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NEW YORK (Standard & Poor's) May 25, 2006--Standard & Poor's Ratings Services said today it affirmed its 'AA' counterparty credit and financial strength ratings on Pacific Life Insurance Co. and Pacific Life & Annuity Co. and affirmed its 'A' counterparty credit rating on the parent, Pacific LifeCorp. The outlook is stable.
"The ratings on Pacific Life Insurance Co. and Pacific Life & Annuity Insurance Co. (collectively, Pacific Life) reflects its sustained strength in the U.S. individual life and individual annuity marketplace and strong competitive positioning in institutional products business," explained Standard & Poor's credit analyst Neil Strauss. "In 2005, Pacific Life was the 10th-largest producer of individual life insurance premium in the U.S., and it also generated a substantial $7.2 billion in annuity premium sales." The insurer maintains very strong liquidity characteristics and very strong capital strength.
The counterparty credit rating on Pacific LifeCorp reflects its very strong consolidated earnings profile sourced primarily from Pacific Life, and to a lesser extent, Aviation Capital Group (not rated). Total group GAAP pretax operating earnings totaled a very strong $481 million in 2005, although it was a decline from $513 million in 2004 due to narrower spreads and reduced investment prepayment income in 2005, as well as the influence of some nonrecurring items. The life insurance and annuity divisions produced healthy profits and generated approximately 75% of consolidated earnings. Pacific LifeCorp maintained conservative consolidated financial leverage of 15% at year-end 2005, and very strong fixed-charge coverage of 12x.
Standard & Poor's expects Pacific LifeCorp to generate very strong consolidated earnings in 2006 while maintaining very strong liquidity and capital strength. Consolidated debt (nonrecourse) to capital of 15%-20% and fixed-charge coverage of at least 10x is expected as well as a Standard & Poor's capital adequacy ratio exceeding 200% at Pacific Life.
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