Delaware | 001-16517 | 06-1599088 |
(State or other jurisdiction | (Commission File Number) | (IRS Employer |
of incorporation) | Identification No.) |
One American Row, Hartford, CT | 06102-5056 |
(Address of Principal Executive Offices) | (Zip Code) |
Registrant’s telephone number, including area code: | 860 403-5000 |
NOT APPLICABLE |
(Former name or former address, if changed since last report) |
¨ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
þ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
¨ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
¨ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
THE PHOENIX COMPANIES, INC. | ||
Date: March 15, 2016 | By: | /s/ Bonnie J. Malley |
Name: Bonnie J. Malley | ||
Title: Executive Vice President and Chief Financial Officer |
Contacts: | |
Media Relations Alice S. Ericson, 860-403-5946 | Investor Relations Naomi Baline Kleinman, 860-403-7100 |
• | Net loss attributable to The Phoenix Companies, Inc. of $21.4 million for 4Q15, $133.7 million for FY15 |
• | Holding company liquidity at $65.8 million at Dec. 31, 2015 |
• | Annuity deposits at $703.9 million, Saybrus Partners EBITDA increased to $8.1 million for 2015 |
• | Phoenix Life Insurance Company (“PLIC”) Statutory Surplus and AVR at $535.3 million, RBC at 409% at Dec. 31, 2015 |
• | PHL Variable Insurance Company (“PHL Variable”) Statutory Surplus and AVR at $209.3 million, RBC at 200% at Dec. 31, 2015 |
• | Nassau transaction expected to close in second quarter of 2016 |
• | Fourth quarter 2015 mortality was unfavorable compared with expectations, driven by unfavorable universal life experience. |
• | Net other-than-temporary impairment losses of $9.3 million. |
• | External financial reporting expenses of $9.0 million, which continue to decline but remain elevated. |
• | An annual actuarial assumption unlock benefit of $4.0 million partially offset the negative drivers. |
• | Full year 2015 mortality was unfavorable compared with expectations, driven by unfavorable universal life experience. |
• | External financial reporting expenses of $51.9 million. |
• | A $48.5 million charge to settle class actions relating to certain cost of insurance (COI) rate adjustments. |
• | Derivative losses of $34.2 million, which were driven by volatility in equity markets and interest rates. |
• | Net other-than-temporary impairment losses of $22.8 million. |
• | A $34.3 million tax benefit partially offset the negative drivers. |
For the Quarter Ended December 31, | For the Year Ended December 31, | ||||||||||||||
($ in millions, except per share data) | 2015 | 2014 | 2015 | 2014 | |||||||||||
Net income (loss) | $ | (21.4 | ) | $ | (136.1 | ) | $ | (127.0 | ) | $ | (209.2 | ) | |||
Less: Net income (loss) attributable to noncontrolling interests | — | 4.2 | 6.7 | 4.0 | |||||||||||
Net income (loss) attributable to The Phoenix Companies, Inc. | (21.4 | ) | (140.3 | ) | (133.7 | ) | (213.2 | ) | |||||||
EARNINGS PER SHARE SUMMARY: | |||||||||||||||
Net income (loss) attributable to The Phoenix Companies, Inc. | |||||||||||||||
Basic | $ | (3.72 | ) | $ | (24.40 | ) | $ | (23.25 | ) | $ | (37.09 | ) | |||
Diluted | $ | (3.72 | ) | $ | (24.40 | ) | $ | (23.25 | ) | $ | (37.09 | ) | |||
Weighted average shares outstanding (in thousands) | |||||||||||||||
Basic | 5,751 | 5,750 | 5,751 | 5,748 | |||||||||||
Diluted | 5,751 | 5,750 | 5,751 | 5,748 |
• | Net other-than-temporary impairment losses were $9.3 million and $22.8 million for the fourth quarter and full year, respectively, and primarily include debt and equity securities within the energy sector. Credit impairments were significantly below long-term expectations. |
