OLDWICK, N.J., Jun 16, 2008 (BUSINESS WIRE) -- A.M. Best Co. has affirmed the financial strength rating (FSR) of A++ (Superior) and issuer credit ratings (ICR) of "aa+" of Pacific Life Insurance Company (PLIC) (Nebraska) and its wholly owned subsidiary, Pacific Life & Annuity Company (Arizona) (together known as Pacific Life). In addition, A.M. Best has affirmed the (ICR) of "a+" and the debt ratings of PLIC's parent holding company, Pacific LifeCorp (Delaware). Concurrently, A.M. Best has affirmed the debt ratings of the outstanding notes issued under the general account and separate account funding agreement-backed securities (FABS) programs sponsored by PLIC. The outlook for all ratings is stable. (Please see link below for a detailed listing of the companies and ratings.)
The ratings of Pacific Life reflect its superior risk-adjusted capitalization, excellent liquidity profile and financial flexibility, extensive distribution relationships, strong competitive positions and prudent financial and risk management practices. A.M. Best also notes the strength of company management, which is evidenced by its disciplined and highly focused business strategies.
Pacific Life continues to maintain its prominent position as a provider of choice in the most affluent market segments for individual life insurance and variable annuities. In addition, Pacific Life has consistently achieved revenue growth that exceeds industry averages, yielding healthy levels of operating cash flow supported by a stable liability structure, a diversified investment portfolio and extensive liquidity sources. The group's pro forma adjusted debt-to-capital ratio remains moderate at approximately 17%. In addition, interest coverage is strong and projected to remain well within A.M. Best's guidelines for its current ratings.
These strengths are partly offset by the ongoing potential for earnings volatility due to the nature of Pacific Life's business mix. Given its competitive position among the market leaders in variable life and variable annuities, Pacific Life has a disproportionate exposure to the equity markets relative to the rest of the industry. Pacific Life's core universal and corporate owned life insurance (COLI) products, as well as its institutional investment products, are also sensitive to further changes in interest rates, economic conditions and unfavorable legislation. While Pacific Life's broad product portfolio and its diversified and highly productive distribution relationships offer some insulation from unfavorable market conditions, the potential for earnings volatility remains a risk to its long-term financial strength. In addition, Pacific Life maintains an above average exposure to NAIC class 2 bonds (22% of invested assets, 34% of bonds). However, A.M. Best notes that Pacific Life's solid investment management capabilities and strong financial and risk management practices largely mitigate concerns in this area.
A.M. Best notes that Pacific Life recently announced that it has signed a definitive agreement for Pacific LifeCorp to acquire the International Life Reinsurance segment of Scottish Re Group Limited for USD $71.2 million in cash (subject to certain potential downward adjustments). Pending regulatory approval, the transaction is expected to close during the third quarter. In A.M. Best's view, as a relatively modest investment of its parent holding company, the transaction is not material enough to Pacific Life's overall operations to have an impact on its ratings over the near term.
For a complete listing of Pacific Life's FSRs, ICRs and debt ratings, please visit http://www.ambest.com/press/061603pacificlife.pdf.
Founded in 1899, A.M. Best Company is a global full-service credit rating organization dedicated to serving the financial and health care service industries, including insurance companies, banks, hospitals and health care system providers. For more information, visit www.ambest.com.