PACIFIC LIFE 2013 Annual Report

PACIFIC LIFE 2013 Annual Report T H E VA L U E S T H AT D E F I N E U S P E O P L E A C C O U N TA B I L I T Y C U S T O M E R F O C U S I N T E G R I T Y F I N A N C I A L S T R E N G T H I N N O VAT I O N C O M M U N I T Y

CONTENTS 1 Financial Summary 2 Letter to Policyholders and Clients 6 Life Insurance Division 8 Retirement Solutions Division 10 Aviation Capital Group 1 2 Pacific Life Re 14 Investment Management 1 5 Real Estate Investments 1 6 Pacific Asset Management 1 7 Pacific Global Advisors 1 8 Investment and Risk Management Review 24 Directors/Corporate Senior Management 25 Contact Information PACIFIC MUTUAL HOLDING COMPANY Pacific Mutual Holding Company (Pacific Mutual) is the parent company of Pacific LifeCorp, which is the parent company of Pacific Life Insurance Company. Policyholders of Pacific Life Insurance Company are members of Pacific Mutual and, as such, are able to attend an annual meeting of Pacific Mutual and to elect its board of directors. Through its direct and indirect subsidiaries, Pacific Mutual is engaged in a wide variety of insurance, financial services, and other investment-related businesses. PACIFIC LIFE INSURANCE COMPANY Offering insurance since 1868, Pacific Life 1 provides a wide range of life insurance products, annuities, and mutual funds, and offers a variety of investment products and services to individuals, businesses, and pension plans. Pacific Life counts more than half of the 100 largest U.S. companies as its clients. 2 PACIFIC LIFE & ANNUITY COMPANY Pacific Life & Annuity Company offers a wide range of products, including life insurance, annuities, structured settlement annuities, and other investment products and services for individuals and businesses. 1 Pacific Life refers to Pacific Life Insurance Company and its affiliates, including Pacific Life & Annuity Company. 2 Client count as of May 2013 is compiled by Pacific Life using the 2013 FORTUNE 500 list. Pacific Life Insurance Company, a subsidiary of Pacific Mutual Holding Company, is licensed in all states except New York. In New York, individual life insurance and annuity products are available through Pacific Life & Annuity Company, a subsidiary of Pacific Life Insurance Company. Product availability and features vary by state. Insurance product and rider guarantees are backed by the financial strength and claims-paying ability of the issuing company and do not protect the value of the variable investment options. Each company is solely responsible for the financial obligations accruing under the policies it issues. Variable products are issued by Pacific Life Insurance Company and Pacific Life & Annuity Company. These products and mutual funds are distributed by Pacific Select Distributors, Inc. (member FINRA & SIPC), a subsidiary of Pacific Life Insurance Company and an affiliate of Pacific Life & Annuity Company, and are available through licensed third-party broker-dealers. For current ratings, visit us online at www.pacificlife.com/ratings.

PACIFIC LIFE 2013 1 2013 FINANCIAL SUMMARY Pacific Mutual Holding Company D O L L A R S I N M I L L I O N S D e c e m b e r 3 1, 2 0 1 3 2 0 1 2 %Change Company Assets $ 129, 921 $ 123,697 5% Policyholder & Other Liabilities $ 120,948 $ 114,198 6% Equity 1 $ 8,1 3 2 $ 7,412 10% Operating Revenues 2 $ 7,521 $ 7,250 4% Operating Income 3 $ 54 1 $ 522 4% Company Assets IN BILLIONS OF DOLLARS Operating Revenue IN BILLIONS OF DOLLARS 116 6.7 124 130 7.3 7.5 Equity IN BILLIONS OF DOLLARS Operating Income IN MILLIONS OF DOLLARS 7.0 460 7.4 522 8.1 541 1 Excludes accumulated other comprehensive income and noncontrolling interest. 2 Excludes net realized investment gain (loss) (NRIGL) and other than temporary impairments (OTTI). 3 Excludes NRIGL (net of an estimate of related amortization of deferred policy acquisition costs (DAC) for variable annuity products), adjustments to variable annuity DAC resulting from true-ups, assumption unlockings and modeling refinements, OTTI, and discontinued operations, net of taxes.

