Pacific Life Annuities

Pacific Life Corp. today ranks as one of America’s leading financial and insurance operations, with over $96 billion in assets and over $5 billion in policyholder equity. It is a mutual insurance holding company, owned by its policyholders, which boasts over half of America’s 100 largest companies as its clients. In addition to insurance, it also sells mutual fund and annuity products. Its advertising icon, the humpback whale, is a well-known corporate symbol.

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The company began operations in 1868 as the Pacific Life Insurance Co. It branched out into accident and disability insurance over the years before changing its corporate structure to a mutual insurance company in 1936. (Today, the life insurance company has reverted to stock structure, providing access to capital markets if needed, but the basic mutual structure remains in effect for policyholders, who own the holding company.) In the 1950s, the company was one of the first in America to begin computerizing its data-entry operations. In recent years, it launched a subsidiary, Pacific Investment Management Company (PIMCO), which has become one of the leading fixed-income management firms in the world. Included among its other subsidiaries are companies providing life reinsurance in Europe and Asia and a company specializing in leasing aircraft.

Pacific Life Annuities

Pacific Life annuities include both Fixed and Variable products. One of its two fixed annuities is a single-premium deferred annuity; the other is a flexible-premium annuity. Its seven different variable annuity products are all tailored to different stages in the retirement-planning process. The company also lists nine annuity products it characterizes as “inactive” – not currently offered for sale.

Financial-strength ratings

Pacific Life annuities are issued by Pacific Life Insurance Co., Pacific Life & Annuity Co. and Pacific Select Distributors, Inc. (a subsidiary of Pacific Life Insurance Co.; it issues the variable annuities). The most recent financial-strength ratings for the holding company, Pacific Life Corp., and Pacific Life Insurance Co. and Pacific Life & Annuity Co. are: A+ (2nd best) by A.M. Best; AA- (4th best) by Standard & Poor’s; Aa3 (4th best) by Moody’s; and AA- (4th best) by Fitch.

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Recent news

The company’s ratings were downgraded in early 2009 by three of the four rating agencies. A.M. Best downgraded its financial-strength rating from A++ to A+ on 03/06/2009; Standard & Poor’s downgraded its financial-strength rating from AA to AA- on 02/26/2009; Fitch downgraded its financial-strength rating from AA to AA- on 02/26/2009. Moody’s left its financial-strength rating unchanged at Aa3 on 02/17/2009. All four agencies changed the company’s future outlook designation from “stable” to “negative.” The outlook designation expresses the agency’s opinion of the company’s financial performance in the near-future and the likelihood of future rating downgrades.

The downgrades in financial strength and outlook reflected deteriorating conditions in the economy generally and the life-insurance industry in particular. (On the same day that Standard & Poor’s announced its rating downgrade for Pacific Life, it also announced downgrades for 10 other life-insurance groups.) The company’s variable-annuity product offerings made it vulnerable to the stock-market decline beginning in the fall of 2008. The rating agencies anticipated that the company’s fixed-income portfolios (which include commercial mortgages and mortgage-backed securities) would likely decline in value in the coming months.

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