• | Derivative losses were $2.7 million and $34.2 million for the fourth quarter and full year, respectively, and were driven primarily by volatility in interest rates and in the equity markets during the year. |
For the Quarter Ended December 31, | For the Year Ended December 31, | ||||||||||||||
($ in millions) | 2015 | 2014 | 2015 | 2014 | |||||||||||
Net realized investment gains (losses) | $ | (3.0 | ) | $ | (14.7 | ) | $ | (32.8 | ) | $ | (41.2 | ) | |||
Net other-than-temporary impairment losses | $ | (9.3 | ) | $ | (3.0 | ) | $ | (22.8 | ) | $ | (8.1 | ) | |||
Derivative gains (losses) | $ | (2.7 | ) | $ | (22.3 | ) | $ | (34.2 | ) | $ | (66.7 | ) |
• | At Dec. 31, 2015, holding company cash and non-affiliated securities, net of a $23.1 million contribution payable to PHL Variable, were $65.8 million, compared with $78.3 million at Dec. 31, 2014. The decrease was driven primarily by operating expenses of $52.9 million, which include external financial reporting expenses, and $33.1 million in capital contributions to benefit PHL Variable. The decrease was partially offset by $59.9 million in dividends received from PLIC during 2015. PLIC’s dividend capacity for 2016 is $37.2 million. |
• | Total stockholders’ equity attributable to The Phoenix Companies, Inc. was $161.2 million at Dec. 31, 2015, compared with $326.6 million at Dec. 31, 2014. The decrease was driven primarily by the $133.7 million net loss and a $31.8 million loss of other comprehensive income (“OCI”). |
• | Liquidity in the life companies remained strong with cash and cash equivalents, short-term investments, treasuries and agency mortgage-backed securities totaling $1.4 billion, or 10.7% of the fixed income portfolio, at Dec. 31, 2015, compared with $1.7 billion, or 12.7% of the fixed income portfolio, at Dec. 31, 2014. |
• | The quality of the investment portfolio remained strong during 2015 with the proportion of below investment grade bonds as a percentage of total available-for-sale debt securities at 6.5% at Dec. 31, 2015, at the low end of Phoenix’s target range of 6% - 10%, compared with 6.7% at Dec. 31, 2014. |
• | Phoenix has no debt maturities until 2032. |
December 31, | Change | ||||||||||
($ in millions) | 2015 | 2014 | |||||||||
Total Assets | $ | 21,091.9 | $ | 21,745.9 | $ | (654.0 | ) | ||||
Total Liabilities | $ | 20,918.1 | $ | 21,399.3 | $ | (481.2 | ) | ||||
Indebtedness | $ | 378.9 | $ | 378.9 | $ | 0.0 | |||||
Accumulated Other Comprehensive Income (Loss) | $ | (266.2 | ) | $ | (234.4 | ) | $ | (31.8 | ) | ||
Total Stockholders’ Equity | $ | 173.8 | $ | 346.6 | $ | (172.8 | ) |
• | Annuity deposits of $703.9 million in 2015, primarily fixed indexed annuities, were down approximately 10% from 2014 levels after price and other product changes implemented had the intended effect of increasing annuity profitability and decreasing sales. |
• | Life insurance annualized premium of $18.5 million in 2015 increased significantly year-over-year, driven by sales of term insurance. |
• | 2015 life insurance policy persistency, as measured by total individual life surrenders and life surrenders in the closed block, improved year-over-year. |
• | 2015 annuity persistency improved year-over-year. |
• | Phoenix’s distribution company, Saybrus Partners’, revenue grew 15% year-over-year and EBITDA grew 29%, driven by growth in third-party business. |
• | Full year 2015 mortality was unfavorable compared with expectations, with unfavorable experience in both the open and closed blocks. Fourth quarter 2015 mortality was unfavorable compared with expectations, driven by unfavorable universal life and closed block experience. |
• | External financial reporting expenses of $51.9 million were down from $102.6 million in 2014. These external financial reporting expenses have included restatement, SEC reporting catch up, remediation and audit expenses. |
