10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

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FORM 10-Q

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

FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2012

OR

o 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: 001-16517

THE PHOENIX COMPANIES, INC.

(Exact name of registrant as specified in its charter)

Delaware	06-1599088
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
One American Row, Hartford, Connecticut	06102-5056
(Address of principal executive offices)	(Zip Code)
(860) 403-5000
(Registrant’s telephone number, including area code)

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 þ     NO ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).   YES þ     NO ¨

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

Large accelerated filer ¨	Accelerated filer þ	Non-accelerated filer ¨	Smaller reporting company ¨
		(Do not check if smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).   YES ¨     NO þ

On July 31, 2012, the registrant had 116.0 million shares of common stock outstanding.

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TABLE OF CONTENTS
PART I	FINANCIAL INFORMATION		Page
Item 1.	Financial Statements (unaudited)		3
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		45
Item 3.	Quantitative and Qualitative Disclosures About Market Risk		67
Item 4.	Controls and Procedures		68
PART II	OTHER INFORMATION
Item 1.	Legal Proceedings		69
Item 1A.	Risk Factors		69
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds		70
Item 3.	Defaults Upon Senior Securities		70
Item 4.	Mine Safety Disclosures		70
Item 5.	Other Information		70
Item 6.	Exhibits		70
Signatures		72

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PART I. FINANCIAL INFORMATION

Item 1.

FINANCIAL STATEMENTS

THE PHOENIX COMPANIES, INC.

Consolidated Balance Sheets

($ in millions, except share data)

June 30, 2012 (unaudited) and December 31, 2011

	June 30,		Dec 31,
	2012		2011
ASSETS:
Available-for-sale debt securities, at fair value (amortized cost of $11,588.9 and $11,351.8)	$	12,335.3	$	11,890.0
Available-for-sale equity securities, at fair value (cost of $34.4 and $29.5)		42.1		35.7
Limited partnerships and other investments		618.5		601.3
Policy loans, at unpaid principal balances		2,362.4		2,379.3
Derivative instruments		186.6		174.8
Fair value option investments		87.0		86.6
Total investments		15,631.9		15,167.7
Cash and cash equivalents		248.9		194.3
Accrued investment income		186.6		175.6
Receivables		422.5		415.1
Deferred policy acquisition costs		1,076.0		1,162.8
Deferred income taxes		91.7		118.2
Other assets		156.8		164.6
Discontinued operations assets		43.6		69.2
Separate account assets		3,336.8		3,817.6
Total assets	$	21,194.8	$	21,285.1
LIABILITIES:
Policy liabilities and accruals	$	13,040.1	$	12,981.1
Policyholder deposit funds		2,767.1		2,429.4
Indebtedness		426.9		426.9
Other liabilities		642.7		613.8
Discontinued operations liabilities		34.6		58.3
Separate account liabilities		3,336.8		3,817.6
Total liabilities		20,248.2		20,327.1
CONTINGENCIES AND COMMITMENTS (NOTES 18 & 19)
STOCKHOLDERS’ EQUITY:
Common stock, $.01 par value: 116.0 million and 116.3 million shares outstanding		1.3		1.3
Additional paid-in capital		2,631.0		2,630.5
Accumulated other comprehensive loss		(124.9)		(134.8)
Accumulated deficit		(1,380.8)		(1,359.5)
Treasury stock, at cost: 11.7 million and 11.3 million shares		(180.0)		(179.5)
Total stockholders’ equity		946.6		958.0
Total liabilities and stockholders’ equity	$	21,194.8	$	21,285.1

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

3

THE PHOENIX COMPANIES, INC.

Unaudited Interim Consolidated Statements of Comprehensive Income

($ in millions, except share data)

Three and Six Months Ended June 30, 2012 and 2011

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2012		2011		2012		2011
REVENUES:
Premiums	$	104.3	$	109.3	$	204.5	$	220.3
Fee income		137.2		154.6		283.7		308.4
Net investment income		218.2		211.2		428.1		412.6
Net realized investment gains (losses):
Total other-than-temporary impairment (“OTTI”) losses		(15.0)		(6.6)		(26.7)		(14.0)
Portion of OTTI losses recognized in     other comprehensive income (“OCI”)		9.9		3.6		15.4		5.3
Net OTTI losses recognized in earnings		(5.1)		(3.0)		(11.3)		(8.7)
Net realized investment gains (losses), excluding OTTI losses		(3.1)		6.1		(12.5)		(4.4)
Net realized investment gains (losses)		(8.2)		3.1		(23.8)		(13.1)
Total revenues		451.5		478.2		892.5		928.2
BENEFITS AND EXPENSES:
Policy benefits, excluding policyholder dividends		259.0		270.8		513.1		531.2
Policyholder dividends		84.3		73.6		149.3		137.2
Policy acquisition cost amortization		41.8		42.8		92.0		94.1
Interest expense on indebtedness		7.9		7.9		15.9		15.9
Other operating expenses		60.8		59.6		123.2		119.8
Total benefits and expenses		453.8		454.7		893.5		898.2
Income from continuing operations before income taxes		(2.3)		23.5		(1.0)		30.0
Income tax expense		4.6		7.6		13.5		9.0
Income (loss) from continuing operations		(6.9)		15.9		(14.5)		21.0
Loss from discontinued operations, net of income taxes		(6.3)		(0.7)		(6.8)		(2.2)
Net income (loss)	$	(13.2)	$	15.2	$	(21.3)	$	18.8
EARNINGS PER SHARE:
Earnings (loss) from continuing operations – basic	$	(0.06)	$	0.14	$	(0.12)	$	0.18
Earnings (loss) from continuing operations – diluted	$	(0.06)	$	0.14	$	(0.12)	$	0.18
Earnings (loss) from discontinued operations – basic	$	(0.05)	$	(0.01)	$	(0.06)	$	(0.02)
Earnings (loss) from discontinued operations – diluted	$	(0.05)	$	(0.01)	$	(0.06)	$	(0.02)
Net earnings (loss) – basic	$	(0.11)	$	0.13	$	(0.18)	$	0.16
Net earnings (loss) – diluted	$	(0.11)	$	0.13	$	(0.18)	$	0.16
Basic weighted-average common shares outstanding   (in thousands)		116,232		116,325		116,272		116,265
Diluted weighted-average common shares outstanding   (in thousands)		116,232		117,850		116,272		117,789
COMPREHENSIVE INCOME (LOSS):
Net income (loss)	$	(13.2)	$	15.2	$	(21.3)	$	18.8
Net unrealized investment gains		31.7		13.1		32.2		12.4
Non-credit portion of OTTI losses recognized in OCI		(6.4)		(2.3)		(10.0)		(3.4)
Net pension liability adjustment		(13.8)		2.0		(12.5)		2.7
Net unrealized other assets		—		—		—		1.0
Net unrealized derivative instruments gains (losses)		0.4		(0.3)		0.2		(0.8)
Other comprehensive income (loss)		11.9		12.5		9.9		11.9
Comprehensive income (loss)	$	(1.3)	$	27.7	$	(11.4)	$	30.7

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

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THE PHOENIX COMPANIES, INC.

Unaudited Interim Consolidated Statements of Cash Flows

($ in millions)

Six Months Ended June 30, 2012 and 2011

	June 30,
	2012		2011
OPERATING ACTIVITIES:
Net income (loss)	$	(21.3)	$	18.8
Net realized investment losses		23.8		13.1
Policy acquisition costs deferred		(47.6)		(63.2)
Amortization of deferred policy acquisition costs		92.0		94.1
Amortization and depreciation		6.9		5.1
Undistributed equity in earnings of limited partnerships and other investments		(41.7)		(23.3)
Change in:
Accrued investment income		(18.0)		(18.1)
Receivables		(8.4)		(26.7)
Policy liabilities and accruals		(46.9)		(78.8)
Other, net		(8.0)		13.2
Cash used for continuing operations		(69.2)		(65.8)
Discontinued operations, net		(2.0)		4.9
Cash used for operating activities		(71.2)		(60.9)
INVESTING ACTIVITIES:
Purchases of:
Available-for-sale debt securities		(1,551.3)		(1,701.1)
Available-for-sale equity securities		(6.0)		(5.7)
Limited partnerships and other investments		(45.0)		(47.9)
Derivative instruments		(29.2)		(21.5)
Fair value option investments		—		—
Sales, repayments and maturities of:
Available-for-sale debt securities		1,323.5		1,367.0
Available-for-sale equity securities		0.4		1.7
Limited partnerships and other investments		75.5		72.3
Derivative instruments		12.1		28.1
Fair value option investments		0.1		8.6
Policy loans, net		16.9		21.5
Proceeds from sale of subsidiary		1.0		—
Premises and equipment additions		(2.4)		(2.2)
Discontinued operations, net		4.0		(0.3)
Cash used for investing activities		(200.4)		(279.5)
FINANCING ACTIVITIES:
Policyholder deposit fund deposits		650.1		959.5
Policyholder deposit fund withdrawals		(323.4)		(605.9)
Treasury stock acquired		(0.5)		—
Cash provided by financing activities		326.2		353.6
Change in cash and cash equivalents		54.6		13.2
Cash and cash equivalents, beginning of period		194.3		121.9
Cash and cash equivalents, end of period	$	248.9	$	135.1
Supplemental Disclosure of Cash Flow Information
Income taxes paid	$	(3.3)	$	(6.9)
Interest expense on indebtedness paid	$	(15.7)	$	(17.4)

Included in cash and cash equivalents above is cash held as collateral by a third party of $8.6 million and $8.0 million as of June 30, 2012 and 2011, respectively.

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

5

THE PHOENIX COMPANIES, INC.

Unaudited Interim Consolidated Statements of Changes in Stockholders’ Equity

($ in millions)

Six Months Ended June 30, 2012 and 2011

	June 30,
	2012		2011
COMMON STOCK:
Balance, beginning of period	$	1.3	$	1.3
Common shares issued		—		—
Balance, end of period	$	1.3	$	1.3
ADDITIONAL PAID-IN CAPITAL:
Balance, beginning of period	$	2,630.5	$	2,631.0
Issuance of shares and compensation expense on stock compensation awards		0.5		1.4
Balance, end of period	$	2,631.0	$	2,632.4
ACCUMULATED OTHER COMPREHENSIVE LOSS:
Balance, beginning of period	$	(134.8)	$	(133.8)
Adjustment for cumulative effect of accounting change		—		31.1
Other comprehensive income		9.9		11.9
Balance, end of period	$	(124.9)	$	(90.8)
ACCUMULATED DEFICIT:
Balance, beginning of period	$	(1,359.5)	$	(1,163.5)
Adjustment for cumulative effect of accounting change		—		(243.6)
Net income (loss)		(21.3)		18.8
Balance, end of period	$	(1,380.8)	$	(1,388.3)
TREASURY STOCK, AT COST:
Balance, beginning of period	$	(179.5)	$	(179.5)
Change in treasury stock		(0.5)		—
Balance, end of period	$	(180.0)	$	(179.5)
TOTAL STOCKHOLDERS’ EQUITY:
Balance, beginning of period, as adjusted	$	958.0	$	943.0
Change in stockholders’ equity		(11.4)		32.1
Stockholders’ equity, end of period	$	946.6	$	975.1

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

6

THE PHOENIX COMPANIES, INC.

Notes to Unaudited Interim Consolidated Financial Statements

Three and Six Months Ended June 30, 2012 and 2011

1.

