-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, CnV9eDSmppDHrONL1MMSaQ6gNNOjprrG9Xx2spkYnDNui6/OUtnle5tbxk4ai1cL p9f3mhrwjtiek6sxlaWSGA== 0001129633-02-000016.txt : 20020515 0001129633-02-000016.hdr.sgml : 20020515 20020515153758 ACCESSION NUMBER: 0001129633-02-000016 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20020331 FILED AS OF DATE: 20020515 FILER: COMPANY DATA: COMPANY CONFORMED NAME: PHOENIX COMPANIES INC/DE CENTRAL INDEX KEY: 0001129633 STANDARD INDUSTRIAL CLASSIFICATION: FIRE, MARINE & CASUALTY INSURANCE [6331] IRS NUMBER: 060493340 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-16517 FILM NUMBER: 02651872 BUSINESS ADDRESS: STREET 1: ONE AMERICAN ROW STREET 2: PO BOX 5056 CITY: HARTFORD STATE: CT ZIP: 061025056 BUSINESS PHONE: 8604035000 MAIL ADDRESS: STREET 1: ONE AMERICAN ROW STREET 2: PO BOX 5056 CITY: HARTFORD STATE: CT ZIP: 06012 10-Q 1 pnx10q_33102.htm 1ST QUARTER 2002

1
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FORM 10-Q

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

(MARK ONE)

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

FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2002
--------------

[ ] 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 333-55268
---------

THE PHOENIX COMPANIES, INC.
---------------------------
(Exact name of registrant as specified in its charter)

Delaware 06-0493340
-------- ----------
(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 X. No__.
-

On March 31, 2002, the registrant had 100,054,114 shares of common stock outstanding.

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TABLE OF CONTENTS

PART I. FINANCIAL INFORMATION

Item 1. Unaudited Consolidated Financial Statements:

Consolidated Balance Sheet as of March 31, 2002 and December 31, 2001
Consolidated Statement of Income and Comprehensive Income for the three months ended March 31,
2002 and 2001
Consolidated Statement of Cash Flows for the three months ended March 31, 2002 and 2001
Consolidated Statement of Changes in Stockholders' Equity for the three months ended March 31,
2002 and 2001
Notes to Unaudited Consolidated Financial Statements
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
Item 3. Quantitative and Qualitative Disclosures About Market Risk

PART II. OTHER INFORMATION

Item 1. Legal Proceedings
Item 2. Changes in Securities and Use of Proceeds
Item 3. Defaults Upon Senior Securities
Item 4. Submission of Matters to a Vote of Security Holders
Item 5. Other Information
Item 6. Exhibits and Reports on Form 8-K
Signature

PART I.
FINANCIAL INFORMATION

ITEM 1. UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

THE PHOENIX COMPANIES, INC.
Consolidated Balance Sheet
(Amounts in millions, except per share data)
March 31, 2002 and December 31, 2001

2002 2001

ASSETS:
Available-for-sale debt securities, at fair value................. $ 10,014.0 $ 9,607.7
Equity securities, at fair value.................................. 303.7 290.9
Mortgage loans, at unpaid principal balances...................... 522.7 535.8
Real estate, at lower of cost or fair value....................... 75.3 83.1
Venture capital partnerships, at equity in net assets............. 290.3 291.7
Affiliate equity and debt securities.............................. 295.1 330.6
Policy loans, at unpaid principal balances........................ 2,162.8 2,172.2
Other investments................................................. 278.0 282.4
----------- -----------
Total investments............................................. 13,941.9 13,594.4

Cash and cash equivalents......................................... 564.4 815.5
Accrued investment income......................................... 217.0 203.1
Premiums, accounts and notes receivable........................... 187.8 147.8
Reinsurance recoverable balances.................................. 55.9 21.3
Deferred policy acquisition costs................................. 1,191.8 1,123.7
Premises and equipment............................................ 117.3 117.7
Deferred income taxes............................................. -- 1.8
Goodwill and other intangible assets.............................. 832.8 858.6
Net assets of discontinued operations............................. 20.7 20.8
Other general account assets...................................... 25.7 50.7
Separate account and investment trust assets...................... 5,711.2 5,570.0
----------- -----------
Total assets.................................................. $22,866.5 $22,525.4
============ ===========
LIABILITIES:
Policy liabilities and accruals................................... $13,395.6 $13,005.0
Policyholder deposit funds........................................ 340.5 356.6
Deferred income taxes............................................. 2.7 --
Indebtedness...................................................... 599.9 599.3
Other general account liabilities................................. 596.8 595.1
Separate account and investment trust liabilities................. 5,708.0 5,564.9
------------ -----------
Total liabilities............................................. 20,643.5 20,120.9
MINORITY INTEREST: ------------ -----------
Minority interest in net assets of subsidiaries................... 4.1 8.8
------------ -----------
STOCKHOLDERS' EQUITY:
Common stock, $0.01 par value: 1.0 billion shares authorized;
106.4 million shares issued................................... 1.0 1.0
Additional paid-in capital........................................ 2,410.4 2,410.4
Accumulated deficit............................................... (132.3) (30.8)
Accumulated other comprehensive income............................ 38.8 81.1
Treasury stock, at cost: 6.3 million and 4.5 million shares (99.0) (66.0)
------------ -----------
Total stockholders' equity.................................... 2,218.9 2,395.7
------------ -----------
Total liabilities, minority interest and stockholders'equity.. $22,866.5 $22,525.4
============== ===============

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

THE PHOENIX COMPANIES, INC.
Consolidated Statement of Income and Comprehensive Income
(Amounts in millions, except per share data)
Three Months Ended March 31, 2002 and 2001

2002 2001
----------- -----------
REVENUES:
Premiums................................................................ $ 257.4 $ 266.0
Insurance and investment product fees................................... 140.3 145.5
Net investment income................................................... 231.2 168.2
Net realized investment losses.......................................... (35.0) (15.6)
----------- -----------
Total revenues...................................................... 593.9 564.1
----------- -----------
BENEFITS AND EXPENSES:
Policy benefits and increases in policy liabilities..................... 333.9 334.1
Policyholder dividends.................................................. 74.2 106.3
Policy acquisition cost amortization.................................... (10.9) 35.1
Intangible asset amortization........................................... 8.1 13.2
Interest expense........................................................ 7.7 7.1
Demutualization expenses................................................ .9 10.7
Other operating expenses................................................ 136.0 237.4
----------- -----------
Total benefits and expenses 549.9 743.9
----------- -----------
Income (loss) before income taxes and minority interest................. 44.0 (179.8)
Applicable income tax expense (benefit)................................. 12.3 (69.0)
----------- -----------
Income (loss) before minority interest.................................. 31.7 (110.8)
Minority interest in net income of subsidiaries......................... (2.8) (1.8)
----------- -----------
Income (loss) before cumulative effect of accounting changes ........... 28.9 (112.6)
Cumulative effect of accounting changes:

Goodwill impairment (note 4)........................................ (130.3) --
Venture capital partnerships and derivative financial instruments... -- (44.9)
----------- -----------
Net loss................................................................ $(101.4) $ (157.5)
=========== ===========
EARNINGS PER SHARE (note 3) :
Income (loss) before cumulative effect of accounting changes ........... $ 0.29 $ (1.08)
Cumulative effect of accounting changes................................. (1.29) (.43)
----------- -----------
Net loss................................................................ $ (1.00) $ (1.51)
=========== ===========
Weighted-average common shares outstanding.............................. 101.2 104.6
=========== ===========
Pro forma amounts assuming the goodwill change is applied
retroactively:
Net income (loss)....................................................... $ 28.9 $ (153.7)
=========== ===========
Earnings per share...................................................... $ 0.29 $ (1.47)
=========== ===========
COMPREHENSIVE INCOME:
Net loss................................................................ $(101.4) $ (157.5)
Other comprehensive loss:
Net unrealized investment losses.................................... (28.6) (12.7)
Net unrealized foreign currency translation adjustment and other.... (13.7) (3.3)
----------- -----------
Total other comprehensive loss.................................. (42.3) (16.0)
----------- -----------
Comprehensive loss...................................................... $(143.7) $ (173.5)
=========== ===========

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

THE PHOENIX COMPANIES, INC.
Consolidated Condensed Statement of Cash Flows
(Amounts in millions)
Three Months Ended March 31, 2002 and 2001

2002 2001
------------ -----------
OPERATING ACTIVITIES:

Net loss................................................................. $ (101.4) $ (157.5)
------------ -----------
Cash from (for) operations............................................... 7.7 (23.5)
------------ -----------
INVESTING ACTIVITIES:
Available-for-sale debt security sales................................... 210.2 240.8
Debt security maturities:
Available-for-sale.................................................... 268.1 29.9
Held-to-maturity...................................................... -- 4.2
Debt security repayments:
Available-for-sale.................................................... 8.6 94.3
Held-to-maturity -- 41.9
Equity security sales.................................................... 13.1 39.7
Subsidiary sales......................................................... -- 2.0
Mortgage loan maturities................................................. 4.1 16.2
Mortgage loan principal repayments....................................... 9.2 8.1
Venture capital partnership distributions................................ 9.2 9.2
Real estate and other invested assets sales.............................. 22.2 .7
Available-for-sale debt security purchases............................... (944.2) (520.5)
Held-to-maturity debt security purchases................................. -- (68.9)
Equity security purchases................................................ (14.1) (23.5)
Subsidiary purchases..................................................... (110.8) (367.2)
Mortgage loan principal disbursements.................................... -- (.2)
Unconsolidated affiliate and other invested asset purchases.............. (20.0) (12.4)
Venture capital partnership investments.................................. (13.0) (12.9)
Other continuing operation investing activities, net..................... (6.5) (6.1)
Policy loan advances, net................................................ 9.4 (16.5)
Premises and equipment additions......................................... (4.3) (3.9)
------------ -----------
Cash for continuing operations........................................... (558.8) (545.1)
Cash from discontinued operations........................................ 25.4 16.0
------------ -----------
Cash for investing activities............................................ (533.4) (529.1)
------------ -----------
FINANCING ACTIVITES:
Policyholder deposit fund receipts, net.................................. 315.9 100.9
Indebtedness proceeds.................................................... .7 180.0
Indebtedness repayments.................................................. -- (115.0)
Debenture repayments..................................................... -- (19.2)
Common stock repurchases................................................. (32.9) --
Minority interest distributions.......................................... (9.1) (5.8)
------------ -----------
Cash from financing activities........................................... 274.6 140.9
------------ -----------
Cash and cash equivalents changes........................................ (251.1) (411.7)
Cash and cash equivalents, beginning of period........................... 815.5 720.0
------------ -----------
Cash and cash equivalents, end of period................................. $ 564.4 $ 308.3
============ ===========

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

THE PHOENIX COMPANIES, INC.
Consolidated Statement of Changes in Stockholders' Equity
(Amounts in millions)
Three Months Ended March 31, 2002 and 2001

2002 2001
----------- -----------

Stockholders' equity, beginning of period............................... $ 2,395.7 $ 1,840.9

Accumulated deficit:
Net loss................................................................ (101.4) (157.5)
Other equity adjustments................................................ -- 3.2

Accumulated other comprehensive income:
Other comprehensive loss................................................ (42.3) (16.0)

Treasury stock:
Common shares acquired.................................................. (33.1) --
----------- -----------
Stockholders' equity, end of period..................................... $ 2,218.9 $ 1,670.6
=========== ===========

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

THE PHOENIX COMPANIES, INC.
Notes to the Unaudited Consolidated Financial Statements

1. Description of Business

The Phoenix Companies, Inc. and its subsidiaries ("Phoenix") provide wealth
management products and services offered through a variety of select advisors
and financial services firms to serve the accumulation, preservation and
transfer needs of the affluent and high net worth market, businesses and
institutions. Phoenix offers a broad range of life insurance, annuity and
investment management solutions through a variety of distributors. These
products and services are managed within four reportable segments: Life and
Annuity, Investment Management, Venture Capital and Corporate and Other. See
note 6, "Segment Information."

