10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(MARK ONE)

þ	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
	OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2006

OR

¨	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
	OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE TRANSITION PERIOD FROM __________ TO __________   

Commission File Number:  333-20277

PHL VARIABLE INSURANCE COMPANY

(Exact name of registrant as specified in its charter)

Delaware	06-1045829
(State or other jurisdiction of	(I.R.S. Employer
incorporation or organization)	Identification No.)

One American Row, Hartford, Connecticut 06102-5056

(860) 403-5000

(Address, including zip code, and telephone number,

including area code, of principal executive offices)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes ¨     No þ

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer.  See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act.  (Check one):

Large accelerated filer ¨     Accelerated filer ¨     Non-accelerated filer þ

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes ¨     No þ

PHL Variable Insurance Company is a wholly-owned indirect subsidiary of The Phoenix Companies, Inc., and there is no market for the registrant’s common stock.  On July 31, 2006, there were 500 shares of the registrant’s common stock outstanding.

The registrant meets the conditions set forth in General Instruction H(1)(a) and (b) of Form 10-Q and is therefore filing this Form with the reduced disclosure format permitted by that General Instruction.

1

TABLE OF CONTENTS

	Item No.	Description	Page
PART I.		FINANCIAL INFORMATION
	1	Financial Statements:
		Unaudited Interim Condensed Balance Sheet as of    June 30, 2006 and December 31, 2005	3
		Unaudited Interim Condensed Statement of Income and    Comprehensive Income and Changes in Stockholder’s Equity    for the three and six months ended June 30, 2006 and 2005	4
		Unaudited Interim Condensed Statement of Cash Flows for the    three and six months ended June 30, 2006 and 2005	5
		Notes to Unaudited Interim Condensed Financial Statements for the  three and six months ended June 30, 2006 and 2005	6
	2	Management’s Discussion and Analysis of Financial Condition and  Results of Operations	12
	3	Quantitative and Qualitative Disclosures About Market Risk	18
	4	Controls and Procedures	19
PART II		OTHER INFORMATION
	1	Legal Proceedings	20
	1A	Risk Factors	21
	2	Unregistered Sales of Equity Securities and Use of Proceeds	21
	3	Defaults Upon Senior Securities	21
	4	Submission of Matters to a Vote of Security Holders	21
	5	Other Information	21
	6	Exhibits	22
Signature			23

2

PART I.  FINANCIAL INFORMATION

ITEM 1.  FINANCIAL STATEMENTS

PHL VARIABLE INSURANCE COMPANY

Unaudited Interim Condensed Balance Sheet

($ in thousands, except share data)

June 30, 2006 (unaudited) and December 31, 2005

	June 30,		Dec 31,
	2006		2005
ASSETS:
Available-for-sale debt securities, at fair value	$	2,183,000	$	2,789,491
Policy loans, at unpaid principal balances		14,231		8,171
Other invested assets		1,267		1,129
Total investments		2,198,498		2,798,791
Cash and cash equivalents		13,974		25,818
Accrued investment income		21,371		30,837
Receivables		75,459		25,107
Deferred policy acquisition costs		648,265		529,315
Receivable from related parties		2,554		32,340
Other general account assets		2,355		247
Separate account assets		2,642,399		2,537,685
Total assets	$	5,604,875	$	5,980,140
LIABILITIES:
Policyholder deposit funds	$	1,699,575	$	2,256,129
Policy liabilities and accruals		604,713		487,573
Deferred income taxes		83,489		73,356
Payable to related parties		20,181		72,446
Other general account liabilities		18,370		10,688
Separate account liabilities		2,642,399		2,537,685
Total liabilities		5,068,727		5,437,877
CONTINGENT LIABILITIES (Note 5)
STOCKHOLDER’S EQUITY:
Common stock, $5,000 par value: 1,000 shares authorized; 500 shares issued		2,500		2,500
Additional paid-in capital		503,234		503,234
Retained earnings		40,295		37,134
Accumulated other comprehensive loss		(9,881)		(605)
Total stockholder’s equity		536,148		542,263
Total liabilities and stockholder’s equity	$	5,604,875	$	5,980,140

The accompanying notes are an integral part of these financial statements.

3

PHL VARIABLE INSURANCE COMPANY

Unaudited Interim Condensed Statement of Income and Comprehensive Income

and Changes in Stockholder’s Equity

($ in thousands, except share data)

Three and Six Months Ended June 30, 2006 and 2005

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2006		2005		2006		2005
REVENUES:
Premiums	$	3,219	$	1,539	$	5,694	$	2,891
Insurance and investment product fees		41,841		25,542		83,836		49,167
Investment income, net of expenses		33,906		38,133		68,966		75,921
Net realized investment losses		(64)		(1,680)		(4,147)		(2,270)
Total revenues		78,902		63,534		154,349		125,709
BENEFITS AND EXPENSES:
Policy benefits		36,640		32,486		80,488		65,443
Policy acquisition cost amortization		20,767		36,494		33,824		51,316
Other operating expenses		16,263		9,374		35,775		16,718
Total benefits and expenses		73,670		78,354		150,087		133,477
Income (loss) before income taxes		5,232		(14,820)		4,262		(7,768)
Applicable income taxes (benefits)		1,329		(5,279)		1,101		(2,903)
Net income (loss)	$	3,903	$	(9,541)	$	3,161	$	(4,865)
COMPREHENSIVE INCOME:
Net income (loss)	$	3,903	$	(9,541)	$	3,161	$	(4,865)
Net unrealized investment gains (losses)		(4,812)		3,803		(9,128)		(3,341)
Net unrealized derivative losses		(65)		(84)		(148)		(167)
Other comprehensive income (loss)		(4,877)		3,719		(9,276)		(3,508)
Comprehensive loss	$	(974)	$	(5,822)	$	(6,115)	$	(8,373)
RETAINED EARNINGS:
Net income (loss)	$	3,903	$	(9,541)	$	3,161	$	(4,865)
OTHER COMPREHENSIVE INCOME:
Other comprehensive income (loss)		(4,877)		3,719		(9,276)		(3,508)
Change in stockholder’s equity		(974)		(5,822)		(6,115)		(8,373)
Stockholder’s equity, beginning of period		537,122		545,810		542,263		548,361
Stockholder’s equity, end of period	$	536,148	$	539,988	$	536,148	$	539,988

The accompanying notes are an integral part of these financial statements.