Organization and Description of Business

The Phoenix Companies, Inc. (“we,” “our,” “us,” the “Company,” or “Phoenix”) is a holding company and our operations are conducted through subsidiaries, principally Phoenix Life Insurance Company (“Phoenix Life”) and PHL Variable Insurance Company (“PHL Variable”). We provide life insurance and annuity products through independent agents and financial advisors. Our policyholder base includes both affluent and middle market consumers, with our more recent business concentrated in the middle market. Most of our life insurance in force is permanent life insurance insuring one or more lives. Our annuity products include fixed and variable annuities with a variety of death benefit and guaranteed living benefit options.

We operate two business segments: Life and Annuity and Saybrus. The Life and Annuity segment includes individual life insurance and annuity products including universal life and variable universal life and fixed and variable annuities. It also includes the results of our closed block, which consists primarily of participating whole life products. Saybrus is our distribution company that provides dedicated consulting services to partner companies as well as wholesaling support for the Phoenix Life and PHL Variable product lines.

Since 2009, we have focused on selling products and services that are less capital intensive and less sensitive to our ratings. In 2011 and the first six months of 2012, Phoenix product sales were primarily in fixed indexed annuities. Sales of other insurance companies’ policies through Saybrus were also expanded during the same period.

2.

Basis of Presentation and Significant Accounting Policies

We have prepared these unaudited financial statements in accordance with accounting principles generally accepted in the United States of America (“GAAP”), which differ materially from the accounting practices prescribed by various insurance regulatory authorities. Our interim consolidated financial statements include the accounts of the Company and its subsidiaries. Intercompany balances and transactions have been eliminated in consolidating these financial statements. As of December 31, 2011, the Company changed from the direct to the indirect method of reporting its consolidated cash flow statement. Prior year consolidated cash flow statements, as well as other prior year amounts, have been reclassified to conform to the current year presentation.

These financial statements include all adjustments (consisting primarily of accruals) considered necessary for the fair statement of the consolidated balance sheet, consolidated statements of comprehensive income, and consolidated statements of cash flows for the interim periods. Certain financial information that is not required for interim reporting has been omitted. The interim financial statements should be read in conjunction with the consolidated financial statements included in our 2011 Annual Report on Form 10-K. Financial results for the three and six months ended June 30, 2012 are not necessarily indicative of full year results.

Adjustments Related to Prior Years

A net loss from continuing operations of $14.5 million was recognized during the six months ended June 30, 2012. This reflects approximately $3.0 million associated with the correction of errors related to 2011, which decreased income from continuing operations recognized during 2012. We have assessed the impact of these errors and have determined that the errors were not material to any prior periods or previously issued financial statements.

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2.

Basis of Presentation and Significant Accounting Policies (continued)

Use of estimates

In preparing these financial statements in conformity with GAAP, we are required to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting periods. Significant estimates and assumptions are made in the determination of estimated gross profits (“EGPs”) used in the valuation and amortization of assets and liabilities associated with universal life and annuity contracts; policyholder liabilities and accruals; valuation of investments in debt and equity securities; limited partnerships and other investments; valuation of deferred tax assets; pension and other post-employment benefits liabilities; and accruals for contingent liabilities. Actual results could differ from these estimates.

Adoption of new accounting standards

Amendments to the Presentation of Comprehensive Income

In June 2011, the Financial Accounting Standards Board (the “FASB”) issued amended guidance to ASC 220, Comprehensive Income, with respect to the presentation of comprehensive income as part of the effort to establish common requirements in accordance with GAAP and International Financial Reporting Standards (“IFRS”). This amended guidance requires entities to present all non-owner changes in stockholders’ equity either in a single continuous statement of comprehensive income or in two separate but consecutive statements. The amendments do not affect which components of comprehensive income are recognized in net income or comprehensive income, or when an item of other comprehensive income must be classified to net income. The computation and presentation of earnings per share also does not change. This guidance was adopted in the first quarter of 2012. Disclosures in Note 12 reflect the retrospective adoption of this guidance. Other than additional disclosures, adoption of this guidance did not have a material effect on our consolidated financial statements.

Amendments to Fair Value Measurement and Disclosure Requirements

In May 2011, the FASB issued amended guidance to ASC 820, Fair Value Measurement, with respect to measuring fair value and related disclosures as part of the effort to establish common requirements in accordance with GAAP and IFRS. The amended guidance clarifies that the concept of highest and best use should only be used in the valuation of non-financial assets, specifies how to apply fair value measurements to instruments classified in stockholders’ equity and requires that premiums or discounts be applied consistent with what market participants would use absent Level 1 inputs. The amendment also explicitly requires additional disclosures related to the valuation of assets categorized as Level 3 within the fair value hierarchy. Additional disclosures include quantitative information about unobservable inputs, the sensitivity of fair value measurement to changes in unobservable outputs and information on the valuation process used. This guidance was adopted in the first quarter of 2012. Disclosures in Note 10 reflect the prospective adoption of this guidance. Other than additional disclosures, adoption of this guidance did not have a material effect on our consolidated financial statements.

Accounting for Costs Associated with Acquiring or Renewing Insurance Contracts

In October 2010, the FASB issued amended guidance to ASC 944, Financial Services – Insurance, to address the diversity in practice for accounting for costs associated with acquiring or renewing insurance contracts. The amendment clarifies the definition of acquisition costs (i.e., costs which qualify for deferral) to incremental direct costs that result directly from, and are essential to, a contract and would not have been incurred by the insurance entity had the contract transaction not occurred. Therefore, only costs related to successful efforts of acquiring a new, or renewal, contract should be deferred. This guidance was retrospectively adopted on January 1, 2012. The cumulative effect of retrospective adoption reduced deferred policy acquisition costs and beginning stockholders’ equity as of January 1, 2012 by $168.2 million primarily related to lower deferrals associated with expenses not directly related to new policy sales.

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2.

Basis of Presentation and Significant Accounting Policies (continued)

The tables below show selected financial data as adjusted for the retrospective adoption noted above. Adoption of the standard did not affect the previously reported totals for net cash flows provided by (used for) operating, investing or financing activities.

Summarized Selected Annual Financial Data:	Year Ended December 31,
($ in millions)	2011		2010		2009		2008
Deferred policy acquisition costs, as previously reported	$	1,317.6	$	1,444.3	$	1,916.0	$	2,708.3
Impact of adoption		(154.8)		(197.8)		(279.4)		(355.5)
Deferred policy acquisition costs, as revised	$	1,162.8	$	1,246.5	$	1,636.6	$	2,352.8
Deferred tax asset, as previously reported	$	118.3	$	116.4	$	166.2	$	435.2
Impact of adoption		(0.1)		—		9.9		129.6
Deferred tax asset, as revised	$	118.2	$	116.4	$	176.1	$	564.8
Policy liabilities and accruals, as previously reported	$	12,967.8	$	12,992.5	$	13,151.1	$	13,932.9
Impact of adoption		13.3		14.6		15.9		14.9
Policy liabilities and accruals, as revised	$	12,981.1	$	13,007.1	$	13,167.0	$	13,947.8
Total equity, as previously reported	$	1,126.2	$	1,155.5	$	1,131.1	$	865.1
Impact of adoption		(168.2)		(212.5)		(285.4)		(240.7)
Total equity, as revised	$	958.0	$	943.0	$	845.7	$	624.4

Summarized Selected Quarterly Financial Data:	Quarter Ended
($ in millions)	Dec 31,		Sept 30,		June 30,		Mar 31,
	2011
Policy benefits, excluding policyholder dividends, as previously reported	$	283.2	$	268.2	$	271.1	$	260.7
Impact of adoption		(0.3)		(0.4)		(0.3)		(0.3)
Policy benefits, excluding policyholder dividends, as revised	$	282.9	$	267.8	$	270.8	$	260.4
Policy acquisition cost amortization, as previously reported	$	38.7	$	57.5	$	51.8	$	62.7
Impact of adoption		(8.1)		(11.0)		(9.0)		(11.6)
Policy acquisition cost amortization, as revised	$	30.6	$	46.5	$	42.8	$	51.1
Operating expenses, as previously reported	$	69.7	$	57.2	$	58.9	$	59.3
Impact of adoption		0.3		0.4		0.3		0.4
Operating expenses, as revised	$	70.0	$	57.6	$	59.2	$	59.7
Income (loss) from continuing operations, before income tax,   as previously reported	$	(7.4)	$	29.8	$	14.5	$	(4.9)
Impact of adoption		8.1		11.0		9.0		11.5
Income from continuing operations, before income tax, as revised	$	0.7	$	40.8	$	23.5	$	6.6
Income tax expense (benefit), as previously reported	$	(0.5)	$	(6.7)	$	9.4	$	(0.3)
Impact of adoption		0.1		—		(1.8)		1.8
Income tax expense (benefit), as revised	$	(0.4)	$	(6.7)	$	7.6	$	1.5
Net income (loss), as previously reported	$	(22.0)	$	31.8	$	4.4	$	(6.1)
Impact of adoption		8.0		11.0		10.8		9.7
Net income (loss), as revised	$	(14.0)	$	42.8	$	15.2	$	3.6
Earnings (loss) per share, as previously reported	$	(0.19)	$	0.27	$	0.04	$	(0.05)
Impact of adoption		0.07		0.10		0.09		0.08
Earnings (loss) per share, as revised	$	(0.12)	$	0.37	$	0.13	$	0.03

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2.

Basis of Presentation and Significant Accounting Policies (continued)

Summarized Selected Annual Financial Data:	Year Ended December 31,
($ in millions)	2011		2010		2009		2008
Policy benefits, excluding policyholder dividends, as previously reported	$	1,083.2	$	1,090.0	$	1,179.6	$	1,260.7
Impact of adoption		(1.3)		(1.3)		(1.4)		(0.5)
Policy benefits, excluding policyholder dividends, as revised	$	1,081.9	$	1,088.7	$	1,178.2	$	1,260.2
Policy acquisition cost amortization, as previously reported	$	210.6	$	298.2	$	260.6	$	406.0
Impact of adoption		(39.7)		(51.9)		(57.9)		(116.2)
Policy acquisition cost amortization, as revised	$	170.9	$	246.3	$	202.7	$	289.8
Operating expenses, as previously reported	$	245.2	$	291.2	$	303.5	$	254.9
Impact of adoption		1.3		2.2		15.8		65.9
Operating expenses, as revised	$	246.5	$	293.4	$	319.3	$	320.8
Income (loss) from continuing operations, before income tax,   as previously reported	$	32.0	$	(34.7)	$	(87.1)	$	(295.3)
Impact of adoption		39.7		51.0		43.5		50.8
Income (loss) from continuing operations, before income tax, as revised	$	71.7	$	16.3	$	(43.6)	$	(244.5)
Income tax expense (benefit), as previously reported	$	1.9	$	(10.1)	$	108.9	$	(118.5)
Impact of adoption		0.1		12.1		123.9		(108.6)
Income tax expense (benefit), as revised	$	2.0	$	2.0	$	232.8	$	(227.1)
Net income (loss), as previously reported	$	8.1	$	(12.6)	$	(319.0)	$	(726.0)
Impact of adoption		39.6		38.9		(80.4)		159.4
Net income (loss), as revised	$	47.7	$	26.3	$	(399.4)	$	(566.6)
Earnings (loss) per share, as previously reported	$	0.07	$	(0.11)	$	(2.74)	$	(6.35)
Impact of adoption		0.34		0.33		(0.69)		1.39
Earnings (loss) per share, as revised	$	0.41	$	0.22	$	(3.43)	$	(4.96)

Accounting standards not yet adopted

Disclosures about Offsetting Assets and Liabilities

In December 2011, the FASB issued amended guidance to ASC 210, Balance Sheet, with respect to disclosure of offsetting assets and liabilities as part of the effort to establish common requirements in accordance with GAAP and IFRS. This amended guidance requires the disclosure of both gross information and net information about both financial instruments and derivative instruments eligible for offset in our consolidated balance sheet and instruments and transactions subject to an agreement similar to a master netting arrangement. This guidance is effective for periods beginning on or after January 1, 2013, with respective disclosures required retrospectively for all comparative periods presented. The adoption of this guidance effective January 1, 2013 is not expected to have a material effect on our consolidated financial statements.