2. Basis of Presentation

The accompanying unaudited consolidated financial statements have been prepared
in accordance with accounting principles generally accepted in the United States
of America ("GAAP") for interim financial information. Accordingly, they do not
include all of the information and footnotes required by GAAP for complete
financial statements.

In the opinion of management, all adjustments (consisting only of normal
recurring accruals) considered necessary for a fair statement have been
included. Operating results for the three months ended March 31, 2002 are not
necessarily indicative of the results that may be expected for the year ending
December 31, 2002. These unaudited consolidated financial statements should be
read in conjunction with the consolidated financial statements of Phoenix for
the year ended December 31, 2001 on Form 10-K.

3. Reorganization and Initial Public Offering

On December 18, 2000, the board of directors of Phoenix Home Life Mutual
Insurance Company ("Phoenix Mutual") unanimously adopted a plan of
reorganization which was amended and restated on January 26, 2001. On June 25,
2001, the effective date of the demutualization, Phoenix Mutual converted from a
mutual life insurance company to a stock life insurance company, became a wholly
owned subsidiary of Phoenix and changed its name to Phoenix Life Insurance
Company ("Phoenix Life"). At the same time, Phoenix Investment Partners, Ltd.
("PXP") became an indirect wholly owned subsidiary of Phoenix. All policyholder
membership interests in the mutual company were extinguished on the effective
date and eligible policyholders of the mutual company received 56.2 million
shares of common stock, $28.8 million of cash and $12.7 million of policy
credits as compensation. The demutualization was accounted for as a
reorganization. Accordingly, Phoenix's retained earnings immediately following
the demutualization and the closing of the Initial Public Offering ("IPO") on
June 25, 2001 (net of the cash payments and policy credits that were charged
directly to retained earnings) were reclassified to common stock and additional
paid-in capital. In addition, Phoenix Life established a closed block for the
benefit of holders of certain of its individual life insurance policies. The
purpose of the closed block is to protect, after demutualization, the reasonable
policy dividend expectations of the holders of the policies included in the
closed block. The closed block will continue in effect until such date as none
of such policies are in force. See note 7, "Closed Block."

On June 25, 2001, Phoenix closed its IPO, in which 48.8 million shares of common
stock were issued at a price of $17.50 per share. Net proceeds from the IPO
equaling $807.9 million were contributed to Phoenix Life. On July 24, 2001,
Morgan Stanley Dean Witter exercised its right to purchase 1,395,900 shares of
the common stock of Phoenix at the IPO price of $17.50 per share less
underwriters discount. Net proceeds of $23.2 million were contributed to Phoenix
Life.

The 2001 weighted-average shares outstanding calculation for earnings per share
is pro forma and excludes the period of time before the IPO during which no
common stock shares were issued.

4. Summary of New Significant Accounting Policies

Business Combinations/Goodwill and Other Intangible Assets

Effective January 1, 2002, Phoenix adopted a new accounting standard for
goodwill and other intangible assets. The standard primarily addresses the
accounting for goodwill and intangible assets subsequent to their initial
recognition. Under the standard, amortization of goodwill and other intangible
assets with indefinite lives recorded in past business combinations is
discontinued after 2001 and reporting units must be identified for the purpose
of assessing potential future impairments of goodwill. In accordance with the
standard, goodwill amortization will not be recognized after 2001.

The provisions of the standard also apply to equity-method investments. The
standard prohibits amortization of the excess of cost over the underlying equity
in the net assets of an equity-method investee that is recognized as goodwill.

The standard also requires that goodwill and indefinite-lived intangible assets
be tested at least annually for impairment. Upon adoption of the standard,
goodwill and indefinite-lived intangibles were tested for impairment by
comparing the fair value to the carrying amount of the asset as of the beginning
of 2002. The effect of adopting the standard in 2002 decreased after-tax income
by $130.3 million ($1.29 per share) for the three months ended March 31, 2002,
primarily due to declines in the market value of the business units previously
acquired. Phoenix recognized $4.0 million in goodwill amortization in the first
quarter of 2001.

Impairment of Long-Lived Assets

Effective January 1, 2002, Phoenix adopted a new accounting standard, Accounting
for the Impairment or Disposal of Long-Lived Assets. Under the standard,
long-lived assets to be sold within one year must be separately identified and
carried at the lower of carrying value or fair value less cost to sell.

Long-lived assets expected to be held longer than one year are subject to
depreciation and must be written down to fair value upon impairment. Long-lived
assets no longer expected to be sold within one year, such as some foreclosed
real estate, must be written down to the lower of current fair value or fair
value at the date of foreclosure adjusted to reflect depreciation since
acquisition. Upon adoption of the standard, Phoenix determined there was no
material effect on its results of operations or financial condition.

5. Significant Transactions

PXP's Purchase of Kayne Anderson Rudnick Investment Management, LLC

On January 29, 2002, PXP acquired a majority interest in Kayne Anderson Rudnick.
In accordance with the terms of the acquisition agreement, PXP purchased an
initial 60% interest, with future purchases of an additional 15% to occur by
2007. Its management retained the remaining ownership interests in Kayne
Anderson Rudnick. In addition to the cash payment of approximately $100 million
made at closing, a subsequent payment may be made in 2004 based upon management
fee revenue growth of the purchased business through 2003. Kayne Anderson
Rudnick, based in Los Angeles, California, had approximately $9.0 billion in
assets under management at March 31, 2002. Kayne Anderson Rudnick's results of
operations for the period beginning January 30, 2002 through March 31, 2002 are
included in our consolidated results of operations for the three months ended
March 31, 2002. Our 2001 results do not include the financial results of Kayne
Anderson Rudnick.

Stock Repurchase Program

On September 17, 2001, Phoenix announced a plan to repurchase up to an aggregate
of six million shares of the company's outstanding common stock. On January 7,
2002, Phoenix announced its authorization to repurchase up to an aggregate of
five million additional shares, bringing the combined share repurchase
authorization up to an aggregate of 11 million shares of common stock. Purchases
can be made on the open market, as well as through negotiated transactions,
subject to market prices and other conditions. No time limit was placed on the
duration of the repurchase program, which may be modified, extended or
terminated by the board of directors at any time. For the three months ended
March 31, 2002, 1,858,700 shares of the company's common stock had been
repurchased at a cumulative weighted-average price of $17.73 per share.

Deferred Policy Acquisition Costs

In the first quarter of 2002, Phoenix refined the mortality assumptions used in
the development of estimated gross margins for the traditional participating
block of business to reflect favorable experience. This revision resulted in a
$22.1 million increase in the DAC balances.

6. Segment Information

The following tables provide certain information with respect to Phoenix's
operating segments as of March 31, 2002, December 31, 2001 and for each of the
three months ended March 31, 2002 and 2001 (amounts in millions).

2002 2001
------------- -------------
Total consolidated revenues:
Life and Annuity.................................... $ 558.2 $ 562.5
Investment Management............................... 69.9 73.2
Venture Capital..................................... (5.0) (57.3)
Corporate and Other................................. 10.2 6.6
------------- -------------
Total segment revenues........................... 633.3 585.0
Net realized investment losses...................... (35.0) (15.6)
Inter-segment revenues.............................. (4.4) (5.3)
------------- -------------
Total consolidated revenues...................... $ 593.9 $ 564.1
============= =============

Investment
Life and Annuity Management
------------------------ ----------------------
2002 2001 2002 2001
---------- ---------- --------- ---------

Premiums....................................... $ 257.4 $ 266.0 $ -- $ --
Insurance and investment product fees.......... 77.6 78.3 66.7 70.7
Net investment income.......................... 223.2 218.2 3.2 2.5
---------- ---------- --------- ---------
Total revenues.............................. $ 558.2 $ 562.5 $69.9 $73.2
========== ========== ========= =========

2002 2001
------------- -------------
Operating income before income taxes:
Life and Annuity................................... $ 28.2 $ 9.0
Investment Management.............................. 1.9 1.7
Venture Capital.................................... (5.0) (57.3)
Corporate and Other................................ (8.7) (18.9)
------------- -------------
Operating income before income taxes............... 16.4 (65.5)
Applicable income taxes............................ 3.6 (25.6)
------------- -------------
Operating income................................... 12.8 (39.9)
Net realized investment gains (losses), net of income
taxes........................................... 1.6 (10.1)
Non-recurring items, net of income taxes........... 14.5 (62.6)
------------- -------------
Income (loss) before cumulative effect of accounting
changes......................................... $ 28.9 $ (112.6)
============= =============
Total consolidated assets:
Life and Annuity................................... $ 19,806.1 $ 18,925.0
Investment Management.............................. 1,101.3 1,165.0
Venture Capital.................................... 290.3 291.7
Corporate and Other................................ 1,648.1 2,122.9
------------- -------------
Total segment assets............................ 22,845.8 22,504.6
Net assets of discontinued operations.............. 20.7 20.8
------------- -------------
Total consolidated assets....................... $ 22,866.5 $ 22,525.4
============= =============

7. Closed Block

On the date of demutualization, Phoenix Life established a closed block for the
benefit of holders of certain individual participating life insurance policies
and annuities of Phoenix Life for which Phoenix Life had a dividend scale
payable in 2000. See note 15 of Phoenix's consolidated financial statements for
the year ended December 31, 2001 in Phoenix's Form 10-K for more information on
the closed block.

As specified in the plan of reorganization, the allocation of assets for the
closed block was made as of December 31, 1999. Consequently, cumulative earnings
on the closed block assets and liabilities for the period January 1, 2001 to
March 31, 2002 in excess of expected cumulative earnings did not inure to
stockholders and have been used to establish a policyholder dividend obligation
as of March 31, 2002. The decrease in the policyholder dividend obligation of
$64.4 million pre-tax, consists of $26.2 million of pre-tax losses for the
period January 1, 2002 to March 31, 2002 and the unrealized losses on assets in
the closed block for the period January 1, 2002 to March 31, 2002 of $38.2
million, pre-tax.