As of or for the Quarter Ended December 31, | As of or for the Year Ended December 31, | ||||||||||||||
($ in millions, unless noted otherwise) | 2015 | 2014 | 2015 | 2014 | |||||||||||
Annuity deposits | $ | 107.9 | $ | 177.8 | $ | 703.9 | $ | 770.9 | |||||||
Net annuity flows (deposits less surrenders) | $ | (41.2 | ) | 19.6 | $ | 79.3 | $ | 112.5 | |||||||
Annuity funds under management ($ in billions) | $ | 5.6 | $ | 5.7 | $ | 5.6 | $ | 5.7 | |||||||
Life insurance annualized premium | $ | 4.9 | $ | 2.5 | $ | 18.5 | $ | 4.8 | |||||||
Gross life insurance in force ($ in billions) | $ | 91.5 | $ | 95.8 | $ | 91.5 | $ | 95.8 | |||||||
Total individual life surrenders (annualized) | 3.5 | % | 4.7 | % | 3.8 | % | 4.3 | % | |||||||
Total closed block life surrenders (annualized) | 3.3 | % | 4.3 | % | 3.5 | % | 4.1 | % | |||||||
Total annuity surrenders (annualized) | 10.6 | % | 11.2 | % | 11.0 | % | 11.8 | % | |||||||
Holding company cash and non-affiliated Securities | $ | 65.8 | $ | 78.3 | $ | 65.8 | $ | 78.3 | |||||||
Saybrus Partners EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization) | $ | 2.6 | $ | 1.6 | $ | 8.1 | $ | 6.3 | |||||||
Saybrus Partners revenue | $ | 12.9 | $ | 10.3 | $ | 43.3 | $ | 37.5 |
• | PLIC reported a statutory net gain from operations of $40.8 million and a statutory net loss of $660.7 million (including the $687.9 million realized loss on the de-stacking) for the year ended Dec. 31, 2015, compared with a statutory net gain from operations of $116.2 million and statutory net income of $132.5 million for the year ended Dec. 31, 2014. |
• | PLIC’s statutory surplus and asset valuation reserve was $535.3 million at Dec. 31, 2015, compared with $752.2 million at Dec. 31, 2014. The decrease was driven by a $262.2 million impact from the de-stacking that includes the carrying value of the de-stacked subsidiaries and related reduction of admitted deferred tax assets, as well as $59.9 million in dividends PLIC paid to the parent holding company and a $48.5 million charge related to a legal settlement recorded in the first quarter of 2015. These negative drivers were partially offset by the $153.5 million favorable impact of the intercompany reinsurance treaty between PLIC and PHL Variable executed in the second quarter. |
• | PLIC’s risk-based capital (“RBC”) ratio was 409% at Dec. 31, 2015, compared with 334% at Dec. 31, 2014, primarily driven by the impact of the de-stacking. |
• | PHL Variable reported a statutory net loss from operations of $11.8 million and statutory net loss of $14.0 million for the year ended Dec. 31, 2015, compared with a statutory net loss from operations of $37.5 million and a statutory net loss of $41.1 million for the year ended Dec. 31, 2014. |
• | PHL Variable’s statutory surplus and asset valuation reserve was $209.3 million at Dec. 31, 2015, compared with $213.7 million at Dec. 31, 2014. The decrease was driven by adverse mortality and PHL Variable’s $36.4 million portion of the legal settlement referenced above. These negative drivers were partially offset by the $52.5 million favorable impact of the intercompany reinsurance treaty between PLIC and PHL Variable and $33.1 million in capital contributions from the holding company. |
• | PHL Variable’s RBC ratio was 200% at Dec. 31, 2015, compared with 218% at Dec. 31, 2014. |
• | On Dec. 17, 2015, Phoenix stockholders approved the adoption of the Agreement and Plan of Merger. |
• | Nassau made the required filings requesting approval from the New York State Department of Financial Services and from the Connecticut Insurance Department on Nov. 6, 2015 and has since continued to provide supplemental information to the New York and Connecticut insurance regulators. |
