Revision of Previously Reported Financial Statements

In the Company’s Annual Report on Form 10-K for the year ended December 31, 2014, which was filed with the SEC on April 9, 2015 (the “2014 Form 10-K”), the Company revised its financial statements for all periods presented in connection with the restatement of the financial statements of the Company’s parent, Phoenix. The unaudited financial statements for the three month period ended March 31, 2014 contained in this Form 10-Q are presented on a revised basis, consistent with revised financial statements for the three month period ended March 31, 2014 contained in the 2014 Form 10-K. As discussed in the 2014 Form 10-K, the Company has revised its consolidated financial statements as of and for the comparative three months ended March 31, 2014 to adjust for the impact of errors identified, including the recording of previously identified out-of-period errors that were previously determined not to be material individually, or in the aggregate, in the appropriate period. The Company concluded that these errors were not material individually or in the aggregate to PHL Variable. Consistent with its parent, Phoenix, the Company has classified the errors into two categories (i) UL Unlock and (ii) Other Adjustments.

UL Unlock

In accordance with U.S. GAAP and our accounting policy, the Company performs an annual assumption review where management makes a determination of the best estimate assumptions to be used based on a comprehensive review of recent experience studies and industry trends each year. In 2013, the Company revised a number of assumptions, the most significant of which resulted in changes to expected premium persistency and incorporation of mortality improvement in its UL business. The incorporation of these changes resulted in manual updates to various models for which certain errors were subsequently identified in the course of performing analysis between the fourth quarter of 2014 and the prior period results. These errors related to inappropriate implementation of data used in the calculation and approximation of certain product features which then resulted in the incorrect calculation of the ultimate impact of the Unlock for the fourth quarter of 2013.

Other Adjustments

Amounts primarily relate to various out-of-period errors identified which were previously determined not to be material individually or in the aggregate. The Company considered the impacts of each of these errors, many of which were previously identified and subsequently recorded as out-of-period adjustments, as well as subsequently identified errors both individually and in the aggregate and concluded that none were significant for individual categorization herein.

The impact of the correction of these errors on the financial statements is presented in the tables within this Note below.



($ in millions)	Statement of Income and Comprehensive Income For the three months ended March 31, 2014
				Correction of errors
	As reported			UL unlock			Other adjustments			As revised
REVENUES:
Premiums	$	2.8		$	—		$	—		$	2.8
Insurance and investment product fees	88.8			—			0.2			89.0
Net investment income	40.0			—			—			40.0
Net realized gains (losses):
Total other-than-temporary impairment (“OTTI”) losses	—			—			—			—
Portion of OTTI losses recognized in other comprehensive income (“OCI”)	—			—			—			—
Net OTTI losses recognized in earnings	—			—			—			—
Net realized gains (losses), excluding OTTI losses	(33.9		)	—			(1.2		)	(35.1		)
Net realized gains (losses)	(33.9		)	—			(1.2		)	(35.1		)
Total revenues	97.7			—			(1.0		)	96.7

BENEFITS AND EXPENSES:
Policy benefits	76.1			(0.2		)	(3.8		)	72.1
Policy acquisition cost amortization	16.3			0.1			0.3			16.7
Other operating expenses	24.0			—			(0.5		)	23.5
Total benefits and expenses	116.4			(0.1		)	(4.0		)	112.3
Income (loss) before income taxes	(18.7		)	0.1			3.0			(15.6		)
Income tax expense (benefit)	(1.9		)	—			1.5			(0.4		)
Net income (loss)	$	(16.8	)	$	0.1		$	1.5		$	(15.2	)

COMPREHENSIVE INCOME (LOSS):
Net income (loss)	$	(16.8	)	$	0.1		$	1.5		$	(15.2	)
Other comprehensive income (loss) before income taxes:
Unrealized investment gains (losses), net of related offsets	11.1			0.3			1.6			13.0
Less: Income tax expense (benefit) related to:
Unrealized investment gains (losses), net of related offsets	14.0			—			0.4			14.4
Other comprehensive income (loss), net of income taxes	(2.9		)	0.3			1.2			(1.4		)
Comprehensive income (loss)	$	(19.7	)	$	0.4		$	2.7		$	(16.6	)