The following sets forth certain summarized financial information relating to
the closed block as of March 31, 2002 and December 31, 2001 (in millions):

2002 2001
-------------- ------------
LIABILITIES:
Policy liabilities and accruals and policyholder deposit funds..... $ 9,202.2 $ 9,150.2
Policyholder dividends payable..................................... 366.4 357.3
Policyholder dividend obligation................................... 102.8 167.2
Other closed block liabilities..................................... 62.5 57.0
-------------- ------------
Total closed block liabilities..................................... 9,733.9 9,731.7
-------------- ------------
ASSETS:
Available-for-sale debt securities at fair value................... 5,812.0 5,734.2
Mortgage loans..................................................... 380.5 386.5
Policy loans....................................................... 1,399.8 1,407.1
Deferred income taxes.............................................. 391.9 392.6
Investment income due and accrued.................................. 127.4 125.3
Net due and deferred premiums...................................... 39.5 41.1
Cash and cash equivalents.......................................... 162.7 239.7
Other closed block assets.......................................... 43.4 14.8
-------------- ------------
Total closed block assets.......................................... 8,357.2 8,341.3
-------------- ------------
Excess of reported closed block liabilities over closed block assets
representing maximum future earnings to be recognized from
closed block assets and liabilities............................. $ 1,376.7 $ 1,390.4
============== ============
CHANGE IN POLICYHOLDER DIVIDEND OBLIGATION:
Balance at beginning of period..................................... $ 167.2 $ 115.5
Change during the period........................................... (64.4) 51.7
-------------- ------------
Balance at end of period........................................... $ 102.8 $ 167.2
============== ============

The following sets forth certain summarized financial information relating to
the closed block for the quarter ended March 31, 2002 (in millions):

REVENUES:
Premiums........................................................... $ 248.7
Net investment income.............................................. 138.8
Realized investment losses, net.................................... (36.1)
--------------
Total revenues..................................................... 351.4
--------------
EXPENSES:
Benefits to policyholders.......................................... 253.5
Other operating costs and expenses................................. 2.8
Change in policyholder dividend obligation......................... (26.2)
Dividends to policyholders......................................... 100.2
--------------
Total benefits and expenses........................................ 330.3
--------------
Contribution from the closed block, before income taxes ........... 21.1
Income tax expense................................................. 7.4
--------------
Contributions from closed block, after income taxes ................ $ 13.7
==============

8. Discontinued Reinsurance Operations

In 1999, Phoenix exited its reinsurance operations through a combination of
sale, reinsurance and placement of certain components into run-off. The
reinsurance segment consisted primarily of individual life reinsurance
operations as well as group accident and health reinsurance business. Phoenix
placed the retained group accident and health reinsurance business into run-off.
Phoenix adopted a formal plan to stop writing new contracts covering these risks
and end the existing contracts as soon as those contracts would permit. However,
Phoenix remained liable for claims under those contracts.

Phoenix has reviewed its estimates of future losses related to the group
accident and health reinsurance business as well as future expenses associated
with managing the run-off. Based on the most recent information available,
Phoenix did not recognize any additional reserve provisions during the first
three months of 2002.

Phoenix's reserves and aggregate excess of loss reinsurance coverage are
expected to cover the run-off of the business; however, the nature of the
underlying risks is such that the claims may take years to reach the reinsurers
involved. Therefore, Phoenix expects to pay claims out of existing estimated
reserves for up to ten years as the level of business diminishes.

A significant portion of the claims arising from the discontinued group accident
and health reinsurance business arises from the activities of Unicover Managers,
Inc. ("Unicover"). Unicover organized and managed a group, or pool, of insurance
companies ("Unicover pool") and certain other facilities, which reinsured the
life and health insurance components of workers' compensation insurance policies
issued by various property and casualty insurance companies. Phoenix was a
member of the Unicover pool. Phoenix terminated its participation in the
Unicover pool effective March 1, 1999.

Phoenix is involved in disputes relating to the activities of Unicover. Under
Unicover's underwriting authority, the Unicover pool and Unicover facilities
wrote a dollar amount of reinsurance coverage that was many times greater than
originally estimated. As a member of the Unicover pool, Phoenix is involved in
several disputes in which the pool members assert that they can deny coverage to
certain insurers that claim that they purchased reinsurance coverage from the
pool.

Further, Phoenix was, along with Sun Life Assurance of Canada ("Sun Life") and
Cologne Life Reinsurance Company ("Cologne Life"), a retrocessionaire (meaning a
reinsurer of other reinsurers) of the Unicover pool and two other Unicover
facilities, providing the pool and facility members with reinsurance of the
risks that the pool and facility members had assumed. In September 1999, Phoenix
joined an arbitration proceeding that Sun Life had begun against the members of
the Unicover pool and the Unicover facilities. In this arbitration, Phoenix and
Sun Life sought to cancel their retrocession agreement on the grounds that
material misstatements and nondisclosures were made to them about, among other
things, the amount of risks they would be reinsuring. The arbitration
proceedings are ongoing only with respect to the Unicover pool, because Phoenix,
Sun Life and Cologne Life reached settlement with the two Unicover facilities in
the first quarter of 2000.

In its capacity as a retrocessionaire of the Unicover business, Phoenix had an
extensive program of its own reinsurance in place to protect it from financial
exposure to the risks it had assumed. Currently, Phoenix is involved in separate
arbitration proceedings with certain of its own retrocessionaires which are
seeking on various grounds to avoid paying any amounts to Phoenix. Most of these
proceedings remain in their preliminary phases. Because the same retrocession
program that covers Phoenix's Unicover business covers a significant portion of
its other remaining group accident and health reinsurance business, Phoenix
could have additional material losses if one or more of its retrocesssionaires
successfully avoids its obligations.

A second set of disputes involves personal accident business that was reinsured
in the London reinsurance market in the mid-1990s in which Phoenix participated.
The disputes involve multiple layers of reinsurance, and allegations that the
reinsurance program created by the brokers involved in placing those layers was
interrelated and devised to disproportionately pass losses to a top layer of
reinsurers. Many companies who participated in this business are involved in
arbitrations in which those top layer companies are attempting to avoid their
obligations on the basis of misrepresentation. Because of the complexity of the
disputes and the reinsurance arrangements, many of these companies are currently
participating in negotiations of the disputes for certain contract years, and
Phoenix believes that similar discussions will follow for the remaining years.
Although Phoenix is vigorously defending its contractual rights, Phoenix is
actively involved in the attempt to reach negotiated business solutions.

Given the uncertainty associated with litigation and other dispute resolution
proceedings, and the expected long-term development of net claims payments, the
estimated amount of the loss on disposal of reinsurance discontinued operations
may differ from actual results. However, it is management's opinion, after
consideration of the provisions made in these financial statements, that future
developments will not have a material effect on Phoenix's consolidated financial
position.

The assets and liabilities of the discontinued operations have been excluded
from the assets and liabilities of continuing operations and separately
identified on the Consolidated Balance Sheet. Net assets of the discontinued
operations totaled $20.7 million and $20.8 million as of March 31, 2002 and
December 31, 2001, respectively.

There were no discontinued reinsurance operating results for the three months
ended March 31, 2002 and 2001 because the operations were discontinued prior to
January 1, 2001.

9. Commitments and Contingencies

Certain group accident and health reinsurance business has become the subject of
disputes concerning the placement of the business with reinsurers and the
recovery of the reinsurance. See note 8, "Discontinued Operations."

Under the terms of the Capital West Asset Management, LLC ("CapWest") purchase
agreement, PXP may be obligated to pay more for its initial 65% ownership
interest in 2005 depending upon CapWest's revenue growth through 2004. In
addition, under the terms of the purchase agreement, PXP will purchase an
additional 10% ownership interest in CapWest by 2007.

Under the terms of the Kayne Anderson Rudnick purchase agreement, PXP will
purchase an additional 15% ownership interest by 2007. PXP may be obligated to
pay additional sums in 2004 for its initial 60% interest based upon Kayne
Anderson Rudnick's management fee revenue growth through 2003.

Under the terms of the Seneca purchase agreement, PXP is obligated to make
additional payments for its ownership interest in 2002 and future years to the
extent there is growth in Seneca's revenues. This amount totaled $3.5 million in
the first quarter of 2002.

Phoenix makes off-balance sheet commitments related to venture capital
partnerships. As of March 31, 2002, total unfunded capital commitments were
$162.0 million.

Phoenix also unconditionally guarantees loans to Phoenix Life and PXP under the
master credit facility.

ITEM 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Management's discussion and analysis reviews our consolidated financial
condition as of March 31, 2002 as compared to December 31, 2001; our
consolidated results of operations for the three months ended March 31, 2002 and
2001; and, where appropriate, factors that may affect our future financial
performance. This discussion and analysis should be read in conjunction with the
unaudited interim financial statements and notes thereto of The Phoenix
Companies, Inc. ("Phoenix") contained in this filing as well as in conjunction
with the audited financial statements and related notes included in the Annual
Report on Form 10-K of Phoenix for the year ended December 31, 2001.

This quarterly report contains statements that constitute forward-looking
statements within the meaning of the Private Securities Litigation Reform Act of
1995. These include statements relating to trends in, or representing
management's beliefs about, Phoenix'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 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) Phoenix's primary reliance, as a holding company, on
dividends from its subsidiaries to meet debt payment obligations and the
applicable regulatory restrictions on the ability of the subsidiaries to pay
such dividends; (iv) regulatory, accounting or tax changes that may affect the
cost of, or demand for, the products or services of Phoenix's subsidiaries; (v)
downgrades in the claims paying ability or financial strength ratings of
Phoenix's subsidiaries; (vi) discrepancies between actual claims experience and
assumptions used in setting prices for the products of insurance subsidiaries
and establishing the liabilities of such subsidiaries for future policy benefits
and claims relating to such products; (vii) movements in the equity markets that
affect our investment results, including those from venture capital, the fees we
earn from assets under management and the demand for our variable products;
(viii) Phoenix's success in achieving its planned expense reductions; (ix) and
other risks and uncertainties described from time to time in Phoenix's filings
with the Securities and Exchange Commission. Phoenix specifically disclaims any
obligation to update or revise any forward-looking statement, whether as a
result of new information, future developments or otherwise.

We are a leading provider of wealth management products and services offered
through a variety of select advisors and financial services firms to serve the
accumulation, preservation and transfer needs of the affluent and high-net-worth
market, businesses and institutions. We refer to our products and services
together as our wealth management solutions. We offer a broad range of life
insurance, annuity and investment management solutions through a variety of
distributors. These distributors include affiliated and non-affiliated advisors
and financial services firms who make our solutions available to their clients.

Our Demutualization

On June 25, 2001, Phoenix Home Life Mutual Insurance Company ("Phoenix Mutual")
converted from a mutual life insurance company to a stock life insurance
company, became a wholly owned subsidiary of Phoenix and changed its name to
Phoenix Life Insurance Company ("Phoenix Life"). At the same time, Phoenix
Investment Partners, Ltd. ("PXP") became an indirect wholly owned subsidiary of
Phoenix.

Phoenix Life established a closed block for the benefit of holders of certain
individual life insurance policies (closed block policies). The purpose of the
closed block is to ensure that the reasonable dividend expectations of
policyholders who own policies included in the closed block are met. The closed
block will continue in effect until the date none of such policies is in force.
On June 25, 2001, Phoenix Life allocated assets to the closed block in an amount
that produces cash flows which, together with anticipated revenue from the
closed block policies, are reasonably expected to be sufficient in the
aggregate: (i) to support the obligations and liabilities relating to these
policies, and (ii) to provide for a continuation of dividend scales in effect at
that time, if the experience underlying such scales continues. Appropriate
adjustments will be made to the dividend scales when actual experience differs
from the aggregate experience underlying such scales.

In addition to the closed block assets, we hold assets outside the closed block
in support of closed block liabilities. Investment earnings on these assets less
allocated expenses and the amortization of deferred acquisition costs provide an
additional source of earnings to our stockholders. In addition, the amortization
of deferred acquisition costs requires the use of various assumptions. To the
extent that actual experience is more or less favorable than assumed,
stockholder earnings will be impacted.