Significant Accounting Policies

Our significant accounting policies are presented in the notes to our consolidated financial statements in our 2011 Annual Report on Form 10-K. With the exception of our adoption of new guidance related to accounting for costs associated with acquiring or renewing insurance contracts effective January 1, 2012, there have been no significant changes since year end December 31, 2011. See Note 5 to these financial statements for our updated accounting policy related to this new guidance.

10

3.

Business Combinations and Dispositions

Goodwin Capital Advisers, Inc.

On September 14, 2011, we entered into a definitive agreement to sell Goodwin Capital Advisers, Inc. (“Goodwin”) to Conning Holdings Corp. (“Conning Holdings”). Also, on September 14, 2011, we entered into multi-year investment management agreements with Conning, Inc. (“Conning”) under which Conning will manage the Company’s publicly-traded fixed income assets. Because of the ongoing cash flows associated with the investment management agreements, results of these operations have been reflected within continuing operations. The transaction closed on November 18, 2011.

Private placement and limited partnership portfolios previously managed under Goodwin continue to be managed by Phoenix under its subsidiary, Phoenix Life.

4.

Demutualization and Closed Block

In 1999, we began the process of reorganizing and demutualizing our then principal operating company, Phoenix Home Life. We completed the process in June 2001, when all policyholder membership interests in this mutual company were extinguished and eligible policyholders of the mutual company received shares of common stock of The Phoenix Companies, Inc., together with cash and policy credits, as compensation. To protect the future dividends of these policyholders, we also established a closed block for their existing policies.

Because closed block liabilities exceed closed block assets, we have a net closed block liability at June 30, 2012 and December 31, 2011. This net liability represents the maximum future earnings contribution to be recognized from the closed block and the change in this net liability each period is in the earnings contribution recognized from the closed block for the period. To the extent that actual cash flows differ from amounts anticipated, we may adjust policyholder dividends. If the closed block has excess funds, those funds will be available only to the closed block policyholders. However, if the closed block has insufficient funds to make policy benefit payments that are guaranteed, the payments will be made from assets outside of the closed block.

Closed Block Assets and Liabilities:	June 30,		Dec 31,
($ in millions)	2012		2011		Inception
Debt securities	$	6,379.1	$	6,353.1	$	4,773.1
Equity securities		14.8		12.0		—
Limited partnerships and other investments		372.4		352.8		399.0
Policy loans		1,258.0		1,280.4		1,380.0
Fair value option investments		11.2		10.6		—
Total closed block investments		8,035.5		8,008.9		6,552.1
Cash and cash equivalents		34.7		14.2		—
Accrued investment income		90.6		94.2		106.8
Receivables		50.7		52.2		35.2
Deferred income taxes		228.7		223.9		389.4
Other closed block assets		17.8		14.5		6.2
Total closed block assets		8,458.0		8,407.9		7,089.7
Policy liabilities and accruals		8,521.4		8,644.5		8,301.7
Policyholder dividends payable		235.8		240.1		325.1
Policy dividend obligation		660.2		519.7		—
Other closed block liabilities		55.6		32.8		12.3
Total closed block liabilities		9,473.0		9,437.1		8,639.1
Excess of closed block liabilities over closed block assets(1)	$	1,015.0	$	1,029.2	$	1,549.4

———————

⁽¹⁾

The maximum future earnings summary to inure to the benefit of the stockholders is represented by the excess of closed block liabilities over closed block assets. All unrealized investment gains (losses), net of income tax, have been allocated to the policyholder dividend obligation.

11

4.

Demutualization and Closed Block (continued)

Closed Block Revenues and Expenses and Changes in	Three Months Ended				Six Months Ended
Policyholder Dividend Obligations:	June 30,				June 30,
($ in millions)	2012		2011		2012		2011
Closed block revenues
Premiums	$	97.2	$	103.8	$	188.9	$	207.0
Net investment income		121.0		118.0		234.8		235.6
Net realized investment gains (losses)		2.9		3.2		2.0		1.6
Total revenues		221.1		225.0		425.7		444.2
Policy benefits, excluding dividends		124.8		137.5		251.9		279.1
Other operating expenses		1.1		1.5		2.7		3.0
Total benefits and expenses, excluding policyholder dividends		125.9		139.0		254.6		282.1
Closed block contribution to income   before dividends and income taxes		95.2		86.0		171.1		162.1
Policyholder dividends		84.2		73.5		149.2		137.1
Closed block contribution to income before income taxes		11.0		12.5		21.9		25.0
Applicable income tax expense		3.8		4.4		7.6		8.7
Closed block contribution to income	$	7.2	$	8.1	$	14.3	$	16.3
Policyholder dividend obligation
Policyholder dividends provided through earnings	$	84.2	$	73.5	$	149.2	$	137.1
Policyholder dividends provided through OCI		64.5		64.0		93.5		78.7
Additions to policyholder dividend liabilities		148.7		137.5		242.7		215.8
Policyholder dividends paid		(54.1)		(62.3)		(106.5)		(122.8)
Increase in policyholder dividend liabilities		94.6		75.2		136.2		93.0
Policyholder dividend liabilities, beginning of period		801.4		620.1		759.8		602.3
Policyholder dividend liabilities, end of period		896.0		695.3		896.0		695.3
Policyholder dividends payable, end of period		(235.8)		(261.8)		(235.8)		(261.8)
Policyholder dividend obligation, end of period	$	660.2	$	433.5	$	660.2	$	433.5

As of June 30, 2012, the policyholder dividend obligation includes approximately $120.7 million for cumulative closed block earnings in excess of expected amounts calculated at the date of demutualization. These closed block earnings will not inure to stockholders, but will result in additional future dividends to closed block policyholders unless otherwise offset by future performance of the closed block that is less favorable than expected. If actual cumulative performance is less favorable than expected, only actual earnings will be recognized in net income. As of June 30, 2012, the policyholder dividend obligation also includes $539.5 million of net unrealized gains on investments supporting the closed block liabilities.

5.

Deferred Policy Acquisition Costs

Deferred Policy Acquisition Costs:	Three Months Ended				Six Months Ended
($ in millions)	June 30,				June 30,
	2012		2011		2012		2011
Policy acquisition costs deferred	$	21.5	$	29.0	$	47.6	$	63.2
Costs amortized to expenses:
Recurring costs		(46.8)		(42.7)		(93.2)		(93.8)
Realized investment gains (losses)		5.0		(0.1)		1.2		(0.3)
Offsets to net unrealized investment gains or losses   included in AOCI(1)		(25.8)		(19.2)		(42.4)		(30.7)
Change in deferred policy acquisition costs		(46.1)		(33.0)		(86.8)		(61.6)
Deferred policy acquisition costs, beginning of period		1,122.1		1,217.9		1,162.8		1,246.5
Deferred policy acquisition costs, end of period	$	1,076.0	$	1,184.9	$	1,076.0	$	1,184.9

———————

⁽¹⁾

An offset to deferred policy acquisition costs and AOCI is recorded each period to the extent that, had unrealized holding gains or losses from securities classified as available-for-sale actually been realized, an adjustment to deferred policy acquisition costs amortized using gross profits or gross margins would result.

12

5.

Deferred Policy Acquisition Costs (continued)

We defer incremental direct costs related to the successful sale of new or renewal contracts. Incremental direct costs are those costs that result directly from and are essential to the sale of a contract. Costs incurred related directly to acquisition activities performed by the insurer are also deferred. During the three and six months ended June 30, 2012 and 2011, deferred expenses primarily consisted of third-party commissions related to fixed indexed annuity sales.

We amortize deferred policy acquisition costs based on the related policy’s classification. For individual participating life insurance policies, deferred policy acquisition costs are amortized in proportion to estimated gross margins. For universal life, variable universal life and accumulation annuities, deferred policy acquisition costs are amortized in proportion to EGPs. Policies may be surrendered for value or exchanged for a different one of our products (internal replacement). The deferred policy acquisition cost balance associated with the replaced or surrendered policies is adjusted to reflect these surrenders. In addition, an offset to deferred policy acquisition costs and AOCI is recorded each period for unrealized gains or losses on securities classified as available-for-sale as if they had been realized, an adjustment to deferred policy acquisition costs amortized using gross profits or gross margins would result.

The projection of EGPs requires the use of extensive actuarial assumptions, estimates and judgments about the future. Future EGPs are generally projected on a policy-by-policy basis for the estimated lives of the contracts. Assumptions are set separately for each product and are reviewed at least annually based on our current best estimates of future events.

In addition to our quarterly reviews, we conduct a comprehensive assumption review on an annual basis, or as circumstances warrant. Upon completion of these comprehensive assumption reviews, we revise our assumptions to reflect our current best estimates, thereby changing our estimate of EGPs in the deferred policy acquisition cost amortization models. The deferred policy acquisition cost asset is then adjusted in a process known as “unlocking,” with an offsetting benefit or charge to income.

During the three and six months ended June 30, 2012 and 2011, it was determined that an unlocking was not warranted.

6.

Investing Activities

Debt and equity securities

We invest in a variety of debt and equity securities. We classify these investments into various sectors using industry conventions; however, our classifications may differ from similarly titled classifications of other companies.

Net unrealized investment gains and losses on securities classified as available-for-sale and certain other assets are included in our consolidated balance sheet as a component of AOCI.

13

6.

Investing Activities (continued)

Fair Value and Cost of Securities:	June 30, 2012
($ in millions)			Gross		Gross				OTTI
	Amortized		Unrealized		Unrealized		Fair		Recognized
	Cost		Gains		Losses		Value		in AOCI(1)
U.S. government and agency	$	877.5	$	84.6	$	(5.8)	$	956.3	$	—
State and political subdivision		292.4		32.6		(2.8)		322.2		—
Foreign government		180.4		27.0		(0.3)		207.1		—
Corporate		6,527.4		683.9		(128.2)		7,083.1		(5.7)
Commercial mortgage-backed (“CMBS”)		982.5		64.1		(13.7)		1,032.9		(18.8)
Residential mortgage-backed (“RMBS”)		1,986.5		90.7		(61.1)		2,016.1		(99.4)
CDO/CLO		272.3		5.4		(43.2)		234.5		(24.2)
Other asset-backed		469.9		20.8		(7.6)		483.1		(1.2)
Available-for-sale debt securities	$	11,588.9	$	1,009.1	$	(262.7)	$	12,335.3	$	(149.3)
Amounts applicable to the closed block	$	5,841.6	$	624.3	$	(86.8)	$	6,379.1	$	(48.2)
Available-for-sale equity securities	$	34.4	$	13.4	$	(5.7)	$	42.1	$	(1.9)
Amounts applicable to the closed block	$	12.8	$	5.0	$	(3.0)	$	14.8	$	(1.0)

———————

⁽¹⁾

Represents the amount of non-credit OTTI losses recognized in AOCI excluding net unrealized gains or losses subsequent to the date of impairment.

