |                                      |   |  |                                                                                              | 708    |   |  |   | (1,316  | )
|Impact of net unrealized investment Gains (losses) on deferred policy acquisition costs |  |                                            |        |   |                                   |   | 8,075   |                                 |  |   |                                      |   |  |                                                                                              | (3,026 | ) |  |   | 5,049   |  
|Impact of net unrealized investment gains (losses) on policyholders account balances   |  |                                            |        |   |                                   |   |        |                                 |  |   | (1,465                                | ) |  |                                                                                              | 555    |   |  |   | (910    | )
|                                                                                        |  |                                            |         |   |                                   |   |         |                                 |  |   |                                       |   |  |                                                                                              |        |   |  |   |         |  
|Balance, December 31, 2004                                                              |  |                                            | 29,496  |   |                                   |   | (11,849 | )                               |  |   | 2,731                                 |   |  |                                                                                              | (7,132 | ) |  |   | 13,246  |  
|Net investment gains (losses) on investments arising during the period                  |  |                                            | (28,357 | ) |                                   |   |        |                                 |  |   |                                      |   |  |                                                                                              | 9,926  |   |  |   | (18,431 | )
|Reclassification adjustment for gains (losses) included in net income                   |  |                                            | 314     |   |                                   |   |        |                                 |  |   |                                      |   |  |                                                                                              | (111   | ) |  |   | 203     |  
|Impact of net unrealized investment gains (losses) on deferred policy acquisition costs |  |                                            |        |   |                                   |   | 11,961  |                                 |  |   |                                      |   |  |                                                                                              | (4,186 | ) |  |   | 7,775   |  
|Impact of net unrealized investment gains (losses) on policyholders account balances   |  |                                            |        |   |                                   |   |        |                                 |  |   | (3,012                                | ) |  |                                                                                              | 1,054  |   |  |   | (1,958  | )
|                                                                                        |  |                                            |         |   |                                   |   |         |                                 |  |   |                                       |   |  |                                                                                              |        |   |  |   |         |  
|Balance, December 31, 2005                                                              |  |                                            | 1,453   |   |                                   |   | 112     |                                 |  |   | (281                                  | ) |  |                                                                                              | (449   | ) |  |   | 835     |  
|Net investment gains (losses) on investments arising during the period                  |  |                                            | 21,752  |   |                                   |   |        |                                 |  |   |                                      |   |  |                                                                                              | (7,613 | ) |  |   | 14,139  |  
|Reclassification adjustment for gains (losses) included in net income                   |  |                                            | (14,373 | ) |                                   |   |        |                                 |  |   |                                      |   |  |                                                                                              | 5,031  |   |  |   | (9,342  | )
|Impact of net unrealized investment gains (losses) on deferred policy acquisition costs |  |                                            |        |   |                                   |   | (3,701  | )                               |  |   |                                      |   |  |                                                                                              | 1,295  |   |  |   | (2,406  | )
|Impact of net unrealized investment gains (losses) on policyholders account balances   |  |                                            |        |   |                                   |   |        |                                 |  |   | 1,194                                 |   |  |                                                                                              | (418   | ) |  |   | 776     |  
|                                                                                        |  |                                            |         |   |                                   |   |         |                                 |  |   |                                       |   |  |                                                                                              |        |   |  |   |         |  
|Balance, December 31, 2006                                                              |  | $                                          | 8,832   |   |                                   | $ | (3,589  | )                               |  | $ | 913                                   |   |  | $                                                                                            | (2,154 | ) |  | $ | 4,002   |  
|                                                                                        |  |                                            |         |   |                                   |   |         |                                 |  |   |                                       |   |  |                                                                                              |        |   |  |   |         |  



F - 18



---

Pruco Life Insurance Company of New Jersey

Notes to Financial Statements

---

3. INVESTMENTS (continued)



The table below presents net unrealized gains on investments by asset class at December 31,



|                                |  |                |       |      |   |       |  |   |       
|------------------------------- |  | -------------- | ----- | ---- | - | ----- |  | - | ------
|                                |  | 2006           |       | 2005 |   | 2004 
|                                |  | (in thousands)
|Fixed maturities                |  | $              | 8,233 |      | $ | 857   |  | $ | 29,021
|Other long-term investments     |  |                | 599   |      |   | 596   |  |   | 475   
|                                |  |                |       |      |   |       |  |   |       
|Unrealized gains on investments |  | $              | 8,832 |      | $ | 1,453 |  | $ | 29,496
|                                |  |                |       |      |   |       |  |   |       

Included in other long-term investments are equity securities.

Duration of Gross Unrealized Loss Positions for Fixed Maturities

The
following table shows the fair value and gross unrealized losses aggregated by investment category and length of time that individual fixed maturity securities have been in a continuous unrealized loss position, as of December 31, 2006 and 2005
respectively:



|                                                                                      |  |                         |         |                       |   |            |  |                  |         |            |   |                  |  |   |         |  |   |       
|------------------------------------------------------------------------------------- |  | ----------------------- | ------- | --------------------- | - | ---------- |  | ---------------- | ------- | ---------- | - | ---------------- |  | - | ------- |  | - | ------
|                                                                                      |  | Less than twelve months |         | Twelve months or more |   | Total     
|                                                                                      |  | Fair Value              |         | UnrealizedLosses      |   | Fair Value |  | UnrealizedLosses |         | Fair Value |   | UnrealizedLosses
|                                                                                      |  | (in thousands)         
|Fixed maturities, available for sale: 2006                                            |  |                         |         |                       |   |            |  |                  |         |            |   |                  |  |   |         |  |   |       
|U.S. Treasury securities and obligations of U.S. government corporations and agencies |  | $                       | 455     |                       | $ | 10         |  | $                | 2,316   |            | $ | 44               |  | $ | 2,771   |  | $ | 54    
|Corporate securities                                                                  |  |                         | 91,728  |                       |   | 855        |  |                  | 122,582 |            |   | 4,048            |  |   | 214,310 |  |   | 4,903 
|Mortgage-backed securities                                                            |  |                         | 3,310   |                       |   | 23         |  |                  | 3,722   |            |   | 87               |  |   | 7,032   |  |   | 110   
|                                                                                      |  |                         |         |                       |   |            |  |                  |         |            |   |                  |  |   |         |  |   |       
|Total                                                                                 |  | $                       | 95,493  |                       | $ | 888        |  | $                | 128,620 |            | $ | 4,179            |  | $ | 224,113 |  | $ | 5,067 
|                                                                                      |  |                         |         |                       |   |            |  |                  |         |            |   |                  |  |   |         |  |   |       
|Fixed maturities, available for sale: 2005                                            |  |                         |         |                       |   |            |  |                  |         |            |   |                  |  |   |         |  |   |       
|U.S. Treasury securities and obligations of U.S. government corporations and agencies |  | $                       | 7,678   |                       | $ | 22         |  | $                | 899     |            | $ | 23               |  | $ | 8,577   |  | $ | 45    
|Corporate securities                                                                  |  |                         | 436,319 |                       |   | 8,410      |  |                  | 53,409  |            |   | 1,658            |  |   | 489,728 |  |   | 10,068
|Mortgage-backed securities                                                            |  |                         | 101,510 |                       |   | 1,627      |  |                  | 2,000   |            |   | 59               |  |   | 103,510 |  |   | 1,686 
|                                                                                      |  |                         |         |                       |   |            |  |                  |         |            |   |                  |  |   |         |  |   |       
|Total                                                                                 |  | $                       | 545,507 |                       | $ | 10,059     |  | $                | 56,308  |            | $ | 1,740            |  | $ | 601,815 |  | $ | 11,799
|                                                                                      |  |                         |         |                       |   |            |  |                  |         |            |   |                  |  |   |         |  |   |       