In addition, Phoenix Life remains responsible for paying the benefits guaranteed
under the policies included in the closed block, even if cash flows and revenues
from the closed block prove insufficient. We funded the closed block to provide
for these payments and for continuation of dividends paid under 2000 policy
dividend scales, assuming the experience underlying such dividend scales
continues. Therefore, we do not believe that Phoenix Life will have to pay these
benefits from assets outside the closed block unless the closed block business
experiences very substantial adverse deviations in investment, mortality,
persistency or other experience factors. We intend to accrue any additional
contributions necessary to fund guaranteed benefits under the closed block if
and when it becomes probable that we will be required to fund any shortage.

The allocation of assets for the closed block was made as of December 31, 1999.
Consequently, cumulative earnings on the closed block assets and liabilities for
the period January 1, 2001 to March 31, 2002 in excess of expected cumulative
earnings do not inure to stockholders and have been used to establish a
policyholder dividend obligation as of March 31, 2002. The decrease in the
policyholder dividend obligation of $64.4 million pre-tax, consists of $26.2
million of pre-tax losses for the period January 1, 2002 to March 31, 2002 and
the unrealized losses on assets in the closed block for the period January 1,
2002 to March 31, 2002 of $38.2 million, pre-tax.

We incurred costs relating to the demutualization, excluding costs relating to
the initial public offering, of $38.6 million, net of income taxes of $10.0
million, of which $14.1 million was recognized in the year ended December 31,
2000, $23.9 million was recognized in the year ended December 31, 2001 and $0.6
million was recognized in the three months ended March 31, 2002. We estimate we
will have additional after-tax expenses relating to the demutualization of $0.2
million in 2002.

Recently Issued Accounting Standards

Business Combinations/Goodwill and Other Intangible Assets. Effective January 1,
2002, we adopted a new accounting standard for goodwill and other intangible
assets. The standard primarily addresses the accounting for goodwill and
intangible assets subsequent to their initial recognition. Under the standard,
amortization of goodwill and other intangible assets with indefinite lives
recorded in past business combinations is discontinued after 2001 and reporting
units must be identified for the purpose of assessing potential future
impairments of goodwill. In accordance with the standard, goodwill amortization
will not be recognized after 2001.

The standard also requires that goodwill and indefinite-lived intangible assets
be tested at least annually for impairment. Upon adoption of the standard,
intangible assets deemed to have an indefinite life was tested for impairment by
comparing the fair value to the carrying amount of the asset as of the beginning
of the fiscal year in the year of adoption. The effect of adopting the standard
in 2002 decreased after-tax income by $130.3 million ($1.29 per share) for the
three months ended March 31, 2002, primarily due to declines in the market value
of the business units previously acquired. Goodwill amortization recognized in
the first quarter of 2001 was $4.0 million.

Impairment of Long-Lived Assets. Effective January 1, 2002, we adopted a new
accounting standard, Accounting for the Impairment or Disposal of Long-Lived
Assets. Under the standard, long-lived assets to be sold within one year must be
separately identified and carried at the lower of carrying value or fair value
less cost to sell.

Long-lived assets expected to be held longer than one year are subject to
depreciation and must be written down to fair value upon impairment. Long-lived
assets no longer expected to be sold within one year, such as some foreclosed
real estate, must be written down to the lower of current fair value or fair
value at the date of foreclosure adjusted to reflect depreciation since
acquisition. Upon adoption of the standard, we determined there was no material
effect on our results of operations or financial condition.

Consolidated Results of Operations

The following table presents summary consolidated financial data for the three
months ended March 31, 2002 and 2001 (in millions).

2002 2001 Change
---------- ---------- ----------
REVENUES:
Premiums............................................................ $257.4 $266.0 $ (8.6)
Insurance and investment product fees............................... 140.3 145.5 (5.2)
Net investment income............................................... 231.2 168.2 63.0
Net realized investment losses...................................... (35.0) (15.6) (19.4)
---------- ---------- ----------
Total revenues................................................. 593.9 564.1 29.8
---------- ---------- ----------
BENEFITS AND EXPENSES:
Policy benefits and increase in policy liabilities.................. 333.9 334.1 (.2)
Policyholder dividends.............................................. 74.2 106.3 (32.1)
Policy acquisition cost amortization................................ (10.9) 35.1 (46.0)
Intangible asset amortization....................................... 8.1 13.2 (5.1)
Interest expense.................................................... 7.7 7.1 .6
Demutualization expenses............................................ .9 10.7 (9.8)
Other operating expenses............................................ 136.0 237.4 (101.4)
---------- ---------- ----------
Total benefits and expenses.................................... 549.9 743.9 (194.0)
---------- ---------- ----------
Income (loss) before income taxes and minority interest............. 44.0 (179.8) 223.8
Applicable income tax expense (benefit)............................. 12.3 (69.0) 81.3
---------- ---------- ----------
Income (loss) before minority interest.............................. 31.7 (110.8) 142.5
Minority interest in net income of subsidiaries..................... (2.8) (1.8) (1.0)
---------- ---------- ----------
Income (loss) before cumulative effects of accounting changes ...... 28.9 (112.6) 141.5
Cumulative effect of accounting changes:
Goodwill impairment............................................. (130.3) -- (130.3)
Venture capital partnerships and derivative financial instruments -- (44.9) 44.9
---------- ---------- ----------
Net loss ........................................................... $ (101.4) $ (157.5) $ 56.1
========== ========== ==========

The increase in net investment income of 38% for the three months ended March
31, 2002 was primarily due to smaller losses in our venture capital portfolio,
compared to significant declines in the first quarter of 2001.

The increase in net realized investment losses of 124% for the three months
ended March 31, 2002 was primarily due to increased credit related losses in
telecom and collateralized debt obligation holdings. The majority of these
losses were in the closed block and were offset by a decrease to the
policyholder dividend obligation.

The decrease in policyholder dividends of 30% for the three months ended March
31, 2002 was primarily due to the decrease in the policyholder dividend
obligation as a result of net realized investment losses. This decrease was
slightly offset by the increase in dividends paid to policyholders.

The decrease in policy acquisition cost amortization of 131% for the three
months ended March 31, 2002 is primarily due to revised mortality assumptions.
In the first quarter of 2002, we refined the mortality assumptions used in the
development of estimated gross margins to reflect favorable experience. As a
result, the amortization of deferred acquisition costs in the closed block was
revised to reflect higher future estimated gross margins. Accordingly, the
amortization cost decreased. This revision also resulted in a $22.1 million
increase in the DAC balances for individual participating life insurance
policies.

The decrease in intangible asset amortization of 39% for the three months ended
March 31, 2002 resulted primarily from our adoption of a new accounting
standard, which eliminates the amortization of goodwill and indefinite-lived
intangible assets beginning January 1, 2002, partially offset by the
amortization of intangible assets resulting from our acquisition of a 60%
interest in Kayne Anderson Rudnick in January 2002.

The decrease in other operating expenses of 43% for the three months ended March
31, 2002 is primarily due to the decrease of $89.9 million in non-recurring
items including expenses of $71.6 million related to the acquisition of the PXP
minority interest and of $18.3 million related to an early retirement program.
Other operating expenses decreased in the Life and Annuity segment by 6% as a
result of lower commissions for certain Life and Annuity distributors and a
higher level of reinsurance allowances in 2001 compared to 2002. In addition,
other operating expenses decreased in the Corporate and Other segment by 51% as
a result of exiting our physician practice management business in the second
quarter of 2001. Corporate and Other also experienced lower compensation,
advertising, and charitable contributions during the three months ended March
31, 2002 compared to the same period in 2001. As a result, we believe we are on
track to reduce expenses by more than $25 million by the end of 2002.

The income tax expense was $12.3 million for the three months ended March 31,
2002 compared to an income tax benefit of $69.0 million for the three months
ended March 31, 2001. This change reflects a tax expense from operating income
for the three months ended March 31, 2002, compared to a tax benefit on
operating losses for the three months ended March 31, 2001. The effective tax
rate decreased to 28.0% for the three months ended March 31, 2002 compared to a
nominal tax rate of 35%, primarily due to an IRS tax settlement and low-income
housing credits.

The increase in minority interest in net income of subsidiaries of 56% for the
three months ended March 31, 2002 was due to increased earnings in Seneca and
the acquisition of Kayne Anderson Rudnick.

Results of Operations by Segment

We evaluate segment performance on the basis of segment after-tax operating
income. Realized investment gains and some non-recurring items are excluded
because we do not consider them when evaluating the financial performance of the
segments. The size and timing of realized investment gains are often subject to
our discretion. Non-recurring items are removed from segment after-tax operating
income if, in our opinion, they are not indicative of overall operating trends.
While some of these items may be significant components of net income reported
in accordance with generally accepted accounting principles ("GAAP"), we believe
that segment after-tax operating income is an appropriate measure that
represents the net income attributable to the ongoing operations of our
business. The criteria used to identify non-recurring items and to determine
whether to exclude a non-recurring item from segment after-tax operating income
include whether the item is infrequent and:

- is material to the segment's after-tax operating income; or
- results from a business restructuring; or
- results from a change in the regulatory environment; or
- relates to other unusual circumstances (e.g., litigation).

Non-recurring items excluded from segment after-tax operating income may vary
from period to period. Because such items are excluded based on our discretion,
inconsistencies in the application of our selection criteria may exist. Segment
after-tax operating income is not a substitute for net income determined in
accordance with GAAP and may be different from similarly titled measures of
other companies.

Segment Allocations

We allocate capital to Investment Management on an historical cost basis and to
insurance products based on 250% of company action level risk-based capital. We
allocate net investment income based on the assets allocated to each segment. We
allocate other costs and operating expenses to each segment based on a review of
the nature of such costs, cost allocations using time studies, and other
allocation methodologies.

The following table presents a reconciliation of segment after-tax operating
income to GAAP reported income for the three months ended March 31, 2002 and
2001 (in millions).

2002 2001
------------ -----------
SEGMENT OPERATING INCOME:

Life and Annuity............................................. $ 18.3 $ 5.9
Investment Management........................................ 2.4 .2
Venture Capital.............................................. (3.3) (37.3)
Corporate and Other.......................................... (4.6) (8.7)
------------ -----------
Total segment after-tax operating income (loss)......... 12.8 (39.9)
------------ -----------
ADJUSTMENTS:

Net realized investment gains (losses)....................... 1.6 (10.1)
Deferred policy acquisition costs............................ 15.1 --
Pension adjustment........................................... -- (6.9)
Demutualization expenses..................................... (.6) (11.9)
Expense of purchase of PXP minority interest................. -- (43.8)
------------ -----------
Total after-tax adjustments............................. 16.1 (72.7)
------------ -----------
GAAP REPORTED INCOME:
Income (loss) before cumulative effect of
accounting changes......................................... $ 28.9 $(112.6)
============ ===========
Life and Annuity Segment

The following table presents summary financial data relating to Life and Annuity
for the three months ended March 31, 2002 and 2001 (in millions).

