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Rating Action:

MOODY'S ASSIGNS A3 RATING TO PACIFIC LIFECORP NOTE ISSUE

02 Sep 2003
MOODY'S ASSIGNS A3 RATING TO PACIFIC LIFECORP NOTE ISSUE

New York, September 02, 2003 -- Moody's Investors Service has assigned an A3 debt rating to Pacific LifeCorp's senior note issue maturing in 2033. The outlook for the rating is stable. Pacific LifeCorp is the parent life company of Pacific Life Insurance Company (Pacific Life, Aa3 insurance financial strength rating with a stable outlook). Pacific LifeCorp is, in turn, 98% owned by Pacific Mutual Holding Company, a mutual holding company whose members are policyholders of Pacific Life.

The proceeds of the debt issue will be used primarily to make a substantial capital contribution to Pacific Life, with the remaining funds for general corporate purposes. The company is expected to keep a substantial portion of the proceeds at Pacific LifeCorp, which should provide the company with strong flexibility in meeting its annual interest expense.

Moody's says that the rating is based upon on the company's established market position in variable and universal life, annuities, and group pensions and institutional products, as well as its strong asset management capabilities, prudent asset/liability management and good capitalization. These strengths are somewhat offset by risks arising from its issuance of institutional investment products (such as funding agreement backed notes), the sensitivity of its variable annuity business to equity market fluctuations, and credit losses from invested assets.

Pacific Life has grown considerably faster than its industry peers in recent years due to its broad distribution network, strong customer service capabilities, and favorable reputation. This rapid growth, and along with credit losses on several of its investments in 2002 and difficult equity markets, have adversely affected Pacific Life's statutory capitalization.

Pacific LifeCorp's primary source of funds to service this debt issue and its other obligations will be dividends and other payments from Pacific Life. These payments are subject to regulatory restrictions and could be suspended by insurance regulators under certain circumstances.

The debt issue increases Pacific LifeCorp's financial leverage on a pro-forma basis (excluding accumulated other comprehensive income) to 15% based upon the company's June 30, 2003 GAAP financials, with the expectation that most of Pacific LifeCorp's existing consolidated short-term debt will be retired through the use of the proceeds of this and other transactions.

The statutory cash flow coverage based upon an ordinary dividend in 2003 is $144 million which can be made by Pacific Life to Pacific LifeCorp without prior regulatory approval, results in on a pro forma coverage for Pacific LifeCorp of 4.9 times.

GAAP interest coverage on a pro forma basis giving effect for the new issue is 7.4 times, based upon the company's trailing twelve months ending June 30, 2003 earnings before interest and taxes (EBIT).

The following ratings were also confirmed with a stable outlook:

Pacific Life Insurance Company: insurance financial strength at Aa3; surplus notes at A2, short-term insurance financial strength rating at Prime-1; commercial paper rating at Prime-1.

Pacific Life & Annuity Company: insurance financial strength at Aa3;

Pacific Life Funding, LLC: senior debt at Aa3;

Premium Asset Trust Series 2003-3: senior debt at Aa3.

Pacific LifeCorp is an insurance and financial services organization headquartered in Newport Beach, California. It had approximately $62 billion in GAAP assets and $5.1 billion in stockholders' equity as of June 30, 2003. Pacific Life, its primary subsidiary, had total statutory assets of $55 billion and total adjusted statutory capital of $2.3 billion as of June 30, 2003.

An insurance financial strength rating measures an insurance company's ability to repay punctually its senior policyholder obligations and claims.

For more information, please visit our Web site at www.moodys.com/insurance.

New York
Robert Riegel
Managing Director
LIfe Insurance Group
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

New York
Arthur Fliegelman
VP - Senior Credit Officer
Life Insurance Group
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

No Related Data.
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