As of December 31, 2006, gross unrealized losses on fixed maturities totaled approximately $5 million
comprising 135 issuers. Of this amount, there was $1 million in the less than twelve months category comprising 56 issuers and $4 million in the greater than twelve months category comprising 79 issuers. There were no individual issuers with gross
unrealized losses greater than $0.3 million. Investment grade securities was comprised of gross unrealized losses of $3.4 million and $2 million of gross unrealized losses of twelve months or more were concentrated in the finance, manufacturing, and
service sectors. Based on a review of the above information in conjunction with other factors as outlined in our policy surrounding other than temporary impairments (see Note 2 to the Financial Statements), we have concluded that an adjustment for
other than temporary impairments for these securities is not warranted at December 31, 2006.

As of December 31, 2005, gross unrealized losses on
fixed maturities totaled approximately $12 million comprising 232 issuers. Of this amount, there was $10 million in the less than twelve months category comprising 189 issuers and $2 million in the greater than twelve months category comprising 43
issuers. There were no individual issuers with gross unrealized losses greater than $0.51 million. $9 million of gross unrealized losses is comprised of investment grade securities. $1 million of gross unrealized losses of twelve months or more were
concentrated in the finance, manufacturing, and service sectors. Based on a review of the above information in conjunction with other factors as outlined in our policy surrounding other than temporary impairments (see Note 2 to the Financial
Statements), we have concluded that an adjustment for other than temporary impairments for these securities is not warranted at December 31, 2005.



F - 19



---

Pruco Life Insurance Company of New Jersey

Notes to Financial Statements

---

3. INVESTMENTS (continued)



Securities Pledged, Restricted Assets and Special Deposits

The Company pledges investment securities it owns to unaffiliated parties through certain transactions including securities lending,

securities sold under agreements to repurchase, and futures contracts. At December 31, 2006 and 2005, the carrying values of fixed maturities available for sale
pledged to third parties as reported in the Statements of Financial Position were $31 million and $86.3 million, respectively.

Fixed maturities of $0.5
million at December 31, 2006 and 2005 were on deposit with governmental authorities or trustees as required by certain insurance laws.

4. DEFERRED
POLICY ACQUISITION COSTS

The balance of and changes in deferred policy acquisition costs for the year ended December 31, are as follows:



|                                                        |  |                |         |   |      |   |         |      |  |   |         |  
|------------------------------------------------------- |  | -------------- | ------- | - | ---- | - | ------- | ---- |  | - | ------- | -
|                                                        |  | 2006           |         |   | 2005 |   |         | 2004 | 
|                                                        |  | (in thousands) |        
|Balance, beginning of year                              |  | $              | 225,572 |   |      | $ | 183,219 |      |  | $ | 176,529 |  
|Capitalization of commissions, sales and issue expenses |  |                | 42,918  |   |      |   | 39,238  |      |  |   | 21,374  |  
|Amortization                                            |  |                | (8,940  | ) |      |   | (8,846  | )    |  |   | (23,147 | )
|Change in unrealized investment gains                   |  |                | (3,701  | ) |      |   | 11,961  |      |  |   | 8,463   |  
|                                                        |  |                |         |   |      |   |         |      |  |   |         |  
|Balance, end of year                                    |  | $              | 255,849 |   |      | $ | 225,572 |      |  | $ | 183,219 |  
|                                                        |  |                |         |   |      |   |         |      |  |   |         |  

Deferred acquisition costs include reductions in capitalization and amortization related to the reinsurance
expense allowances resulting from the coinsurance treaty with Prudential Arizona Reinsurance Captive Company, or PARCC discussed in Note 13 to the Financial Statements below.

Ceded capitalization was $16 million, $14 million and $37 million in 2006, 2005 and 2004 respectively. Amortization relating to this treaty included in the above table amounted to $4 million in both 2006 and 2005 and
$3 million in 2004.

5. POLICYHOLDERS LIABILITIES

Future policy benefits at December 31 are as follows:



|                                             |  |                |         |      |   |        
|-------------------------------------------- |  | -------------- | ------- | ---- | - | -------
|                                             |  | 2006           |         | 2005
|                                             |  | (in thousands)
|Life insurance                               |  | $              | 242,936 |      | $ | 196,756
|Individual and group annuities               |  |                | 4,791   |      |   | 4,733  
|Policy claims and other contract liabilities |  |                | 2,326   |      |   | 1,933  
|                                             |  |                |         |      |   |        
|Total future policy benefits                 |  | $              | 250,053 |      | $ | 203,422
|                                             |  |                |         |      |   |        

Life insurance liabilities include reserves for death benefits and other policy benefits. Individual and Group
annuity liabilities include reserves for annuities that are in payout status.

Future policy benefits for life insurance are equal to the aggregate of
(1) the present value of future benefit payments and related expenses, less the present value of future net premiums, and (2) any premium deficiency reserves. Assumptions as to mortality and persistency are based on the Companys
experience, and in certain instances, industry experience, when the basis of the reserve is established. Interest rates range from 2.50% to 7.50%.

Future
policy benefits for individual and group annuities are equal to the aggregate of 1) the present value of expected future payments on the basis of actuarial assumptions established at issue, and 2) any premium deficiency reserves. Assumptions as to
mortality are based on the Companys experience when the basis of the reserve is established. The interest rates used in the determination of the individual and group annuities reserves range from 5.25% to 8.75%, with 10% of the reserves based
on an interest rate in excess of 8%.



F - 20



---

Pruco Life Insurance Company of New Jersey

Notes to Financial Statements

---

5. POLICYHOLDERS
LIABILITIES (continued)



Future policy benefits for other contract liabilities are generally equal to the present value of expected future
payments based on the Companys experience (except for certain group insurance coverages for which future policy benefits are equal to gross unearned premium reserves). The interest rates used in the determination of the present values range
from 5.18% to 6.20%.

Policyholders account balances at December 31 are as follows:



|                                                                 |  |                |         |      |   |        
|---------------------------------------------------------------- |  | -------------- | ------- | ---- | - | -------
|                                                                 |  | 2006           |         | 2005
|                                                                 |  | (in thousands)
|Interest-sensitive life contracts                                |  | $              | 495,150 |      | $ | 456,366
|Individual annuities                                             |  |                | 264,892 |      |   | 308,146
|Guaranteed investment contracts and guaranteed interest accounts |  |                | 34,701  |      |   | 37,333 
|Dividend accumulations and other                                 |  |                | 42,237  |      |   | 39,977 
|                                                                 |  |                |         |      |   |        
|Total policyholders account balances                            |  | $              | 836,980 |      | $ | 841,822
|                                                                 |  |                |         |      |   |        

Policyholders account balances represent an accumulation of account deposits plus credited interest less
withdrawals, expenses and mortality charges, if applicable. Interest crediting rates for interest-sensitive life contracts range from 3.00% to 4.80%. Interest crediting rates for individual annuities range from 1.50% to 12.00%, with less than 1% of
the policyholders account balances with interest crediting rates in excess of 8.00%. Interest crediting rates for guaranteed investment contracts and guaranteed interest accounts range from 3.00% to 6.30%. Interest crediting rates range from
3.00% to 3.86% for dividend accumulations and other.