Fair Value and Cost of Securities:	December 31, 2011
($ in millions)			Gross		Gross				OTTI
	Amortized		Unrealized		Unrealized		Fair		Recognized
	Cost		Gains		Losses		Value		in AOCI(1)
U.S. government and agency	$	708.6	$	80.1	$	(5.3)	$	783.4	$	—
State and political subdivision		251.9		21.6		(2.9)		270.6		—
Foreign government		185.7		21.2		(1.7)		205.2		—
Corporate		6,167.0		603.9		(171.5)		6,599.4		(5.7)
CMBS		1,109.9		53.5		(20.3)		1,143.1		(28.0)
RMBS		2,132.9		80.3		(81.9)		2,131.3		(89.6)
CDO/CLO		294.2		4.5		(48.1)		250.6		(24.2)
Other asset-backed		501.6		11.1		(6.3)		506.4		(1.2)
Available-for-sale debt securities	$	11,351.8	$	876.2	$	(338.0)	$	11,890.0	$	(148.7)
Amounts applicable to the closed block	$	5,908.2	$	568.4	$	(123.5)	$	6,353.1	$	(48.5)
Available-for-sale equity securities	$	29.5	$	12.2	$	(6.0)	$	35.7	$	—
Amounts applicable to the closed block	$	10.8	$	4.3	$	(3.1)	$	12.0	$	—

———————

⁽¹⁾

Represents the amount of non-credit OTTI losses recognized in AOCI excluding net unrealized gains or losses subsequent to the date of impairment.

14

6.

Investing Activities (continued)

Aging of Temporarily Impaired Securities:	As of June 30, 2012
($ in millions)	Less than 12 months				Greater than 12 months				Total
	Fair		Unrealized		Fair		Unrealized		Fair		Unrealized
	Value		Losses		Value		Losses		Value		Losses
Debt Securities
U.S. government and agency	$	1.2	$	—	$	40.7	$	(5.8)	$	41.9	$	(5.8)
State and political subdivision		10.0		(0.1)		6.4		(2.7)		16.4		(2.8)
Foreign government		7.6		(0.3)		—		—		7.6		(0.3)
Corporate		259.1		(14.1)		452.5		(114.1)		711.6		(128.2)
CMBS		15.9		(0.1)		63.9		(13.6)		79.8		(13.7)
RMBS		54.4		(2.1)		420.2		(59.0)		474.6		(61.1)
CDO/CLO		17.3		(0.3)		143.0		(42.9)		160.3		(43.2)
Other asset-backed		26.1		(1.1)		41.6		(6.5)		67.7		(7.6)
Debt securities		391.6		(18.1)		1,168.3		(244.6)		1,559.9		(262.7)
Equity securities		2.7		(4.9)		0.4		(0.8)		3.1		(5.7)
Total temporarily impaired securities	$	394.3	$	(23.0)	$	1,168.7	$	(245.4)	$	1,563.0	$	(268.4)
Amounts inside the closed block	$	159.8	$	(10.6)	$	492.9	$	(79.2)	$	652.7	$	(89.8)
Amounts outside the closed block	$	234.5	$	(12.4)	$	675.8	$	(166.2)	$	910.3	$	(178.6)
Amounts outside the closed block   that are below investment grade	$	63.5	$	(4.4)	$	227.9	$	(107.1)	$	291.4	$	(111.5)
Number of securities				215				601				816

Unrealized losses on below-investment-grade debt securities outside the closed block with a fair value of less than 80% of amortized cost totaled $93.6 million at June 30, 2012, of which $80.3 million was below 80% of amortized cost for more than 12 months.

Unrealized losses on below-investment-grade debt securities held in the closed block with a fair value of less than 80% of amortized cost totaled $27.2 million at June 30, 2012, of which $17.4 million was below 80% of amortized cost for more than 12 months.

These securities were considered to be temporarily impaired at June 30, 2012 because each of these securities had performed, and is expected to perform, in accordance with original contractual terms. In addition, management does not have the intention to sell, nor does it expect to be required to sell, these securities prior to their recovery.

15

6.

Investing Activities (continued)

Aging of Temporarily Impaired Securities:	As of December 31, 2011
($ in millions)	Less than 12 months				Greater than 12 months				Total
	Fair		Unrealized		Fair		Unrealized		Fair		Unrealized
	Value		Losses		Value		Losses		Value		Losses
Debt Securities
U.S. government and agency	$	—	$	—	$	41.2	$	(5.3)	$	41.2	$	(5.3)
State and political subdivision		26.1		(0.1)		6.3		(2.8)		32.4		(2.9)
Foreign government		25.6		(1.7)		—		—		25.6		(1.7)
Corporate		373.0		(20.1)		512.1		(151.4)		885.1		(171.5)
CMBS		141.3		(2.5)		56.8		(17.8)		198.1		(20.3)
RMBS		174.6		(6.4)		432.5		(75.5)		607.1		(81.9)
CDO/CLO		9.3		(0.1)		165.0		(48.0)		174.3		(48.1)
Other asset-backed		103.6		(2.4)		68.4		(3.9)		172.0		(6.3)
Debt securities		853.5		(33.3)		1,282.3		(304.7)		2,135.8		(338.0)
Equity securities		4.2		(5.2)		0.4		(0.8)		4.6		(6.0)
Total temporarily impaired securities	$	857.7	$	(38.5)	$	1,282.7	$	(305.5)	$	2,140.4	$	(344.0)
Amounts inside the closed block	$	317.6	$	(18.0)	$	556.8	$	(108.6)	$	874.4	$	(126.6)
Amounts outside the closed block	$	540.1	$	(20.5)	$	725.9	$	(196.9)	$	1,266.0	$	(217.4)
Amounts outside the closed block   that are below investment grade	$	61.5	$	(4.5)	$	260.0	$	(128.8)	$	321.5	$	(133.3)
Number of securities				502				664				1,166

Unrealized losses on below-investment-grade debt securities outside the closed block with a fair value of less than 80% of amortized cost totaled $113.3 million at December 31, 2011, of which $88.0 million was below 80% of amortized cost for more than 12 months.

Unrealized losses on below-investment-grade debt securities held in the closed block with a fair value of less than 80% of amortized cost totaled $37.8 million at December 31, 2011, of which $16.0 million was below 80% of amortized cost for more than 12 months.

These securities were considered to be temporarily impaired at December 31, 2011 because each of these securities had performed, and is expected to perform, in accordance with original contractual terms. In addition, management does not have the intention to sell, nor does it expect to be required to sell, these securities prior to their recovery.

Maturities of Debt Securities:	June 30, 2012				December 31, 2011
($ in millions)	Amortized		Fair		Amortized		Fair
	Cost		Value		Cost		Value
Due in one year or less	$	823.9	$	833.9	$	519.9	$	525.3
Due after one year through five years		2,113.4		2,268.5		2,139.3		2,292.8
Due after five years through ten years		2,485.8		2,720.8		2,229.0		2,405.2
Due after ten years		2,454.6		2,745.5		2,425.0		2,635.3
CMBS/RMBS/ABS/CDO/CLO		3,711.2		3,766.6		4,038.6		4,031.4
Total	$	11,588.9	$	12,335.3	$	11,351.8	$	11,890.0

The maturities of debt securities, as of June 30, 2012, are summarized in the table above by contractual maturity. Actual maturities may differ from contractual maturities as certain borrowers have the right to call or prepay obligations with or without call or prepayment penalties, and we have the right to put or sell certain obligations back to the issuers.

16

6.

Investing Activities (continued)

Other-than-temporary impairments

Management assessed all securities in an unrealized loss position in determining whether impairments were temporary or other than temporary. In reaching its conclusions, management exercised significant judgment and used a number of issuer-specific quantitative indicators and qualitative judgments to assess the probability of receiving a given security’s contractual cash flows. This included the issue’s implied yield to maturity, cumulative default rate based on rating, comparisons of issue-specific spreads to industry or sector spreads, specific trading activity in the issue, and other market data such as recent debt tenders and upcoming refinancing requirements. Management also reviewed fundamentals such as issuer credit and liquidity metrics, business outlook and industry conditions. Management maintains a watch list of securities that is reviewed for impairments. Each security on the watch list was evaluated, analyzed and discussed, with the positive and negative factors weighed in the ultimate determination of whether or not the security was other-than-temporarily impaired. For securities for which no OTTI was ultimately indicated at June 30, 2012, management does not have the intention to sell, nor does it expect to be required to sell, these securities prior to their recovery.

Fixed income OTTIs recorded in the first half of 2012 were primarily concentrated in structured securities. These impairments were driven primarily by increased collateral default rates. In our judgment, these credit events or other adverse conditions of the issuers have caused, or will most likely lead to, a deficiency in the contractual cash flows related to the investment. Therefore, based upon these credit events, we have determined that OTTIs exist. Total debt impairments recognized through earnings related to such credit-related circumstances were $3.6 million for the second quarter of 2012 and $3.0 million for the second quarter of 2011 and $9.8 million for the first half of 2012 and $8.7 million for the first half of 2011. There were equity security OTTIs of $1.5 million for the three and six months ended June 30, 2012 and no equity security OTTIs for the first quarter of 2011 or for the first half of 2011. There were no limited partnership and other investment OTTIs for the first quarter of 2012 and 2011 or for the first half of 2012 or 2011.

In addition to these credit-related impairments recognized through earnings, we impaired securities to fair value through other comprehensive loss for any impairments related to non-credit related factors. These types of impairments were driven primarily by market or sector credit spread widening or by a lack of liquidity in the securities. The amount of impairments recognized as an adjustment to other comprehensive loss due to these factors was $9.9 million for the second quarter of 2012, $3.6 million for the second quarter of 2011, $15.4 million for the first half of 2012 and $5.3 million for the first half of 2011.

The following table presents a roll-forward of pre-tax credit losses recognized in earnings related to debt securities for which a portion of the OTTI was recognized in OCI.

Credit Losses Recognized in Earnings on Debt Securities for	Three Months Ended				Six Months Ended
which a Portion of the OTTI Loss was Recognized in OCI:	June 30,				June 30,
($ in millions)	2012		2011		2012		2011
Balance, beginning of period	$	(79.1)	$	(62.6)	$	(73.8)	$	(60.4)
Add: Credit losses on securities not previously impaired(1)		(1.5)		(1.8)		(3.6)		(5.9)
Add: Credit losses on securities previously impaired(1)		(3.3)		(1.1)		(6.5)		(2.3)
Less: Credit losses on securities impaired due to intent to sell		—		—		—		—
Less: Credit losses on securities sold		0.2		—		0.2		3.1
Less: Increases in cash flows expected on   previously impaired securities		—		—		—		—
Balance, end of period	$	(83.7)	$	(65.5)	$	(83.7)	$	(65.5)

———————

⁽¹⁾

Additional credit losses on securities for which a portion of the OTTI loss was recognized in AOCI are included within net OTTI losses recognized in earnings on the statements of comprehensive income.

17

6.

Investing Activities (continued)

Limited partnerships and other investments

Limited Partnerships and Other Investments:	June 30,		Dec 31,
($ in millions)	2012		2011
Private equity	$	255.8	$	241.3
Mezzanine funds		196.1		189.9
Infrastructure funds		36.3		35.7
Hedge funds		30.0		30.0
Leverage lease		19.9		20.3
Mortgage and real estate		6.7		11.6
Direct equity		26.7		25.4
Other alternative assets		47.0		47.1
Limited partnerships and other investments	$	618.5	$	601.3
Amounts applicable to the closed block	$	372.4	$	352.8

Net investment income

Sources of Net Investment Income:	Three Months Ended				Six Months Ended
($ in millions)	June 30,				June 30,
	2012		2011		2012		2011
Debt securities	$	152.4	$	155.8	$	305.1	$	304.0
Equity securities		1.2		—		1.9		0.6
Limited partnerships and other investments		69.0		57.5		128.4		110.0
Fair value option investments		(1.0)		(0.2)		0.8		2.2
Total investment income		221.6		213.1		436.2		416.8
Less: Discontinued operations		0.5		0.5		1.2		1.0
Less: Investment expenses		2.9		1.4		6.9		3.2
Net investment income	$	218.2	$	211.2	$	428.1	$	412.6
Amounts applicable to the closed block	$	121.0	$	118.0	$	234.8	$	235.6

18

6.

