Retired executives golf, work with charities and schmooze in chandelier social clubs.
None of that is on the mind of 63-year-old Thomas Sutton, chief executive of Newport Beach-based Pacific Life Insurance Co., Orange County’s largest private company.
Sutton faces retirement at 65 in late 2007, as is the policy at the life insurer. At that time, Sutton said he might go back to school to brush up on his educational passion: theoretical physics.
Man on Campus
The soft-spoken Sutton hasn’t formally announced plans to retire. But keep an eye out for him at the University of California, Irvine, or other local campuses, toting textbooks.
The reading on Sutton’s nightstand at his Corona del Mar home isn’t light.
You won’t find business books and the latest from Donald Trump. His late-night reading includes “The Historian,” a novel about vampires prowling around dark forests and damp crypts, and the physics book, “Warped Passages: Unraveling the Mysteries of the Universe’s Hidden Dimensions.”
Sutton has spent his entire career with Pacific Life. He followed the company from downtown Los Angeles in 1972 to its ocean view digs in Newport Center.
In recent years, Sutton has expanded Pacific Life from life insurance into commercial jet leasing, annuities, mutual funds and other financial services.
Sutton’s destiny was set long ago. While at college in Canada, he was an actuarial trainee with Toronto’s Confederation Life Insurance Co. in the early 1960s. The Atlanta native studied mathematics and physics at the University of Toronto.
The next two summers he trained at Pacific Life.
By 1965, Sutton married and packed his bags for Los Angeles, where he joined Pacific Life full time,his first and only job.
He worked his way through actuarial and management positions in the life insurance and corporate divisions until his 1987 election as president.
In 1990, Sutton became chairman and chief executive.
Subtle Style
Sutton describes his management style as “laid-back.” His goal from the beginning was to build up financial services operations. In the 1980s, he cut Pacific Life’s investment in real estate after he said the company became overexposed.
Pacific Life’s financial strength today is impressive.
Reports are yet to be filed with regulators, but assets are expected to jump 10% to $85 billion for 2005. The company’s yearly profit is expected to be comparable to 2004’s $540 million. Pacific Life counts annual revenue of about $4 billion.
The company ranks among the top 10 in sales of life insurance and annuities in the U.S., along with biggies such as MetLife Inc., New York Life In-surance Co. and Pru-dential Financial Inc.
Sutton is betting on a number of moves made in recent years. Among them:
n Doubling the size of Pacific Life’s commercial aircraft leasing business to 90 airlines in 42 countries.
n Establishing a regional business center in Omaha, Neb., which could save Pacific Life $10 million to $12 million in annual premium taxes. Technically, Pacific Life lists Omaha as its head office to take advantage of a lower tax rate.
n Selling Pacific Life’s group health insurance business to Cypress-based PacifiCare Health Systems Inc., now part of Uni-tedHealth Group Inc.
In recent months, Pacific Life has set a succession plan for Sutton and other senior brass.
Earlier this month, the company named Jim Morris, 46, as chief operating officer. Morris is expected to become chief executive when Sutton steps down next year.
“I am very confident that he can be a capable and successful CEO,” Sutton said of Morris. “I’m sure he will be here or at another company in the industry. I hope it is here.”
Sutton has done his share of acquisitions, including last year’s $2.6 billion buy of aircraft leasing company Boullioun Aviation Services Inc. of Seattle.
The move doubled the size of Pacific Life’s Aviation Capital Group, which was launched more than a decade ago and now has 220 planes worth more than $5 billion. Pacific Life is the fourth largest leaser of aircraft.
“This company basically buys aircraft, finances aircraft and leases to airlines all over the world,” Sutton said.
About half of the planes are leased to airlines in Europe, he said. About a quarter are in Asia with the rest in Latin and North America.
The company was rumored to be among the bidders for what’s now Ameriprise Financial Inc. before American Express Co. spun it off to shareholders last year.
For now, Sutton said there are no deals in the offing.
And he said there’s just one laggard in his company’s portfolio: Princeton-based College Savings Bank, an acquisition made in 2002 because Pacific Life wanted to grab share in what looked like a growing field for Section 529 college savings plans.
Sutton said he’d consider selling College Savings Bank, which has $800 million in assets.
The bank “does not have a continuing strategic purpose,” he said.
Last year’s sale of Pacific Life’s group health insurance business was bittersweet, Sutton said. He had reservations about pulling the trigger on the deal, he said.
For a decade, Sutton said he resisted courting bids for the business, including several from PacifiCare as well as Indianapolis-based WellPoint Inc., the largest health insurer.
The concern: the fate of hundreds of workers with the unit, he said.
Caught Off Gaurd
Sutton said he was caught off guard by PacifiCare’s move to shift some work out of OC with another buy, 2004’s American Medical Security Group Inc. of Wisconsin.
“I thought originally that (the PacifiCare acquisition) would give the employees the best chance of retaining their positions,” Sutton said. “It didn’t turn out well for them.”
A PacifiCare spokesman said some layoffs had taken place at the acquired unit.
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Pimco Payoff
One of Pacific Life Insurance Co.’s best diversification moves: creating Pacific Investment Management Co. in 1971.
Through the years, Pacific Life has raked in more than $1 billion from its investment in the bond fund manager.
Pimco got its start in Pacific Life’s offices and now is next door to the life insurer in Newport Center.
In the late 1990s, Pacific Life held a $1.5 billion stake in Pimco, or about 40%. The stake was down to 30% by the time Germany’s Allianz AG bought most of Pimco in 2000.
Pacific Life kept its Pimco stake and slowly has sold off chunks to Allianz. In 2003, it sold $1 billion worth. In 2004, the company sold $500 million worth.
Today, Pacific Life still holds a $366 million Pimco stake. In the next year, Chief Executive Thomas Sutton said he expects Allianz to exercise its option to buy out the remaining interest.
,Pat Maio