4

PHL VARIABLE INSURANCE COMPANY

Unaudited Interim Condensed Statement of Cash Flows

($ in thousands)

Six Months Ended June 30, 2006 and 2005

	Six Months Ended
	June 30,
	2006		2005
OPERATING ACTIVITIES:
Net income (loss)	$	3,161	$	(4,865)
Net realized investment losses		4,147		2,270
Investment income (loss)		2,869		(5,436)
Deferred income taxes (benefit)		15,129		(6)
(Increase) decrease in receivables		(7,009)		7,689
(Increase) decrease in deferred policy acquisition costs		(97,825)		7,144
Increase in policy liabilities and accruals		124,807		59,239
Other assets and other liabilities net change		(16,517)		6,670
Cash from operating activities		28,762		72,705
INVESTING ACTIVITIES:
Investment purchases		(471,246)		(370,262)
Investment sales, repayments and maturities		987,194		419,810
Cash from investing activities		515,948		49,548
FINANCING ACTIVITIES:
Policyholder deposit fund deposits		106,566		126,097
Policyholder deposit fund withdrawals		(663,120)		(268,777)
Cash for financing activities		(556,554)		(142,680)
Change in cash and cash equivalents		(11,844)		(20,427)
Cash and cash equivalents, beginning of period		25,818		39,598
Cash and cash equivalents, end of period	$	13,974	$	19,171

The accompanying notes are an integral part of these financial statements.

5

PHL VARIABLE INSURANCE COMPANY

Notes to Unaudited Interim Condensed Financial Statements

Three and Six Months Ended June 30, 2006 and 2005

1.

Organization and Operations

PHL Variable Insurance Company is a life insurance company offering variable and fixed annuity and non-participating life insurance products.  It is a wholly-owned subsidiary of PM Holdings, Inc.  PM Holdings, Inc. is a wholly-owned subsidiary of Phoenix Life Insurance Company (Phoenix Life), which is a wholly-owned subsidiary of The Phoenix Companies, Inc., a New York Stock Exchange listed company. Certain prior year amounts have been reclassified to conform with 2006 presentation.

We have prepared these financial statements in accordance with accounting principles generally accepted in the United States, or GAAP.  In preparing these financial statements in conformity with GAAP, we are required to make estimates and assumptions that affect the reported amounts of assets and liabilities at reporting dates and the reported amounts of revenues and expenses during the reporting periods.  Actual results will differ from these estimates and assumptions.  We employ significant estimates and assumptions in the determination of: deferred policy acquisition costs; policyholder liabilities and accruals; the valuation of investments in debt and equity securities; the valuation of deferred tax liabilities and accruals for contingent liabilities.  Our significant accounting policies are presented in the notes to our financial statements in our 2005 Annual Report on Form 10-K.

Our interim financial statements do not include all of the disclosures required by GAAP for annual financial statements.  In our opinion, we have included all adjustments, consisting of normal, recurring adjustments, considered necessary for a fair statement of the results for the interim periods.  Financial results for the three and six-month periods in 2006 are not necessarily indicative of the results that may be expected for the year 2006.  These unaudited financial statements should be read in conjunction with our financial statements in our 2005 Annual Report on Form 10-K.

Recently issued accounting standards

Uncertain Tax Positions:  In June 2006, the Financial Accounting Standards Board Issued FIN 48, Accounting for Uncertainty in Income Taxes, or FIN 48.  FIN 48 clarifies the accounting for income taxes by prescribing a minimum recognition threshold a tax position is required to meet before being recognized in the financial statements.  FIN 48 also provides guidance on measurement and classification of taxes and introduces new disclosure requirements.  This guidance is effective for fiscal years beginning after December 15, 2006.  We are currently assessing the impact of FIN 48 on our financial position and results of operations.

Deferred Acquisition Costs:  In September 2005, the Accounting Standards Executive Committee, or AcSEC, of the American Institute of Certified Public Accountants, or AICPA, issued Statement of Position 05-1, Accounting by Insurance Enterprises for Deferred Acquisition Costs in Connection With Modifications or Exchanges of Insurance Contracts, or SOP 05-1.  SOP 05-1 provides guidance on accounting by insurance enterprises for deferred acquisition costs on internal replacements of insurance and investment contracts other than those specifically described in Statement of Financial Accounting Standards No. 97, or SFAS No. 97.  The SOP defines an internal replacement as a modification in product benefits, features, rights, or coverages that occurs by the exchange of a contract for a new contract, or by amendment, endorsement, or rider to a contract, or by the election of a feature or coverage within a contract.  This SOP is effective for internal replacements occurring in fiscal years beginning after December 15, 2006.  We will adopt SOP 05-1 on January 1, 2007.  We are currently assessing the impact of SOP 05-1 on our financial position and results of operations.

Servicing of Financial Assets:  In March 2006, the Financial Accounting Standards Board issued SFAS 156, Accounting for Servicing of Financial Assets, an amendment of FASB Statement No. 140, or SFAS 156.  SFAS 156 provides guidance on recognition and disclosure of servicing assets and liabilities and is effective beginning January 1, 2007.  We do not expect our adoption of SFAS 156 to have a material impact on our financial statements.

6

Accounting changes

Certain Hybrid Financial Instruments:  Effective January 1, 2006, we adopted SFAS 155, Accounting for Certain Hybrid Financial Instruments, or SFAS 155.  SFAS 155 resolves certain issues surrounding the accounting for beneficial interests in securitized financial assets.  Our adoption of SFAS 155 did not have a material effect on our financial statements.

Other-Than-Temporary Impairments:  Effective January 1, 2006, we adopted FASB Staff Position Nos. FAS 115-1 and FAS 124-1, The Meaning of Other-Than-Temporary Impairment and Its Application to Certain Investments, or FSP 115-1. FSP 115-1 provides guidance as to the determination of other-than-temporarily impaired securities and requires certain financial disclosures with respect to unrealized losses.  These accounting and disclosure requirements largely codify our existing practices as to other-than-temporarily impaired securities and, accordingly, our adoption did not have a material effect on our financial statements.

2.

Operating Activities

Activity in Deferred Policy Acquisition Costs:	Three Months Ended				Six Months Ended
($ in thousands)	June 30,				June 30,
	2006		2005		2006		2005
Policy acquisition costs deferred	$	47,984	$	21,960	$	131,648	$	44,172
Recurring costs amortized to expense		(20,600)		(36,494)		(35,935)		(51,316)
Decrease (increase) related to realized investment gains  or losses		(167)		—		2,111		—
(Cost) credit offsets to net unrealized investment gains  or losses included in other comprehensive income		10,568		(24,953)		21,126		9,049
Change in deferred policy acquisition costs		37,785		(39,487)		118,950		1,905
Deferred policy acquisition costs, beginning of period		610,480		474,850		529,315		433,458
Deferred policy acquisition costs, end of period	$	648,265	$	435,363	$	648,265	$	435,363

3.

Investing Activities

Debt securities

Fair Value and Cost of Debt Securities:	June 30, 2006				December 31, 2005
($ in thousands)	Fair Value		Cost		Fair Value		Cost
U.S. government and agency	$	115,042	$	117,242	$	124,552	$	125,673
State and political subdivision		18,806		19,278		28,585		28,934
Foreign government		54,984		53,518		73,412		69,275
Corporate		1,236,008		1,273,494		1,490,696		1,510,681
Mortgage-backed		474,271		484,663		648,124		649,346
Other asset-backed		283,889		285,362		424,122		425,634
Debt securities	$	2,183,000	$	2,233,557	$	2,789,491	$	2,809,543

We owned no non-income producing debt securities as of June 30, 2006 or 2005.