2 PACIFIC LIFE 2013 TO OUR POLICYHOLDERS AND CLIENTS Throughout Pacific Life s history, we have been defined by our people and our purpose. In 1868, our founders among them Leland Stanford, Mark Hopkins, and Charles Crocker launched a California-based life insurance company. Our experience and evolution, spanning nearly 150 years, have provided us with a strong foundation of integrity and financial strength. As a mutual company, we make decisions based on what is best for our policyholders, and we continue to focus on our long-term vision, not short-term gains. These values, along with innovation and focus, help us to provide security and prosperity to our customers and to maintain our reputation as a leader in our industry. People. Accountability. Customer Focus. Integrity. Financial Strength. Innovation. Community. These are the values that define us and that have guided us in achieving another very successful year. 2013 Financial Review We are pleased to report that Pacific Life ended 2013 with some of our strongest financial results to date. Company assets grew 5 percent to $129.9 billion, and our net income was $720 million, compared to $460 million in 2012. We generated a return on equity of more than 9 percent. Company equity ended the year at $8.1 billion, the highest level ever. These results were driven by strong sales throughout the company, positive equity markets, increasing interest rates, and investment gains. Our Life Insurance Division remains an industry leader in indexed universal life, universal life, and variable universal life, and we finished 2013 ranked fifth in overall life insurance sales. 1 Pacific PremierCare SM, a universal life insurance product that offers long-term care insurance benefits, achieved a 116 percent sales increase year over year. Responding to the 1 LIMRA International, 2013 Confidential Annual Sales Survey of Participating Companies. Sales rankings for Pacific Life Insurance Company are based on planned recurring premiums as measured against 80 participating companies.

PACIFIC LIFE 2013 3 2 0 1 3 H I G H L I G H T S Total consolidated assets of Pacific Mutual Holding Company reached $129.9 billion. Net income increased to $720 million, compared to $460 million in 2012. Equity of Pacific Mutual Holding Company reached $8.1 billion, compared to $7.4 billion in 2012. Life Insurance Division sales were $290 million, an 8 percent increase over 2012. Retirement Solutions Division sales were $9.9 billion, a 23 percent increase over 2012. Revenues in Aviation Capital Group were $765 million, a 12 percent increase over 2012. Pacific Life Re generated net income of $100 million, compared to $72 million in 2012.

4 PACIFIC LIFE 2013 TO O U R PO L I CYHOLDERS AND CLIENTS co n t i n u e d changing market environment, we introduced Pacific PRIME Term, an innovative term life insurance product designed for a new generation of customers who want a cost-effective, fast, and simple way to get protection for their families and businesses. We also implemented a state-of-the-art automated underwriting system that streamlines the traditional underwriting process. Pacific Life s investment areas continued to outperform the industry average with strong credit performance. In 2013, we had no net credit losses in our bond portfolio. We originated $2.2 billion of new commercial mortgage loans and real estate securities investments at very favorable yields. Pacific Asset Management achieved over $1 billion in sales of their fixed income mutual funds. The Retirement Solutions Division continued to focus on diversifying its product mix to meet evolving consumer needs. Two new annuities were launched in 2013: a low-cost variable annuity that gives clients both value and flexibility by allowing them to customize features and fees to fit their personal needs, and Pacific Income Advantage, a deferred fixed annuity for customers concerned about market volatility, short-term interest-rate fluctuations, and taxation while assets accumulate. Pacific Life Funds, our mutual fund complex, reached over $2 billion in sales and achieved $5.4 billion in assets under management. Aviation Capital Group, our aircraft leasing subsidiary, continued to expand its jet aircraft portfolio, raising over $2.5 billion in debt capital to grow to 261 aircraft owned and managed, with an additional 140 new jet aircraft on order. Our global presence in over 40 countries and with 90 different airlines adds further diversification to our company and improves our risk profile. Pacific Life Re, our international reinsurance business, grew net income to $100 million, a 39 percent increase over 2012. In the leading independent survey of the U.K. and Ireland life

PACIFIC LIFE 2013 5 reinsurance market, U.K. respondents gave Pacific Life Re the top rating for overall business capability. Pacific Global Advisors, our pension advisory business, achieved $20 billion in assets under advisement and management. CEO David Oaten was named by Institutional Investor magazine as one of the 40 most influential people in shaping the future of pensions. Acknowledgments In May 2013, Thomas C. Sutton retired from the board of directors. After retiring in 2007 as CEO of Pacific Life, Tom served an additional six years on the board. We thank him for the nearly 50 years of outstanding service he has given to the company. the development and recognition of the Pacific Life brand and the humpback whale icon. We are grateful to Bob for his significant contributions to Pacific Life. Company of Choice We understand that you have a choice when choosing a company to protect your financial future. For generations, we have dedicated ourselves to meeting the needs of our customers, giving them the power to help them succeed. Pacific Life s values represent what is most important to us, what is essential to our success, and what makes Pacific Life a unique organization. These values guide how we behave and make decisions. We remain committed to you, our policyholders and clients, and we thank you for making us your Company of Choice. Our senior vice president of brand management and public affairs, Robert G. Haskell, retired at the end of 2013, following 30 years of service to Pacific Life. He was instrumental in JAMES T. MORRIS Chairman and Chief Executive Officer

6 PACIFIC LIFE 2013 LIFE INSURANCE DIVISION WE OFFER SOLUTIONS to individuals, families, and businesses to help them reach their goals for financial protection, wealth accumulation, and wealth preservation through life insurance coverage. We work with leading financial and insurance professionals to provide high-quality products and services for the diverse and evolving needs of their clients.