• | Phoenix filed its applications for change of control of equity ownership with FINRA with respect to its two broker dealers. |
• | Both Phoenix and Nassau have filed the required notifications under the Hart-Scott-Rodino Act, and the Federal Trade Commission granted early termination of the waiting period on Oct. 26, 2015. |
($ in millions, except per share data) | Three Months Ended December 31, | Twelve Months Ended December 31, | |||||||||||||
2015 | 2014 | 2015 | 2014 | ||||||||||||
REVENUES: | |||||||||||||||
Premiums | $ | 98.0 | $ | 91.2 | $ | 349.1 | $ | 332.1 | |||||||
Fee income | 139.5 | 140.9 | 543.6 | 545.1 | |||||||||||
Net investment income | 195.8 | 223.0 | 834.9 | 830.9 | |||||||||||
Net realized gains (losses): | |||||||||||||||
Total other-than-temporary impairment (“OTTI”) losses | (8.5 | ) | (3.0 | ) | (20.8 | ) | (7.7 | ) | |||||||
Portion of OTTI losses recognized in other comprehensive income (“OCI”) | (0.8 | ) | — | (2.0 | ) | (0.4 | ) | ||||||||
Net OTTI losses recognized in earnings | (9.3 | ) | (3.0 | ) | (22.8 | ) | (8.1 | ) | |||||||
Net realized gains (losses), excluding OTTI losses | 6.3 | (11.7 | ) | (10.0 | ) | (33.1 | ) | ||||||||
Net realized gains (losses) | (3.0 | ) | (14.7 | ) | (32.8 | ) | (41.2 | ) | |||||||
Total revenues | 430.3 | 440.4 | 1,694.8 | 1,666.9 | |||||||||||
BENEFITS AND EXPENSES: | |||||||||||||||
Policy benefits | 310.9 | 324.0 | 1,186.6 | 1,119.2 | |||||||||||
Policyholder dividends | 55.8 | 73.0 | 211.5 | 244.8 | |||||||||||
Policy acquisition cost amortization | 6.0 | 46.5 | 77.8 | 119.6 | |||||||||||
Interest expense on indebtedness | 7.1 | 7.1 | 28.3 | 28.3 | |||||||||||
Other operating expenses | 73.2 | 91.6 | 349.9 | 350.2 | |||||||||||
Total benefits and expenses | 453.0 | 542.2 | 1,854.1 | 1,862.1 | |||||||||||
Income (loss) from continuing operations before income taxes | (22.7 | ) | (101.8 | ) | (159.3 | ) | (195.2 | ) | |||||||
Income tax expense (benefit) | (2.1 | ) | 32.3 | (34.3 | ) | 10.5 | |||||||||
Income (loss) from continuing operations | (20.6 | ) | (134.1 | ) | (125.0 | ) | (205.7 | ) | |||||||
Income (loss) from discontinued operations, net of income taxes | (0.8 | ) | (2.0 | ) | (2.0 | ) | (3.5 | ) | |||||||
Net income (loss) | (21.4 | ) | (136.1 | ) | (127.0 | ) | (209.2 | ) | |||||||
Less: Net income (loss) attributable to noncontrolling interests | — | 4.2 | 6.7 | 4.0 | |||||||||||
Net income (loss) attributable to The Phoenix Companies, Inc. | $ | (21.4 | ) | $ | (140.3 | ) | $ | (133.7 | ) | $ | (213.2 | ) |
(Continued from previous page) ($ in millions, except per share data) | Three Months Ended December 31, | Twelve Months Ended December 31, | |||||||||||||
2015 | 2014 | 2015 | 2014 | ||||||||||||
COMPREHENSIVE INCOME (LOSS): | |||||||||||||||
Net income (loss) attributable to The Phoenix Companies, Inc. | $ | (21.4 | ) | (140.3 | ) | $ | (133.7 | ) | $ | (213.2 | ) | ||||
Net income (loss) attributable to noncontrolling interests | — | 4.2 | 6.7 | 4.0 | |||||||||||
Net income (loss) | (21.4 | ) | (136.1 | ) | (127.0 | ) | (209.2 | ) | |||||||
Other comprehensive income (loss) before income taxes: | |||||||||||||||
Unrealized investment gains (losses), net of related offsets | (60.3 | ) | 5.3 | (107.7 | ) | 66.5 | |||||||||
Net pension liability adjustment | (2.5 | ) | (85.3 | ) | 4.6 | (80.2 | ) | ||||||||
Other comprehensive income (loss) before income taxes | (62.8 | ) | (80.0 | ) | (103.1 | ) | (13.7 | ) | |||||||
Less: Income tax expense (benefit) related to: | |||||||||||||||
Unrealized investment gains (losses), net of related offsets | (32.1 | ) | (24.9 | ) | (71.3 | ) | 35.7 | ||||||||
Net pension liability adjustment | — | — | — | — | |||||||||||
Total income tax expense (benefit) | (32.1 | ) | (24.9 | ) | (71.3 | ) | 35.7 | ||||||||