Investing Activities (continued)

Net realized investment gains (losses)

Sources and Types of	Three Months Ended				Six Months Ended
Net Realized Investment Gains (Losses):	June 30,				June 30,
($ in millions)	2012		2011		2012		2011
Total other-than-temporary debt impairment losses	$	(13.5)	$	(6.6)	$	(25.2)	$	(14.0)
Portion of loss recognized in OCI		9.9		3.6		15.4		5.3
Net debt impairment losses recognized in earnings	$	(3.6)	$	(3.0)	$	(9.8)	$	(8.7)
Debt security impairments:
U.S. government and agency	$	—	$	—	$	—	$	—
State and political subdivision		—		—		—		—
Foreign government		—		—		—		—
Corporate		—		(0.2)		(0.6)		(4.6)
CMBS		(1.0)		—		(1.2)		—
RMBS		(2.3)		(2.7)		(7.4)		(4.0)
CDO/CLO		(0.1)		—		(0.1)		—
Other asset-backed		(0.2)		(0.1)		(0.5)		(0.1)
Net debt security impairments		(3.6)		(3.0)		(9.8)		(8.7)
Equity security impairments		(1.5)		—		(1.5)		—
Limited partnerships and other investment impairments		—		—		—		—
Impairment losses		(5.1)		(3.0)		(11.3)		(8.7)
Debt security transaction gains(1)		5.8		5.5		8.0		9.4
Debt security transaction losses(1)		(2.4)		(1.2)		(3.4)		(3.1)
Equity security transaction gains		—		0.1		—		0.1
Equity security transaction losses		—		—		—		—
Limited partnerships and other investment transaction gains		0.6		—		1.4		—
Limited partnerships and other investment transaction losses		—		—		—		(1.6)
Net transaction gains		4.0		4.4		6.0		4.8
Derivative instruments		13.1		5.0		(23.0)		(15.1)
Embedded derivatives(2)		(19.1)		(4.7)		3.7		4.9
Fair value option investments		(1.1)		1.4		0.8		1.0
Net realized investment gains (losses),   excluding impairment losses		(3.1)		6.1		(12.5)		(4.4)
Net realized investment gains (losses),   including impairment losses	$	(8.2)	$	3.1	$	(23.8)	$	(13.1)

———————

⁽¹⁾

Proceeds from the sale of available-for-sale debt securities were $296.0 million and $396.1 million for the three months ended June 30, 2012 and 2011, respectively. Proceeds from the sale of available-for-sale debt securities were $402.3 million and $693.1 million for the six months ended June 30, 2012 and 2011, respectively.

⁽²⁾

Includes the change in fair value of embedded derivatives associated with variable annuity GMWB, GMAB, GPAF and COMBO riders. See Note 8 to these financial statements for additional disclosures.

19

6.

Investing Activities (continued)

Unrealized investment gains (losses)

Sources of Changes in	Three Months Ended				Six Months Ended
Net Unrealized Investment Gains (Losses):	June 30,				June 30,
($ in millions)	2012		2011		2012		2011
Debt securities	$	129.5	$	102.0	$	208.2	$	149.8
Equity securities		0.1		(3.7)		1.5		(3.9)
Other investments		—		—		—		—
Net unrealized investment gains	$	129.6	$	98.3	$	209.7	$	145.9
Net unrealized investment gains	$	129.6	$	98.3	$	209.7	$	145.9
Applicable closed block policyholder dividend obligation		64.5		64.0		93.5		78.7
Applicable deferred policy acquisition cost		25.8		19.2		42.4		30.7
Applicable future policyholder benefits		4.5		—		18.3		—
Applicable deferred income tax expense		9.5		4.3		33.3		27.5
Offsets to net unrealized investment gains		104.3		87.5		187.5		136.9
Net unrealized investment gains included in OCI	$	25.3	$	10.8	$	22.2	$	9.0

Non-consolidated variable interest entities

Entities which do not have sufficient equity at risk to allow the entity to finance its activities without additional financial support or in which the equity investors, as a group, do not have the characteristic of a controlling financial interest are referred to as VIEs. We perform ongoing assessments of our investments in VIEs to determine whether we have a controlling financial interest in the VIE and therefore would be considered to be the primary beneficiary. An entity would be considered a primary beneficiary and be required to consolidate a VIE when the entity has both the power to direct the activities of a VIE that most significantly affect the entity’s economic performance and the obligation to absorb losses, or right to receive benefits, that could potentially be significant to the VIE. We reassess our VIE determination with respect to an entity on an ongoing basis.

We are involved with various entities that are deemed to be VIEs primarily as a passive investor in private equity limited partnerships and through direct investments, in which we are not related to the general partner. These investments are accounted for under the equity method of accounting and are included in limited partnerships and other investments on our balance sheet. The following table presents the carrying value of assets and liabilities, and the maximum exposure to loss relating to significant VIEs for which we are not the primary beneficiary.

Carrying Value of Assets and Liabilities	June 30, 2012						December 31, 2011
and Maximum Exposure Loss Relating					Maximum						Maximum
to Variable Interest Entities:					Exposure						Exposure
($ in millions)	Assets		Liabilities		to Loss		Assets		Liabilities		to Loss
Limited partnerships	$	568.7	$	—	$	568.7	$	552.1	$	—	$	552.1
Direct equity investments		26.7		—		26.7		25.4		—		25.4
Receivable		7.3		—		7.3		6.6		—		6.6
Total	$	602.7	$	—	$	602.7	$	584.1	$	—	$	584.1

The asset value of our investments in VIEs (based upon sponsor values and financial statements of the individual entities) for which we are not the primary beneficiary was $602.7 million as of June 30, 2012. Our maximum exposure to loss related to these non-consolidated VIEs is limited to the amount of our investment.

20

6.

Investing Activities (continued)

Issuer and counterparty credit exposure

Credit exposure related to issuers and derivatives counterparties is inherent in investments and derivative contracts with positive fair value or asset balances. We manage credit risk through the analysis of the underlying obligors, issuers and transaction structures. We review our debt security portfolio regularly to monitor the performance of obligors and assess the stability of their credit ratings. We also manage credit risk through industry and issuer diversification and asset allocation. Maximum exposure to an issuer or derivative counterparty is defined by quality ratings, with higher quality issuers having larger exposure limits. As of June 30, 2012, we were not exposed to any credit concentration risk of a single issuer greater than 10% of stockholders’ equity other than U.S. government and government agencies backed by the faith and credit of the U.S. government. We have an overall limit on below-investment-grade rated issuer exposure. To further mitigate the risk of loss on derivatives, we enter into contracts in which the counterparty is a financial institution with a rating of A or higher from at least one rating agency.

As of June 30, 2012, we held derivative assets, net of liabilities, with a fair value of $144.9 million. Derivative credit exposure was diversified with nine different counterparties. We also had debt securities of these issuers with a fair value of $160.3 million as of June 30, 2012. Our maximum amount of loss due to credit risk with these issuers was $305.2 million as of June 30, 2012. See Note 9 to these financial statements for more information regarding derivatives.

7.

Financing Activities

Indebtedness at Carrying Value:	June 30,		Dec 31,
($ in millions)	2012		2011
7.15% surplus notes	$	174.1	$	174.1
7.45% senior unsecured bonds		252.8		252.8
Total indebtedness	$	426.9	$	426.9

Our 7.15% surplus notes are an obligation of Phoenix Life and are due December 15, 2034. The carrying value of the 2034 notes is net of $0.9 million of unamortized original issue discount. Interest payments are at an annual rate of 7.15%, require the prior approval of the New York Department of Financial Services (“NYDFS”) (formerly known as the State of New York Insurance Department) and may be made only out of surplus funds which the NYDFS determines to be available for such payments under New York Insurance Law. The notes may be redeemed at the option of Phoenix Life at any time at the “make-whole” redemption price set forth in the offering circular. New York Insurance Law provides that the notes are not part of the legal liabilities of Phoenix Life.

Our senior unsecured bonds were issued in December 2001 for gross proceeds of $300.0 million (net proceeds of $290.6 million) and mature in January 2032. We pay interest at an annual rate of 7.45%. We may redeem any or all of the bonds at a redemption price equal to 100% of principal plus accrued and unpaid interest to the redemption date. We have repurchased a cumulative amount of $47.3 million of par value of these bonds as of June 30, 2012. During 2011, we purchased $0.8 million of par value of these bonds for $0.6 million, resulting in a gain of $0.2 million. During 2010 and prior years, we repurchased $46.5 million of par value of these bonds for $24.8 million, resulting in a gain of $21.7 million.

We have recorded indebtedness at unpaid principal balances of each instrument net of issue discount. The Company or its subsidiaries may, from time to time, purchase its debt securities in the open market subject to considerations including, but not limited to, market conditions, relative valuations, capital allocation and the determination that it is in the best interest of the Company and its stakeholders.

Future minimum annual principal payments on indebtedness as of June 30, 2012 are $252.8 million in 2032 and $175.0 million in 2034.

21

7.

Financing Activities (continued)

Interest Expense on Indebtedness, including	Three Months Ended				Six Months Ended
Amortization of Debt Issuance Costs:	June 30,				June 30,
($ in millions)	2012		2011		2012		2011
Surplus notes	$	3.1	$	3.1	$	6.3	$	6.3
Senior unsecured bonds		4.8		4.8		9.6		9.6
Interest expense on indebtedness	$	7.9	$	7.9	$	15.9	$	15.9

Common stock dividends

During the six months ended June 30, 2012 and the year ended December 31, 2011, we did not pay any stockholder dividends.

8.

Separate Accounts, Death Benefits and Other Insurance Benefit Features

Separate account products are those for which a separate investment and liability account is maintained on behalf of the policyholder. Investment objectives for these separate accounts vary by fund account type, as outlined in the applicable fund prospectus or separate account plan of operations. Our separate account products include variable annuities, fixed indexed annuities and variable life insurance contracts. The assets supporting these contracts are carried at fair value. Assets supporting variable annuity and variable life contracts are reported as separate account assets with an equivalent amount reported as separate account liabilities. The assets supporting fixed indexed annuity contracts are reported within the respective investment line items on the consolidated balance sheet. Amounts assessed against the policyholder for mortality, administration, and other services are included within revenue in fee income. For the three and six month periods ended June 30, 2012 and 2011, there were no gains or losses on transfers of assets from the general account to a separate account.

On May 21, 2012, the employee pension plan surrendered its variable annuity contract with PHL Variable. All assets held within the employee pension plan separate account were subsequently transferred to the direct control of the plan’s trustee. This resulted in a decrease in separate account assets and liabilities of $464.2 million during the quarter ended June 30, 2012.