PACIFIC LIFE 2013 7 OV E R V I E W LIFE INSURANCE DIVISION D O L L A R S I N M I L L I O N S D e c e m b e r 3 1, 13 12 INDIVIDUAL LIFE INSURANCE IN FORCE I N B I L L I O N S O F D O L L A R S DIRECT PREMIUM 2 I N B I L L I O N S O F D O L L A R S Assets $ 35,641 Operating Revenues 1 $ 2,160 Assets $ 33,838 Operating Revenues 1 $ 1,972 2.5 225 226 2.7 232 2.9 1 Excludes net realized investment gains/losses and other than temporary impairments. 2 Statutory basis. 3 LIMRA International, 2013 Confidential Annual Sales Survey of Participating Companies. Sales rankings for Pacific Life Insurance Company are based on planned recurring premiums as measured against 80 participating companies. H I G H L I G H T S Produced $290 million in life insurance sales, representing an 8 percent increase over 2012. Increased sales growth in several product lines, including universal life insurance with long-term care benefits by 116 percent, indexed universal life insurance by 17 percent, and variable universal life insurance by 15 percent over 2012. Ranked first in indexed universal life insurance sales, second in both variable universal life insurance sales and universal life insurance sales, and fifth in overall sales within the industry. 3 Developed one of the industry s first fully integrated technology platforms for selling and servicing life insurance via mobile devices. Introduced a term life insurance product offering an easy application process, affordable death benefit protection, and the flexibility to convert to a cash value life insurance policy. PRINCIPAL PRODUCTS Universal life Variable universal life Indexed universal life DISTRIBUTION SYSTEMS Divisional sales/regional offices M Financial Group Marketing organizations Independent broker-dealers Interest-sensitive whole life Joint and last survivor life Term life PRIMARY MARKETS Individuals Small businesses Corporations Regional wirehouses National wirehouses Financial institutions SENIOR MANAGEMENT RICHARD J. SCHINDLER, CLU, FLMI Executive Vice President KEVIN M. RODDY Senior Vice President Finance DAWN M. TRAUTMAN Senior Vice President Information Technology & Strategic Planning

8 PACIFIC LIFE 2013 RETIREMENT SOLUTIONS DIVISION WE OFFER A BROAD and diversified range of products and solutions designed to help individuals and families achieve asset growth, sustainable retirement income, and long-term financial independence. We help businesses manage and fulfill their long-term retirement plan commitments to employees.

PACIFIC LIFE 2013 9 OV E R V I E W RETIREMENT SOLUTIONS DIVISION D O L L A R S I N M I L L I O N S D e c e m b e r 3 1, 13 12 ANNUITY SALES I N B I L L I O N S O F D O L L A R S MUTUAL FUND SALES I N B I L L I O N S O F D O L L A R S Assets $ 78,509 Operating Revenues 1 $ 3,347 Assets $ 73,166 Operating Revenues 1 $ 3,219 1.2 5.2 1.5 6.4 7.6 2.1 H I G H L I G H T S Expanded our variable annuity offerings by introducing two low-fee products, including one offered exclusively through Charles Schwab. Responded to investor anticipation of rising interest rates with a new fixed annuity offering a built-in lifetime withdrawal benefit. Strengthened and diversified our product sales platform by adding to our line of retail mutual funds and launching an innovative pension de-risking product. Deepened engagement with financial professionals through a new social media outreach program and a new digital information platform for our variable annuity asset allocation solutions. For the 16th time, recognized by DALBAR as an industry-leading service provider to registered representatives and contract owners. 2 PRINCIPAL PRODUCTS Fixed annuities Variable annuities Mutual funds DISTRIBUTION SYSTEMS Independent broker-dealers Regional wirehouses National wirehouses Small business 401(k) programs Individual(k) programs Structured settlement annuities Single-premium group annuity contracts PRIMARY MARKETS Individuals Small businesses Retirement plans Financial institutions Structured settlement brokers Pacific Life Producer Alliance SENIOR MANAGEMENT DEWEY P. BUSHAW Executive Vice President KEVIN R. BYRNE Senior Vice President Finance & Risk Management PHILIP A. TEETER Senior Vice President Technology & Operations CHRIS VAN MIERLO Senior Vice President, Sales and Chief Marketing Officer BRIAN T. WOOLFOLK Senior Vice President Product Design & Pricing 1 Excludes net realized investment gains/losses and other than temporary impairments. 2 DALBAR Service Awards awarded to Pacific Life in 2013. DALBAR, Inc. is a Boston-based financial services market research company.

10 PACIFIC LIFE 2013 AVIATION CAPITAL GROUP AVIATION CAPITAL GROUP (ACG) is proud to celebrate 25 years as an aviation industry leader. With a platform of 261 commercial jet aircraft leased to 90 airlines in over 40 countries, ACG has established itself as a trusted fleet strategy solution provider to the world s airlines. ACG also provides aircraft asset management and advisory services to lenders and institutional investors.