2002 2001 Change
------------ ------------ -----------
REVENUES:
Premiums.............................................. $ 257.4 $ 266.0 $ (8.6)
Insurance and investment product fees................. 77.6 78.3 (.7)
Net investment income 223.2 218.2 5.0
------------ ------------ -----------
Total revenues................................. 558.2 562.5 (4.3)
------------ ------------ -----------
BENEFITS AND EXPENSES:
Policy benefits and dividends......................... 439.7 437.6 2.1
Policy acquisition cost amortization.................. 14.7 35.1 (20.4)
Other operating expenses.............................. 75.6 80.8 (5.2)
------------ ------------ -----------
Total expenses................................ 530.0 553.5 (23.5)
------------ ------------ -----------

Operating income before income taxes.................. 28.2 9.0 19.2
Applicable income tax expense......................... 9.9 3.1 6.8
------------ ------------ -----------
Segment operating income.............................. $ 18.3 $ 5.9 $ 12.4
============ ============ ===========

The decrease in policy acquisition cost amortization of 58% for the three months
ended March 31, 2002 is primarily due to revised mortality assumptions. Deferred
policy acquisition costs ("DAC") for individual participating life insurance
policies are amortized in proportion to estimated gross margins. The
amortization process requires the use of various assumptions, estimates and
judgments about the future. The primary assumptions involve expenses, investment
performance, mortality and contract cancellations (i.e., lapses, withdrawals and
surrenders). These assumptions are reviewed on a regular basis and are generally
based on our past experience, industry studies, regulatory requirements and
judgments about the future. In the first quarter of 2002, we refined the
mortality assumptions used in the development of estimated gross margins to
reflect favorable experience.

The decrease in other operating expenses of 6% for the three months ended March
31, 2002 is primarily due to lower commissions for certain Life and Annuity
distributors and a higher level of reinsurance allowances in 2001 compared to
2002.

Investment Management Segment

The following table presents summary financial data relating to Investment
Management for the three months ended March 31, 2002 and 2001 (in millions).

2002 2001 Change
------------ ------------ ------------
REVENUES:
Investment product fees................................ $ 66.7 $ 70.7 $ (4.0)
Net investment income.................................. 3.2 2.5 .7
------------ ------------ ------------
Total revenues.................................. 69.9 73.2 (3.3)
------------ ------------ ------------
EXPENSES:
Intangible asset amortization.......................... 8.1 12.5 (4.4)
Other operating expenses............................... 57.1 57.2 (.1)
------------ ------------ ------------
Total expenses................................. 65.2 69.7 (4.5)
------------ ------------ ------------
Income (loss) from continuing operations before
income taxes and minority interest.................. 4.7 3.5 1.2
Applicable income tax (benefit) expense................ (.5) 1.5 (2.0)
Minority interest in net income of subsidiaries (2.8) (1.8) (1.0)
------------ ------------ ------------
Segment operating loss................................. $ 2.4 $ .2 $ 2.2
============ ============ ============

The decrease in investment product fees of 6% for the three months ended March
31, 2002 was primarily the result of a decrease in the fee structure for the
Phoenix general account, partially offset by increases of $5.5 billion and $4.0
billion in average assets under management for the private client and
institutional lines of business, respectively. The increase in average assets
under management is the result of our acquisition of Kayne Anderson
Rudnick in January 2002.

The increase in net investment income was due primarily to equity in the
increased earnings of Aberdeen.

The decrease in intangible asset amortization of 35% for the three months ended
March 31, 2002 resulted primarily from our adoption of a new accounting
standard, which eliminates the amortization of goodwill and indefinite-lived
intangible assets beginning January 1, 2002, partially offset by the
amortization of intangible assets resulting from our acquisition of a 60%
interest in Kayne Anderson Rudnick in January 2002.

The increase in minority interest in net income of subsidiaries of 56% for the
three months ended March 31, 2002 was due to increased earnings in Seneca and
the acquisition of Kayne Anderson Rudnick.

Venture Capital Segment

Our investments in Venture Capital are primarily in the form of limited
partnership interests in venture capital funds, leveraged buyout funds and other
private equity partnerships sponsored and managed by third parties. We refer to
all of these types of investments as venture capital.

We record our investments in venture capital partnerships in accordance with the
equity method of accounting. Our pro rata share of the earnings or losses of the
partnerships, which represent realized and unrealized investment gains and
losses, as well as operations of the partnership, is included in our investment
income. We record our share of the net equity in earnings of the venture capital
partnerships in accordance with GAAP, using the most recent financial
information received from the partnerships. Historically, this information had
been provided to us on a one-quarter lag. Due to the volatility in the equity
markets, we believed the one-quarter lag in reporting was no longer appropriate.
Therefore, beginning in the first quarter of 2001 we changed our method of
applying the equity method of accounting to eliminate the quarterly lag in
reporting. We removed the lag in reporting by estimating the change in our share
of the net equity in earnings of the venture capital partnerships for the period
from December 31, 2000, the date of the most recent financial information
provided by the partnerships, to our then current reporting date of March 31,
2001. To estimate the net equity in earnings of the venture capital partnerships
for each quarter, we developed a methodology to estimate the change in value of
the underlying investee companies in the venture capital partnerships. For
public investee companies, we used quoted market prices at the end of each
quarter, applying liquidity discounts to these prices in instances where such
discounts were applied in the underlying partnerships' financial statements. For
private investee companies, we applied a public industry sector index to roll
the value forward each quarter. We applied this methodology consistently each
quarter with subsequent adjustments to reflect market events reported by the
partnerships (e.g., new rounds of financing, initial public offerings and
writedowns by the general partners). In addition, on an annual basis we revised
the valuations we have assigned to the investee companies to reflect the
valuations contained in the audited financial statements received from the
venture capital partnerships. Our venture capital earnings remain subject to
variability.

In the first quarter of 2001, we recorded a charge of $48.8 million (net of
income taxes of $26.3 million) representing the cumulative effect of this
accounting change on the fourth quarter of 2000. The cumulative effect was based
on the actual fourth quarter 2000 financial results as reported by the
partnerships.

The following table presents summary financial data relating to Venture Capital
for the quarters ended March 31, 2002 and 2001 (in millions).

2002 2001 Change
---------- ---------- ----------
REVENUES:
Net investment loss............................... $ (5.0) $ (57.3) $52.3
---------- ---------- ----------
Operating loss before income taxes................ (5.0) (57.3) 52.3
EXPENSES:
Applicable income tax benefit..................... (1.7) (20.0) 18.3
---------- ---------- ----------
Segment operating loss (1)................... $ (3.3) $ (37.3) $34.0
========== ========== ==========

(1) Excludes the charge of $48.8 million representing the cumulative effect of
an accounting change in the first quarter of 2001, as described above.

The increase in net investment income of 91% for the three months ended March
31, 2002 was due to declines in the sector indexes in 2001, which were more
severe than they were in 2002, applied against a higher investment balance in
2001. The 2002 balance represents an adjustment to the 2001 audited partnership
financial statements of a $12.9 million gain offset by operating losses of $2.0
million and a first quarter loss estimate of $15.9 million based on declines in
the industry sector indexes.

Corporate and Other Segment

The following table presents summary financial data relating to Corporate and
Other for the quarters ended March 31, 2002 and 2001 (in millions).

2002 2001 Change
----------- ----------- -----------
REVENUES:
Insurance and investment product fees................. $ 2.8 $ 3.7 $ (.9)
Net investment income................................. 7.4 2.9 4.5
----------- ----------- -----------
Total revenues................................. 10.2 6.6 3.6
----------- ----------- -----------
EXPENSES:
Policy benefits, excluding policyholder dividends .... 3.6 2.8 .8
Interest expense...................................... 7.7 7.1 .6
Other operating expenses.............................. 7.6 15.6 (8.0)
----------- ----------- -----------
Total expenses................................. 18.9 25.5 (6.6)
----------- ----------- -----------
Operating loss before income taxes.................... (8.7) (18.9) 10.2
Applicable income tax benefit......................... (4.1) (10.2) 6.1
----------- ----------- -----------
Segment operating loss......................... $ (4.6) $ (8.7) $ 4.1
=========== =========== ===========

The increase in net investment income of 155% for the three months ended March
31, 2002 was primarily due to our equity in the increased earnings of EMCO and
Hilb, Rogal and Hamilton Company. Also, interest on inter-company lending
increased, offset by a decline due to asset re-allocation to Life and Annuity,
effective January 1, 2002.

The decrease in other operating expenses of 51% for the three months ended March
31, 2002 was primarily the result of exiting our physician practice management
business in the second quarter of 2001. We also experienced lower compensation,
advertising, charitable contributions and income tax expenses during the three
months ended March 31, 2002 compared to the same period in 2001.

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 Management professionals manage our general account
assets. We manage our 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
specific liability or liabilities within them. Segmentation of assets allows us
to manage the risks and measure returns on capital for our various businesses
and products.

Separate Account and Investment Trust Assets

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. Generally, assets
held in separate accounts are not available to satisfy general account
obligations.

Investment trusts are assets held for the benefit of those institutional clients
which have investments in structured finance products offered and managed by our
investment management subsidiary. Investment trusts for which PXP is the sponsor
and actively manages the assets, and for which there is not a substantive amount
of outside third party equity investment in the trust, are consolidated in the
financial statements. In 2001, we determined that two out of the eight
investment trusts that PXP sponsored did not have a substantive amount of
outside equity and, as a result, we concluded that consolidation was required.
Our financial exposure is limited to our share of equity and bond investments in
these vehicles and there are no financial guarantees from, or recourse to, us
for these investment trusts. Asset valuation changes are directly offset by
changes in the corresponding liabilities. We receive investment management fees
for services provided to the trusts.

Asset/Liability and Risk Management

Our primary investment objective is to maximize after-tax investment return
within defined risk parameters. Our primary sources of investment risk are:

o credit risk, which relates to the uncertainty associated with the ongoing
ability of an obligor to make timely payments of principal and interest;

o interest rate risk, which relates to the market price and cash flow
variability associated with changes in market interest rates; and

o equity risk, which relates to the volatility of prices for equity and
equity-like investments.

We manage credit risk through fundamental analysis of the underlying obligors,
issuers and transaction structures. We employ a staff of specialized and
experienced credit analysts who review obligors' management, competitive
position, financial statements, cash flow, coverage ratios, liquidity and other
key financial and non-financial information. These specialists recommend the
investments needed to fund our liability guarantees within diversification and
credit rating guidelines. In addition, when investing in private debt
securities, we rely upon broad access to management information, negotiated
protective covenants, call protection features and collateral protection. We
review our debt security portfolio regularly to monitor the performance of
obligors and assess the integrity of their current credit ratings.

We manage interest rate risk as part of our asset/liability management process
and product design procedures. Asset/liability management strategies include the
segmentation of investments by product line, and the construction of investment
portfolios designed to satisfy the projected cash needs of the underlying
liabilities. We identify potential interest rate risk in portfolio segments by
modeling asset and liability durations and cash flows under current and
projected interest rate scenarios. We use these projections to assess and
control interest rate risk.

We also manage interest rate risk by emphasizing the purchase of securities that
feature prepayment restrictions and call protection. Our product design and
pricing strategies include the use of surrender charges or restrictions on
withdrawals in some products. In addition, we selectively apply derivative
instruments, such as interest rate swaps, swaptions, and floors to reduce the
interest rate risk inherent in our portfolios. These derivatives are transacted
with highly rated counterparties and monitored for effectiveness on an ongoing
basis. We use derivatives exclusively for hedging purposes.

We manage equity risk, as well as credit risk, through industry and issuer
diversification and asset allocation. Maximum exposure to an issuer is defined
by quality ratings, with higher quality issuers having larger exposure limits.
We have an overall limit on below investment-grade rated issuer exposure.