7

Gross and Net Unrealized Gains and Losses from	June 30, 2006				December 31, 2005
Debt Securities:	Gains		Losses		Gains		Losses
($ in thousands)
U.S. government and agency	$	135	$	(2,335)	$	369	$	(1,490)
State and political subdivision		190		(662)		239		(588)
Foreign government		2,054		(588)		4,539		(402)
Corporate		3,466		(40,952)		10,796		(30,781)
Mortgage-backed		2,280		(12,672)		6,141		(7,363)
Other asset-backed		1,959		(3,432)		2,052		(3,564)
Debt securities gains (losses)	$	10,084	$	(60,641)	$	24,136	$	(44,188)
Debt securities net losses	$	(50,557)			$	(20,052)

Aging of Temporarily Impaired	June 30, 2006
Debt Securities:	Less than 12 months				Greater than 12 months				Total
($ in thousands)	Fair		Unrealized		Fair		Unrealized		Fair		Unrealized
	Value		Losses		Value		Losses		Value		Losses
Debt securities
U.S. government and agency	$	76,029	$	(1,343)	$	28,286	$	(992)	$	104,315	$	(2,335)
State and political subdivision		2,563		(32)		13,672		(630)		16,235		(662)
Foreign government		8,852		(213)		8,168		(375)		17,020		(588)
Corporate		615,857		(22,170)		454,400		(18,782)		1,070,257		(40,952)
Mortgage-backed		276,172		(8,943)		125,653		(3,729)		401,825		(12,672)
Other asset-backed Other asset-backed		98,010		(1,152)		89,440		(2,280)		187,450		(3,432)
Total temporarily impaired securities	$	1,077,483	$	(33,853)	$	719,619	$	(26,788)	$	1,797,102	$	(60,641)
Below investment grade	$	61,143	$	(2,660)	$	60,633	$	(3,510)	$	121,776	$	(6,170)
Below investment grade after offsets  for deferred policy acquisition cost  adjustment and taxes			$	(570)			$	(664)			$	(1,234)

These securities are considered to be temporarily impaired at June 30, 2006 as each of these securities has performed, and is expected to continue to perform, in accordance with their original contractual terms, and we have the ability and intent to hold these securities until they recover their value.

There are no unrealized losses of below investment grade debt securities with a fair value less than 80% of the securities amortized cost at June 30, 2006.

Aging of Temporarily Impaired General	As of December 31, 2005
Account Debt Securities:	Less than 12 months				Greater than 12 months				Total
($ in thousands)	Fair		Unrealized		Fair		Unrealized		Fair		Unrealized
	Value		Losses		Value		Losses		Value		Losses
Debt Securities
U.S. government and agency	$	62,372	$	(714)	$	33,369	$	(776)	$	95,741	$	(1,490)
State and political subdivision		7,854		(15)		16,067		(573)		23,921		(588)
Foreign government		14,877		(269)		4,834		(133)		19,711		(402)
Corporate		651,536		(18,520)		340,112		(12,261)		991,648		(30,781)
Mortgage-backed		245,240		(3,751)		165,412		(3,612)		410,652		(7,363)
Other asset-backed Other asset-backed		140,801		(1,797)		101,004		(1,767)		241,805		(3,564)
Total temporarily impaired securities	$	1,122,680	$	(25,066)	$	660,798	$	(19,122)	$	1,783,478	$	(44,188)
Below investment grade	$	72,000	$	(2,888)	$	40,186	$	(2,667)	$	112,186	$	(5,555)
Below investment grade after offsets  for deferred acquisition cost  adjustment and taxes			$	(469)			$	(305)			$	(774)

These securities were considered to be temporarily impaired at December 31, 2005 as each of these securities had performed, and was expected to continue to perform, in accordance with their original contractual terms, and we have the ability and intent to hold these securities until they recover their value.

8

Net investment income

Sources of Net Investment Income:	Three Months Ended				Six Months Ended
($ in thousands)	June 30,				June 30,
	2006		2005		2006		2005
Debt securities	$	33,830	$	38,445	$	68,704	$	76,580
Equity securities		—		1		—		1
Other investments		(27)		32		39		36
Policy loans		47		115		134		233
Cash and cash equivalents		514		199		1,093		428
Total investment income		34,364		38,792		69,970		77,278
Less: investment expenses		458		659		1,004		1,357
Net investment income	$	33,906	$	38,133	$	68,966	$	75,921

The negative income amount of $27 thousand shown for other investments is attributable to partnership valuation per the financial statements received in the second quarter of 2006.

Net realized investment gains (losses)

Sources and Types of Net Realized Investment	Three Months Ended				Six Months Ended
Gains (Losses):	June 30,				June 30,
($ in thousands)	2006		2005		2006		2005
Debt security impairments	$	—	$	—	$	(411)	$	—
Debt security transaction gains		1,053		327		2,263		854
Debt security transaction losses		(1,494)		(1,760)		(6,561)		(3,253)
Equity security transaction gains		—		—		—		26
Other invested asset transaction gains (losses)		377		(247)		562		103
Net transaction gains (losses)		(64)		(1,680)		(3,736)		(2,270)
Net realized investment gains (losses)	$	(64)	$	(1,680)	$	(4,147)	$	(2,270)
Net realized investment gains (losses)	$	(64)	$	(1,680)	$	(4,147)	$	(2,270)
Applicable deferred policy acquisition costs		167		—		(2,111)		—
Applicable deferred income tax benefit		(81)		(581)		(713)		(787)
Offsets to realized investment gains		86		(581)		(2,824)		(787)
Net realized investment gains (losses)  included in net income	$	(150)	$	(1,099)	$	(1,323)	$	(1,483)

Unrealized investment gains (losses)

Sources of Changes in Net Unrealized Investment	Three Months Ended				Six Months Ended
Gains (Losses):	June 30,				June 30,
($ in thousands)	2006		2005		2006		2005
Debt securities	$	(17,974)	$	30,813	$	(35,170)	$	(14,153)
Equity securities		—		(9)		—		(35)
Net unrealized investment gains (losses)	$	(17,974)	$	30,804	$	(35,170)	$	(14,188)
Net unrealized investment gains (losses)	$	(17,974)	$	30,804	$	(35,170)	$	(14,188)
Applicable deferred policy acquisition costs (benefit)		(10,568)		24,953		(21,126)		(9,049)
Applicable deferred income tax benefit		(2,594)		2,048		(4,915)		(1,798)
Offsets to net unrealized investment losses		(13,162)		27,001		(26,041)		(10,847)
Net unrealized investment gains (losses)  included in other comprehensive income	$	(4,812)	$	3,803	$	(9,128)	$	(3,341)

9

4.