PACIFIC LIFE 2013 11 OV E R V I E W AVIATION CAPITAL GROUP D O L L A R S I N M I L L I O N S D e c e m b e r 3 1, 13 12 Assets $ 8,569 Operating Revenues 1 $ 765 Assets $ 7,957 Operating Revenues 1 $ 684 AIRCRAFT OWNED OR MANAGED NEW AIRCRAFT ON ORDER 140 245 250 158 261 166 H I G H L I G H T S Achieved record lease revenues of $736 million and record EBITDA 2 of $620 million. Raised more than $2.5 billion of debt capital. Increased our investor support with more than 100 institutional investors participating in our bond offerings. Increased the company s liquidity to $1 billion with support from 19 international banks. Accepted delivery of 27 new aircraft and sold 15 older aircraft, improving the weighted average fleet age to 6 years. Ended the year with 140 new jet aircraft on order from Airbus and Boeing, ranking fifth in order book size among leasing companies. PRINCIPAL PRODUCTS AND SERVICES Operating lease of commercial jets to airlines worldwide Aircraft asset management for institutional investors Commercial jet aircraft trading PRIMARY MARKETS Commercial airlines Aircraft manufacturers Institutional investors/lenders DISTRIBUTION SYSTEM Maintains a global presence in the U.S., U.K., Ireland, Chile, China, and Singapore SENIOR MANAGEMENT DENIS P. KALSCHEUR Chief Executive Officer JOHN N. FEREN Executive Vice President Global Strategy ANDREW M. MANSELL Executive Vice President and Head of Airline Marketing MADHU VIJAY Executive Vice President and Chief Financial Officer TODD E. WOODWARD Executive Vice President Asset Management 1 Excludes net realized investment gains/losses. 2 Earnings before interest, taxes, depreciation, and amortization.

12 PACIFIC LIFE 2013 PACIFIC LIFE RE PACIFIC LIFE RE offers a comprehensive range of wholesale life risk management products and services in the United Kingdom, Ireland, Asia, and North America. We specialize in risk and capital management of life assurance, critical illness, income protection, and annuity businesses.

PACIFIC LIFE 2013 13 OV E R V I E W PACIFIC LIFE RE D O L L A R S I N M I L L I O N S D e c e m b e r 3 1, 13 12 Assets $ 2,551 Operating Revenues 1 $ 971 Assets $ 2,505 Operating Revenues 1 $ 965 EARNED PREMIUM I N M I L L I O N S O F D O L L A R S H I G H L I G H T S Generated earned premium income of $896 million. Grew net income to $100 million, compared to $72 million in 2012. Completed four longevity swap reinsurance transactions covering underlying liabilities of over $2 billion. Rated number one for overall business capability by U.K. respondents to the leading independent survey of the U.K. and Ireland life reinsurance market. 2 Continued to expand our client base in Asia with the addition of ten new clients across five different countries. 460 898 896 PRINCIPAL PRODUCTS AND SERVICES Reinsurance of life assurance, critical illness, and income protection businesses Reinsurance of annuity and longevity risk Life insurance retrocession Associated reinsurance services and technical support SENIOR MANAGEMENT DAVID R. HOWELL, FSA Chief Executive Officer LIFE REINSURANCE IN FORCE I N B I L L I O N S O F D O L L A R S 187 236 285 PRIMARY MARKETS United Kingdom Ireland Selected markets in Asia United States and Canada (life insurance retrocession business only) DISTRIBUTION SYSTEM In-house marketing to insurance companies and retrocession clients DUNCAN L. HAYWARD, FCA Chief Financial Officer DAVID G. HEENEY, FIA Chief Marketing Officer U.K. and Ireland ALEX R. KING, FIA Managing Director Asia ROBERT A. DIEFENBACHER, FSA, MAAA Senior Vice President Retrocession 1 Excludes net realized investment gains/losses and other than temporary impairments. 2 Life & Health Reinsurance Programme 2013 by NMG Consulting.

14 PACIFIC LIFE 2013 INVESTMENT MANAGEMENT WE SUPPORT THE Pacific Life family of companies by focusing on investment strategies that stand the test of time and provide attractive risk-adjusted returns. We provide demonstrated expertise in investment-grade and high-yield public bonds, private placements, emerging market debt, residential mortgage-backed securities, and hedging strategies. H I G H L I G H T S Grew our portfolio of fixed maturity securities to $34 billion. Maintained our focus on credit quality and highly competitive yields to support the attractive crediting rates offered by our product divisions. Made new investments of $5 billion that met our high-quality standards and broad diversification goals. Executed on our innovative investment approaches, resulting in strong portfolio yields in the face of a difficult interest rate environment while also improving our credit quality and generating capital gains. Reported no net credit losses in our bond portfolio, outperforming our industry peers for the eighth consecutive year. PRINCIPAL INVESTMENTS AND SERVICES Public corporate bonds Private placements Residential mortgage-backed securities Hedging strategies SENIOR MANAGEMENT TOD NASSER Senior Vice President Investment Management