Separate Account Investments of Account Balances of Variable Annuity Contracts with Guarantees:	June 30,		Dec 31,
($ in millions)	2012		2011
Debt securities	$	492.2	$	515.4
Equity funds		1,860.9		1,883.3
Other		78.9		81.7
Total	$	2,432.0	$	2,480.4

Investments of Account Balances of Fixed Indexed Annuity Contracts with Guarantees:	June 30,		Dec 31,
($ in millions)	2012		2011
Debt securities	$	1,227.9	$	972.4
Equity funds		—		—
Other		—		—
Total	$	1,227.9	$	972.4

Variable annuity guaranteed benefits

Many of our variable annuity contracts offer various guaranteed minimum death, accumulation, withdrawal and income benefits.

22

8.

Separate Accounts, Death Benefits and Other Insurance Benefit Features (continued)

We establish policy benefit liabilities for minimum death and income benefit guarantees relating to certain annuity policies as follows:

·

Liabilities associated with the guaranteed minimum death benefit (“GMDB”) are determined by estimating the expected value of death benefits in excess of the projected account balance and recognizing the excess ratably over the accumulation period based on total expected assessments. The assumptions used for calculating the liabilities are generally consistent with those used for amortizing deferred policy acquisition costs.

·

Liabilities associated with the guaranteed minimum income benefit (“GMIB”) are determined by estimating the expected value of the income benefits in excess of the projected account balance at the date of annuitization and recognizing the excess ratably over the accumulation period based on total expected assessments. The assumptions used for calculating such guaranteed income benefit liabilities are generally consistent with those used for amortizing deferred policy acquisition costs.

For variable annuities with GMDB and GMIB, reserves for these guarantees are calculated and recorded in policy liabilities and accruals on our balance sheet. Changes in the liability are recorded in policy benefits, excluding policyholder dividends, on our statements of comprehensive income. We regularly evaluate estimates used and adjust the additional liability balances, with a related charge or credit to benefit expense if actual experience or other evidence suggests that earlier assumptions should be revised.

Changes in Guaranteed Liability Balances:	As of
($ in millions)	June 30, 2012
	Variable Annuity
	GMDB		GMIB
Liability balance as of January 1, 2012	$	4.9	$	17.8
Incurred		(0.6)		3.7
Paid		0.7		—
Liability balance as of June 30, 2012	$	5.0	$	21.5

Changes in Guaranteed Liability Balances:	Year Ended
($ in millions)	December 31, 2011
	Variable Annuity
	GMDB		GMIB
Liability balance as of January 1, 2011	$	4.6	$	18.1
Incurred		(1.8)		(0.3)
Paid		2.1		—
Liability balance as of December 31, 2011	$	4.9	$	17.8

For those guarantees of benefits that are payable in the event of death, the net amount at risk is generally defined as the benefit payable in excess of the current account balance at our balance sheet date. We have entered into reinsurance agreements to reduce the net amount of risk on certain death benefits. Following are the major types of death benefits currently in-force:

23

8.

Separate Accounts, Death Benefits and Other Insurance Benefit Features (continued)

Variable Annuity GMDB Benefits by Type:			Net Amount		Average
($ in millions)	Account		at Risk after		Attained Age
	Value		Reinsurance		of Annuitant
GMDB return of premium	$	832.8	$	13.5		62
GMDB step up		1,371.7		73.7		63
GMDB earnings enhancement benefit (“EEB”)		38.7		0.2		63
GMDB greater of annual step up and roll up		26.7		8.2		66
Total GMDB at June 30, 2012	$	2,269.9	$	95.6
GMDB return of premium	$	870.2	$	23.4		61
GMDB step up		1,398.4		118.6		63
GMDB earnings enhancement benefit (“EEB”)		39.8		0.4		62
GMDB greater of annual step up and roll up		27.1		8.8		66
Total GMDB at December 31, 2011	$	2,335.5	$	151.2

Return of Premium: The death benefit is the greater of current account value or premiums paid (less any adjusted partial withdrawals).

Step Up: The death benefit is the greater of current account value, premiums paid (less any adjusted partial withdrawals) or the annual step up amount prior to the oldest original owner attaining a certain age. On and after the oldest original owner attains that age, the death benefit is the greater of current account value or the death benefit at the end of the contract year prior to the oldest original owner’s attaining that age plus premium payments (less any adjusted partial withdrawals) made since that date.

Earnings Enhancement Benefit: The death benefit is the greater of the premiums paid (less any adjusted partial withdrawals) or the current account value plus the EEB. The EEB is an additional amount designed to reduce the impact of taxes associated with distributing contract gains upon death.

Greater of Annual Step Up and Annual Roll Up: The death benefit is the greatest of premium payments (less any adjusted partial withdrawals), the annual step up amount, the annual roll up amount or the current account value prior to the eldest original owner attaining age 81. On and after the eldest original owner attained age 81, the death benefit is the greater of current account value or the death benefit at the end of the contract year prior to the eldest original owner’s attained age of 81 plus premium payments (less any adjusted partial withdrawals) made since that date.

We also offer certain separate account variable products with a guaranteed minimum withdrawal benefit (“GMWB”), guaranteed minimum accumulation benefit (“GMAB”), guaranteed payout annuity floor (“GPAF”) and combination rider (“COMBO”).

Additional Insurance Benefits:			Average
($ in millions)	Account		Attained Age
	Value		of Annuitant
GMWB	$	557.9	63
GMIB		425.1	63
GMAB		389.3	57
GPAF		16.8	77
COMBO		9.9	61
Total at June 30, 2012	$	1,399.0
GMWB	$	555.4	62
GMIB		442.1	63
GMAB		385.6	57
GPAF		21.8	77
COMBO		10.1	61
Total at December 31, 2011	$	1,415.0

24

8.

Separate Accounts, Death Benefits and Other Insurance Benefit Features (continued)

The GMWB rider guarantees the contract owner a minimum amount of withdrawals and benefit payments over time, regardless of the investment performance of the contract, subject to an annual limit. Optional resets are available. In addition, these contracts have a feature that allows the contract owner to receive the guaranteed annual withdrawal amount for as long as they are alive.

The GMAB rider provides the contract owner with a minimum accumulation of the contract owner’s purchase payments deposited within a specific time period, adjusted for withdrawals, after a specified amount of time determined at the time of issuance of the variable annuity contract.

The GPAF rider provides the contract owner with a minimum payment amount if the variable annuity payment falls below this amount on the payment calculation date.

The COMBO rider includes the GMAB and GMWB riders as well as the GMDB rider at the contract owner’s option.

The GMWB, GMAB, GPAF and COMBO represent embedded derivative liabilities in the variable annuity contracts that are required to be reported separately from the host variable annuity contract. These investments are accounted for at fair value within policyholder deposit funds on the consolidated balance sheet with changes in fair value recorded in realized investment gains on the consolidated statements of comprehensive income. The fair value of the GMWB, GMAB, GPAF and COMBO obligation is calculated based on actuarial and capital market assumptions related to the projected cash flows, including benefits and related contract charges, over the lives of the contracts, incorporating expectations concerning policyholder behavior. As markets change, contracts mature and actual policyholder behavior emerges, we continually evaluate and may from time to time adjust these assumptions.

Embedded derivative liabilities for GMWB, GMAB, GPAF and COMBO are shown in the table below. There were no benefit payments made related to the GMWB and GMAB riders during the six months ended June 30 2012 or during the six months ended June 30, 2011. Benefit payments made for GPAF riders were $0.1 million for the six months ended June 30, 2012 and $0.1 million for the six months ended June 30, 2011. In order to manage the risk associated with these variable annuity embedded derivative liabilities, we have established a risk management strategy under which we hedge our GMAB, GMWB and COMBO exposure using equity index options, equity index futures, equity index variance swaps, interest rate swaps and swaptions.

Variable Annuity Embedded Derivative Liabilities:	June 30,		Dec 31,
($ in millions)	2012		2011
GMWB	$	18.3	$	17.0
GMAB		20.9		25.2
GPAF		1.3		2.3
COMBO		(0.3)		(0.3)
Total variable annuity embedded derivative liabilities	$	40.2	$	44.2

Fixed indexed annuity guaranteed benefits

Many of our fixed indexed annuities offer guaranteed minimum withdrawal and death benefits.

Liabilities associated with the GMWB for the fixed indexed annuities differ from those offered on variable annuities in that there is less exposure to capital market risk due to the fixed nature of the underlying contract. These liabilities are determined by estimating the expected value of the withdrawal benefits in excess of the projected account balance at the date of election and recognizing the excess ratably over the accumulation period based on total expected assessments. The assumptions used for calculating such guaranteed withdrawal benefit liabilities are consistent with those used for amortizing deferred policy acquisition costs. Some of these riders also offer a GMDB in addition to the withdrawal benefits.

The GMWB and GMDB guarantees are recorded in policy liabilities and accruals on our balance sheet. Changes in the liability are recorded in policy benefits, excluding policyholder dividends, on our statements of comprehensive income. We regularly evaluate estimates used and adjust the additional liability balances, with a related charge or credit to benefit expense if actual experience or other evidence suggests that earlier assumptions should be revised.

25

8.

Separate Accounts, Death Benefits and Other Insurance Benefit Features (continued)

Changes in Guaranteed Liability Balances:	Fixed Indexed Annuity
($ in millions)	GMWB & GMDB
	June 30,		Dec 31,
	2012		2011
Liability balance, beginning of period	$	5.6	$	0.2
Incurred		6.2		5.4
Paid		—		—
Liability balance, end of period	$	11.8	$	5.6

Fixed indexed annuities also offer a variety of index options: policy credits that are calculated based on the performance of an outside equity market or other index over a specified term. The index options represent embedded derivative liabilities that are required to be reported separately from the host contract. These investments are accounted for at fair value within policyholder deposits within the consolidated balance sheet with changes in fair value recorded in policy benefits, excluding dividends, in the consolidated statements of comprehensive income. The fair value of these index options is calculated based on the impact of projected interest rates on the discounted liabilities. Several additional inputs reflect our internally developed assumptions related to lapse rates and policyholder behavior.

Fixed indexed annuity embedded derivatives were $115.2 million and $78.3 million as of June 30, 2012 and December 31, 2011, respectively. In order to manage the risk associated with these fixed indexed annuity options, we hedge using equity index options.

Universal life

Liabilities for universal life are generally determined by estimating the expected value of losses when death benefits exceed revenues and recognizing those benefits ratably over the accumulation period based on total expected assessments. The assumptions used in estimating these liabilities are consistent with those used for amortizing deferred policy acquisition costs. A single set of best estimate assumptions is used since these insurance benefits do not vary significantly with capital market conditions. At June 30, 2012 and December 31, 2011, we held additional universal life benefit reserves in accordance with death benefit and other insurance benefit reserves of $145.3 million and $146.6 million, respectively.

9.

Derivative Instruments

Derivative instruments

We use derivative financial instruments, including options, futures and swaps as a means of hedging exposure to interest rate, equity price change, equity volatility and foreign currency risk. This includes our surplus hedge which utilizes futures and options to hedge against declines in equity markets and the resulting statutory capital and surplus impact. We also use derivative instruments to economically hedge our exposure on living benefits offered on certain of our variable products as well as index credits on our fixed indexed annuity products.

The Company seeks to enter into over-the-counter (“OTC”) derivative transactions pursuant to master agreements that provide for a netting of payments and receipts by counterparty. As of June 30, 2012 and December 31, 2011, $8.6 million and $8.0 million, respectively, of cash and cash equivalents were held as collateral by a third party related to our derivative transactions.

Our derivatives generally do not qualify for hedge accounting, with the exception of cross currency swaps. We do not designate the purchased derivatives related to variable annuity living benefits or fixed indexed annuity index credits as hedges for accounting purposes.

26

9.