For further information about our management of interest rate risk and equity
risk, see "Management's Discussion and Analysis of Financial Condition and
Results of Operations--Quantitative and Qualitative Information About Market
Risk."

Debt Securities

Our debt security portfolio consists 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 March 31, 2002, debt securities represented 69% of general account
invested assets, with a carrying value of $10,014.0 million. Public debt
securities represented 77% of this total amount, with the remaining 23%
consisted of private debt securities. Our debt securities are classified as
available-for-sale and are reported at fair value with unrealized gains or
losses included in equity.

Each year, the majority of our net cash flows are invested in investment grade
debt securities. However, we maintain a portfolio allocation between 6% and 10%
of debt securities in below investment grade rated bonds. Allocations are based
on our assessment of relative value and the likelihood of enhancing
risk-adjusted portfolio returns. The size of our allocation to below investment
grade bonds is constrained by the size of our net worth. We are subject to the
risk that the issuers of the debt securities we own may default on principal and
interest payments, particularly if a major economic downturn occurs. As of March
31, 2002, total debt securities having an increased risk of default (those
securities with a Securities Valuation Office ("SVO") securities rating of four
or greater) totaled $191.5 million, or 2%, of our total debt security portfolio,
and our below investment grade debt securities represented 8% of our total debt
security portfolio.

The following table displays the SVO ratings for our debt security portfolio as
of March 31, 2002 and December 31, 2001 (in millions), along with an equivalent
S&P rating agency designation. The majority of our bonds are investment
grade, with 92% invested in Categories 1 and 2 securities as of March 31, 2002.

Total Debt Securities by Credit Quality

SVO Rating S&P Equivalent Designation 2002 2001
---------- -------------------------------------- ------------ ------------
1 AAA/AA/A $6,558.2 $6,139.3
2 BBB 2,700.1 2,686.7
3 BB 574.4 581.6
4 B 150.5 173.0
5 CCC and lower 24.2 38.6
6 In or near default 16.8 23.3
------------ ------------
Total 10,024.2 9,634.0
Less debt securities of discontinued operations................ 10.2 34.8
------------ ------------
Total debt securities, continuing operations................... $ 10,014.0 $9,607.7
============ ============

The following table displays the credit quality of our public debt security
portfolio as of March 31, 2002 and December 31, 2001 (in millions).

Public Debt Securities by Credit Quality....

SVO Rating S&P Equivalent Designation 2002 2001
---------- -------------------------------------- ------------ ------------
1 AAA/AA/A $5,411.4 $5,019.3
2 BBB 1,704.8 1,667.9
3 BB 452.3 452.9
4 B 129.8 150.4
5 CCC and lower 12.5 18.0
6 In or near default 16.8 19.8
------------ ------------
Total $ 7,727.6 $7,328.3
============ ============

The following table displays the credit quality of our private debt security
portfolio as of March 31, 2002 and December 31, 2001 (in millions).

Private Debt Securities by Credit Quality

SVO Rating S&P Equivalent Designation 2002 2001
---------- -------------------------------------- ------------ ------------
1 AAA/AA/A $1,146.8 $1,111.5
2 BBB 995.3 1,018.8
3 BB 122.1 128.7
4 B 20.7 22.6
5 CCC and lower 11.7 20.6
6 In or near default -- 3.5
------------ ------------
Total $2,296.6 $2,305.7
============ ============

Liquidity and Capital Resources

In the normal course of business, we enter into transactions involving various
types of financial instruments such as debt securities and equity securities.
These instruments have credit risk and also may be subject to risk of loss due
to interest rate and market fluctuations. We also make off-balance sheet
commitments related to venture capital partnerships; as of March 31, 2002, such
total unfunded capital commitments were $162.0 million.

Liquidity refers to the ability of a company to generate sufficient cash flow to
meet its cash requirements. The following discussion combines liquidity and
capital resources as these subjects are interrelated. Consistent with the
discussion of our results of operations, we discuss liquidity and capital
resources on both consolidated and segment bases.

The Phoenix Companies, Inc. (unconsolidated)

Our primary uses of liquidity include the payment of dividends on our common
stock, loans or contributions to our subsidiaries, debt service and the funding
of our general corporate expenses.

Our primary source of liquidity is dividends from Phoenix Life. Based on the
historic cash flows and the current financial results of Phoenix Life, and
subject to any dividend limitations which may be imposed upon Phoenix Life or
any of its subsidiaries by regulatory authorities, we believe that cash flows
from Phoenix Life's operating activities will be sufficient to enable us to make
dividend payments on our common stock, pay our operating expenses, service our
outstanding debt, make contributions to our subsidiaries and meet our other
obligations. In addition, we have a master credit facility (the "Master Credit
Facility") under which we have direct borrowing rights, as do Phoenix Life and
PXP with our unconditional guarantee.

Under the New York Insurance Law, the ability of Phoenix Life to pay stockholder
dividends to us in any calendar year in excess of the lesser of:

(1) 10% of Phoenix Life's surplus to policyholders as of the immediately
preceding calendar year; or

(2) Phoenix Life's statutory net gain from operations for the immediately
preceding calendar year, not including realized capital gains,

is subject to the discretion of the New York Superintendent of Insurance.

The dividend limitation imposed by the New York Insurance Law is based on the
statutory financial results of Phoenix Life. Statutory accounting practices
differ in certain respects from accounting principles used in financial
statements prepared in conformity with GAAP. The significant differences relate
to deferred acquisition costs, deferred income taxes, required investment
reserves, reserve calculation assumptions and surplus notes.

We do not expect to receive significant dividend income from PXP for several
years, because we expect that during this time PXP will use a substantial
portion of its cash flows from operations to pay down its outstanding debt.

Phoenix Life

Phoenix Life's liquidity requirements principally relate to: the liabilities
associated with its various life insurance and annuity products; the payment of
dividends to us; operating expenses; contributions to subsidiaries; and payment
of principal and interest on outstanding debt obligations. Phoenix Life's
liabilities arising from its life insurance and annuity products include the
payment of benefits, as well as cash payments in connection with policy
surrenders, withdrawals and loans. Phoenix Life also has liabilities arising
from the runoff of the remaining group accident and health reinsurance
discontinued operations.

Historically, Phoenix Life has used cash flow from operations and investment
activities to fund its liquidity requirements. Phoenix Life's principal cash
inflows from its life insurance and annuities activities come from premiums,
annuity deposits and charges on insurance policies and annuity contracts, as
well as dividends and distributions from subsidiaries. Phoenix Life's principal
cash inflows from its investment activities result from repayments of principal,
proceeds from maturities, sales of invested assets and investment income.

Additional sources of liquidity to meet unexpected cash outflows are available
from Phoenix Life's portfolio of liquid assets. These liquid assets include
substantial holdings of U.S. government and agency bonds, short-term investments
and marketable debt and equity securities. The cash Phoenix Life received as
consideration for the transfer of shares of common stock of PXP and other
subsidiaries following the demutualization was a non-recurring source of
liquidity. Pursuant to the plan of reorganization, this cash payment was $659.8
million.

Phoenix Life's current sources of liquidity also include a master credit
facility under which Phoenix Life has direct borrowing rights, subject to our
unconditional guarantee (see "Debt Financing"). Following the demutualization,
Phoenix Life no longer has access to the cash flows generated by the closed
block assets for any purpose other than funding the closed block.

A primary liquidity concern with respect to life insurance and annuity products
is the risk of early policyholder and contractholder withdrawal. Phoenix Life
closely monitors its liquidity requirements in order to match cash inflows with
expected cash outflows, and employs an asset/liability management approach
tailored to the specific requirements of each product line, based upon the
return objectives, risk tolerance, liquidity, tax and regulatory requirements of
the underlying products. In particular, Phoenix Life maintains investment
programs generally intended to provide adequate funds to pay benefits without
forced sales of investments. Products having liabilities with relatively long
lives, such as life insurance, are matched with assets having similar estimated
lives, such as long-term bonds, private placement bonds and mortgage loans.
Shorter-term liabilities are matched with investments such as short-term and
medium-term fixed maturities.

The following table summarizes Phoenix Life's annuity contract reserves and
deposit fund liabilities in terms of contractholders' ability to withdraw funds
as of March 31, 2002 and December 31, 2001 (dollars in millions):

Withdrawal Characteristics of Annuity Contract
Reserves and Deposit Fund Liabilities (1)

2002 2001
----------------------- ----------------------
Amount % Amount %
----------- --------- ----------- --------

Not subject to discretionary withdrawal provisions ...... $ 172.3 3% $ 173.9 3%
Subject to discretionary withdrawal without adjustment... 1,282.4 24% 1,054.8 21%
Subject to discretionary withdrawal with market value
adjustment............................................ 299.1 6% 239.1 5%
Subject to discretionary withdrawal at contract value
less surrender charge................................. 489.9 9% 453.3 9%
Subject to discretionary withdrawal at market value ..... 3,079.5 58% 3,087.5 62%
----------- --------- ----------- --------
Total annuity contract reserves and deposit fund
liabiltiy............................................. $ 5,323.2 100% $ 5,008.6 100%
=========== ===========
- ----------

(1) Data are reported on a statutory basis, which more accurately reflects the
potential cash outflows. Data include variable product liabilities. Annuity
contract reserves and deposit fund liabilities are monetary amounts that an
insurer must have available to provide for future obligations with respect
to its annuities and deposit funds. These are liabilities on the balance
sheet of financial statements prepared in conformity with statutory
accounting practices. These amounts are at least equal to the values
available to be withdrawn by policyholders.

Individual life insurance policies are less susceptible to withdrawals than are
annuity contracts because policyholders may incur surrender charges and be
required to undergo a new underwriting process in order to obtain a new
insurance policy. As indicated in the table above, most of Phoenix Life's
annuity contract reserves and deposit fund liabilities are subject to
withdrawals.

Individual life insurance policies, other than term life insurance policies,
increase in cash values over their lives. Policyholders have the right to borrow
from Phoenix Life an amount generally up to the cash value of their policies at
any time. As of March 31, 2002, Phoenix Life had approximately $10.6 billion in
cash values with respect to which policyholders had rights to take policy loans.
The majority of cash values eligible for policy loans are at variable interest
rates that are reset annually on the policy anniversary. Phoenix Life's amount
of policy loans has not changed significantly since 1999. Policy loans at March
31, 2002 were $2.2 billion.

The primary liquidity concerns with respect to Phoenix Life's cash inflows from
its investment activities are the risks of default by debtors, interest rate and
other market volatility and potential illiquidity of investments. Phoenix Life
closely monitors and manages these risks.

We believe that Phoenix Life's current and anticipated sources of liquidity are
adequate to meet its present and anticipated needs.

PXP

PXP's cash requirements are primarily to fund operating expenses and repay
outstanding debt. PXP also will require liquidity to fund the costs of any
future acquisitions. Historically, PXP's principal source of liquidity has been
cash flows from operations. We expect that cash flow from operations will
continue to be PXP's principal source of working capital for the foreseeable
future. PXP, together with Phoenix and Phoenix Life, has entered into a master
credit facility. Under this facility, PXP has direct borrowing rights, subject
to Phoenix's unconditional guarantee. See "Debt Financing-- Master Credit
Facility." We believe that PXP's current and anticipated sources of liquidity
are adequate to meet its present and anticipated needs.

