AM Best Information Services

MAY 09, 2018 09:13 AM (EDT)

A.M. Best Upgrades Issuer Credit Ratings of Members of Pacific Life Group

 Anthony McSwieney
Senior Financial Analyst
+1 908 439 2200, ext. 5715

William Pargeans
+1 908 439 2200, ext. 5359

Christopher Sharkey
Manager, Public Relations
(908) 439 2200, ext. 5159

Jim Peavy
Director, Public Relations
(908) 439 2200, ext. 5644


OLDWICK - MAY 09, 2018 09:13 AM (EDT)
A.M. Best has upgraded the Long-Term Issuer Credit Ratings (Long-Term ICR) to “aa” from “aa-” and affirmed the Financial Strength Rating of A+ (Superior) of the members of Pacific Life Group (Pacific Life) (headquartered in Newport Beach, CA): Pacific Life Insurance Company and Pacific Life & Annuity Company. Additionally, A.M. Best has upgraded the Long-Term ICR to “a” from “a-” for the group’s holding company, Pacific LifeCorp (Wilmington, DE). A.M. Best also has upgraded the Long-Term Issue Credit Ratings (Long-Term IR) of Pacific LifeCorp and its operating subsidiaries. The outlook of the Long-Term ICRs and the Long-Term IRs has been revised to stable from positive, while the outlook for the FSR remains stable. (See below for a detailed listing of the Long- and Short-Term IRs.)

The ratings reflect Pacific Life’s balance sheet strength, which A.M. Best categorizes as strongest, as well as its strong operating performance, favorable business profile and very strong enterprise risk management (ERM). The rating actions reflect Pacific Life’s ability to strengthen its risk-adjusted capitalization through strong and consistent operating performance.

Pacific Life’s balance sheet is supported by its historically strong and improving trend in risk-adjusted capitalization, diversified operating profile, strong liquidity resources and solid earnings, which are supported by being one of the industry’s leading sales organizations in its key product lines. Pacific Life is a prominent leader in the affluent market segments for individual life insurance and is considered a top-tier writer of life insurance sales, holding leading market positions in universal life, indexed universal life and variable universal life insurance. The company’s earnings profile benefits from diversification within the life insurance and retirement services segments, along with the company’s aircraft leasing business. Pacific Life’s ratings reflect the company’s robust ERM program, which puts a strong focus on protecting the balance sheet from 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 dynamic and macro-hedging capabilities. Commercial mortgage exposure is considered high relative to the industry along with the company’s allocation to NAIC 2 asset classes and is considered a concentration risk to the company’s risk profile; however, Pacific Life has demonstrated the ability to manage these concentration risks within the commercial loan portfolio and has less exposure to assets classes below NAIC 2 compared with industry peers.

The following Long-Term IRs have been upgraded with the outlook revised to stable from positive:

Pacific LifeCorp

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

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

— to “a” from “a-” on $450 million 6.00% senior unsecured notes, due 2020

Pacific Life Insurance Company

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

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

— to “a+” from “a” on $1 billion 9.25% surplus notes, due 2039 (of which $621 million remains)

Pacific Life Funding, LLC—to “aa” from “aa-” program rating

— to “aa” from “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 Pacific Life Global Funding has been upgraded to “aa” from “aa-” with the outlook revised to stable from positive.

This press release relates to Credit Ratings that have been published on A.M. 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 A.M. Best’s Recent Rating Activity web page. For additional information regarding the use and limitations of Credit Rating opinions, please view Understanding Best’s Credit Ratings. For information on the proper media use of Best’s Credit Ratings and A.M. Best press releases, please view Guide for Media - Proper Use of Best’s Credit Ratings and A.M. Best Rating Action Press Releases.

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