PACIFIC LIFE 2013 15 REAL ESTATE INVESTMENTS WE SUPPORT THE Pacific Life businesses with high-quality commercial real estate investments and an asset management capability that is also offered to thirdparty investors. Our diverse portfolio includes direct mortgage loan originations, real estate-related debt securities, and private real estate equity investments that may be shared with select partners or funds. H I G H L I G H T S Continued strong commercial mortgage performance in our $8.5 billion portfolio, with less than $8.5 million in total loan losses over the past seven years. Originated $2.2 billion of new commercial mortgage loan and real estate securities investments at very favorable yields. Experienced very strong performance in both commercial mortgage-backed securities (CMBS) and real estate investment trust (REIT) portfolios and finished 2013 with 100 percent of CMBS and REIT debt holdings rated investment-grade. Achieved $108 million in gains through sales of company-owned real estate and real estate securities with a total book value of $331 million. PRINCIPAL INVESTMENTS AND SERVICES Mortgage loans on commercial properties, including apartments Real estate-related debt securities Real estate properties Asset management and loan servicing SENIOR MANAGEMENT T. ANTHONY PREMER Senior Vice President Real Estate Investments

16 PACIFIC LIFE 2013 PACIFIC ASSET MANAGEMENT PACIFIC ASSET MANAGEMENT 1 provides investment management solutions to institutional and retail investors. As a registered investment adviser specializing in fixed income management with a focus on corporate debt, we manage portfolios across various investment strategies, including floating-rate loans, high-yield bonds, investmentgrade bonds, core plus, strategic credit, and short duration. H I G H L I G H T S Reached $4.5 billion in assets under management, a 40 percent increase over 2012. Managed five mutual funds that ranked in the top third for investment performance in each of their respective Morningstar fixed income categories. 2 Achieved $1 billion in sales of our fixed income mutual funds. Exceeded $900 million in assets in the second full calendar year of our bank loan mutual fund. PRINCIPAL PRODUCTS AND SERVICES Fixed income investment management Subadvisory investment management Institutional separate accounts PRIMARY MARKETS Mutual fund investors Government and corporate defined benefit plans Foundations and endowments Investment consultants SENIOR MANAGEMENT JAMES P. LEASURE Senior Managing Director DOMINIC D. NOLAN, CFA Senior Managing Director REX A. OLSON, CFA Senior Managing Director JASON R. ROSIAK Senior Managing Director 1 Pacific Asset Management is a division of Pacific Life Fund Advisors LLC, an SEC registered investment adviser and wholly owned subsidiary of Pacific Life Insurance Company. 2 The Morningstar category is assigned based on the underlying securities in each portfolio.

PACIFIC LIFE 2013 17 PACIFIC GLOBAL ADVISORS PACIFIC GLOBAL ADVISORS (PGA) specializes in customized investment, risk management, and termination solutions for pension plans and other institutional investors, based on detailed analysis of their liabilities, objectives, and constraints. PGA offers full-service solutions, including advice and implementation provided by industry-leading experts in capital markets, risk management, and actuarial sciences. H I G H L I G H T S Ranked among the top 15 largest investment outsourcers, based on total worldwide institutional outsourced assets under management. 1 Grew assets under advisement and management by over $1 billion to $20 billion. Achieved strong client returns 2 that averaged 9.0 percent gross of fees (8.6 percent net of fees) over the last three years, compared to the 7.3 percent return of a traditional portfolio approach. 3 Honored by having PGA CEO David Oaten recognized as one of the top 40 most important people in deciding the future of U.S. pensions. 4 1 Pensions and Investments magazine: Outsourced assets catapult 59% to $1 trillion in 2 years, July 8, 2013. 2 Represents an average of total portfolio returns (all plan assets, including PGA and external investment managers) for all PGA pension clients whose assets were managed for the last three years. Past results are not necessarily indicative of future results. Source: Client trustees. 3 Traditional 60/30/10 allocation represents the combined return, rebalanced monthly, of 60 percent MSCI ACXI Index-ND, 30 percent Barclays Aggregate Total Return Index, and 10 percent HFRI Hedge Fund of Funds Index. Source: Bloomberg. 4 Institutional Investor magazine: The 2013 Pension 40: David Oaten, November 12, 2013. PRINCIPAL PRODUCTS AND SERVICES Pension risk advisory Pension termination solutions Asset liability management Investment management Manager selection and asset allocation Liquid alternatives investment strategies SENIOR MANAGEMENT DAVID A. OATEN Chief Executive Officer PRIMARY MARKETS Corporate defined benefit and defined contribution plans Voluntary employees beneficiary associations Nuclear decommissioning trusts Endowment funds