Income Taxes

For the six months ended June 30, 2006 and 2005, the effective income tax rates applicable to income from continuing operations differ from the 35.0% U.S. federal statutory tax rate.  Items giving rise to the differences and the effects are as follows:

Analysis of Effective Income Tax Rates:	Three Months Ended		Six Months Ended
	June 30,		June 30,
	2006	2005	2006	2005
Income taxes at statutory rate	35.0%	(35.0%)	35.0%	(35.0%)
Investment income not subject to tax	(9.6%)	(0.6%)	(9.2%)	(2.4%)
Effective income tax benefit rates applicable to  continuing operations	25.4%	(35.6%)	25.8%	(37.4%)

Our federal income tax returns are routinely audited by the IRS and estimated provisions are routinely provided in the financial statements in anticipation of the results of these audits.  The current periods being audited by the IRS are the 2002 and 2003 tax years.  While it is often difficult to predict the outcome of these audits, including the timing of any resolution of any particular tax matter, we believe that our reserves, as recorded on the balance sheet, are adequate for all open years.  Unfavorable resolution of any particular issue could result in additional use of cash to pay liabilities that would be deemed owed to the IRS.  Additionally, any unfavorable or favorable resolution of any particular issue could result in an increase or decrease, respectively, to our effective income tax rate to the extent that our estimates differ from the ultimate resolution.

5.

Contingent Liabilities

We are regularly involved in litigation, both as a defendant and as a plaintiff.  The litigation naming us as a defendant ordinarily involves our activities as an insurer, investor or taxpayer.  Several current proceedings are discussed below.  In addition, state regulatory bodies, the Securities and Exchange Commission, or SEC, the National Association of Securities Dealers, Inc., or NASD, and other regulatory bodies regularly make inquiries of us and, from time to time, conduct examinations or investigations concerning our compliance with, among other things, insurance laws and securities laws.

For example, during 2003 and 2004, the SEC conducted examinations of certain Company variable products and certain affiliated investment advisors and mutual funds.  In 2004, the NASD also commenced examinations of two affiliated broker-dealers; the examinations were closed in April 2005 and November 2004, respectively.  In February 2005, the NASD notified an affiliate of the Company that it was asserting violations of trade reporting rules by the affiliate of the Company.  The affiliated company responded to the NASD allegations in May 2005 but has not received any further inquiries to date.

Federal and state regulatory authorities from time to time make inquiries and conduct examinations regarding compliance by the Company with securities and other laws and regulations affecting its registered products.  The Company endeavors to respond to such inquiries in an appropriate way and to take corrective action if warranted.  Recently, there has been a significant increase in federal and state regulatory activity relating to financial services companies, with a number of recent regulatory inquiries focusing on late-trading, market timing and valuation issues.  Our products entitle us to impose restrictions on transfers between separate account sub-accounts associated with our variable products.

In 2004 and 2005, the Boston District Office of the SEC conducted a compliance examination of certain of the Company’s affiliates that are registered under the Investment Company Act of 1940 or the Investment Advisers Act of 1940. Following the examination, the staff of the Boston District Office issued a deficiency letter primarily focused on perceived weaknesses in procedures for monitoring trading to prevent market timing activity.  The staff requested the Company to conduct an analysis as to whether shareholders, policyholders and contract holders who invested in the funds that may have been affected by undetected market timing activity had suffered harm and to advise the staff whether the Company believes reimbursement is necessary or appropriate under the circumstances.  A third party was retained to assist the Company in preparing the analysis.  Based on this analysis, the Company advised the SEC that it does not believe that reimbursement is appropriate.

10

Over the past two years, a number of companies have announced settlements of enforcement actions with various regulatory agencies, primarily the SEC and the New York Attorney General’s Office.  While no such action has been initiated against us, it is possible that one or more regulatory agencies may pursue this type of action against us in the future.

Financial services companies have also been the subject of broad industry inquiries by state regulators and attorneys general which do not appear to be company-specific.  In this regard, in 2004, we received a subpoena from the Connecticut Attorney General’s office requesting information regarding certain distribution practices since 1998.  Over 40 companies received such a subpoena.  We cooperated fully and have had no further inquiry since filing our response.

These types of regulatory actions may be difficult to assess or quantify, may seek recovery of indeterminate amounts, including punitive and treble damages, and the nature and magnitude of their outcomes may remain unknown for substantial periods of time.  While it is not feasible to predict or determine the ultimate outcome of all pending investigations and legal proceedings or to provide reasonable ranges of potential losses, we believe that their outcomes are not likely, either individually or in the aggregate, to have a material adverse effect on our financial condition, or consideration of available insurance and reinsurance and the provision made in our financial statements.  However, given the large or indeterminate amounts sought in certain of these matters and litigation’s inherent unpredictability, it is possible that an adverse outcome in certain matters could, from time to time, have a material adverse effect on our results of operation or cash flows.

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ITEM 2.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS

FORWARD-LOOKING STATEMENTS

The following discussion may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.  The Company intends these forward-looking statements to be covered by the safe harbor provisions of the federal securities laws relating to forward-looking statements.  These include statements relating to trends in, or representing management’s beliefs about, the Company’s future strategies, operations and financial results, as well as other statements including words such as “anticipate,” “believe,” “plan,” “estimate,” “expect,” “intend,” “may,” “should” and other similar expressions.  Forward-looking statements are made based upon management’s current expectations and beliefs concerning trends and future developments and their potential effects on the Company.  They are not guarantees of future performance. Actual results may differ materially from those suggested by forward-looking statements as a result of risks and uncertainties which include, among others: (i) changes in general economic conditions, including changes in interest and currency exchange rates and the performance of financial markets; (ii) heightened competition, including with respect to pricing, entry of new competitors and the development of new products and services by new and existing competitors; (iii) regulatory, accounting or tax developments that may affect the Company or the cost of, or demand for, its products or services; (iv) downgrades in the financial strength ratings of the Company; (v) discrepancies between actual claims experience and assumptions used in setting prices for the Company’s products and establishing the Company’s liabilities for future policy benefits and claims relating to such products; (vi) movements in the equity markets that affect our investment results, the fees we earn from funds on deposit and the demand for our variable products; (vii) the relative success and timing of implementation of the Company’s strategies; (viii) the effects of closing the Company’s retail brokerage operations; and (ix) other risks and uncertainties described in Part II, Item IA. “Risk Factors” below or in any of the Company’s other filings with the SEC.  The Company undertakes no obligation to update or revise publicly any forward-looking statement, whether as a result of new information, future events or otherwise.

MANAGEMENT’S NARRATIVE ANALYSIS OF THE

RESULTS OF OPERATIONS

This section reviews our results of operations for the three and six months ended June 30, 2006 and 2005.  This discussion should be read in conjunction with the unaudited interim condensed financial statements and notes contained in this filing as well as in conjunction with our financial statements for the year ended December 31, 2005 in our 2005 Annual Report on Form 10-K.