Derivative Instruments (continued)

Derivative Instruments:		Fair Value as of June 30, 2012						Fair Value as of December 31, 2011
($ in millions)		Notional						Notional
	Maturity	Amount		Assets		Liabilities		Amount		Assets		Liabilities
Non-hedging derivative instruments
Interest rate swaps	2017-2026	$	156.0	$	17.2	$	6.9	$	131.0	$	15.0	$	5.2
Variance swaps	2015-2017		0.9		—		1.3		0.9		3.2		—
Swaptions	2024		25.0		0.1		—		25.0		0.3		—
Put options	2015-2022		406.0		100.1		—		406.0		109.6		—
Call options	2012-2017		635.5		50.8		33.5		355.0		28.0		19.0
Equity futures	2012		207.7		18.0		—		70.0		18.5		—
			1,431.1		186.2		41.7		987.9		174.6		24.2
Hedging derivative instruments
Cross currency swaps	2016		10.0		0.4		—		15.0		0.2		—
			10.0		0.4		—		15.0		0.2		—
Total derivative instruments		$	1,441.1	$	186.6	$	41.7	$	1,002.9	$	174.8	$	24.2

Derivative Instrument Realized Gains (Losses)	Three Months Ended				Six Months Ended
Recognized in Earnings:	June 30,				June 30,
($ in millions)	2012		2011		2012		2011
Derivative instruments by type
Interest rate swaps	$	2.4	$	1.8	$	0.6	$	1.5
Variance swaps		0.9		(0.3)		(4.5)		(1.7)
Swaptions		—		(0.2)		(0.2)		(0.9)
Put options		15.0		5.4		(9.6)		(8.5)
Call options		(9.8)		(1.6)		0.1		0.1
Equity futures		4.6		(0.1)		(9.4)		(5.6)
Cross currency swaps		—		—		—		—
Total derivative instrument realized gains (losses)   recognized in earnings	$	13.1	$	5.0	$	(23.0)	$	(15.1)

Interest Rate Swaps

We maintain an overall interest rate risk management strategy that primarily incorporates the use of interest rate swaps as hedges of our exposure to changes in interest rates. Our exposure to changes in interest rates primarily results from our commitments to fund interest-sensitive insurance liabilities, as well as from our significant holdings of fixed rate financial instruments. We use interest rate swaps that effectively convert variable rate cash flows to fixed cash flows in order to hedge the interest rate risks associated with guaranteed minimum living benefit (GMAB/GMWB) rider liabilities.

Interest Rate Options

We use interest rate options, such as swaptions, to hedge against market risks to assets or liabilities from substantial changes in interest rates. An interest rate swaption gives us the right but not the obligation to enter into an underlying swap. Swaptions are options on interest rate swaps. All of our swaption contracts are receiver swaptions, which give us the right to enter into a swap where we will receive the agreed-upon fixed rate and pay the floating rate. If the market conditions are favorable and the swap is needed to continue hedging our inforce liability business, we will exercise the swaption and enter into a fixed rate swap. If a swaption contract is not exercised by its option maturity date, it expires with no value.

Exchange Traded Future Contracts

We use equity index futures to hedge the market risks from changes in the value of equity indices, such as S&P 500, associated with guaranteed minimum living benefit (GMAB/GMWB) rider liabilities. Positions are short-dated, exchange-traded futures with maturities of three months.

27

9.

Derivative Instruments (continued)

Equity Index Options

We use equity indexed options to hedge against market risks from changes in equity markets, volatility and interest rates.

An equity index option affords us the right to make or receive payments based on a specified future level of an equity market index. We may use exchange-trade or OTC options.

Generally, we have used a combination of equity index futures, interest rate swaps, variance swaps and long-dated put options to hedge its GMAB and GMWB liabilities and equity index call options to hedge its indexed annuity option liabilities.

Cross Currency Swaps

We use cross currency swaps to hedge against market risks from changes in foreign currency exchange rates. Currency swaps are used to swap bond asset cash flows denominated in a foreign currency back to U.S. dollars. Under foreign currency swaps, we agree with another party (referred to as the counterparty) to exchange principal and periodic interest payments denominated in foreign currency for payments in U.S. dollars.

Contingent features

Derivative counterparty agreements may contain certain provisions that require our insurance companies’ financial strength rating to be above a certain threshold. If our financial strength ratings were to fall below a specified rating threshold, certain derivative counterparties could request immediate payment or demand immediate and ongoing full collateralization on derivative instruments in net liability positions, or trigger a termination of existing derivatives and/or future derivative transactions.

In certain derivative counterparty agreements, our financial strength ratings are below the specified threshold levels. However, the Company held no derivative instruments as of June 30, 2012 in a net aggregate liability position payable to any counterparty (i.e., such derivative instruments have fair values in a net asset position payable to the Company if such holdings were liquidated).

10.

Fair Value of Financial Instruments

ASC 820-10 defines and establishes the framework for measuring fair value. The framework is based on inputs that are used in the valuation and a fair value hierarchy based on the quality of those inputs used to measure fair value. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.

A financial instrument’s categorization within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement. The valuation hierarchy is based upon the transparency of inputs to the valuation of an asset or liability as of the measurement date. The three levels, from highest to lowest, are defined as follows:

·

Level 1 – inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets. Level 1 securities include highly liquid government bonds and exchange-traded equities.

·

Level 2 – inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument. Examples of such instruments include government-backed mortgage products, certain collateralized mortgage and debt obligations and certain high-yield debt securities.

·

Level 3 – inputs to the valuation methodology are unobservable and significant to the fair value measurement. Securities classified within Level 3 include broker quoted investments, certain residual interests in securitizations and other less liquid securities. Most valuations that are based on brokers’ prices are classified as Level 3 due to a lack of transparency in the process they use to develop prices.

28

10.

Fair Value of Financial Instruments (continued)

A financial instrument’s categorization within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement.

Investments, in which fair value is based upon unadjusted quoted market prices, are reported as Level 1. We receive quoted market prices from an independent third party, nationally recognized pricing vendor (“pricing vendor”). When quoted prices are not available, we use a pricing vendor to give an estimated fair value in which amounts are included in Level 2 of the hierarchy. If quoted prices, or an estimated price from the pricing vendor are not available or we determine that the price is based on disorderly transactions or in inactive markets, fair value is based upon internally developed models. These internal models use primarily market-based or independently-sourced market parameters, including interest rate yield curves, option volatilities and currency rates. Valuation adjustments may be made to ensure that financial instruments are recorded at fair value. These adjustments include amounts to reflect counterparty credit quality, our own creditworthiness, liquidity and unobservable parameters that are applied consistently over time. The majority of the valuations of Level 3 assets were internally calculated or obtained from independent third-party broker quotes.

Management reviews all Level 2 and Level 3 market prices on a quarterly basis. Level 2 prices are grouped by asset class validated by using any combination of the following:

·

Yield curve analysis

·

Published index data

·

Ratings data

·

Spread data

·

Sector specific economics / performance

·

Alternative / comparable price sources (if available)

·

Price stratification to prior price

·

Similar traded securities

Level 3 prices are validated on an individual security basis using multiple indicators which may include any combination of the following:

·

Coupon rate

·

Maturity data

·

Quality ratings

·

Comparison price analysis

·

Sector / asset class specific index data

·

Vintage year / seasoning of issue (structured products)

·

Cash flow analysis

·

Alternative / comparable price sources (if available)

The following is a description of our valuation methodologies for assets and liabilities measured at fair value. Such valuation methodologies were applied to all of the assets and liabilities carried at fair value.

Available-for-sale debt securities

We use a pricing vendor to estimate fair value for the majority of our available-for-sale debt securities. The pricing vendor’s evaluations are based on market data and use pricing models that vary by asset class and incorporate available trade, bid and other market information. For investments that are not priced by the pricing vendor, we estimated fair value using an internal matrix. The internal matrix uses underlying source data from independent third parties for treasury yields, market spreads and average life calculations. Because our internal matrix prices are derived from observable market data, we include these estimates in Level 2 of our hierarchy.

29

10.

Fair Value of Financial Instruments (continued)

Structured Securities

For structured securities, the majority of the fair value estimates are provided by our pricing vendor. When pricing is not available from the pricing vendor, we obtain fair value information from brokers or use internal models. These models consider the best estimate of cash flows until maturity to determine our ability to collect principal and interest and compare this to the anticipated cash flows when the security was purchased. In addition, management judgment is used to assess the probability of collecting all amounts contractually due to us. After consideration is given to the available information relevant to assessing the collectibility, including historical events, current conditions and reasonable forecasts, an estimate of future cash flows is determined. This includes evaluating the remaining payment terms, prepayment speeds, the underlying collateral, expected defaults using current default data and the financial condition of the issuer. Other factors considered are composite credit ratings, industry forecast, analyst reports and other relevant market data are also considered, similar to those the Company believes market participants would use.

To determine fair values for certain structured, collateralized loan obligations (“CLO”) and collateralized debt obligation (“CDO”) assets for which current pricing indications either do not exist, or are based on inactive markets or sparse transactions, we utilize model pricing using a third-party forecasting application that leverages historical trustee information for each modeled security. Principal and interest cash flows are modeled under various default scenarios for a given tranche of a security in accordance with its contractual cash flow priority of claim and subordination with respect to credit losses. The key assumptions include the level of annual default rates, loss-given-default or recovery rate, collateral prepayment rate and reinvestment spread.

Fair value is then determined based on discounted projected cash flows. We use a discount rate based upon a combination of the current U.S. Treasury rate plus the most recent gross CDO/CLO spreads (including the corresponding swap spread) by original tranche rating, which is representative of the inherent credit risk exposure in a deal’s capital structure.

The majority of the internal valuations calculated for structured securities are reported in Level 3 of the valuation hierarchy.

Derivatives

Exchange-traded derivatives valued using quoted prices are classified within Level 1 of the valuation hierarchy. However, few classes of derivative contracts are listed on an exchange. Therefore, the majority of our derivative positions are valued using internally developed models that use as their basis readily observable market parameters. These positions are classified within Level 2 of the valuation hierarchy. Such derivatives include basic interest rate swaps, options and credit default swaps.

Fair values for OTC derivative financial instruments, principally forwards, options and swaps, represent the present value of amounts estimated to be received from or paid to a marketplace participant in settlement of these instruments (i.e., the amount we would expect to receive in a derivative asset assignment or would expect to pay to have a derivative liability assumed). These derivatives are valued using pricing models based on the net present value of estimated future cash flows and directly observed prices from exchange-traded derivatives or other OTC trades, while taking into account the counterparty’s credit ratings, or our own credit ratings, as appropriate. Determining the fair value for OTC derivative contracts can require a significant level of estimation and management judgment.

New and/or complex instruments may have immature or limited markets. As a result, the pricing models used for valuation often incorporate significant estimates and assumptions that market participants would use in pricing the instrument, which may impact the results of operations reported in the consolidated financial statements. For long-dated and illiquid contracts, extrapolation methods are applied to observed market data in order to estimate inputs and assumptions that are not directly observable. This enables us to mark to market all positions consistently when only a subset of prices is directly observable. Values for OTC derivatives are verified using observed information about the costs of hedging the risk and other trades in the market. As the markets for these products develop, we continually refine our pricing models to correlate more closely to the market risk of these instruments.

Retained interest in securitization

Retained interests in securitizations do not trade in an active, open market with readily observable prices. Accordingly, we estimate the fair value of certain retained interests in securitizations using discounted cash flow (“DCF”) models.

30

10.

