(The following statement was released by the rating agency)CHICAGO, May 07 (Fitch) Fitch Ratings has affirmed the ratings of Pacific LifeCorp (PLC) and certain of its subsidiaries, including Pacific Life Insurance Company (PLIC). The Rating Outlook is Stable. A full list of ratings follows at the end of this release. KEY RATING DRIVERSPLC's ratings are based on the company's diverse business profile, strong statutory capitalization, good liquidity and solid investment performance. Somewhat offsetting these positives are the increased leverage across the organization relative to pre-crisis levels and expectations of lower earnings which will pressure organic capital generation and interest coverage metrics. PLIC had statutory capitalization of $7.1 billion at year-end 2013, up 2% from the prior year-end as statutory net income was partially offset by a change in unrealized gains and a $200 million dividend paid to the holding company. Favorably, PLIC has diversified its product portfolio and has been moving away from capital intensive products. The company has also strengthened its VA hedging program, which should lessen the statutory capital impact if equity markets experience significant deterioration. PLIC's reported RBC has exhibited more volatility than peers since historically PLIC had not moved the VA business to a captive affiliate. At Dec. 31, 2013 the company's RBC was 673% compared to 596% at the prior year-end. Currently the company cedes a small percentage of the existing VA block and new business to a captive. During 2013, PLIC changed the valuation basis/method for VA statutory reserves to include a voluntary reserve component. Both of these actions should reduce RBC volatility going forward.PLC's large VA exposure has also resulted in higher than expected statutory and GAAP earnings volatility over the past several years. PLC reported net income of $721 million on a GAAP basis in 2013, up from $462 million in 2012 due to a higher level of interest rates, strong investment performance and strong sales partially offset by one-time expenses related to the tender of surplus notes and hedging losses within the macro hedge program. Fitch expects prospective earnings to lag pre-crisis levels due to increased hedging costs, lower investment yields and higher interest expenses. Fitch believes any future investment losses, particularly in the company's commercial mortgage loan and RMBS portfolios should remain manageable in context of PLIC's statutory capitalization and earnings. Fitch views PLC's future financial flexibility as constrained given the increased financial leverage, limited access to external equity capital and modest organic statutory earnings generation prospects. While PLC's traditional GAAP-based financial leverage ratio at 22.5% is consistent with industry norms, the high total financing and commitments (TFC) ratio at 1.1 times (x) diverges from that of many life industry peers. This high ratio is primarily driven by the capital intensive profile of the company's aircraft leasing subsidiary, Aviation Capital Group (ACG). Fitch views these activities as well managed and related risks are captured in Fitch's ratings. ACG debt is nonrecourse to PLC. PLIC's statutory carrying value of ACG was $1.4 billion at year-end 2013. RATING SENSITIVITIESThe key rating triggers that could result in a downgrade include: --Financial leverage ratio at or above 30%;--TFC ratio above 1.4x;--Decline in statutory capital of 10% or more;--Significant earnings and capital volatility; --Losses or rapid growth at aircraft leasing subsidiary;--Increase in surplus notes component of statutory capital above 15% could lead to a downgrade in surplus notes rating. The key rating triggers that could result in an upgrade include: --Decline in TFC ratio to 1.0x or below; --Decline in financial leverage below 20%--Sustained improvement in operating performance as evidenced by an increase in GAAP EBIT-to-interest coverage ratios to near 10x;--Demonstrated success in executing shift in product and distribution strategy. Fitch has affirmed the following ratings with a Stable Outlook: Pacific LifeCorp --Long-term Issuer Default Rating (IDR) at 'A-';--$450 million 6% senior notes due 2020 at 'BBB+';--$600 million 6.6% senior notes due 2033 at 'BBB+';--$500 million 5.125% senior notes due 2043 at 'BBB+'. Pacific Life Insurance Company --Long-term IDR at 'A';--$150 million 7.9% surplus notes due 2023 at 'A-';--$676 million 9.25% surplus notes due 2039 at 'A-';--Insurer Financial Strength (IFS) at 'A+';--Short-term IDR at 'F1';--Commercial paper at 'F1'. Pacific Life & Annuity Company--IFS at 'A+'. Pacific Life Re Limited--IFS at 'A+'.Pacific Life Funding, LLC--Funding agreement-backed note program at 'A+'. Pacific Life Global Funding--Funding agreement-backed note program at 'A+'. Contact:Primary AnalystTana M. HigmanDirector+1-312-368-3122Fitch Ratings, Inc.70 W. Madison StreetChicago, IL 60602Secondary AnalystJulie A. Burke, CPA, CFAManaging Director+1-312-368-3158Committee ChairpersonBrian C. Schneider, CPA, CPCUSenior Director+1-312-606-2321Media Relations: Brian Bertsch, New York, Tel: +1 212-908-0549, Email: brian.bertsch@fitchratings.com.Additional information is available at '
  www.fitchratings.com'
 Applicable Criteria Related Research: --'Insurance Rating Methodology' (November 2013).Applicable Criteria and Related Research: Insurance Rating Methodology 
  http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=723072
 Additional Disclosure Solicitation Status 
  http://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=829039
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