6. REINSURANCE

The Company participates in reinsurance with Prudential Insurance, PARCC and other companies, in order to provide greater diversification of business, provide additional capacity for future growth and limit the
maximum net loss potential arising from large risks. Life reinsurance is accomplished through various plans of reinsurance, primarily yearly renewable term and coinsurance. Reinsurance ceded arrangements do not discharge the Company as the primary
insurer. Ceded balances would represent a liability of the Company in the event the reinsurers were unable to meet their obligations to the Company under the terms of the reinsurance agreements. The likelihood of a material reinsurance liability
reassumed by the Company is considered to be remote. Effective October 3, 2005, the Company entered into a new coinsurance agreement with Pruco Reinsurance Ltd. (Pruco Re) (see Note 13 to the Financial Statements) providing for the 100%
reinsurance of its Lifetime Five benefit feature sold on new business after October 3, 2005.

Reinsurance premiums, commissions, expense
reimbursements, benefits and reserves related to reinsured long-duration contracts are accounted for over the life of the underlying reinsured contracts using assumptions consistent with those used to account for the underlying contracts. Amounts
recoverable from reinsurers, for both long and short duration reinsurance arrangements, are estimated in a manner consistent with the claim liabilities and policy benefits associated with the reinsured policies.

Reinsurance amounts included in the Statement of Operations and Comprehensive Income for the years ended December 31 are below.



|                                                  |  |                |          |   |      |   |         |      |  |   |         |  
|------------------------------------------------- |  | -------------- | -------- | - | ---- | - | ------- | ---- |  | - | ------- | -
|                                                  |  | 2006           |          |   | 2005 |   |         | 2004 | 
|                                                  |  | (in thousands) |         
|Direct premiums and policy charges and fee income |  | $              | 184,637  |   |      | $ | 162,830 |      |  | $ | 142,492 |  
|Reinsurance ceded                                 |  |                | (116,040 | ) |      |   | (94,074 | )    |  |   | (37,817 | )
|                                                  |  |                |          |   |      |   |         |      |  |   |         |  
|Premiums and policy charges and fee income        |  | $              | 68,597   |   |      | $ | 68,756  |      |  | $ | 104,675 |  
|                                                  |  |                |          |   |      |   |         |      |  |   |         |  
|Policyholders benefits ceded                     |  | $              | 51,306   |   |      | $ | 41,641  |      |  | $ | 20,028  |  
|                                                  |  |                |          |   |      |   |         |      |  |   |         |  

Reinsurance premiums ceded for interest-sensitive life products is accounted for as a reduction of policy charges
and fee income. Reinsurance ceded for term insurance products is accounted for as a reduction of premiums.

Reinsurance recoverables, included in the
Companys Statements of Financial Position, at December 31, 2006 and 2005 were $135 million and $92 million, respectively.



F - 21



---

Pruco Life Insurance Company of New Jersey

Notes to Financial Statements

---

6. Reinsurance (continued) INCOME
TAXES



During 2004, the Company entered into reinsurance contracts with affiliates covering the entire domestic life in
force. As a result, all reinsurance contracts are with affiliates as of December 31, 2004. These contracts are described further (in Note 13 to the Financial Statements), below.

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



|                                      |  |                |             |   |      |   |             |      |  |   |             |  
|------------------------------------- |  | -------------- | ----------- | - | ---- | - | ----------- | ---- |  | - | ----------- | -
|                                      |  | 2006           |             |   | 2005 |   |             | 2004 | 
|                                      |  | (in thousands) |            
|Life insurance face amount in force   |  | $              | 63,399,375  |   |      | $ | 52,930,588  |      |  | $ | 42,903,082  |  
|Ceded                                 |  |                | (56,034,023 | ) |      |   | (46,406,195 | )    |  |   | (37,708,317 | )
|                                      |  |                |             |   |      |   |             |      |  |   |             |  
|Net amount of life insurance in force |  | $              | 7,365,352   |   |      | $ | 6,524,393   |      |  | $ | 5,194,765   |  
|                                      |  |                |             |   |      |   |             |      |  |   |             |  

7. INCOME TAXES

The components of income tax expense (benefits) for the years ended December 31, are as follows:



|                               |  |                |        |   |      |   |        |  |   |        |  
|------------------------------ |  | -------------- | ------ | - | ---- | - | ------ |  | - | ------ | -
|                               |  | 2006           |        |   | 2005 |   | 2004   | 
|                               |  | (in thousands) |       
|Current tax (benefit) expense: |  |                |        |   |      |   |        |  |   |        |  
|U.S.                           |  | $              | (596   | ) |      | $ | 6,441  |  | $ | 14,639 |  
|State and local                |  |                |       |   |      |   |       |  |   | (55    | )
|                               |  |                |        |   |      |   |        |  |   |        |  
|Total                          |  |                | (596   | ) |      |   | 6,441  |  |   | 14,584 |  
|                               |  |                |        |   |      |   |        |  |   |        |  
|Deferred tax expense:          |  |                |        |   |      |   |        |  |   |        |  
|U.S.                           |  |                | 12,073 |   |      |   | 7,151  |  |   | (2,640 | )
|State and local                |  |                |       |   |      |   |       |  |   | (1,576 | )
|                               |  |                |        |   |      |   |        |  |   |        |  
|Total                          |  |                | 12,073 |   |      |   | 7,151  |  |   | (4,216 | )
|                               |  |                |        |   |      |   |        |  |   |        |  
|Total income tax expense       |  | $              | 11,477 |   |      | $ | 13,592 |  | $ | 10,368 |  
|                               |  |                |        |   |      |   |        |  |   |        |  

The income tax expense for the years ended December 31, differs from the amount computed by applying the
expected federal income tax rate of 35% to income from operations before income taxes and cumulative effect of accounting change for the following reasons:



|                                                   |  |                |        |   |      |   |        |      |  |   |        |  
|-------------------------------------------------- |  | -------------- | ------ | - | ---- | - | ------ | ---- |  | - | ------ | -
|                                                   |  | 2006           |        |   | 2005 |   |        | 2004 | 
|                                                   |  | (in thousands) |       
|Expected federal income tax expense                |  | $              | 17,644 |   |      | $ | 18,486 |      |  | $ | 12,589 |  
|IRS settlement for examination period 1997 to 2001 |  |                |       |   |      |   | (2,769 | )    |  |   |       |  
|State and local income taxes                       |  |                |       |   |      |   |       |      |  |   | (1,060 | )
|Non taxable investment income                      |  |                | (6,206 | ) |      |   | (2,979 | )    |  |   | (1,240 | )
|Other                                              |  |                | 39     |   |      |   | 854    |      |  |   | 79     |  
|                                                   |  |                |        |   |      |   |        |      |  |   |        |  
|Total income tax expense                           |  | $              | 11,477 |   |      | $ | 13,592 |      |  | $ | 10,368 |  
|                                                   |  |                |        |   |      |   |        |      |  |   |        |  