Debt Financing

As of March 31, 2002, we had outstanding debt of $300 million (excluding the
indebtedness of Phoenix Life and PXP described below under "Phoenix Life" and
"PXP," respectively).

Debt offering. On December 19, 2001, we completed a debt offering of $300
million, thirty-year senior unsecured bonds at a coupon of 7.45%. The bonds are
traded on the New York Stock Exchange under the symbol PFX. The carrying value
at March 31, 2002 was $300 million.

Master Credit Facility. In June 2001, we, Phoenix Life and PXP entered into a
$375 million revolving credit facility which matures on June 10, 2005 (the
"Master Credit Facility") and terminated Phoenix Life's and PXP's prior credit
facilities. Bank of Montreal is the administrative agent for this credit
facility. Each company has direct borrowing rights under this credit facility.
We unconditionally guarantee loans to Phoenix Life and PXP. Base rate loans bear
interest at the greater of the Bank of Montreal's prime commercial rate or the
effective federal funds rate plus 0.5%. Eurodollar rate loans bear interest at
LIBOR plus an applicable margin. At March 31, 2002, the outstanding balance
under this facility was $125 million, subject to the Eurdollar rate structure.
The credit agreement contains customary financial and operating covenants that
include, among other provisions, requirements that we maintain a minimum
stockholders' equity and a maximum debt to capitalization ratio; that Phoenix
Life maintain a minimum risk based capital ratio and a minimum financial
strength rating; and that PXP maintain a maximum debt to capitalization ratio
and a minimum stockholder's equity.

Phoenix Life

As of March 31, 2002, Phoenix Life had $175 million of debt outstanding, but
none under the Master Credit Facility.

Surplus Notes. In November 1996, Phoenix Life issued $175 million principal
amount of 6.95% surplus notes due December 1, 2006. Each payment of interest or
principal of the notes requires the prior approval of the New York
Superintendent of Insurance and may be made only out of surplus funds which the
Superintendent determines to be available for such payment under the New York
Insurance Law. The notes contain neither financial covenants nor early
redemption provisions and are to rank equally with any subsequently issued
surplus, capital or contribution notes or similar obligations of Phoenix Life.
Section 1307 of the New York Insurance Law provides that the notes are not part
of the legal liabilities of Phoenix Life and are not a basis of any set-off
against Phoenix Life.

PXP

As of March 31, 2002, PXP had $464 million of debt outstanding, including:

Phoenix Life Subordinated Note. In exchange for the debentures held by it,
Phoenix Life agreed to accept from PXP, in lieu of cash, a $69.0 million
subordinated note due 2006, bearing interest annually at the rate of LIBOR plus
two hundred basis points.

Phoenix Subordinated Note. In December 2001, PXP paid down $150 million in debt
from the Master Credit Facility and borrowed from Phoenix in the form of a $150
million subordinated note due 2007, bearing interest annually at the rate of
LIBOR plus seventy-two basis points. During the first quarter of 2002, PXP
borrowed an additional $100 million from Phoenix to fund the purchase of Kayne
Anderson Rudnick.

Senior Note. During the first quarter of 2002, PXP borrowed $20 million from
Phoenix to fund significant non-operating cash outflows. The senior note matures
in 2006 and bears interest annually at 7.6%.

Master Credit Facility. As of March 31, 2002, PXP had $125 million of debt
outstanding under the Master Credit Facility.

Reinsurance

We maintain life reinsurance programs designed to protect against large or
unusual losses in our life insurance business. Over the last several years in
response to the reduced cost of reinsurance coverage, we increased the amount of
individual mortality risk coverage purchased from third party reinsurers. 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 uncollectable life
reinsurance.

Risk Based Capital

Section 1322 of the New York Insurance Law requires that New York life insurers
report their risk based capital ("RBC"). RBC is based on a formula calculated by
applying factors to various asset, premium and statutory reserve items. The
formula takes into account the risk characteristics of the insurer, including
asset risk, insurance risk, interest rate risk and business risk. Section 1322
gives the New York Superintendent of Insurance explicit regulatory authority to
require various actions by, or take various actions against, insurers whose
total adjusted capital does not exceed certain RBC levels. As of December 31,
2001, Phoenix Life's total adjusted capital was in excess of each of these RBC
levels. Each of the U.S. insurance subsidiaries of Phoenix Life is also subject
to these same RBC requirements. As of December 31, 2001, the total adjusted
capital of each of these insurance subsidiaries was in excess of each of their
respective RBC levels.

Net Capital Requirements

Phoenix Equity Planning Corporation ("PEPCO"), PXP Securities Corp. ("PSC") and
Rutherford, Brown and Catherwood, LLC ("Rutherford"), each a direct or indirect
owned subsidiary of PXP, PHOENIXLINK Investments, Inc. ("PHOENIXLINK") and PFG
Distribution Company, both of which are subsidiaries of Phoenix Life, and Main
Street Management and WS Griffith, both of which are subsidiaries of Phoenix
Distribution Management Company, are each subject to the net capital
requirements imposed on registered broker-dealers by the Securities Exchange Act
of 1934 (the "Exchange Act"). Each company is also required to maintain a ratio
of aggregate indebtedness to net capital that does not exceed 15 to 1. PEPCO had
net capital of approximately $6.5 million. This amount exceeded PEPCO's
regulatory minimum of $0.8 million. The ratio of aggregate indebtedness to net
capital for PEPCO was 1.9 to 1. The ratios of aggregate indebtedness to net
capital for each of the other listed broker-dealers were also below the margin
limit at March 31, 2002.

Consolidated Cash Flows

The following table presents summary consolidated cash flow data for the three
months ended March 31, 2002 and 2001 for the purpose of illustrating significant
changes in the components of our cash flows (in millions).

2002 2001
-------------- -----------------

Cash from (for) operations............................................ $ 7.7 $ (23.5)
Cash from financing activities........................................ 274.6 140.9

The increase in cash from operations in the first quarter of 2002 is primarily
due to lower operating expenses partially offset by lower investment income and
higher claim payments by our reinsurance discontinued operations.

The increase in cash from financing activities is largely due to an increase in
net annuity deposits in the guaranteed interest account and increased sales of
fixed annuities, partially offset by a buyback of treasury stock, distributions
to minority stockholders and a lower level of borrowing.

ITEM 3.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Market Risk Exposures and Risk Management

We must effectively manage, measure and monitor the market risk generally
associated with our insurance and annuity business and, in particular, our
commitment to fund insurance liabilities. We have developed an integrated
process for managing risk, which we conduct through our Corporate Portfolio
Management Department, Actuarial Department, Corporate Finance Department and
additional specialists at the business segment level. These groups confer with
each other regularly. We have implemented comprehensive policies and procedures
at both the corporate and business segment level to minimize the effects of
potential market volatility.

Market risk is the risk that we will incur losses due to adverse changes in
market rates and prices. We have exposure to market risk through both our
insurance operations and our investment activities. Our primary market risk
exposure is to changes in interest rates, although we also have exposures to
changes in equity prices and foreign currency exchange rates. We also have
credit risks in connection with our derivative contracts.

Interest Rate Risk

Interest rate risk is the risk that we will incur economic losses due to adverse
changes in interest rates. Our exposure to interest rate changes primarily
results from our commitment to fund interest-sensitive insurance liabilities, as
well as from our significant holdings of fixed rate investments. Our insurance
liabilities are largely comprised of dividend-paying individual whole life and
universal life policies. Our fixed maturity investments include U.S. and foreign
government bonds, securities issued by government agencies, corporate bonds,
asset-backed securities, mortgage-backed securities and mortgage loans, most of
which are mainly exposed to changes in medium-term and long-term U.S. Treasury
rates.

We manage interest rate risk as part of our asset/liability management process
and product design procedures. Asset/liability strategies include the
segmentation of investments by product line and the construction of investment
portfolios designed to specifically satisfy the projected cash needs of the
underlying product liability. We manage the interest rate risk inherent in our
assets relative to the interest rate risk inherent in our insurance products. We
identify potential interest rate risk in portfolio segments by modeling asset
and product liability durations and cash flows under current and projected
interest rate scenarios.

One of the key measures we use to quantify this interest rate exposure is
duration. Duration is one of the most significant measurement tools in measuring
the sensitivity of the fair value of assets and liabilities to changes in
interest rates. For example, if interest rates increase by 100 basis points, or
1%, the fair value of an asset with a duration of five years is expected to
decrease by 5%. We believe that as of March 31, 2002 and December 31, 2001, our
asset and liability portfolio durations were well matched, especially for the
largest segments of our balance sheet (i.e., whole life and universal life).
Since our insurance products have variable interest rates (which expose us to
the risk of interest rate fluctuations), we regularly undertake a sensitivity
analysis that calculates liability durations under various cash flow scenarios.

The selection of a 100 basis point immediate, parallel increase or decrease in
interest rates is a hypothetical rate scenario used to demonstrate potential
risk. While a 100 basis point immediate, parallel increase or decrease does not
represent our view of future market changes, it is a reasonably possible
hypothetical near-term change that illustrates the potential impact of such
events. Although these fair value measurements provide a representation of
interest rate sensitivity, they are based on our portfolio exposures at a point
in time and may not be representative of future market results. These exposures
will change as a result of ongoing portfolio transactions in response to new
business, management's assessment of changing market conditions and available
investment opportunities.

To calculate duration, we project asset and liability cash flows and discount
them to a net present value using a risk-free market rate adjusted for credit
quality, sector attributes, liquidity and any other relevant specific risks.
Duration is calculated by revaluing these cash flows at an alternative level of
interest rates and by determining the percentage change in fair value from the
base case.

We also employ product design and pricing strategies to manage interest rate
risk. Product design and pricing strategies include the use of surrender charges
or restrictions on withdrawals in some products.

The tables below show the interest rate sensitivity of our fixed income
financial instruments measured in terms of fair value as of March 31, 2002 and
December 31, 2001 (in millions). Given that our asset and liability portfolio
durations were well matched for the periods indicated, it is expected that
market value gains or losses in assets would be largely offset by corresponding
changes in liabilities.

2002: Fair Value
-------------------------------------------------------
Book -100 Basis As of +100 Basis
Value Point Change 3/31/02 Point Change
-------------- ----------------- ------------- ----------------
Cash and short term investments $ 451.8 $ 452.1 $ 451.8 $ 451.4
Floating rate notes............ 135.8 137.3 138.5 139.6
Long term bonds................ 10,019.7 10,677.5 10,174.9 9,698.6
Commercial mortgages........... 522.7 577.2 555.3 534.6
------------ ------------ ------------ ------------
Total $ 11,130.0 $ 11,844.1 $ 11,320.5 $ 10,824.2
============ ============ ============ ============

2001: Fair Value
-------------------------------------------------------
Book -100 Basis As of +100 Basis
Value Point Change 12/31/01 Point Change
-------------- ----------------- ------------- ----------------
Cash and short term investments $ 514.8 $ 515.2 $ 514.8 $ 514.4
Floating rate notes............ 150.0 152.4 150.0 147.6
Long term bonds................ 9,490.7 10,145.8 9,657.2 9,193.2
Commercial mortgages........... 535.8 594.5 571.6 549.8
------------ ------------ ------------ ------------
Total $ 10,691.3 $ 11,407.9 $ 10,893.6 $ 10,405.0
============ ============ ============ ============

With respect to our residual exposure to fluctuations in interest rates, we use
various derivative financial instruments to manage such exposure to fluctuations
in interest rates, including interest rate swap agreements, interest rate caps,
interest rate floors, interest rate swaptions and foreign currency swap
agreements. To reduce counterparty credit risks and diversify counterparty
exposure, we enter into derivative contracts only with highly rated financial
institutions.