18 PACIFIC LIFE 2013 INVESTMENT AND RISK MANAGEMENT REVIEW

PACIFIC LIFE 2013 19 I N V E ST M E N T R E V I E W DISTRIBUTION OF INVESTMENTS Pacific Life primarily invests in high-quality securities and commercial mortgage loans, and we closely monitor these investments. Pacific Life has a seasoned management team with experience in both positive and negative markets. DISTRIBUTION OF INVESTMENTS D e c e m b e r 3 1, 2 0 1 3 D O L L A R S I N M I L L I O N S 1 Fixed Maturity Securities $ 34,000 66.0% 2 Mortgage Loans 8,454 16.4 3 Policy Loans 7, 1 5 5 13.9 4 Private Equity 912 1.8 5 Other Investments 345 0.7 6 Real Estate 234 0.4 7 Trading Securities 231 0.4 8 Equity Securities 1 90 0.4 $ 51, 5 2 1 100.0% assigns quality ratings to fixed maturity securities held by insurance companies. Using the NAIC s designations for investment-grade fixed maturity securities (NAIC 1-2) and non-investment-grade fixed maturity securities (NAIC 3-6), Pacific Life s ratio of noninvestment-grade fixed maturity securities to total investments was 3.3 percent at December 31, 2013. QUALITY OF FIXED MATURITY SECURITIES D e c e m b e r 3 1, 2 0 1 3 D O L L A R S I N M I L L I O N S 1 NAIC 1 Highest Quality $15,906 46.8% 2 NAIC 2 High Quality 16,411 48.3 Investment-Grade 32, 3 1 7 95. 1 3 NAIC 3 Medium Quality 1,250 3.6 4 NAIC 4 Low Quality 262 0.8 5 NAIC 5 Lower Quality 30 0. 1 6 NAIC 6 In or Near Default 141 0.4 Non-Investment-Grade 1,683 4.9 $ 34,000 100.0% Q U A L I T Y O F I N V E S T M E N T S FIXED MATURITY SECURITIES The Securities Valuation Office of the National Association of Insurance Commissioners (NAIC) REAL ESTATE Pacific Life s exposure to equity real estate is minimal, representing less than 1 percent of total investments. As

20 PACIFIC LIFE 2013 I N V E ST M E N T R E V I E W of December 31, 2013, the total value of all real estate owned and actively managed by Pacific Life was $234 million. Pacific Life owns $161 million in company-occupied properties. MORTGAGE LOANS Pacific Life s commercial mortgage loan portfolio continues to have excellent performance. QUALITY OF MORTGAGE LOANS D e c e m b e r 3 1, 2 0 1 3 D O L L A R S I N M I L L I O N S Performing Mortgage Loans $ 8,454 100.0% Non-Performing Mortgage Loans 0 0% $ 8,454 100.0% D I V E R S I F I C A T I O N O F I N V E S T M E N T S FIXED MATURITY SECURITIES Pacific Life has a diversified investment portfolio that limits exposure to any single industry, issuer, or asset type. As a result, the risk of adverse events with any one credit having a material negative impact on the portfolio is minimal. Exposure limits are reviewed on a regular basis and modified as necessary by the Management Investment and Credit Committee. The committee is composed of Pacific Life senior management, whose responsibilities include reviewing and monitoring investments to reflect changing market and economic conditions. DIVERSIFICATION OF FIXED MATURITIES D e c e m b e r 3 1, 2 0 1 3 D O L L A R S I N M I L L I O N S 1 Mortgage-Backed: Residential 1 $ 3,4 1 3 10.0% Commercial 736 2.2 Total Mortgage-Backed 4,1 49 12.2 2 Utilities 5,698 16.8 3 Industrials 5,087 15.0 4 Consumer Non-Cyclicals 4,953 14.6 5 Financials 3,042 8.9 6 Energy 2,578 7.6 7 Telecommunications 2,3 1 5 6.8 8 Real Estate Investment Trusts 2,020 5.9 9 Foreign Governments 1,436 4.2 10 U.S. and Domestic Governments 1,000 2.9 11 Consumer Cyclicals 950 2.8 12 Other 772 2.3 $ 34,000 100.0% 1 Includes U.S. Government agency issues of $833 million.

