A.M. Best Affirms Financial Strength Rating and Assigns Debt Ratings for Pacific Life.

Business Editors

OLDWICK, N.J.--(BUSINESS WIRE)--June 28, 2001

A.M. Best Co. has affirmed the financial strength rating of A++ (Superior) for Pacific Life Insurance Company, Newport Beach, California, and its wholly owned subsidiary, Pacific Life & Annuity Company. In addition, the rating agency has assigned an "aa-" debt rating to the surplus notes and an "AMB-1+" rating to the commercial paper issued by Pacific Life.

The ratings of Pacific Life reflect its excellent operating performance, superior liquidity position, conservative capital structure and strengthened risk-adjusted capitalization, as well as the prominent position the company maintains in the upper-income markets for individual life insurance, annuities and institutional products. Also noteworthy are Pacific Life's exceptional asset management capabilities, its prudent financial and risk management practices and management's disciplined and highly focused business strategies. Pacific Life has consistently achieved revenue growth and profitability at rates well above industry standards and has benefited in recent years from success in the variable annuity arena. A.M. Best views the company's performance as particularly favorable given the highly competitive markets in which it operates and its growing presence in the asset management arena.

Pacific Life complements its operations and financial strength with considerable fee-based income, broadened distribution and competitive investment products for its asset management activities through its 30% ownership interest in PIMCO Advisors L.P. (PIMCO). PIMCO is one of the largest asset management firms in the U.S. with approximately $277 billion of funds under management.

As demonstrated by its significant cash flow generating ability and strong debt servicing capacity, Pacific Life's debt ratings reflect an exceptional ability to repay obligations. The debt ratings are further supported by Pacific Life's high liquidity position, significant and varied repayment sources and extensive financial flexibility. A.M. Best expects Pacific Life to maintain a conservative capital structure, with total debt not to exceed 20% of total capital in the near to medium term. Pacific Life's year-end 2000 financial leverage was approximately 10%.

Pacific Life's risk-adjusted capitalization was also considerably enhanced during the past year as a result of a transaction entered into with Allianz AG in 2000. This agreement requires Allianz to purchase Pacific Life's ownership interest in PIMCO at a fixed multiple of cash flow with a guaranteed minimum value. This transaction resulted in an increase to Pacific Life's existing statutory capital of $440 million or 26% of year-end 2000 capital and surplus.

Pacific Life maintains a superior liquidity position supported by consistent cash flows, a stable liability structure and a diversified investment portfolio. The organization's expertise in investment management has allowed Pacific Life to capitalize on new market opportunities in the structured settlement, structured finance and funding agreement arenas. In addition, A.M. Best believes the company's strong financial and risk management practices provide considerable insulation from potential surplus and earnings volatility.

Notwithstanding the foregoing strengths, Pacific Life's universal and COLI products, as well as its institutional products, are somewhat sensitive to changes in interest rates, economic conditions and further unfavorable tax legislation on COLI products. Additionally, recent federal legislation on estate tax reform is expected to impact a portion of the company's new sales activity. However, Pacific Life's comprehensive and disciplined financial management strategies, broad product portfolio, diversified and highly productive distribution capabilities and new product development should substantially mitigate concerns in these areas.

Pacific Life, a wholly-owned subsidiary of Pacific LifeCorp, an intermediate stock holding company, engages in a broad range of insurance, estate planning and asset accumulation products, in addition to investment products for individuals, businesses, institutions and pension plans. On December 31, 2000, Pacific Life reported $51 billion in statutory admitted assets, $2.2 billion in capital and surplus plus asset valuation reserve and $8.8 billion in net premiums written.

The following debt ratings have been assigned to Pacific Life Insurance Company (formerly named the Pacific Mutual Life Insurance Company):

- "aa-" rating on $150 million 7.9% surplus notes, due December 2023

- Commercial paper rating of "AMB-1+"

A.M. Best Co., established in 1899, is the world's oldest and most authoritative insurance rating and information source. For more information, visit A.M. Best's Web site at www.ambest.com.