Pacific Mutual Seeks Change in Structure

Pacific Mutual Life Insurance Co., the largest life insurer based in California, sought state approval Tuesday to convert its structure to one that would allow the public to buy a stake in the 129-year-old company.

The Newport Beach insurer sees its future expansion through acquisitions and wants to be able to tap the public markets for cash to finance its purchases. As a mutual, the company is owned by policyholders, making it difficult to buy other firms.

“Our industry is going through a pretty intense transformation, with an uncharacteristically high level of mergers and acquisitions,” said Thomas C. Sutton, the company’s chairman. “This change of structure is positioning us for the future.”

Sutton said he hopes to complete the transformation by this fall, paving the way for the company to go public sometime in 1998 at the earliest. The restructuring wouldn’t affect any jobs or duties, he said.

Mutuals make up a small portion of about 2,000 life insurers nationwide, but they are among the biggest. They include such major players as Prudential, Metropolitan Life, Massachusetts Mutual, John Hancock and New York Life. Pacific Mutual, with $27 billion in assets, is the nation’s eighth-largest mutual and 22nd-largest among U.S. life insurance companies.

Pacific Mutual joined other mutuals in pushing for laws that would allow them to restructure in a way that would make acquisitions easier, while keeping policyholders in control.

In the last two years, 11 states, including California, and the District of Columbia have enacted new laws that allow mutuals to convert into a new structure called a mutual holding company. Nationwide, two companies already have converted, and one more is in the final stages.

But an industry expert has questioned whether policyholders’ rights and regulatory oversight will be preserved under the new structure. “It’s entirely possible that these things can be adequately handled, but nobody’s done it yet,” said Joseph M. Belth, editor of the Insurance Forum in Ellettsville, Ind.