F - 22



---

Pruco Life Insurance Company of New Jersey

Notes to Financial Statements

---

7. INCOME TAXES (continued)



Deferred tax assets and liabilities at December 31, resulted from the items listed in the following table:



|                                   |  |                |        |      |   |       
|---------------------------------- |  | -------------- | ------ | ---- | - | ------
|                                   |  | 2006           |        | 2005
|                                   |  | (in thousands)
|Deferred tax assets                |  |                |        |      |   |       
|Investments                        |  | $              | 1,488  |      | $ | 1,670 
|Other                              |  |                | 256    |      |   | 774   
|                                   |  |                |        |      |   |       
|Deferred tax assets                |  |                | 1,744  |      |   | 2,444 
|                                   |  |                |        |      |   |       
|Deferred tax liabilities           |  |                |        |      |   |       
|Insurance reserves                 |  |                | 6,257  |      |   | 1,942 
|Deferred acquisition costs         |  |                | 66,855 |      |   | 57,917
|Net unrealized gains on securities |  |                | 3,107  |      |   | 508   
|Other                              |  |                | 1,003  |      |   | 3,761 
|                                   |  |                |        |      |   |       
|Deferred tax liabilities           |  |                | 77,222 |      |   | 64,128
|                                   |  |                |        |      |   |       
|Net deferred tax liability         |  | $              | 75,478 |      | $ | 61,684
|                                   |  |                |        |      |   |       

Management believes that based on its historical pattern of taxable income, the Company will produce sufficient
income in the future to realize its deferred tax assets after valuation allowance. Adjustments to the valuation allowance will be made if there is a change in managements assessment of the amount of the deferred tax asset that is realizable.

The amount of income taxes paid by the Company is subject to ongoing audits in various jurisdictions. We reserve for our best estimate of potential
payments/settlements to be made to the Internal Revenue Service (the Service) and other taxing jurisdictions for audits ongoing or not yet commenced. In 2006, the Service completed all fieldwork with regards to its examination of the
Companys federal income tax returns for tax years 2002-2003. The Company anticipates the final report being submitted to the Joint Committee on Taxation for their review during the first quarter of 2007. The statute of limitations for the
2002-2003 tax years expires in 2008. In addition, in January 2007 , the Service began an examination of tax years 2004 through 2006 in January 2007.

The
Companys liability for income taxes includes managements best estimate of potential payments and settlements for audit periods still subject to review by the Service or other taxing jurisdictions. Audit periods remain open for review
until the statute of limitations has passed. The completion of review or the expiration of the statute of limitations for a given audit period could result in an adjustment to our liability for income taxes. Any such adjustment could be material to
our results of operations for any given quarterly or annual period based, in part, upon the results of operations for the given period.

On
January 26, 2006, the Internal Revenue Service (the Service) officially closed the audit of the consolidated federal income tax returns for the 1997 to 2001 periods. As a result of certain favorable resolutions, the Companys
statement of operations for the year ended December 31, 2005 includes an income tax benefit of $3 million, reflecting a reduction in the Companys liability for income taxes.

For tax year 2007, the Company has chosen to participate in the Services new Compliance Assurance Program (the CAP). Under CAP, the Service assigns an examination team to review completed
transactions contemporaneously during the 2007 tax year in order to reach agreement with the Company on how they should be reported in the tax return. If disagreements arise, accelerated resolutions programs are available to resolve the
disagreements in a timely manner before the tax return is filed. It is managements expectation this new program will significantly shorten the time period between when the Company files its federal income tax return and the Service completes
its examination of the return.



F - 23



---

Pruco Life Insurance Company of New Jersey

Notes to Financial Statements

---



8. CERTAIN NONTRADITIONAL LONG-DURATION CONTRACTS

The Company issues traditional variable annuity contracts through its separate accounts for which investment income and investment gains and losses accrue directly to,
and investment risk is borne by, the contractholder. The Company also issues variable annuity contracts with general and separate account options where the Company contractually guarantees to the contractholder a return of no less than
(1) total deposits made to the contract less any partial withdrawals (return of net deposits), (2) total deposits made to the contract less any partial withdrawals plus a minimum return (minimum return), or
(3) the highest contract value on a specified anniversary date minus any withdrawals following the contract anniversary (anniversary contract value). These guarantees include benefits that are payable in the event of death,
annuitization or at specified dates during the accumulation period including withdrawal and income benefits payable during specified periods.

The Company
also issues annuity contracts with market value adjusted investment options (MVAs), which provide for a return of principal plus a fixed rate of return if held to maturity, or, alternatively, a market adjusted value if
surrendered prior to maturity or if funds are reallocated to other investment options. The market value adjustment may result in a gain or loss to the Company, depending on crediting rates or an indexed rate at surrender, as applicable.

In addition, the Company issues variable life, variable universal life and universal life contracts where the Company contractually guarantees to the contractholder a
death benefit even when there is insufficient value to cover monthly mortality and expense charges, whereas otherwise the contract would typically lapse (no lapse guarantee). Variable life and variable universal life contracts are
offered with general and separate account options similar to variable annuities.

The assets supporting the variable portion of both traditional variable
annuities and certain variable contracts with guarantees are carried at fair value and reported as Separate account assets with an equivalent amount reported as Separate account liabilities. Amounts assessed against the
contractholders for mortality, administration, and other services are included within revenue in Policy charges and fee income and changes in liabilities for minimum guarantees are generally included in Policyholders
benefits. In 2006 and 2005 there were no gains or losses on transfers of assets from the general account to a separate account.

For those guarantees
of benefits that are payable in the event of death, the net amount at risk is generally defined as the current guaranteed minimum death benefit in excess of the current account balance at the balance sheet date. For guarantees of benefits that are
payable at annuitization, the net amount at risk is generally defined as the present value of the minimum guaranteed annuity payments available to the contractholder determined in accordance with the terms of the contract in excess of the current
account balance. The Companys contracts with guarantees may offer more than one type of guarantee in each contract; therefore, the amounts listed may not be mutually exclusive. As of December 31, 2006 and 2005, the Company had the
following guarantees associated with these contracts, by product and guarantee type:



F - 24



---

Pruco Life Insurance Company of New Jersey

Notes to Financial Statements

---

8. CERTAIN NONTRADITIONAL
LONG-DURATION CONTRACTS (continued)



|                                                               |  |                       |          |                                    |   |                       |  |                                    |          |  |   |          
|-------------------------------------------------------------- |  | --------------------- | -------- | ---------------------------------- | - | --------------------- |  | ---------------------------------- | -------- |  | - | ---------
|                                                               |  | December 31, 2006     |          | December 31, 2005                 
|                                                               |  | In the Event of Death |          | At Annuitization /Accumulation (1) |   | In the Event of Death |  | At Annuitization /Accumulation (1)
|Variable Annuity Contracts                                     |  | (in thousands)        |          | (in thousands)                    
|Return of net deposits                                         |  |                       |          |                                    |   |                       |  |                                    |          |  |   |          
|                                                               |  |                       |          |                                   
|Account value                                                  |  | $                     | 410,196  |                                    |   | N/A                   |  | $                                  | 303,639  |  |   | N/A      
|                                                               |  |                       |          |                                   
|Net amount at risk                                             |  | $                     | 120      |                                    |   | N/A                   |  | $                                  | 102      |  |   | N/A      
|                                                               |  |                       |          |                                   
|Average attained age of contractholders                        |  |                       | 62 years |                                    |   | N/A                   |  |                                    | 62 years |  |   | N/A      
|                                                               |  |                       |          |                                   
|Minimum return or contract value                               |  |                       |          |                                    |   |                       |  |                                    |          |  |   |          
|Account value                                                  |  | $                     | 768,746  |                                    | $ | 286,577               |  | $                                  | 747,305  |  | $ | 139,073  
|Net amount at risk                                             |  | $                     | 21,413   |                                    | $ | 72                    |  | $                                  | 42,256   |  | $ | 2        
|Average attained age of contractholders                        |  |                       | 64 years |                                    |   | 59 years              |  |                                    | 63 years |  |   | 57 years 
|Average period remaining until earliest expected annuitization |  |                       | N/A      |                                    |   | 5.5 years             |  |                                    | N/A      |  |   | 6.4 years



|(1) | Includes income and withdrawal benefits as described herein
|--- | -----------------------------------------------------------



|                                |  |                  |        |                |   |                  |  |                |        |  |   |       
|------------------------------- |  | ---------------- | ------ | -------------- | - | ---------------- |  | -------------- | ------ |  | - | ------
|Market value adjusted annuities |  | Unadjusted Value |        | Adjusted Value |   | Unadjusted Value |  | Adjusted Value
|Account value                   |  | $                | 26,543 |                | $ | 26,856           |  | $              | 31,264 |  | $ | 31,842



|                                                                    |  |                       |           |                   |   |          
|------------------------------------------------------------------- |  | --------------------- | --------- | ----------------- | - | ---------
|                                                                    |  | December 31, 2006     |           | December 31, 2005
|                                                                    |  | In the Event of Death
|Variable Life, Variable Universal Life and Universal Life Contracts |  | (in thousands)       
|No Lapse Guarantees                                                 |  |                       |           |                   |   |          
|                                                                    |  |                      
|Separate account value                                              |  | $                     | 466,859   |                   | $ | 427,765  
|                                                                    |  |                      
|General account value                                               |  | $                     | 103,006   |                   | $ | 83,961   
|                                                                    |  |                      
|Net amount at risk                                                  |  | $                     | 5,982,110 |                   | $ | 5,922,134
|                                                                    |  |                      
|Average attained age of contractholders                             |  |                       | 44 years  |                   |   | 43 years 

Account balances of variable annuity contracts with guarantees were invested in separate account investment
options as follows:



|                   |  |                   |         |                   |   |        
|------------------ |  | ----------------- | ------- | ----------------- | - | -------
|                   |  | December 31, 2006 |         | December 31, 2005
|                   |  | (in thousands)   
|                   |  |                  
|Equity funds       |  | $                 | 672,087 |                   | $ | 638,156
|                   |  |                  
|Bond funds         |  |                   | 65,380  |                   |   | 70,859 
|                   |  |                  
|Balanced funds     |  |                   | 159,423 |                   |   | 20,264 
|                   |  |                  
|Money market funds |  |                   | 22,086  |                   |   | 18,538 
|                   |  |                  
|Specialty funds    |  |                   | 3,364   |                   |   | 1,605  
|                   |  |                   |         |                   |   |        
|Total              |  | $                 | 922,340 |                   | $ | 749,422
|                   |  |                   |         |                   |   |        



F - 25



---

Pruco Life Insurance Company of New Jersey

Notes to Financial Statements

---



8. CERTAIN NONTRADITIONAL LONG-DURATION CONTRACTS (continued)

In addition to the above mentioned amounts invested in separate account investment options, $256.6 million and $301.5 million of account balances of variable annuity
contracts with guarantees (inclusive of contracts with MVA features) were invested in general account investment options in 2006 and 2005 respectively.

Liabilities For Guarantee Benefits

The table below summarizes the changes in general account liabilities for guarantees on variable
contracts prior to reinsurance. The liabilities for guaranteed minimum death benefits (GMDB) and guaranteed minimum income benefits (GMIB) and guaranteed minimum income and withdrawal benefits (GMIWB) are included
in Future policy benefits and the related changes in the liabilities are included in Policyholders benefits. Guaranteed minimum withdrawal benefits (GMWB), and guaranteed minimum income and withdrawals
benefits (GMIWB), features are considered to be derivatives under SFAS No. 133, and changes in the fair value of the derivative are recognized through Realized investment gains (losses), net.



|                                |  |                |        |   |      |   |       |  |    |       |   |  |   |        |  
|------------------------------- |  | -------------- | ------ | - | ---- | - | ----- |  | -- | ----- | - |  | - | ------ | -
|                                |  | GMDB           |        |   | GMIB |   | GMIWB |  |    | Total |  
|                                |  | (in thousands) |       
|Balance as of January 1, 2004   |  | $              | 1,633  |   |      |   |      |  |    |      |   |  | $ | 1,633  |  
|Incurred guarantee benefits(1)  |  |                | 762    |   |      |   | 126   |  |    |      |   |  |   | 888    |  
|Paid guarantee benefits         |  |                | (1,154 | ) |      |   |      |  |    |      |   |  |   | (1,154 | )
|                                |  |                |        |   |      |   |       |  |    |       |   |  |   |        |  
|Balance as of December 31, 2004 |  | $              | 1,241  |   |      | $ | 126   |  |    |      |   |  | $ | 1,367  |  
|Incurred guarantee benefits(1)  |  |                | 1,809  |   |      |   | 189   |  |    |      |   |  |   | 1,998  |  
|Paid guarantee benefits         |  |                | (701   | ) |      |   |      |  |    |      |   |  |   | (701   | )
|                                |  |                |        |   |      |   |       |  |    |       |   |  |   |        |  
|Balance as of December 31, 2005 |  | $              | 2,349  |   |      | $ | 315   |  |    |      |   |  | $ | 2,664  |  
|Incurred guarantee benefits(1)  |  |                | 2,507  |   |      |   | 249   |  |    | (130  | ) |  |   | 2,626  |  
|Paid guarantee benefits         |  |                | (317   | ) |      |   |      |  |    |      |   |  |   | (317   | )
|                                |  |                |        |   |      |   |       |  |    |       |   |  |   |        |  
|Balance as of December 31, 2006 |  | $              | 4,539  |   |      | $ | 564   |  | ($ | 130   | ) |  | $ | 4,973  |  
|                                |  |                |        |   |      |   |       |  |    |       |   |  |   |        |  



|(1) | Incurred guarantee benefits include the portion of assessments established as additions to reserves as well as changes in estimates effecting the reserves. Also includes changes in
the fair value of features considered to be derivatives.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

The GMDB liability is determined each period end by estimating the accumulated
value of a portion of the total assessments to date less the accumulated value of the death benefits in excess of the account balance. The portion of assessments used is chosen such that, at issue, the present value of expected death benefits in
excess of the projected account balance and the portion of the present value of total expected assessments over the lifetime of the contracts are equal. The GMIB liability was determined by estimating the accumulated value of a percentage of the
total assessments to date less the accumulated value of the projected income benefits in excess of the account balance. The Company regularly evaluates the estimates used and adjusts the GMDB and GMIB liability balances, with a related charge or
credit to earnings, if actual experience or other evidence suggests that earlier assumptions should be revised.