PACIFIC LIFE 2013 21 MORTGAGE LOANS AND REAL ESTATE Pacific Life s commercial mortgage loan and real estate emphasis is on properties in high barrier to entry locations and regions exhibiting strong demographic and economic trends. Another major part of Pacific Life s commercial mortgage loan and real estate strategy is to focus on certain types of properties and to diversify holdings across different geographic regions. MORTGAGE LOANS AND REAL ESTATE BY PROPERTY TYPE D e c e m b e r 3 1, 2 0 1 3 D O L L A R S I N M I L L I O N S 1 Office Buildings $ 3,247 37.4% 2 Apartments 1,510 1 7.4 3 Lodging 1,480 1 7.0 4 Retail 992 11.4 5 Credit Tenant Office Buildings 926 10.7 6 Other 533 6. 1 $ 8,688 100.0% MORTGAGE LOANS AND REAL ESTATE BY REGION D e c e m b e r 3 1, 2 0 1 3 D O L L A R S I N M I L L I O N S 1 Atlantic $ 3,790 43.6% 2 Pacific 2,833 32.6 3 South Central 1,108 12.8 4 Other 477 5.4 5 North Central 257 3.0 6 Mountain 223 2.6 $ 8,688 100.0% INVESTMENT PERFORMANCE Through effective asset management, Pacific Life has consistently generated strong returns that have not been earned at the expense of asset quality. Pacific Life has continued to maintain below-industry-average exposure to low-quality bonds. By maintaining our disciplined approach to investing, even in uncertain times, we have been able to add value and security for our clients.

22 PACIFIC LIFE 2013 R I S K M A N AG E M E N T ENTERPRISE RISK MANAGEMENT The purpose of risk management is to enable Pacific Life to meet policyholder obligations at all times and to grow and prosper, regardless of economic environment, by ensuring that we identify, understand, and manage the risks facing the company. The execution of risk management is accomplished by (a) division and subsidiary risk management functions implementing a strategy of providing value-added risk management services to their organization, (b) Enterprise Risk Management overseeing all segments of the company s risk management practices through a consultative, open-communication style that engenders a partnership attitude while retaining an independent, objective oversight role, and (c) Internal Audit providing independent assessment of risk management practices, procedures, and methodologies. The objectives of the risk management framework are to avoid excessive risks that could endanger the survival of Pacific Life, to maintain a risk profile that can support sustainable earnings and capital, to increase risk-adjusted returns, and to provide transparent assessment of risks. Responsibility and authority for risk acceptance and risk taking are clearly defined. The board of directors has oversight responsibility for risk management and ensures that Pacific Life has appropriate and effective policies, operating guidelines, and procedures in place to manage risk. Management is responsible for managing risks and for reporting on key risk issues to the board, or to committee(s) of the board, on a regular basis. Pacific Life has a well-defined risk appetite identifying the level of enterprisewide risk that it is willing to take. It is essential to assess the magnitude and types of risk that Pacific Life is willing and able to take to achieve its objectives and to align itself to successfully deliver on its mission. To provide context to risk appetite, Pacific Life has developed risk appetite stress scenarios that include both qualitative and quantitative assumptions. For each scenario, Pacific Life has targeted minimum levels of capital, income, and value that are acceptable in these stressed economic environments. Pacific Life s risk management activities and policies are centered on exceeding the minimum limits under each of these risk appetite scenarios. Pacific Life s risk management policies provide a consistent approach to measurement, mitigation, control, and monitoring of risk exposures. There is a formal aggregate risk management program along with individual programs within each division and subsidiary. The programs include a process that uses qualitative and quantitative analysis of key risk exposures. This analysis is used to develop enterprisewide views of the most significant risks. Identification and monitoring of key risks that may materially impact Pacific Life as a whole take place within Enterprise Risk Management. Risk control programs are documented and action plans are established for mitigating the exposure if limits are breached.

PACIFIC LIFE 2013 23 To further refine risk management and ensure that business activities are targeted toward risk that Pacific Life prefers, risk preferences for specific risks have been established. These risk preferences are based on a variety of factors, including, but not limited to, internal capabilities to assume and manage a specific risk, diversification benefits at an aggregate level for assuming the risk, competitive position, and return trade-off. The primary risks Pacific Life is exposed to are equity, interest rate, credit, insurance, operational, and liquidity risks. These risks are mitigated through various strategies and programs, including product design, hedging, reinsurance, controlled sales, and asset liability management. Risk reporting is vital to an open and transparent risk culture. Risk reporting is completed on a granular basis starting with individual risk within divisions and subsidiaries. Reporting includes current risk profile, exposures, and risk mitigation activities. In addition, risk profiles are reported under the risk appetite scenarios. This ensures Pacific Life understands what might push it outside its acceptable risk appetite. Risks are aggregated and reported to understand the total risk profile of Pacific Life, identify the risk diversification benefits, and quantify the impact of stressed economic environments on capital, income, and value. The various levels of risk reporting take place at least quarterly to senior management and the board of directors. LIQUIDITY Pacific Life s principal sources of funds are new premiums, investment income, regular investment sales, maturities, and dividends or distributions from its subsidiaries. These funds are used primarily for payment of policyholder benefits, maturities of investmenttype products, asset purchases, policy acquisition costs, taxes, and operating expenses. Remaining funds not used as noted above are generally used to increase the capital base, meet the need for future policy benefit payments, and write new business. Pacific Life closely monitors its liquidity profile. Pacific Life s principal source of liquidity to meet unexpected cash outflows is its portfolio of liquid assets, which includes short-term money market investments and public bonds. These assets provide ample liquidity. As a matter of policy, Pacific Life includes provisions in many of its products that reduce the likelihood of withdrawal. A substantial portion of its liabilities is not subject to surrender, or can be surrendered only after deduction of a charge or market value adjustment. Additionally, Pacific Life maintains a $700 million commercial paper program, a $400 million revolving credit facility to meet working capital requirements, a secured line of credit with the Federal Home Loan Bank of Topeka for Pacific Life Insurance Company, and a $600 million revolving credit facility with various banks. Management believes that these sources of liquidity are more than adequate to meet Pacific Life s cash obligations.

