A.M. Best Downgrades Ratings of Pacific Life Insurance Company and Pacific LifeCorp; Revises Outlook to Negative

OLDWICK, N.J.--(Business Wire)--
A.M. Best Co. has downgraded the financial strength rating (FSR) to A+
(Superior) from A++ (Superior) and issuer credit ratings (ICR) to "aa-" from
"aa+" of Pacific Life Insurance Company (PLIC) (Omaha, NE) and its wholly owned
subsidiary, Pacific Life & Annuity Company (Phoenix, AZ) (together known as
Pacific Life). In addition, A.M. Best has downgraded the ICR and debt ratings to
"a-" from "a+" of Pacific Life`s parent holding company, Pacific LifeCorp
(Wilmington, DE). Concurrently, A.M. Best has downgraded the debt ratings to
"aa-" from "aa+" on the outstanding notes issued under the general account and
separate account funding agreement-backed securities (FABS) programs and all
other debt ratings sponsored by PLIC. The outlook for all ratings has been
revised to negative from stable. (Please see link below for a detailed listing
of the companies and ratings.)

The ratings actions reflect Pacific Life`s earnings volatility in 2008 and also
the decline in the group`s regulatory capital ratio from its historical high in
2007. In addition to credit-related losses, Pacific Life`s statutory and GAAP
earnings were negatively impacted by the equity market downturn through higher
required reserves and a negative net mark-to-market loss (FAS 133) on variable
annuity guarantees along with lower asset-based fee income. Prior to 2008,
Pacific Life maintained one of the strongest regulatory capital ratios in the
industry. While it still maintains one of the strongest risk-based capital
positions within its peer group, Pacific Life`s regulatory ratio declined by
approximately 25% during 2008, which demonstrates the degree of volatility
inherent in its results. The rating actions also incorporate A.M. Best`s
expectation that Pacific Life`s capital ratio may experience further weakening
in 2009 due to additional credit-related losses and statutory reserve increases.

The negative outlook primarily recognizes A.M. Best`s concern over the future
performance of Pacific Life`s investments connected to the commercial mortgage
loan market along with equity markets underlying its variable annuity business.
While A.M. Best notes Pacific Life`s prudent commercial mortgage loan
underwriting practices and excellent historical performance, the persistently
negative economic climate suggests the potential for impairments. A.M. Best
expects rising defaults in light of the deepening recession and is more cautious
on retail, hotel and office properties within close proximity to distressed
housing markets and/or labor markets where unemployment is high. Additionally,
the company`s earnings remain heavily correlated to the equity
markets-particularly within its retail variable annuity businesses-which
potentially may result in a further erosion of operating earnings.

The ratings of Pacific Life reflect its strong risk-adjusted capitalization,
extensive distribution relationships and strong competitive positions. 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. Furthermore, A.M. Best notes that Pacific Life has not fully utilized
available on-shore and off-shore capital management initiatives, which leaves
the company with more statutory financial flexibility than many of its
Superior-rated peers.

Pacific Life also has extensive sources of liquidity. In addition to sizable
positions in cash and highly liquid assets, Pacific Life is approved to receive
collateralized advances as a member of the Federal Home Loan Bank of Topeka
(FHLB). As of December 31, 2008, Pacific Life`s available capacity for FHLB
advances was approximately $1 billion. Pacific Life also has a $700 million
commercial paper program and Pacific LifeCorp has remaining capacity under its
$500 million revolving credit facility, which matures February 2011.

Neither Pacific Life nor its parent holding company has any long-term debt
maturing until 2023 and adjusted financial leverage remains comfortably within
the guidelines for the current ratings Although coverage ratios may decline as
2009 earnings will likely be pressured, A.M. Best notes Pacific LifeCorp`s low
annual debt service requirement of $50 million, which is well below Pacific
Life`s statutory dividend capacity.

For a complete listing of Pacific Life Insurance Company and Pacific LifeCorp`s
FSRs, ICRs and debt ratings, please visit
http://www.ambest.com/press/030606pacificlife.pdf.

The principal methodologies used in determining these ratings, including any
additional methodologies and factors, which may have been considered, can be
found at www.ambest.com/ratings/methodology.

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.

A.M. Best Co.
Analysts
Darian Hala, 908-439-2200, ext. 5802
darian.hala@ambest.com
or
Thomas Rosendale, 908-439-2200, ext. 5201
thomas.rosendale@ambest.com
or
Public Relations
Jim Peavy,908-439-2200, ext. 5644
james.peavy@ambest.com
or
Rachelle Morrow,908-439-2200, ext. 5378
rachelle.morrow@ambest.com

Copyright Business Wire 2009