Other comprehensive income (loss), net of income taxes | (30.7 | ) | (55.1 | ) | (31.8 | ) | (49.4 | ) | |||||||
Comprehensive income (loss) | (52.1 | ) | (191.2 | ) | (158.8 | ) | (258.6 | ) | |||||||
Less: Comprehensive income (loss) attributable to noncontrolling interests | — | 4.2 | 6.7 | 4.0 | |||||||||||
Comprehensive income (loss) attributable to The Phoenix Companies, Inc. | $ | (52.1 | ) | (195.4 | ) | $ | (165.5 | ) | $ | (262.6 | ) | ||||
EARNINGS (LOSS) PER SHARE: | |||||||||||||||
Income (loss) from continuing operations – basic | $ | (3.58 | ) | $ | (24.05 | ) | (22.90 | ) | (36.48 | ) | |||||
Income (loss) from continuing operations – diluted | $ | (3.58 | ) | $ | (24.05 | ) | (22.90 | ) | (36.48 | ) | |||||
Income (loss) from discontinued operations – basic | $ | (0.14 | ) | $ | (0.35 | ) | (0.35 | ) | (0.61 | ) | |||||
Income (loss) from discontinued operations – diluted | $ | (0.14 | ) | $ | (0.35 | ) | (0.35 | ) | (0.61 | ) | |||||
Net income (loss) attributable to The Phoenix Companies, Inc. – basic | $ | (3.72 | ) | $ | (24.40 | ) | (23.25 | ) | (37.09 | ) | |||||
Net income (loss) attributable to The Phoenix Companies, Inc. – diluted | $ | (3.72 | ) | $ | (24.40 | ) | (23.25 | ) | (37.09 | ) | |||||
Basic weighted-average common shares outstanding (in thousands) | 5,751 | 5,750 | 5,751 | 5,748 | |||||||||||
Diluted weighted-average common shares outstanding (in thousands) | 5,751 | 5,750 | 5,751 | 5,748 |
As of December 31, | |||||||
($ in millions, except share data) | 2015 | 2014 | |||||
ASSETS: | |||||||
Available-for-sale debt securities, at fair value ( cost of $11,993.6 and $11,978.0) | $ | 12,190.7 | $ | 12,679.3 | |||
Available-for-sale equity securities, at fair value (cost of $154.6 and $156.0) | 182.0 | 179.5 | |||||
Short-term investments | 164.8 | 149.7 | |||||
Limited partnerships and other investments | 518.7 | 542.8 | |||||
Policy loans, at unpaid principal balances | 2,382.5 | 2,352.1 | |||||
Derivative instruments | 103.5 | 161.3 | |||||
Fair value investments | 165.0 | 235.4 | |||||
Total investments | 15,707.2 | 16,300.1 | |||||
Cash and cash equivalents | 627.3 | 450.0 | |||||
Accrued investment income | 179.2 | 176.7 | |||||
Reinsurance recoverable | 590.7 | 559.1 | |||||
Deferred policy acquisition costs | 941.1 | 848.6 | |||||
Deferred income taxes, net | 105.5 | 34.2 | |||||
Other assets | 361.7 | 311.3 | |||||
Discontinued operations assets | 42.8 | 45.2 | |||||
Separate account assets | 2,536.4 | 3,020.7 | |||||
Total assets | $ | 21,091.9 | $ | 21,745.9 | |||
LIABILITIES: | |||||||
Policy liabilities and accruals | $ | 12,342.7 | $ | 12,417.6 | |||
Policyholder deposit funds | 4,333.2 | 3,955.0 | |||||
Dividend obligations | 716.8 | 916.8 | |||||
Indebtedness | 378.9 | 378.9 | |||||
Pension and post-employment liabilities | 361.6 | 380.0 | |||||
Other liabilities | 210.7 | 289.8 | |||||
Discontinued operations liabilities | 37.8 | 40.5 | |||||
Separate account liabilities | 2,536.4 | 3,020.7 | |||||
Total liabilities | 20,918.1 | 21,399.3 | |||||
COMMITMENTS AND CONTINGENCIES (Notes 21, 22 and 23) | |||||||
STOCKHOLDERS’ EQUITY: | |||||||
Common stock, $.01 par value: 5.8 million and 5.8 million shares outstanding | 0.1 | 0.1 | |||||
Additional paid-in capital | 2,632.9 | 2,632.8 | |||||
Accumulated other comprehensive income (loss) | (266.2 | ) | (234.4 | ) | |||
Retained earnings (accumulated deficit) | (2,022.7 | ) | (1,889.0 | ) | |||
Treasury stock, at cost: 0.7 million and 0.7 million shares | (182.9 | ) | (182.9 | ) | |||
Total The Phoenix Companies, Inc. stockholders’ equity | 161.2 | 326.6 | |||||
Noncontrolling interests | 12.6 | 20.0 | |||||
Total stockholders’ equity | 173.8 | 346.6 | |||||
Total liabilities and stockholders’ equity | $ | 21,091.9 | $ | 21,745.9 |