The present value of death benefits in
excess of the projected account balance and the present value of total expected assessments for GMDBs were determined over a reasonable range of stochastically generated scenarios. For variable annuities and variable universal life, 5,000
scenarios were stochastically generated and, from these, 200 scenarios were selected using a sampling technique. For variable life, various scenarios covering a reasonable range were weighted based on a statistical lognormal model. For universal
life, 1,000 scenarios were stochastically generated and selected.

The GMIWB feature provides a contractholder with two methods to receive guaranteed
minimum payments over time a withdrawal option and an income option. Each of these amounts is based on a protected withdrawal value (the GMIWB Protected Withdrawal Value). The initial GMIWB
Protected Withdrawal Value is determined as of the date that the contractholder makes his/her first withdrawal under the annuity following the election of the GMIWB. The initial GMIWB Protected Withdrawal Value is equal to the greatest of three
amounts, which, stated generally, are (a) account value, plus additional purchase payments and any credits, rolled up at a specified percentage for a period of time (b) account value as of the date of the first withdrawal and (c) a
specified highest anniversary value. Under the withdrawal option, the Company guarantees that a specified percentage of the GMIWB



F - 26



---

Pruco Life Insurance Company of New Jersey

Notes to Financial Statements

---



8. CERTAIN NONTRADITIONAL LONG-DURATION CONTRACTS (continued)

Protected Withdrawal Value can be withdrawn each year until the GMIWB Protected Withdrawal Value has been exhausted. Under the income option, the Company guarantees that
a lesser percentage of the GMIWB Protected Withdrawal Value can be withdrawn for life. As under the GMWB feature, the contract holder may elect to step-up the GMIWB Protected Withdrawal Value if, due to positive market performance, the account value
is greater than the current GMIWB Protected Withdrawal Value. The Company reinsurers 100% of its liability associated with GMIWB with affiliates.

Deferred Sales Inducements

The Company defers sales inducements and amortizes them over the anticipated life of the policy using the
same methodology and assumptions used to amortize deferred policy acquisition costs. The Company offers various types of sales inducements. These inducements include: (i) a bonus whereby the policyholders initial account balance is
increased by an amount equal to a specified percentage of the customers initial deposit and (ii) additional interest credits after a certain number of years a contract is held. Changes in deferred sales inducements are as follows:



|                           |  |                |        |   |      |   |        |      |  |   |        |  
|-------------------------- |  | -------------- | ------ | - | ---- | - | ------ | ---- |  | - | ------ | -
|                           |  | 2006           |        |   | 2005 |   |        | 2004 | 
|                           |  | (in thousands) |       
|Balance, beginning of year |  | $              | 13,616 |   |      | $ | 11,115 |      |  | $ | 7,879  |  
|Capitalization             |  |                | 6,382  |   |      |   | 3,863  |      |  |   | 4,461  |  
|Amortization               |  |                | (985   | ) |      |   | (1,362 | )    |  |   | (1,225 | )
|                           |  |                |        |   |      |   |        |      |  |   |        |  
|Balance, end of year       |  | $              | 19,013 |   |      | $ | 13,616 |      |  | $ | 11,115 |  
|                           |  |                |        |   |      |   |        |      |  |   |        |  

9. STATUTORY NET INCOME AND SURPLUS AND DIVIDEND RESTRICTIONS

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

Statutory net income (loss) of the Company amounted to $1 million, ($1) million, and $57 million
for the years ended December 31, 2006, 2005 and 2004, respectively. Statutory surplus of the Company amounted to $137 million and $142 million at December 31, 2006 and 2005, respectively. The statutory loss in 2003 was primarily attributed
to the surplus strain from new business, which results from higher commissions and selling expenses, which are not deferred under statutory accounting, and from increases to reserves. During 2004, the Company obtained reinsurance on the term life
business from a captive affiliate, mitigating the surplus strain on that business. The agreement is discussed further (in Note 13 to the Financial Statements).

The Company is subject to New Jersey law. The maximum amount of dividends, which can be paid by State of New Jersey insurance companies to shareholders without prior approval of the Insurance Commissioner, is subject to
N.J.S.A.17:27A-4.c(2)(b). There have been no dividend payments to the Companys parent in 2006, 2005 or 2004.

10. FAIR VALUE OF FINANCIAL
INSTRUMENTS

The fair values presented below have been determined by using available market information and by applying valuation methodologies.
Considerable judgment is applied in interpreting data to develop the estimates of fair value. These fair values may not be realized in a current market exchange. The use of different market assumptions and/or estimation methodologies could have a
material effect on the fair values. The methods and assumptions discussed below were used in calculating the fair values of the instruments. See Note 11 to the Financial Statements for a discussion of derivative instruments.

Fixed maturities

The fair values of public fixed maturity
securities are based on quoted market prices or estimates from independent pricing services. However, for investments in private placement fixed maturity securities, this information is not available. For these private investments, the fair value is
determined typically by using a discounted cash flow model, which considers current market credit spreads for publicly traded issues with similar terms by companies of comparable credit quality, and an additional spread



F - 27



---

Pruco Life Insurance Company of New Jersey

Notes to Financial Statements

---



10. FAIR VALUE OF FINANCIAL INSTRUMENTS (Continued)

component for the reduced liquidity associated with private placements. This additional spread component is determined based on surveys of various third party financial
institutions. Historically, changes in estimated future cash flows or the assessment of an issuers credit quality have been the more significant factors in determining fair values.

Commercial Loans

The fair value of commercial loans, other than those held by the Companys commercial
mortgage operations, is primarily based upon the present value of the expected future cash flows discounted at the appropriate U.S. Treasury rate, and adjusted for the current market spread for similar quality loans.

The fair value of commercial loans held by the Companys commercial mortgage operations is based upon various factors, including the terms of the loans, the
intended exit strategy for the loans based upon either a securitization pricing model or commitments from investors, prevailing interest rates, and credit risk.

Policy loans

The fair value of policy loans is calculated using a discounted cash flow model based upon current U.S. Treasury rates
and historical loan repayment patterns.

Investment contracts

For individual deferred annuities and other deposit liabilities, fair value approximates carrying value.