Overview

We are a manufacturer of insurance and annuity products for the accumulation, preservation and transfer of wealth.  We provide products and services to affluent and high-net-worth individuals through their advisors.  We offer a broad range of life insurance and annuity products, including universal, variable universal, term life insurance and a range of variable annuity offerings and services through a variety of distributors. These distributors include independent advisors and financial services firms who make our products and services available to their clients.

We derive our revenues principally from:

·

premiums on life insurance;

·

insurance and investment product fees on variable life and annuity products and universal life products; and

·

net investment income and net realized investment gains.

Under generally accepted accounting principles, or GAAP, premium and deposit collections for variable life, universal life and annuity products are not recorded as revenues.  For certain investment options of variable products, collections are reflected on our balance sheet as an increase in separate account liabilities.  Collections for fixed annuities and certain investment options of variable annuities are reflected on our balance sheet as an increase in policyholder deposit funds.  Collections for other products are reflected on our balance sheet as an increase in policy liabilities and accruals.

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Our expenses consist principally of:

·

insurance policy benefits provided to policyholders, including interest credited on policies;

·

deferred policy acquisition costs amortization;

·

other operating expenses; and

·

income taxes.

Our profitability depends principally upon:

·

the adequacy of our product pricing, which is primarily a function of our:

·

ability to select underwriting risks;

·

mortality experience;

·

ability to generate investment earnings;

·

ability to maintain expenses in accordance with our pricing assumptions; and

·

persistency on policies issued (the percentage of policies remaining in force from year to year as measured by premiums);

·

the amount and composition of funds on deposit;

·

the maintenance of our target spreads between the rate of earnings on our investments and interest rates credited to customers; and

·

our ability to manage expenses.

Our sales and financial results over the last several years have been affected by demographic, industry and market trends.  The baby boom generation has begun to enter its prime savings years.  Americans generally have begun to rely less on defined benefit retirement plans, social security and other government programs to meet their postretirement financial needs.  Product preferences have shifted between fixed and variable options depending on market and economic conditions.  Our balanced product portfolio, including universal life, variable life and variable annuity products, is well positioned to meet this shifting demand.

Recently Issued Accounting Standards

Uncertain Tax Positions:  In June 2006, the Financial Accounting Standards Board Issued FIN 48, Accounting for Uncertainty in Income Taxes, or FIN 48.  FIN 48 clarifies the accounting for income taxes by prescribing a minimum recognition threshold a tax position is required to meet before being recognized in the financial statements.  FIN 48 also provides guidance on measurement and classification of taxes and introduces new disclosure requirements.  This guidance is effective for fiscal years beginning after December 15, 2006.  We are currently assessing the impact of FIN 48 on our financial position and results of operations.

Deferred Acquisition Costs:  In September 2005, the Accounting Standards Executive Committee, or AcSEC, of the American Institute of Certified Public Accountants, or AICPA, issued Statement of Position 05-1, Accounting by Insurance Enterprises for Deferred Acquisition Costs in Connection With Modifications or Exchanges of Insurance Contracts, or SOP 05-1.  SOP 05-1 provides guidance on accounting by insurance enterprises for deferred acquisition costs on internal replacements of insurance and investment contracts other than those specifically described in Statement of Financial Accounting Standards No. 97, or SFAS No. 97.  The SOP defines an internal replacement as a modification in product benefits, features, rights, or coverages that occurs by the exchange of a contract for a new contract, or by amendment, endorsement, or rider to a contract, or by the election of a feature or coverage within a contract.  This SOP is effective for internal replacements occurring in fiscal years beginning after December 15, 2006.  We will adopt SOP 05-1 on January 1, 2007. We are currently assessing the impact of SOP 05-1 on our financial position and results of operations.

Servicing of Financial Assets:  In March 2006, the Financial Accounting Standards Board issued SFAS 156, Accounting for Servicing of Financial Assets, an amendment of FASB Statement No. 140, or SFAS 156.  SFAS 156 provides guidance on recognition and disclosure of servicing assets and liabilities and is effective beginning January 1, 2007.  We do not expect our adoption of SFAS 156 to have a material impact on our financial statements.

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Accounting changes

Certain Hybrid Financial Instruments:  Effective January 1, 2006, we adopted SFAS 155, Accounting for Certain Hybrid Financial Instruments, or SFAS 155.  SFAS 155 resolves certain issues surrounding the accounting for beneficial interests in securitized financial assets.  Our adoption of SFAS 155 did not have a material effect on our financial statements.

Other-Than-Temporary Impairments:  Effective January 1, 2006, we adopted FASB Staff Position Nos. FAS 115-1 and FAS 124-1, The Meaning of Other-Than-Temporary Impairment and Its Application to Certain Investments, or FSP 115-1. FSP 115-1 provides guidance as to the determination of other-than-temporarily impaired securities and requires certain financial disclosures with respect to unrealized losses.  These accounting and disclosure requirements largely codify our existing practices as to other-than-temporarily impaired securities and, accordingly, our adoption did not have a material effect on our financial statements.

Critical Accounting Estimates

The discussion and analysis of our results of operations are based upon our financial statements, which have been prepared in accordance with GAAP.  GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.  Actual results could differ from those estimates.

Critical accounting estimates are reflective of significant judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain.  See our 2005 Annual Report on Form 10-K for a description of our critical accounting estimates.

Results of Operations

Summary Financial Data:	Three Months Ended						Six Months Ended
($ in thousands)	June 30,						June 30,
	2006		2005		Change		2006		2005		Change
REVENUES:
Premiums	$	3,219	$	1,539	$	1,680	$	5,694	$	2,891	$	2,803
Insurance and investment  product fees		41,841		25,542		16,299		83,836		49,167		34,669
Investment income,  net of expenses		33,906		38,133		(4,227)		68,966		75,921		(6,955)
Net realized investment  losses		(64)		(1,680)		1,616		(4,147)		(2,270)		(1,877)
Total revenues		78,902		63,534		15,368		154,349		125,709		28,640
BENEFITS AND EXPENSES:
Policy benefits		36,640		32,486		4,154		80,488		65,443		15,045
Policy acquisition cost  amortization		20,767		36,494		(15,727)		33,824		51,316		(17,492)
Other operating expenses		16,263		9,374		6,889		35,775		16,718		19,057
Total benefits and  expenses		73,670		78,354		(4,684)		150,087		133,477		16,610
Income (loss) before  income taxes		5,232		(14,820)		20,052		4,262		(7,768)		12,030
Applicable income taxes  (benefit)		1,329		(5,279)		6,608		1,101		(2,903)		4,004
Net income (loss)	$	3,903	$	(9,541)	$	13,444	$	3,161	$	(4,865)	$	8,026

Three months ended June 30, 2006 vs. June 30, 2005

Premium revenues for the three and six months ended June 30, 2006 increased $1,680 thousand, or 109%, and $2,803 thousand, or 97%, over the comparable periods in 2005 due primarily to higher sales of our term life insurance products.

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Insurance and investment product fees for the three and six months ended June 30, 2006 increased 64% and 71%, respectively, over the comparable periods in 2005 due principally to higher universal life fees resulting from higher sales and growth of policies in force.

