Moody's lowers Pacific LifeCorp

Moody's Investors Service said it downgraded Pacific LifeCorp's senior debt rating to Baa1 from A3, Pacific Life Insurance Co.'s surplus notes to A3 from A2 and the senior secured debt of Pacific Life Funding, LLC, Pacific Life Global Funding, Pacific Pilot Funding, Pacific Pilot Funding II, Counts Trust, Series 2006-4 and Counts Trust, Series 2007-2 to A1 from Aa3.

Pacific Life Insurance's commercial paper was affirmed at P-1.

The outlook remains negative.

The agency said the downgrade was driven primarily by the company's substantial exposure to variable annuity products with guarantees and their inherent risks and volatility related to the equity markets. It also reflects the expectation of significant credit losses in the company's residential mortgage-backed securities holdings as well as increased losses in its corporate bond and commercial mortgage loan portfolios as a result of higher expected credit defaults due to the recession.

Moody's positively noted that holding company Pacific LifeCorp has no debt maturing for many years, maintains ample liquid assets relative to its annual fixed charges and benefits from a strong market presence and reputation in the upscale life insurance market and the consistent profitability of the company's aircraft-leasing business.

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