24 PACIFIC LIFE 2013 DIRECTORS CORPORATE SENIOR MANAGEMENT DOUGLAS D. ABBEY 1, 2 Chairman Swift Real Estate Partners MARIANN BYERWALTER 1, 2 Chairman SRI International SHARON A. CHEEVER 3 Senior Vice President and General Counsel Pacific Life Insurance Company DWIGHT W. DECKER 1 Retired Chairman and Chief Executive Officer Conexant Systems, Inc. CHRISTOPHER D. FURMAN 2 President and Chief Executive Officer Ventura Foods, LLC JOHN GOTTSCHALK 1 Retired Chairman Omaha World-Herald Company JULIA S. GOUW 1, 2 President and Chief Operating Officer East West Bank LAWRENCE F. HARR 3 Partner Lamson, Dugan and Murray, LLP 1, 2, 3 JAMES T. MORRIS Chairman and Chief Executive Officer Pacific Life Insurance Company SUSAN WESTERBERG PRAGER 1 Dean and Chief Executive Officer Southwestern Law School J. MICHAEL SHEPHERD 1, 2 Chairman and Chief Executive Officer BancWest Corporation SCOTT D. STOWELL 1 Chief Executive Officer and President Standard Pacific Homes WILLIAM S. THOMPSON 2 Retired Chief Executive Officer PIMCO 1, 2, 3 KHANH T. TRAN President Pacific Life Insurance Company JAMES T. MORRIS, FSA Chairman and Chief Executive Officer KHANH T. TRAN President MARY ANN BROWN, FSA Executive Vice President Corporate Risk Management, Technology, Fund Advisory and Reinsurance ADRIAN S. GRIGGS Executive Vice President and Chief Financial Officer EDWARD R. BYRD Senior Vice President and Chief Accounting Officer JOSEPH E. CELENTANO Senior Vice President and Chief Risk Officer SHARON A. CHEEVER Senior Vice President and General Counsel THOMAS GIBBONS Senior Vice President Corporate Treasury, Tax and Enterprise Consulting HOWARD T. HIRAKAWA Senior Vice President Investment Advisor Operations ANDREW OLEKSIW Senior Vice President Corporate Development CAROL R. SUDBECK Senior Vice President Human Resources and Public Affairs RICHARD A. VRIELING Senior Vice President Corporate Information Technology JANE M. GUON 3 Vice President and Secretary Pacific Life Insurance Company DEAN A. YOOST 2 Financial Advisor 1 Director of Pacific Mutual Holding Company 2 Director of Pacific LifeCorp 3 Director of Pacific Life Insurance Company

PACIFIC LIFE 2013 25 CONTACT INFORMATION DESIGNED AND PRODUCED BY MARTÍNEZ DESIGN, OCEANSIDE, CALIFORNIA PACIFIC LIFE INSURANCE COMPANY/ PACIFIC LIFE & ANNUITY COMPANY 700 Newport Center Drive Newport Beach, CA 92660-6397 (800) 800-7646, ext. 3011 / (949) 219-3011 Email: Info@PacificLife.com www.pacificlife.com Investment Management (800) 800-7646, ext. 3011 Real Estate Investments (800) 800-7646, ext. 4763 Retirement Solutions Division (800) 722-4448 Life Insurance Division 45 Enterprise Aliso Viejo, CA 92656-2601 (800) 800-7681, ext. 6000 / (949) 420-6000 PRINCIPAL SUBSIDIARIES Aviation Capital Group Corp. 610 Newport Center Drive, Suite 1400 Newport Beach, CA 92660-6465 (949) 219-4600 www.aviationcapital.com Pacific Asset Management (800) 800-7646, ext. 1656 / (949) 219-1656 www.pam.pacificlife.com Pacific Global Advisors LLC 535 Madison Avenue 14th Floor New York, NY 10022-4214 (212) 405-6300 www.pacificglobaladvisors.com Pacific Life Re Limited Tower Bridge House St. Katharine s Way London E1W 1BA +44 (0)20 7709 1700 www.pacificlifere.com Pacific Select Distributors, Inc. (800) 800-7646, ext. 3881 / (949) 219-3881 To request a copy of the Pacific Mutual Holding Company condensed consolidated financial statements, please send an email to PublicAffairs@PacificLife.com or call (800) 800-7646, ext. 5002. The financial statements are also available online at www.pacificlife.com/financials.

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