The following
table discloses the carrying amounts and fair values of the Companys financial instruments at December 31:



|                                            |  |                |           |            |   |               |  |            |           |  |   |          
|------------------------------------------- |  | -------------- | --------- | ---------- | - | ------------- |  | ---------- | --------- |  | - | ---------
|                                            |  | 2006           |           | 2005      
|                                            |  | Carrying Value |           | Fair Value |   | CarryingValue |  | Fair Value
|                                            |  | (in thousands)
|Financial assets:                           |  |                |           |            |   |               |  |            |           |  |   |          
|                                            |  |                |           |           
|Fixed maturities, available for sale        |  | $              | 920,925   |            | $ | 920,925       |  | $          | 991,575   |  | $ | 991,575  
|Policy loans                                |  |                | 160,614   |            |   | 171,887       |  |            | 155,705   |  |   | 171,264  
|Short-term investments                      |  |                | 11,259    |            |   | 11,259        |  |            | 23,501    |  |   | 23,501   
|Commercial loans                            |  |                | 48,979    |            |   | 48,979        |  |            | 20,353    |  |   | 20,353   
|Cash and cash equivalents                   |  |                | 59,543    |            |   | 59,543        |  |            | 116,040   |  |   | 116,040  
|Separate account assets                     |  |                | 2,619,586 |            |   | 2,619,586     |  |            | 2,287,786 |  |   | 2,287,786
|                                            |  |                |           |           
|Financial liabilities:                      |  |                |           |            |   |               |  |            |           |  |   |          
|                                            |  |                |           |           
|Investment contracts                        |  |                | 358,572   |            |   | 358,572       |  |            | 385,569   |  |   | 385,569  
|Cash collateral for loaned securities       |  |                | 28,212    |            |   | 28,212        |  |            | 86,530    |  |   | 86,530   
|Securities sold under repurchase agreements |  |                | 4,005     |            |   | 4,005         |  |            | 1,708     |  |   | 1,708    
|Short Term Debt to affiliates               |  |                | 25,348    |            |   | 25,348        |  |            | 52,994    |  |   | 52,944   
|Separate account liabilities                |  |                | 2,619,586 |            |   | 2,619,586     |  |            | 2,287,786 |  |   | 2,287,786



F - 28



---

Pruco Life Insurance Company of New Jersey

Notes to Financial Statements

---



11. DERIVATIVE INSTRUMENTS

Types of Derivative Instruments and Derivative Strategies

Exchange-traded futures are used by the
Company to reduce market risks from changes in interest rates, to alter mismatches between the duration of assets in a portfolio and the duration of liabilities supported by those assets, and to hedge against changes in the value of securities it
owns or anticipates acquiring or selling. In exchange-traded futures transactions, the Company agrees to purchase or sell a specified number of contracts, the values of which are determined by the values of designated classes of securities, and to
post variation margin on a daily basis in an amount equal to the difference in the daily market values of those contracts. The Company enters into exchange-traded futures with regulated futures commissions merchants who are members of a trading
exchange.

Futures typically are used to hedge duration mismatches between assets and liabilities. Futures move substantially in value as interest rates
change and can be used to either modify or hedge existing interest rate risk.

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

Under currency swaps, the Company agrees with other parties to exchange, at specified intervals, the difference between one currency and another at an exchange rate and calculated by reference to an agreed principal
amount. Generally, the principal amount of each currency is exchanged at the beginning and termination of the currency swap by each party. These transactions are entered into pursuant to master agreements that provide for a single net payment to be
made by one counterparty for payments made in the same currency at each due date.

Credit derivatives are used by the Company to enhance the return on the
Companys investment portfolio by creating credit exposure similar to an investment in public fixed maturity cash instruments. With credit derivatives the Company can sell credit protection on an identified name, or a basket of names in a first
to default structure, and in return receive a quarterly premium. With single name credit default derivatives, this premium or credit spread generally corresponds to the difference between the yield on the referenced names public fixed maturity
cash instruments and swap rates, at the time the agreement is executed. With first to default baskets, the premium generally corresponds to a high proportion of the sum of the credit spreads of the names in the basket. If there is an event of
default by the referenced name or one of the referenced names in a basket, as defined by the agreement, then the Company is obligated to pay the counterparty the referenced amount of the contract and receive in return the referenced defaulted
security or similar security. In addition to selling credit protection, the Company has purchased credit protection using credit derivatives in order to hedge specific credit exposures in our investment portfolio.

Embedded Derivatives

As described in Note 8, the Company
sells variable annuity products which contain embedded derivatives. These embedded derivatives are marked to market through Realized investment gains (losses), net based on the change in value of the underlying contractual guarantees
which are determined using pricing models. The Company has entered into reinsurance agreements to transfer the risk related to the embedded derivatives to affiliates. These reinsurance agreements are derivatives and have been accounted in the same
manner as the embedded derivative.

The Company invests in fixed maturities that, in addition to a stated coupon, provide a return based upon the results of
an underlying portfolio of fixed income investments and related investment activity. The Company accounts for these investments as available for sale fixed maturities containing embedded derivatives. Such embedded derivatives are marked to market
through Realized investment gains (losses), net, based upon the change in value of the underlying portfolio.

Credit Risk

The Company is exposed to credit-related losses in the event of nonperformance by counterparties to derivative financial instruments. Generally,
the current credit exposure of the Companys derivative contracts is limited to the fair value at the reporting date. The credit exposure of the Companys over-the-counter derivative transactions is represented by the fair value (market
value) of contracts with a positive fair value (market value) at the reporting date. Because exchange-traded futures are effected through regulated exchanges, and positions are settled on a daily basis, the Company has reduced exposure to
credit-related losses in the event of nonperformance by counterparties to such financial instruments.

The Company enters into over-the-counter derivative
transactions with creditworthy counterparties pursuant to master agreements that provide for a netting of payments and receipts with a single counterparty. Substantially all of the Companys over-the-counter derivative contracts are transacted
with an affiliate.



F - 29



---

Pruco Life Insurance Company of New Jersey

Notes to Financial Statements

---



12. COMMITMENTS, CONTINGENCIES AND LITIGATION AND REGULATORY MATTERS

Commitments

The Company has made commitments to fund $14
million of commercial loans in 2006. The Company also made commitments to purchase or fund investments, mostly private fixed maturities, of $18 million in 2006.

Contingencies

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 offer customers appropriate remediation and may incur charges and expenses, including the costs of such remediation, administrative
costs and regulatory fines.

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 such period. Management believes, however, that the ultimate payments in connection
with these matters should not have a material adverse effect on the Companys financial position.

Litigation and Regulatory Proceedings

The Companys litigation and regulatory matters are subject to legal and regulatory actions in the ordinary course of its businesses, which
may include class action lawsuits. Pending legal and regulatory actions include proceedings relating to aspects of the businesses and operations that are specific to the Company and that are typical of the businesses in which the Company operates.
Class action and individual lawsuits may involve a variety of issues and/or allegations, which include sales practices, underwriting practices, claims payment and procedures, premium charges, policy servicing and breach of fiduciary duties to
customers. The Company may also be subject to litigation arising out of its general business activities, such as its investments and third party contracts. In certain of these matters, the plaintiffs may seek large and/or indeterminate amounts,
including punitive or exemplary damages.

The Companys litigation and regulatory matters are subject to many uncertainties, and given the complexity
and scope, the outcomes cannot be predicted. It is possible that the results of operations or the cash flows of the Company in a particular quarterly or annual period could be materially affected by an ultimate unfavorable resolution of litigation
and regulatory matters, depending, in part, upon the results of operations or cash flows 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.