Net investment income for the three and six months ended June 30, 2006 decreased 11% and 9%, respectively, from the comparable periods in 2005.  These decreases are due primarily to lower prepayments, lower incidence of makewhole premiums on called bonds and lower annuity funds on deposit in the general account, primarily related to discontinued products.

Net realized investment losses for the three and six-month periods ended June 30, 2006 increased 96% and 83%, respectively, over the comparable periods in 2005 due to higher sales activity in the 2006 periods to fund policyholder deposit fund withdrawals, including the scheduled maturity of a $20.6 million institutionally-placed contract.

Policy benefits for the three and six months ended June 30, 2006 increased 13% and 23%, respectively, over the comparable periods in 2005 as a result of higher universal life claims. Universal life claims represented a small number of claims which we believe are not indicative of a deterioration in overall experience.

Policy acquisition cost amortization for the three and six months ended June 30, 2006 decreased 43% and 34%, respectively, due primarily to the effects of the second quarter 2005 unlocking of deferred policy acquisition costs and reduced margins from universal life claims.

Other operating expenses for the three and six months ended June 30, 2006 increased 73% and 114%, respectively, over the comparable periods in 2005 as a result of higher non-deferred expenses, such as maintenance and indirect costs associated with business growth and premium taxes driven primarily by the increase in universal life new business.

General Account

The invested assets in our general account are generally of high quality and broadly diversified across asset classes, sectors and individual credits and issuers.  Our investment professionals manage these general account assets in investment segments that support specific product liabilities.  These investment segments have distinct investment policies that are structured to support the financial characteristics of the related liabilities within them.  Segmentation of assets allows us to manage the risks and measure returns on capital for our various products.

Separate Accounts

Separate account assets are managed in accordance with the specific investment contracts and guidelines relating to our variable products.  We generally do not bear any investment risk on assets held in separate accounts.  Rather, we receive investment management fees based on assets under management.  Assets held in separate accounts are not available to satisfy general account obligations.

Debt and Equity Securities Held in Our General Account

Our general account debt securities portfolios consist primarily of investment-grade publicly traded and privately placed corporate bonds, residential mortgage-backed securities, commercial mortgage-backed securities and asset-backed securities.  As of June 30, 2006, our general account held debt securities with a carrying value of $2,183.0 million, representing 99.3% of total general account investments.  Public debt securities represented 81.4% of total debt securities, with the remaining 18.6% represented by private debt securities.

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Debt Securities by Type and Credit Quality:	As of June 30, 2006
($ in thousands)	Investment Grade				Below Investment Grade
	Fair Value		Cost		Fair Value		Cost
United States government and agency	$	115,042	$	117,242	$	—	$	—
State and political subdivision		18,806		19,278		—		—
Foreign government		27,386		27,747		27,598		25,771
Corporate		1,091,071		1,123,078		144,937		150,416
Mortgage-backed		474,271		484,663		—		—
Other asset-backed		272,726		274,159		11,163		11,203
Total debt securities	$	1,999,302	$	2,046,167	$	183,698	$	187,390
Percentage of total debt securities		91.6%		91.6%		8.4%		8.4%

We manage credit risk through industry and issuer diversification.  Maximum exposure to an issuer is defined by quality ratings, with higher quality issuers having larger exposure limits.  Our investment approach emphasizes a high level of industry diversification.  The top five industry holdings as of June 30, 2006 in our debt securities portfolio are diversified financial services (6.2%), banking (5.3%), insurance (3.6%), telecommunications equipment (2.6%) and electric utilities (2.5%).

Total net unrealized losses on debt securities were $50.6 million (unrealized losses of $60.6 million less unrealized gains of $10.0 million).

At the end of each reporting period, we review our security holdings for potential recognition of an other-than-temporary impairment.  We maintain a watch list of securities in default, near default or otherwise considered by our investment professionals as being distressed, potentially distressed or requiring a heightened level of scrutiny.  We also identify securities whose carrying value has been below amortized cost on a continuous basis.

The following table presents certain information with respect to our gross unrealized losses related to our investments in general account debt securities.  Applicable deferred acquisition costs and deferred income taxes reduce the effect of these losses on our comprehensive income.

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Duration of Gross Unrealized Losses	As of June 30, 2006
on General Account Securities:			0 – 6		6 – 12		Over 12
($ in thousands)	Total		Months		Months		Months
Debt securities
Total fair value	$	1,797,103	$	607,420	$	470,064	$	719,619
Total amortized cost		1,857,744		620,841		490,496		746,407
Unrealized losses	$	(60,641)	$	(13,421)	$	(20,432)	$	(26,788)
Unrealized losses after offsets	$	(9,781)	$	(1,758)	$	(3,395)	$	(4,628)
Unrealized losses over 20% of cost	$	—	$	—	$	—	$	—
Unrealized losses over 20% of cost after offsets	$	—	$	—	$	—	$	—
Investment grade:
Unrealized losses	$	(54,471)	$	(12,625)	$	(18,568)	$	(23,278)
Unrealized losses after offsets	$	(8,547)	$	(1,646)	$	(2,937)	$	(3,964)
Unrealized losses over 20% of cost	$	—	$	—	$	—	$	—
Unrealized losses over 20% of cost after offsets	$	—	$	—	$	—	$	—
Below investment grade:
Unrealized losses	$	(6,170)	$	(796)	$	(1,864)	$	(3,510)
Unrealized losses after offsets	$	(1,234)	$	(112)	$	(458)	$	(664)
Unrealized losses over 20% of cost	$	—	$	—	$	—	$	—
Unrealized losses over 20% of cost after offsets	$	—	$	—	$	—	$	—

For debt securities with gross unrealized losses, 87.4% of the unrealized losses after offsets pertain to investment grade securities and 12.6% of the unrealized losses after offsets pertain to below investment grade securities at June 30, 2006.

In determining that the securities giving rise to unrealized losses were not other-than-temporarily impaired, we considered many factors, including those cited previously.  In making these evaluations, we must exercise considerable judgment. Accordingly, there can be no assurance that actual results will not differ from our judgments and that such differences may require the future recognition of other-than-temporary impairment charges that could have a material effect on our financial position and results of operations.  In addition, the value of, and the realization of any loss on, a debt security or equity security is subject to numerous risks, including interest rate risk, market risk, credit risk and liquidity risk.  The magnitude of any loss incurred by us may be affected by the relative concentration of our investments in any one issuer or industry.  We have established specific policies limiting the concentration of our investments in any single issuer and industry and believe our investment portfolio is prudently diversified.

Liquidity and Capital Resources

In the normal course of business, we enter into transactions involving various types of financial instruments such as debt and equity securities.  These instruments have credit risk and also may be subject to risk of loss due to interest rate and market fluctuations.

Our liquidity requirements principally relate to the liabilities associated with various life insurance and annuity products and operating expenses.  Liabilities arising from life insurance and annuity products include the payment of benefits, as well as cash payments in connection with policy surrenders, withdrawals and loans.