We enter into interest rate swap agreements to reduce market risks from changes
in interest rates. We do not enter into interest rate swap agreements for
trading purposes. Under interest rate swap agreements, we exchange cash flows
with another party at specified intervals for a set length of time based on a
specified notional principal amount. Typically, one of the cash flow streams is
based on a fixed interest rate set at the inception of the contract and the
other is based on a variable rate that periodically resets. Generally, no
premium is paid to enter into the contract and neither party makes payment of
principal. The amounts to be received or paid on these swap agreements are
accrued and recognized in net investment income.

We enter into interest rate floor, cap and swaption contracts for our assets and
our insurance liabilities as a hedge against substantial changes in interest
rates. We do not enter into such contracts for trading purposes. Interest rate
floor and interest rate cap agreements are contracts with a counterparty which
require the payment of a premium and give us the right to receive over the term
of the contract the difference between the floor or cap interest rate and a
market interest rate on specified future dates based on an underlying notional
principal. Swaption contracts are options to enter into an interest rate swap
transaction on a specified future date and at a specified interest rate. Upon
the exercise of a swaption, we receive either a swap agreement at the
pre-specified terms or cash for the market value of the swap. We pay the premium
for these instruments on a quarterly basis over the term of the contract and
recognize these payments in computing net investment income.

The tables below show the interest rate sensitivity of our interest rate
derivatives measured in terms of fair value as of March 31, 2002 and December
31, 2001 (dollars in millions). These exposures will change as our insurance
liabilities are created and discharged and as a result of ongoing portfolio and
risk management activities.

2002: Fair Value
Weighted -----------------------------------------------------
Average
Notional Term -100 Basis As of +100 Basis
Amount (Years) Point Change 3/31/02 Point Change
--------------- -------------- ---------------- ----------- ------------------
Interest rate floors $ 85.0 1.3 $ 1.0 $ .2 $ --
Interest rate swaps 605.0 11.6 23.9 7.0 (10.0)
Interest rate caps 50.0 6.2 (.2) .3 1.3
------------ ---------- -------- ---------
Total $ 740.0 $ 24.7 $ 7.5 $ (8.7)
============ ========== ======== =========

2001: Fair Value
Weighted -----------------------------------------------------
Average
Notional Term -100 Basis As of +100 Basis
Amount (Years) Point Change 12/31/01 Point Change
--------------- -------------- ---------------- ----------- ------------------
Interest rate floors $ 110.0 1.4 $ 1.7 $ .4 $ (.4)
Interest rate swaps 590.0 12.2 25.0 6.4 (12.1)
Interest rate caps 50.0 6.5 -- .4 1.3
------------ ---------- --------- ----------
Total $ 750.0 $ 26.7 $ 7.2 $ (11.2)
============ ========== ========= ==========

Equity Risk

Equity risk is the risk that we will incur economic losses due to adverse
changes in equity prices. Our exposure to changes in equity prices primarily
results from our commitment to fund our variable annuity and variable life
products, as well as from our holdings of common stocks, mutual funds and other
equities. We manage our insurance liability risks on an integrated basis with
other risks through our liability and risk management and capital and other
asset allocation strategies. We also manage equity price risk through industry
and issuer diversification and asset allocation techniques. We held $303.7
million and $290.9 million in equities on our balance sheet as of March 31, 2002
and December 31, 2001, respectively. A 10% decline in the relevant equity price
would decrease the value of these assets by approximately $30 million and $29
million as of March 31, 2002 and December 31, 2001, respectively. Conversely, a
10% increase in the relevant equity price would increase the value of these
assets by approximately $30 million and $29 million as of March 31, 2002 and
December 31, 2001, respectively.

Foreign Exchange Risks

Foreign exchange risk is the risk that we will incur economic losses due to
adverse changes in foreign currency exchange rates. Our functional currency is
the U.S. dollar. Our exposure to fluctuations in foreign exchange rates against
the U.S. dollar results from our holdings in non-U.S. dollar-denominated fixed
maturity securities and equity securities and through our investments in foreign
subsidiaries and affiliates. The principal currencies that create foreign
exchange rate risk for us are the British pound sterling, due to our investment
in Aberdeen and Lombard and the Argentine Peso, due to our investment in EMCO.
In the first quarter of 2002, a charge of $11.1 million was taken through other
comprehensive income to reflect the devaluation of the Argentine peso.

PART II.
OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

General

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, employer, investment adviser, investor or taxpayer. In addition, state
regulatory bodies, the SEC, the 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, securities
laws, and laws governing the activities of broker-dealers. These types of
lawsuits and regulatory actions may be difficult to assess or quantify, may seek
recovery of very large and/or indeterminate amounts, including punitive and
treble damages, and their existence and magnitude may remain unknown for
substantial periods of time. A substantial legal liability or significant
regulatory action against us could have a material adverse effect on our
business, results of operations and financial condition.

While it is not feasible to predict or determine the ultimate outcomes of all
pending investigations and legal proceedings or to provide reasonable ranges of
potential losses, it is the opinion of our management that such outcomes, after
consideration of available insurance and reinsurance and the provisions made in
our consolidated financial statements, are not likely to have a material adverse
effect on our consolidated financial condition.

However, given the large and/or indeterminate amounts sought in certain of these
matters and the inherent unpredictability of litigation, it is possible that an
adverse outcome in certain matters could, from time to time, have a material
adverse effect on our operating results or cash flows.

Discontinued Reinsurance Business

The life companies' reinsurance business included, among other things,
reinsurance by the life companies of other insurance companies' group accident
and health business. During 1999, the life companies placed their remaining
group accident and health reinsurance business into runoff, adopting a formal
plan to terminate the related contracts as early as contractually permitted and
not entering into any new contracts. As part of the decision to discontinue
remaining reinsurance operations, Phoenix Life reviewed the runoff block and
estimated the amount and timing of future net premiums, claims and expenses.

We established reserves for claims and related expenses that we expect to pay on
our discontinued group accident and health reinsurance business. These reserves
are a net present value amount that is based on currently known facts and
estimates about, among other things, the amount of insured losses and expenses
that we believe we will pay, the period over which they will be paid, the amount
of reinsurance we believe we will collect under our finite reinsurance and our
other reinsurance to cover our losses and the likely legal and administrative
costs of winding down the business. Total net reserves were $10 million at March
31, 2002. In addition, in 1999 we purchased finite aggregate excess-of-loss
reinsurance to further protect us from unfavorable results from this
discontinued business. The initial premium for this coverage was $130 million.
The maximum coverage available is currently $180 million and increases to $230
million by 2004.

The life companies are involved in two sets of disputes relating to reinsurance
arrangements under which it reinsured group accident and health risks. The first
of these involves contracts for reinsurance of the life and health carveout
components of workers compensation insurance arising out of a reinsurance pool
created and formerly managed by Unicover Managers, Inc. ("Unicover"). In
addition, the life companies are involved in arbitrations and negotiations
pending in the United Kingdom between multiple layers of reinsurers and
reinsureds relating to transactions in which the life companies participated
involving certain personal accident excess-of-loss business reinsured in the
London market.

In light of our provisions for our discontinued reinsurance operations through
the establishment of reserves and the finite reinsurance, based on currently
available information, we do not expect these operations, including the
proceedings described above, to have a material adverse effect on our
consolidated financial position. However, given the large and/or indeterminate
amounts involved and the inherent unpredictability of litigation, it is not
possible to predict with certainty the ultimate impact on us of all pending
matters or of our discontinued reinsurance operations.

Policyholder Lawsuits Challenging the Plan of Reorganization

Three pending lawsuits seek to challenge Phoenix Life's reorganization and the
adequacy of the information provided to policyholders regarding the plan of
reorganization. We believe that each of these lawsuits lacks merit. The first of
these lawsuits, Andrew Kertesz v. Phoenix Home Life Mut. Ins. Co., et al., was
filed on April 16, 2001, in the Supreme Court of the State of New York for New
York County. The plaintiff seeks to maintain a class action on behalf of a
putative class consisting of the eligible policyholders of Phoenix Life as of
December 18, 2000, the date the plan of reorganization was adopted. Plaintiff
seeks compensatory damages for losses allegedly sustained by the class as a
result of the demutualization, punitive damages and other relief. The defendants
named in the lawsuit include Phoenix Life and Phoenix and their directors, as
well as Morgan Stanley &Co. Incorporated, financial advisor to Phoenix Life
in connection with the plan of reorganization.

The second lawsuit, Paulette M. Fantozzi v. Phoenix Home Life Mut. Ins. Co., et
al., was filed on August 23, 2001, in the Supreme Court of the State of New York
for New York County. The allegations and relief requested in this class-action
complaint are virtually identical to the allegations and relief sought in the
Kertesz lawsuit. The defendants named in the Fantozzi action are the same as
those named in Kertesz.

On October 19, 2001, motions to dismiss the claims asserted in the Kertesz and
Fantozzi lawsuits were filed. These motions are pending. We intend to vigorously
defend against all claims asserted in these two pending lawsuits.

On October 22, 2001, Andrew Kertesz filed a proceeding pursuant to Article 78 of
the New York Civil Practice Law and Rules, Andrew Kertesz v. Gregory V. Serio,
et al., in the Supreme Court of New York for New York County. The Article 78
petition seeks to vacate and annul the decision and order of the New York
Superintendent, dated June 1, 2001, approving the plan of reorganization. The
petition names as respondents Phoenix Life and Phoenix and their directors and
the New York Superintendent. We believe that the allegations of the petition are
meritless and intend to vigorously defend against all the claims asserted.

Another lawsuit that sought to challenge the plan of reorganization, Billie J.
Burns v. Phoenix Home Life Mut. Ins. Co., et al., was filed on April 4, 2001, in
the Circuit Court of Cook County, Illinois County Department, Chancery Division.
A motion to dismiss that action was filed on May 4, 2001. On October 2, 2001,
the court entered an order dismissing the action for want of prosecution.

ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS

In connection with the June 25, 2001 demutualization of Phoenix Mutual, during
the three months ended March 31, 2002, Phoenix issued 1,005 shares of common
stock to eligible policyholders, effective as of June 25. In reliance on the
exemption under Section 3(a)(10) of the Securities Act of 1933, Phoenix issued
such shares to policyholders in exchange for their membership interests without
registration under such Act.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

Not applicable

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

Not applicable

ITEM 5. OTHER INFORMATION

Not applicable

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

During the three months ended March 31, 2002, Phoenix filed the following
reports on Form 8-K:

o dated January 7, 2002, Items 5 and 7, regarding announcement of
authorization of additional shares for stock repurchase program;

o dated February 11, 2002, Items 5 and 7, regarding announcement of a
commission-free purchase and sale program;

o dated March 19, 2002, Items 5 and 7, regarding announcement of a new member
of the company's Board of Directors; and

o dated March 26, 2002, Items 5 and 7, regarding announcement of the
appointment of Coleman D. Ross as executive vice president and chief
financial officer, effective April 1, 2002.

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.

THE PHOENIX COMPANIES, INC.

By /s/ Coleman D. Ross
Coleman D. Ross, Executive Vice President and
Chief Financial Officer

May 15, 2002

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