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Best’s News & Research Service - May 29, 2020 12:35 PM (EDT)

AM Best Affirms Credit Ratings of Pacific LifeCorp and Its Subsidiaries

  • May 29, 2020 12:35 PM (EDT)

Oldwick //BestWire// - AM Best has affirmed the Financial Strength Rating of A+ (Superior) and the Long-Term Issuer Credit Ratings (Long-Term ICR) of “aa” of the members of Pacific Life Group (Pacific Life): Pacific Life Insurance Company and Pacific Life & Annuity Company. Both companies are headquartered in Newport Beach, CA. Additionally, AM Best has affirmed the Long-Term ICR of “a” of the group’s intermediate holding company, Pacific LifeCorp (Wilmington, DE). AM Best also has affirmed the Long-Term Issue Credit Ratings (Long-Term IR) of Pacific LifeCorp. The outlook of these Credit Ratings (ratings) is stable. (See below for a detailed listing of the Long- and Short-Term IRs.)

The ratings reflect Pacific Life’s balance sheet strength, which AM Best categorizes as strongest, as well as its strong operating performance, favorable business profile and very strong enterprise risk management (ERM).

Pacific Life’s balance sheet is supported by its historically robust risk-adjusted capitalization, diversified operating profile, liquidity resources and positive earnings trends, which are supported by being one of the industry’s leading sales organizations in its key product lines. The company sold its share in an aircraft leasing business in 2019, lowering its investment exposure to the travel segment. Pacific Life is a prominent leader in the affluent market segments and is considered a top-tier writer of life insurance and annuities, holding leading market positions in universal life, indexed universal life, variable universal life insurance, fixed annuities, variable annuities and structured settlements. The company’s earnings profile benefits from diversification within the life insurance, retirement services and reinsurance segments. Pacific Life’s ratings reflect the company’s robust ERM program, which puts a strong focus on protecting the balance sheet from extreme event-driven risks.

Partially offsetting these positive rating factors are earnings that are correlated to the financial markets due to the company’s exposure to interest and market rate sensitive reserves, which is partially mitigated through hedging programs. AM Best notes that volatility in the economy following the COVID-19 pandemic will likely continue to impact the life insurance and annuity blocks and the assets backing those products. Pacific Life’s commercial mortgage exposure is considered high relative to the industry along with its allocation to NAIC 2 asset classes, which AM Best considers a concentration risk in the company’s risk profile; however, Pacific Life has less exposure to asset classes below NAIC 2 compared with industry peers.

The following Long-Term IRs have been affirmed with stable outlooks:

Pacific LifeCorp—

— “a” on $600 million 6.60% senior unsecured notes, due 2033

— “a” on $500 million 5.125% senior unsecured notes, due 2043

Pacific Life Insurance Company—

— “a+” on $150 million 7.9% surplus notes, due 2023

— “a+” on $1 billion 9.25% surplus notes, due 2039

— “a+” on $750 million 4.3% surplus notes, due 2067

Pacific Life Funding, LLC—“aa” on the program rating

— “aa” on all outstanding notes issued under the program

The following Short-Term IR has been affirmed:

Pacific Life Insurance Company—

— AMB-1+ on commercial paper

The Long-Term ICR of “aa” of Pacific Life Global Funding has been affirmed with a stable outlook.

This press release relates to Credit Ratings that have been published on AM Best’s website. For all rating information relating to the release and pertinent disclosures, including details of the office responsible for issuing each of the individual ratings referenced in this release, please see AM Best’s Recent Rating Activity web page. For additional information regarding the use and limitations of Credit Rating opinions, please view Guide to Best’s Credit Ratings. For information on the proper media use of Best’s Credit Ratings and AM Best press releases, please view Guide for Media - Proper Use of Best’s Credit Ratings and AM Best Rating Action Press Releases.

AM Best is a global credit rating agency, news publisher and data analytics provider specializing in the insurance industry. Headquartered in the United States, the company does business in over 100 countries with regional offices in New York, London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico City.

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