Historically, we have used cash flow from operations and investment activities to fund liquidity requirements.  Our principal cash inflows from life insurance and annuities activities come from premiums, annuity deposits and charges on insurance policies and annuity contracts.  Principal cash inflows from investment activities result from repayments of principal, proceeds from maturities, sales of invested assets and investment income.

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Ratings

Ratings are an important factor in establishing our competitive position in the insurance and financial services marketplace.  There can be no assurance that our ratings will continue for any given period of time or that they will not be changed.  In the event our ratings are downgraded, our ability to borrow, the level of our revenues and the persistency of our business may be adversely affected.  Please see Section II, Item 1A. “Risk Factors” below.

Our current financial strength and debt ratings are set forth in the chart below.

	Financial Strength Ratings of
Rating Agency	Phoenix Life and PHL Variable Life
A.M. Best Company, Inc.	A (“Excellent”)
Fitch	A+ (“Strong”)
Standard & Poor’s	A (“Strong”)
Moody’s	A3 (“Good”)

On July 27, 2006, Standard & Poor’s affirmed our rating, as well as Phoenix Life’s A (“Strong”) financial strength rating.  In addition, Standard & Poor’s revised its outlook for these ratings from stable to negative.  On July 28, 2006, Fitch affirmed our rating, as well as Phoenix Life’s A+ (“Strong”) financial strength rating, and maintained its stable outlook.

These ratings are not a recommendation to buy or hold any of our securities.

See our 2005 Annual Report on Form 10-K for additional information as to liquidity and capital resources.

Contractual Obligations and Commercial Commitments

As of June 30, 2006, there were no significant changes to our outstanding contractual obligations and commercial commitments as disclosed in our 2005 Annual Report on Form 10-K.

Off-Balance Sheet Arrangements

As of June 30, 2006 and December 31, 2005, we did not have any significant off-balance sheet arrangements as defined by Item 303(a)(4)(ii) of SEC Regulation S-K.

Reinsurance

We maintain life reinsurance programs designed to protect against large or unusual losses in our life insurance business. Based on our review of their financial statements and reputations in the reinsurance marketplace, we believe that these third-party reinsurers are financially sound and, therefore, that we have no material exposure to uncollectible life reinsurance.

Risk Based Capital

At June 30, 2006, our estimated Total Adjusted Capital level was in excess of 400% of Company Action Level.

ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We have omitted this information from this report as we meet the conditions set forth in General Instruction H(1)(a) and (b) of Form 10-Q and are therefore filing this Form with the reduced disclosure format permitted by that General Instruction.

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ITEM 4.  CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures.  We have carried out an evaluation under the supervision and with the participation of our management, including our Principal Executive Officer and our Principal Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures.  There are inherent limitations to the effectiveness of any system of disclosure controls and procedures, including the possibility of human error and the circumvention or overriding of the controls and procedures.  Accordingly, even effective disclosure controls and procedures can only provide reasonable assurance of achieving their control objectives.  Based upon our evaluation, these officers have concluded that, as of June 30, 2006, the disclosure controls and procedures were effective to provide reasonable assurance that information required to be disclosed in the reports we file and submit under the Securities and Exchange Act of 1934 is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms.

Changes in Internal Control over Financial Reporting.  During the three months ended on June 30, 2006, there were no changes in our internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II.  OTHER INFORMATION

ITEM 1.  LEGAL PROCEEDINGS

We are regularly involved in litigation, both as a defendant and as a plaintiff.  The litigation naming us as a defendant ordinarily involves our activities as an insurer, investor or taxpayer.  Several current proceedings are discussed below.  In addition, state regulatory bodies, the Securities and Exchange Commission, or SEC, the National Association of Securities Dealers, Inc., or NASD, and other regulatory bodies regularly make inquiries of us and, from time to time, conduct examinations or investigations concerning our compliance with, among other things, insurance laws and securities laws.

For example, during 2003 and 2004, the SEC conducted examinations of certain Company variable products and certain affiliated investment advisors and mutual funds.  In 2004, the NASD also commenced examinations of two affiliated broker-dealers; the examinations were closed in April 2005 and November 2004, respectively.  In February 2005, the NASD notified an affiliate of the Company that it was asserting violations of trade reporting rules by the affiliate of the Company.  The affiliated company responded to the NASD allegations in May 2005 but has not received any further inquiries to date.

Federal and state regulatory authorities from time to time make inquiries and conduct examinations regarding compliance by the Company with securities and other laws and regulations affecting its registered products.  The Company endeavors to respond to such inquiries in an appropriate way and to take corrective action if warranted.  Recently, there has been a significant increase in federal and state regulatory activity relating to financial services companies, with a number of recent regulatory inquiries focusing on late-trading, market timing and valuation issues.  Our products entitle us to impose restrictions on transfers between separate account sub-accounts associated with our variable products.

In 2004 and 2005, the Boston District Office of the SEC conducted a compliance examination of certain of the Company’s affiliates that are registered under the Investment Company Act of 1940 or the Investment Advisers Act of 1940. Following the examination, the staff of the Boston District Office issued a deficiency letter primarily focused on perceived weaknesses in procedures for monitoring trading to prevent market timing activity.  The staff requested the Company to conduct an analysis as to whether shareholders, policyholders and contract holders who invested in the funds that may have been affected by undetected market timing activity had suffered harm and to advise the staff whether the Company believes reimbursement is necessary or appropriate under the circumstances.  A third party was retained to assist the Company in preparing the analysis.  Based on this analysis, the Company advised the SEC that it does not believe that reimbursement is appropriate.

Over the past two years, a number of companies have announced settlements of enforcement actions with various regulatory agencies, primarily the SEC and the New York Attorney General’s Office.  While no such action has been initiated against us, it is possible that one or more regulatory agencies may pursue this type of action against us in the future.

Financial services companies have also been the subject of broad industry inquiries by state regulators and attorneys general which do not appear to be company-specific.  In this regard, in 2004, we received a subpoena from the Connecticut Attorney General’s office requesting information regarding certain distribution practices since 1998.  Over 40 companies received such a subpoena.  We cooperated fully and have had no further inquiry since filing our response.

These types of regulatory actions may be difficult to assess or quantify, may seek recovery of indeterminate amounts, including punitive and treble damages, and the nature and magnitude of their outcomes may remain unknown for substantial periods of time.  While it is not feasible to predict or determine the ultimate outcome of all pending investigations and legal proceedings or to provide reasonable ranges of potential losses, we believe that their outcomes are not likely, either individually or in the aggregate, to have a material adverse effect on our financial condition, or consideration of available insurance and reinsurance and the provision made in our financial statements.  However, given the large or indeterminate amounts sought in certain of these matters and litigation’s inherent unpredictability, it is possible that an adverse outcome in certain matters could, from time to time, have a material adverse effect on our results of operation or cash flows.