13. RELATED PARTY
TRANSACTIONS

The Company has extensive transactions and relationships with 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. These expenses can be grouped into
the following categories: general and administrative expenses and agency distribution expenses.

The Companys general and administrative expenses are
charged to the Company using allocation methodologies based on business processes. Management believes that the methodology is reasonable and reflects costs incurred by Prudential Insurance to process transactions on behalf of the Company. The
Company operates under service and lease agreements whereby services of officers and employees, supplies, use of equipment and office space are provided by Prudential Insurance. The company reviews its allocation methodology periodically which it
may adjust accordingly. General and administrative expenses in 2005 reflect a change in allocations implemented during the fourth quarter of 2005. General and administrative expenses include allocations of stock compensation expenses related to a
stock option program and a deferred compensation program issued by Prudential Financial.

The Company receives a charge to cover 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 final group earning and length of service. While others are based on an
account balance, which takes into consideration age, service and earnings during career.



F - 30



---

Pruco Life Insurance Company of New Jersey

Notes to Financial Statements

---



13. RELATED PARTY TRANSACTIONS (Continued)

Prudential Insurance sponsors voluntary savings plan for the Companys employees (401(k) plans). The plans provide for salary reduction contributions by employees and matching contributions by the Company of
up to 4% of annual salary. The expense charged the Company for the matching contribution to the plans was $0.4 million in 2006, 2005 and 2004, respectively.

The Companys share of net expense for the pension plans was $1.0 million, $0.7 million and $0.8 million in 2006, 2005 and 2004, respectively.

The Company is charged distribution expenses from Prudential Insurances agency network for both its domestic life and annuity products through a transfer pricing agreement, which is intended to reflect a market based pricing
arrangement.

Affiliated Asset Management Fee Income

Beginning October 1, 2002, in accordance with a servicing agreement with Prudential Investments LLC, the Company receives fee income from policyholder account balances invested in the Prudential Series Funds (PSF). These
revenues are recorded as Asset management fees in the Statements of Operations and Comprehensive Income.

Corporate Owned Life Insurance

The Company has sold two Corporate Owned Life Insurance (COLI) policies to Prudential Insurance. The cash surrender value included in
separate accounts was $508 million and $470 million at December 31, 2006 and December 31, 2005, respectively. Fees related to the COLI policies were $5 million, $5 million and $4 million for the years ending December 31, 2006, 2005
and 2004, respectively.

Reinsurance with Affiliates

Prudential Arizona Reinsurance Capitive Company (PARCC)

The Company reinsures with PARCC 90% of the risks under its term life insurance
policies through an automatic and facultative coinsurance agreement. The Company is not relieved of its primary obligation to the policyholder as a result of these reinsurance transactions. The coinsurance agreement with PARCC also replaces the
yearly renewable term agreements with external reinsurers that were previously in effect on this block of business. There was no net cost associated with the initial transaction. Reinsurance recoverables related to this agreement were $128 million
and $85 million as of December 31, 2006 and December 31, 2005, respectively. Premiums ceded to PARCC in 2006, 2005, and 2004 were $86 million, $70 million and $25 million, respectively. Benefits ceded in 2006, 2005 and 2004 were $23
million, $19 million, and $15 million respectively.

Prudential Insurance

The Company has a yearly renewable term reinsurance agreement with Prudential Insurance and reinsures the majority of all mortality risks, not otherwise reinsured. Reinsurance recoverable related to this agreement was
$7 million and $7 million as of December 31, 2006 and December 2005 respectively. Premiums and fees ceded to Prudential Insurance in 2006, 2005 and 2004 were $30 million, $24 million and $1 million, respectively. Benefits ceded in 2006, 2005
and 2004 were $28 million, $22 million, and $3 million, respectively. The Company is not relieved of its primary obligation to the policyholder as a result of these reinsurance transactions.

Pruco Reinsurance Ltd. (Pruco Re)

During 2005 and 2006, the Company
entered into reinsurance agreements with Pruco Re as part of its risk management and capital management strategies for annuities. Effective October 3, 2005, the Company entered into a coinsurance agreement with Pruco Re providing for the 100%
reinsurance of its Lifetime Five benefit feature sold on its annuities after October 3, 2005.

Effective May 26, 2006, the Company entered into a
new coinsurance agreement with Pruco Reinsurance, Ltd. providing for the 100% reinsurance of its Spousal Lifetime Five benefit feature sold on its annuities. Premiums and benefits ceded related to this treaty are de minimis.

Effective November 20, 2006, the Company entered into a coinsurance agreement with Pruco Re providing for the 100% reinsurance of its Highest Daily Lifetime Five
benefit feature sold on its annuities.

Debt Agreements

The Company has an agreement with Prudential Funding, LLC, a wholly owned subsidiary of Prudential Insurance which allows it to borrow funds for working capital and liquidity needs. The borrowings under this agreement are limited to $100
million.



F - 31



---

Pruco Life Insurance Company of New Jersey

Notes to Financial Statements

---



There was $25 million of debt outstanding to Prudential Funding, LLC as of December 31, 2006 as compared to $53 million at December 31, 2005.
Interest expense related to this agreement was $1 million in 2006 and $1 million in 2005, with related interest charged at a variable rate of 3.10% to 5.32%. As of December 31, 2006 and 2005, there was $32 million and $88 million, respectively,
of asset-based financing.

14. QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)

The unaudited quarterly results of operations for the years ended December 31, 2006 and 2005 are summarized in the table below:



|                                           |  |                                   |        |         |   |              |  |             |        |  |   |       
|------------------------------------------ |  | --------------------------------- | ------ | ------- | - | ------------ |  | ----------- | ------ |  | - | ------
|                                           |  | Three months ended (in thousands)
|                                           |  | March 31                          |        | June 30 |   | September 30 |  | December 31
|2006                                       |  |                                   |        |         |   |              |  |             |        |  |   |       
|Total revenues                             |  | $                                 | 31,603 |         | $ | 30,459       |  | $           | 29,015 |  | $ | 38,413
|Total benefits and expenses                |  |                                   | 24,282 |         |   | 26,918       |  |             | 3,999  |  |   | 23,880
|Income from operations before income taxes |  |                                   | 7,321  |         |   | 3,541        |  |             | 25,016 |  |   | 14,533
|Net income                                 |  |                                   | 5,748  |         |   | 2,862        |  |             | 19,210 |  |   | 11,114
|                                           |  |                                   |        |         |   |              |  |             |        |  |   |       
|2005                                       |  |                                   |        |         |   |              |  |             |        |  |   |       
|Total revenues                             |  | $                                 | 33,075 |         | $ | 35,883       |  | $           | 33,059 |  | $ | 35,773
|Total benefits and expenses                |  |                                   | 26,118 |         |   | 24,867       |  |             | 7,830  |  |   | 26,159
|Income from operations before income taxes |  |                                   | 6,957  |         |   | 11,016       |  |             | 25,229 |  |   | 9,614 
|Net income                                 |  |                                   | 6,931  |         |   | 7,834        |  |             | 18,142 |  |   | 6,318 
|                                           |  |                                   |        |         |   |              |  |             |        |  |   |       



F - 32