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PacLife Survives Cycle Of Low Interest Rates

Pacific Life Insurance Co., which has been in business since 1868, has survived the recent era of low interest rates that have decimated competitors in the industry.

In the past 15 years, companies like Metlife Inc., Hartford Financial Services and Allstate Corp. have largely gotten out of selling individual life policies to Americans, as low rates compressed and negatively impacted their earnings.

“Low interest rates have been tough—it’s been a headwind to the insurance industry,” Pacific Life Chief Executive and President Darryl Button told the Business Journal.

“It’s not good for the industry and consumers.

“We’ve done well. We’ve stayed focused. After two decades of low rates, margins and returns are looking better.”

Button became only the 15th president at Pacific Life a year ago, when he replaced Jim Morris who retired.

Evidence of the company’s staying power was results in 2022 showed adjusted operating income of $992 million, up 1% even while adjusted operating revenue declined 1% to $13.5 billion.

Pacific Life ranks No. 3 on this week’s Business Journal list of the largest private companies with headquarters in Orange County (see list, page 27).

Local Focus

Pacific Life employs 4,048, with almost 40% of them in Orange County.

The company plans to “definitely” stay in Orange County, retaining its well-known headquarters at Newport Center in Newport Beach, Button said. It also has an office tower overlooking the 73 Toll Road in Aliso Viejo.

The company is heavily involved in communities where its employees live, having recently announced $8.25 million in donations this year.

“We’re proud of our foundation work and annual giving,” Button said.

Aegon CFO

Button is a longtime executive in the insurance industry, beginning his career at Mutual Life Insurance Co. of Canada.

He spent 17 years at Aegon NV, a publicly traded company (NYSE: AEG) valued at $9.4 billion.

Besides being chief financial officer and a member of its executive board, he was also head of Aegon corporate financial center, CFO of Aegon’s U.S. subsidiary Transamerica and chairman for the company’s Canadian operations.

He is also a fellow of the Society of Actuaries, a fellow of the Canadian Institute of Actuaries, a member of the American Academy of Actuaries and a former member of the board of directors of the American Chamber of Commerce in the Netherlands.
Button joined Pacific Life in 2017 as its CFO.

“I was thrilled to be back at a mutual,” Button said. “We get a lot of strength organized as a mutual.”

He noted that as a private company, Pacific Life doesn’t have shareholders looking for quarterly results.

“That short-term pressure disadvantages companies in our space,” Button said.

No Surprises

Button said there have been no surprises as the new CEO because he helped design the company’s current strategy.

“It was a fairly smooth transition,” he said.

Part of that strategy has been to divest units such as Aviation Capital, which leased passenger jets, and Pacific Asset Management, which managed $20 billion in assets.

“They didn’t fit our core definition of being a life insurance company,” Button said. “We’re focused on being a life insurance company.”

One of its larger units is annuities, which have become controversial among financial advisers for taking large fees.

“Annuities have taken a beating as a product label,” Button said. “The reason I’m bullish is the concept of a lifetime income. Annuity hedges outliving your income.”

Pacific Life is entering new markets such as forming a unit called Workforce Benefits that provides life, vision and dental insurance. It’s also moving more into term and variable products.

In April, it announced a variable universal life insurance product aimed at the $68 trillion wealth transfer market, to help clients financially protect their loved ones while also providing the potential to build cash value.

“We are constantly launching and evolving core life and annuity product lineup,” Button said.

Future

The Wall Street Journal recently reported that only 52% of American adults own life insurance, down from 63% in 2011. The publication said many families rely on policies provided by their employers, though such coverage often is for a relatively small amount.

“It’s still a fundamental need in society—our whole mission is to provide financial security. That need is not going away,” Button said.

“There are still quite a few underserved Americans not having the protection for their families during their earnings years.”

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Sonia Chung
Sonia Chung
Sonia Chung joined the Orange County Business Journal in 2021 as their Marketing Creative Director. In her role she creates all visual content as it relates to the marketing needs for the sales and events teams. Her responsibilities include the creation of marketing materials for six annual corporate events, weekly print advertisements, sales flyers in correspondence to the editorial calendar, social media graphics, PowerPoint presentation decks, e-blasts, and maintains the online presence for Orange County Business Journal’s corporate events.
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