($ in millions)	Statement of Cash Flows For the period ended March 31, 2014
	As reported			Other adjustments			As revised
OPERATING ACTIVITIES:
Net income (loss)	$	(16.8	)	$	1.6		$	(15.2	)
Net realized gains / losses	33.9			1.2			35.1
Policy acquisition costs deferred	(16.9		)	—			(16.9		)
Policy acquisition cost amortization	16.3			0.4			16.7
Interest credited	23.8			—			23.8
Equity in earnings of limited partnerships and other investments	(0.8		)	—			(0.8		)
Change in:
Accrued investment income	(5.9		)	—			(5.9		)
Deferred income taxes, net	(3.9		)	(0.5		)	(4.4		)
Reinsurance recoverable	28.3			(1.8		)	26.5
Policy liabilities and accruals	(78.3		)	(2.4		)	(80.7		)
Due to/from related parties	(13.9		)	—			(13.9		)
Other operating activities, net [1]	16.2			1.5			17.7
Cash provided by (used for) operating activities	(18.0		)	—			(18.0		)

INVESTING ACTIVITIES:
Purchases of:
Available-for-sale debt securities	(151.4		)	—			(151.4		)
Available-for-sale equity securities	—			—			—
Short-term investments	(209.8		)	—			(209.8		)
Derivative instruments	(17.7		)	—			(17.7		)
Fair value investments	—			—			—
Sales, repayments and maturities of:
Available-for-sale debt securities	65.1			—			65.1
Available-for-sale equity securities	—			—			—
Short-term investments	99.9			—			99.9
Derivative instruments	30.1			—			30.1
Fair value investments	0.9			—			0.9
Contributions to limited partnerships and limited liability corporations	(0.5		)	—			(0.5		)
Distributions from limited partnerships and limited liability corporations	0.7			—			0.7
Policy loans, net	(0.7		)	—			(0.7		)
Other investing activities, net	(1.8		)	—			(1.8		)
Cash provided by (used for) investing activities	(185.2		)	—			(185.2		)

(Continued on next page)



(Continued from previous page) ($ in millions)	Statement of Cash Flows For the period ended March 31, 2014
	As reported			Other adjustments		As revised

FINANCING ACTIVITIES:
Policyholder deposits	230.4			—		230.4
Policyholder withdrawals	(164.4		)	—		(164.4		)
Net transfers (to) from separate accounts	97.1			—		97.1
Cash provided by (used for) financing activities	163.1			—		163.1
Change in cash and cash equivalents	(40.1		)	—		(40.1		)
Cash and cash equivalents, beginning of period	181.0			—		181.0
Cash and cash equivalents, end of period	$	140.9		$	—	$	140.9

Supplemental Disclosure of Cash Flow Information
Income taxes (paid) refunded	$	14.5		$	—	$	14.5

Non-Cash Transactions During the Period
Investment exchanges	$	8.9		$	—	$	8.9



($ in millions)	Statement of Changes in Stockholder's Equity For the period ended March 31, 2014
	As reported			Correction of errors			As revised
COMMON STOCK:
Balance, beginning of period	$	2.5		$	—		$	2.5
Balance, end of period	$	2.5		$	—		$	2.5

ADDITIONAL PAID-IN CAPITAL:
Balance, beginning of period	$	847.2		$	—		$	847.2
Balance, end of period	$	847.2		$	—		$	847.2

ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS):
Balance, beginning of period	$	(11.9	)	$	(0.8	)	$	(12.7	)
Other comprehensive income (loss)	(2.9		)	1.5			(1.4		)
Balance, end of period	$	(14.8	)	$	0.7		$	(14.1	)

ACCUMULATED DEFICIT:
Balance, beginning of period	$	(465.3	)	$	9.7		$	(455.6	)
Net income (loss)	(16.8		)	1.6			(15.2		)
Balance, end of period	$	(482.1	)	$	11.3		$	(470.8	)

TOTAL STOCKHOLDER’S EQUITY:
Balance, beginning of period	$	372.5		$	8.9		$	381.4
Change in stockholder’s equity	(19.7		)	3.1			(16.6		)
Balance, end of period	$	352.8		$	12.0		$	364.8