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ITEM 1A.  RISK FACTORS

We face significant risks, any of which could have a significant or material adverse effect on our business, financial condition, operating results or liquidity.  The risks described below updates the risk factors described in our 2005 Form
10-K and should be read in addition to those risk factors.  The risk factors described in this Form 10-Q and our 2005 Form 10-K may not be the only risks we face.  This information should be considered carefully together with the other information contained in this Form 10-Q and the other reports and materials we file with the Securities and Exchange Commission.

Downgrades to Phoenix Life’s and PHL Variable Insurance Company’s financial strength ratings could increase policy surrenders and withdrawals, adversely affect relationships with distributors, reduce new sales and earnings from certain of our life insurance products and increase our future borrowing costs.

Rating agencies assign financial strength ratings based on their opinions of the relevant company’s ability to meet its financial obligations.  Financial strength ratings reflect a rating agency’s view of an insurance company’s ability to meet its obligations to its insureds.  These ratings are therefore key factors underlying the competitive position of life insurers. Downgrades could adversely affect our reputation and, hence, our relationships with existing distributors and our ability to establish additional distributor relationships.  If this were to occur, we might experience a decline in sales of certain products and the persistency of existing customers.  At this time, we cannot estimate the impact on sales or persistency. A significant decline in our sales or persistency could have a material adverse effect on our financial results.

ITEM 2.  UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

We have omitted this information from this report as we meet the conditions set forth in General Instruction H(1)(a) and (b) of Form 10-Q and are therefore filing this Form with the reduced disclosure format permitted by that General Instruction.

ITEM 3.  DEFAULTS UPON SENIOR SECURITIES

We have omitted this information from this report as we meet the conditions set forth in General Instruction H(1)(a) and (b) of Form 10-Q and are therefore filing this Form with the reduced disclosure format permitted by that General Instruction.

ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

We have omitted this information from this report as we meet the conditions set forth in General Instruction H(1)(a) and (b) of Form 10-Q and are therefore filing this Form with the reduced disclosure format permitted by that General Instruction.

ITEM 5.  OTHER INFORMATION

(a)

None.

(b)

No material changes.

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ITEM 6.  EXHIBITS

Exhibit
3.1	Form of Amended and Restated Certificate of Incorporation (as amended and restated effective May 31, 1994) (incorporated herein by reference to Exhibit 3.1 to the PHL Variable Insurance Company’s Annual Report on Form 10-K filed March 31, 2006)
3.2	Bylaws of PHL Variable Life Insurance Company (as amended and restated effective May 16, 2002) (incorporated herein by reference to Exhibit 3.2 to the PHL Variable Insurance Company’s Annual Report on Form 10-K filed March 31, 2006)
10.1	Services Agreement effective as of January 1, 1995 by and among PHL Variable Insurance Company, Phoenix Life Insurance Company, American Life and Reassurance Company, Phoenix American Life Insurance Company and Phoenix Home Life Mutual Insurance Company (incorporated herein by reference to Exhibit 10.1 to the PHL Variable Insurance Company’s Annual Report on Form 10-K filed March 31, 2006)
10.2	Investment Management Agreement effective as of January 1, 1995 by and between PHL Variable Insurance Company and Phoenix Investment Counsel, Inc. (incorporated herein by reference to Exhibit 10.2 to the PHL Variable Insurance Company’s Annual Report on Form 10-K filed March 31, 2006)
10.3	Amendment #1 (effective as of January 1, 1998) to the Investment Management Agreement dated as of January 1, 1995 by and between PHL Variable Insurance Company and Phoenix Investment Counsel, Inc. (incorporated herein by reference to Exhibit 10.3 to the PHL Variable Insurance Company’s Annual Report on Form 10-K filed March 31, 2006)
10.4	Amended and Restated Tax Allocation Agreement dated as of January 1, 2001 by and among The Phoenix Companies, Inc. and most of its subsidiaries (incorporated herein by reference to Exhibit 10.4 to the PHL Variable Insurance Company’s Annual Report on Form 10-K filed March 31, 2006)
10.5	Amendment #1 (effective as of January 1, 2006) to the Amended and Restated Tax Allocation Agreement dated as of January 1, 2001 by and among The Phoenix Companies, Inc. and most of its subsidiaries (incorporated herein by reference to Exhibit 10.5 to the PHL Variable Insurance Company’s Annual Report on Form 10-K filed March 31, 2006)
31.1	Certification of Philip K. Polkinghorn, Chief Executive Officer, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002*
31.2	Certification of Michael E. Haylon, Chief Financial Officer, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002*
32	Certification by Philip K. Polkinghorn, Chief Executive Officer and Michael E. Haylon, Chief Financial Officer, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002*

* Filed herewith

We will furnish any exhibit upon the payment of a reasonable fee, which fee shall be limited to our reasonable expenses in furnishing such exhibit.  Requests for copies should be directed to: Corporate Secretary, The Phoenix Companies, Inc., One American Row, P.O. Box 5056, Hartford, Connecticut 06102-5056.

22

Signature

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

PHL VARIABLE INSURANCE COMPANY

Date:

August 14, 2006

By:

/s/ Michael E. Haylon

Michael E. Haylon

Executive Vice President

  and Chief Financial Officer

23

EX-31.1

EXHIBIT 31.1

CERTIFICATION

I, the Chief Executive Officer of PHL Variable Insurance Company (the “registrant”), certify that:

1.

I have reviewed this Quarterly report on Form 10-Q of the registrant;

2.

Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.

Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.

The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

(a)

designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b)

evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(c)

disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.

The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a)

all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b)

any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date:  August 14, 2006	/s/ Philip K. Polkinghorn
	Name: Philip K. Polkinghorn
	Title: Chief Executive Officer

EX-31.2

EXHIBIT 31.2

CERTIFICATION

I, the Chief Financial Officer of PHL Variable Insurance Company (the “registrant”), certify that:

1.

I have reviewed this Quarterly report on Form 10-Q of the registrant;

2.

Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.

Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.

The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

(a)

designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b)

evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(c)

disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.

The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a)

all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b)

any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date:  August 14, 2006	/s/ Michael E. Haylon
	Name:   Michael E. Haylon
	Title:   Chief Financial Officer

EX-32

EXHIBIT 32

CERTIFICATION

The undersigned hereby certify that the Quarterly Report on Form 10-Q for the fiscal quarter ended June 30, 2006 of PHL Variable Insurance Company (the “Company”) filed with the Securities and Exchange Commission on the date hereof fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and that the information contained in such report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ Philip K. Polkinghorn	/s/ Michael E. Haylon
Name:   Philip K. Polkinghorn	Name:   Michael E. Haylon
Title:   Chief Executive Officer	Title:   Chief Financial Officer
Date:   August 14, 2006	Date:   August 14, 2006

A signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this written statement required by Section 906, has been provided to PHL Variable Insurance Company and will be retained by PHL Variable Insurance Company and furnished to the Securities and Exchange Commission or its staff upon request.