Fair Value of Financial Instruments (continued)

For certain other retained interests in securitizations, a single interest rate path DCF model is used and generally includes assumptions based upon projected finance charges related to the securitized assets, estimated net credit losses, prepayment assumptions and contractual interest paid to third-party investors. Changes in the assumptions used may have a significant impact on our valuation of retained interests and such interests are, therefore, typically classified within Level 3 of the valuation hierarchy.

We compare the fair value estimates and assumptions to observable market data where available and to actual portfolio experience.

Private equity investments

The valuation of non-public private equity investments requires significant management judgment due to the absence of quoted market prices, an inherent lack of liquidity and the long-term nature of such assets. Private equity investments are valued initially based upon transaction price. The carrying values of private equity investments are adjusted either upwards or downwards from the transaction price to reflect expected exit values as evidenced by financing and sale transactions with third parties, or when determination of a valuation adjustment is confirmed through ongoing reviews by senior investment managers. A variety of factors are reviewed and monitored to assess positive and negative changes in valuation including, but not limited to, current operating performance and future expectations of the particular investment, industry valuations of comparable public companies, changes in market outlook and the third-party financing environment over time. In determining valuation adjustments resulting from the investment review process, emphasis is placed on current company performance and market conditions. Private equity investments are included in Level 3 of the valuation hierarchy.

Private equity investments may also include publicly held equity securities, generally obtained through the initial public offering of privately held equity investments. Such securities are marked-to-market at the quoted public value less adjustments for regulatory or contractual sales restrictions. Discounts for restrictions are quantified by analyzing the length of the restriction period and the volatility of the equity security.

Valuation of embedded derivatives

We make guarantees on certain variable annuity contracts, including GMAB and GMWB as well as provide credits based on the performance of certain indices (“index credits”) on our fixed indexed annuity contracts that meet the definition of an embedded derivative. The GMAB and GMWB embedded derivative liabilities associated with our variable annuity contracts are accounted for at fair value using a risk neutral stochastic valuation methodology with changes in fair value recorded in realized investment gains. The inputs to our fair value methodology include information derived from the asset derivatives market, including the volatility surface and the swap curve. Several additional inputs are not obtained from independent sources, but instead reflect our internally developed assumptions related to mortality rates, lapse rates and policyholder behavior. The fair value of the embedded derivative liabilities associated with the index credits on our fixed indexed annuity contracts is calculated using the budget method with changes in fair value recorded in policy benefits. The initial value under the budget method is established based on the fair value of the options used to hedge the liabilities. The budget amount for future years is based on the impact of projected interest rates on the discounted liabilities. Several additional inputs reflect our internally developed assumptions related to lapse rates and policyholder behavior. As there are significant unobservable inputs included in our fair value methodology for these embedded derivative liabilities, we consider the above-described methodology as a whole to be Level 3 within the fair value hierarchy.

Our fair value calculation of embedded derivative liabilities includes a credit standing adjustment (the “CSA”). The CSA represents the adjustment that market participants would make to reflect the risk that guaranteed benefit obligations may not be fulfilled (“non-performance risk”). In analyzing various alternatives to the CSA calculation, we determined that we could not use credit default swap spreads as there are no such observable instruments on the Company’s life insurance subsidiaries nor could we consistently obtain an observable price on the surplus notes issued by Phoenix Life, as the surplus notes are not actively traded. Therefore, when discounting cash flows for calculation of the fair value of the liability, we calculated the CSA that reflects the credit spread (based on a Standard & Poor’s BB- credit rating) for financial services companies similar to the Company’s life insurance subsidiaries. This average credit spread is recalculated every quarter and, therefore, the fair value will change with the passage of time even in the absence of any other changes that would affect the valuation. The impact of the CSA related to variable annuity GMAB and GMWB embedded derivatives at June 30, 2012 and December 31, 2011 was a reduction of $26.7 million and $36.0 million in the reserves associated with these riders, respectively.

31

10.

Fair Value of Financial Instruments (continued)

The following tables present the financial instruments carried at fair value by ASC 820-10 valuation hierarchy (as described above).

Fair Values of Financial Instruments by Level:	As of June 30, 2012
($ in millions)	Level 1		Level 2		Level 3		Total
Assets
Available-for-sale debt securities
U.S. government and agency	$	570.7	$	385.6	$	—	$	956.3
State and political subdivision		—		322.2		—		322.2
Foreign government		—		207.1		—		207.1
Corporate		—		6,861.3		221.8		7,083.1
CMBS		—		1,001.0		31.9		1,032.9
RMBS		—		1,975.5		40.6		2,016.1
CDO/CLO		—		8.3		226.2		234.5
Other asset-backed		—		446.5		36.6		483.1
Available-for-sale equity securities		1.5		—		40.6		42.1
Derivative assets		18.0		168.6		—		186.6
Separate account assets		3,336.8		—		—		3,336.8
Fair value option investments(1)		21.9		—		65.1		87.0
Total assets	$	3,948.9	$	11,376.1	$	662.8	$	15,987.8
Liabilities
Derivative liabilities	$	—	$	41.7	$	—	$	41.7
Embedded derivatives		—		—		155.4		155.4
Total liabilities	$	—	$	41.7	$	155.4	$	197.1

———————

⁽¹⁾

Fair value option investments at June 30, 2012 include $65.1 million of available-for-sale debt securities in which the fair value option has been elected. In addition, we have also elected the fair value option for available-for-sale equity securities backing our deferred compensation liabilities at $21.9 million as of June 30, 2012. Changes in the fair value of these assets are reflected in results from continuing operations.

There were no transfers of assets between Level 1 and Level 2 during the quarter ended June 30, 2012.

Fair Values of Financial Instruments by Level:	As of December 31, 2011
($ in millions)	Level 1		Level 2		Level 3		Total
Assets
Available-for-sale debt securities
U.S. government and agency	$	385.2	$	398.2	$	—	$	783.4
State and political subdivision		—		270.6		—		270.6
Foreign government		—		205.2		—		205.2
Corporate		—		6,389.8		209.6		6,599.4
CMBS		—		1,084.4		58.7		1,143.1
RMBS		—		2,090.1		41.2		2,131.3
CDO/CLO		—		7.5		243.1		250.6
Other asset-backed		—		460.2		46.2		506.4
Available-for-sale equity securities		1.5		0.3		33.9		35.7
Derivative assets		18.5		156.3		—		174.8
Separate account assets(1)		3,690.3		78.3		—		3,768.6
Fair value option investments(2)		22.2		—		64.4		86.6
Total assets	$	4,117.7	$	11,140.9	$	697.1	$	15,955.7
Liabilities
Derivative liabilities	$	—	$	24.2	$	—	$	24.2
Embedded derivatives		—		—		122.5		122.5
Total liabilities	$	—	$	24.2	$	122.5	$	146.7

———————

⁽¹⁾

Excludes $40.1 million in limited partnerships and real estate investments accounted for on the equity method as well as $8.9 million in cash and cash equivalents and money market funds.

⁽²⁾

Fair value option investments at December 31, 2011 include $64.4 million of available-for-sale debt securities in which the fair value option has been elected. In addition, we have also elected the fair value option for available-for-sale equity securities backing our deferred compensation liabilities at $22.2 million as of December 31, 2011. Changes in the fair value of these assets are reflected in results from continuing operations.

32

10.

Fair Value of Financial Instruments (continued)

There were no transfers of assets between Level 1 and Level 2 during the year ended December 31, 2011.

Level 3 financial assets and liabilities

The following tables set forth a summary of changes in the fair value of our Level 3 financial assets and liabilities. Financial assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement. For example, a hypothetical derivative contract with Level 1, Level 2 and significant Level 3 inputs would be classified as a Level 3 financial instrument in its entirety. Subsequently, even if only Level 1 and Level 2 inputs are adjusted, the resulting gain or loss is classified as Level 3. Further, Level 3 instruments are frequently hedged with instruments that are classified as Level 1 or Level 2 and, accordingly, gains or losses reported as Level 3 in the table below may be offset by gains or losses attributable to instruments classified in Level 1 or 2 of the fair value hierarchy.

Level 3 Financial Assets:	Three Months Ended June 30, 2012
($ in millions)					Corp &		Asset-				Common		Fair Value		Total
	CDO/CLO		RMBS		Other		Backed		CMBS		Stock		Options		Assets
Balance, beginning of period	$	249.1	$	46.9	$	210.5	$	38.5	$	51.4	$	35.5	$	66.2	$	698.1
Purchases		15.9		—		5.4		0.2		—		1.7		—		23.2
Sales		(32.3)		(0.3)		(3.5)		(1.3)		(1.7)		—		(0.1)		(39.2)
Transfers into Level 3(1)		—		—		44.6		—		—		4.9		—		49.5
Transfers out of Level 3(2)		(8.3)		(0.3)		(37.7)		—		(18.6)		—		—		(64.9)
Realized gains (losses)   included in earnings		—		—		—		(0.7)		(1.0)		—		(0.1)		(1.8)
Unrealized gains (losses)   included in OCI		1.5		(5.8)		2.5		(0.1)		1.8		(1.5)		—		(1.6)
Amortization/accretion		0.3		0.1		—		—		—		—		(0.9)		(0.5)
Balance, end of period	$	226.2	$	40.6	$	221.8	$	36.6	$	31.9	$	40.6	$	65.1	$	662.8

———————

⁽¹⁾

Transfers into Level 3 for the three months ended June 30, 2012 represent securities for which Level 2 input assumptions for valuation pricing were no longer applicable.

⁽²⁾

Transfers out of Level 3 for the three months ended June 30, 2012 represent securities for which reliable Level 2 input assumptions for valuation pricing became obtainable.

Level 3 Financial Assets:	Six Months Ended June 30, 2012
($ in millions)					Corp &		Asset-				Common		Fair Value		Total
	CDO/CLO		RMBS		Other		Backed		CMBS		Stock		Options		Assets
Balance, beginning of period	$	243.1	$	41.2	$	209.6	$	46.2	$	58.7	$	33.9	$	64.4	$	697.1
Purchases		16.1		—		38.5		0.2		—		6.3		—		61.1
Sales		(33.3)		(0.7)		(17.9)		(5.0)		(6.1)		—		(0.1)		(63.1)
Transfers into Level 3(1)		2.5		—		24.5		—		—		0.3		—		27.3
Transfers out of Level 3(2)		(8.4)		(0.2)		(38.5)		—		(24.2)		—		—		(71.3)
Realized gains (losses)   included in earnings		0.2		—		(0.6)		(1.0)		(1.0)		0.1		(0.1)		(2.4)
Unrealized gains (losses)   included in OCI		5.4		0.2		6.2		(3.8)		4.5		—		—		12.5
Amortization/accretion		0.6		0.1		—		—		—		—		0.9		1.6
Balance, end of period	$	226.2	$	40.6	$	221.8	$	36.6	$	31.9	$	40.6	$	65.1	$	662.8

———————

⁽¹⁾

Transfers into Level 3 for the six months ended June 30, 2012 represent securities for which Level 2 input assumptions for valuation pricing were no longer applicable.

⁽²⁾

Transfers out of Level 3 for the six months ended June 30, 2012 represent securities for which reliable Level 2 input assumptions for valuation pricing became obtainable.

33

10.

Fair Value of Financial Instruments (continued)

Level 3 Financial Assets:	Three Months Ended June 30, 2011
($ in millions)					Corp &		Asset-				Common		Fair Value		Total
	CDO/CLO		RMBS		Other		Backed		CMBS		Stock		Options		Assets
Balance, beginning of period	$	253.8	$	53.7	$	269.1	$	78.0	$	73.7	$	50.2	$	29.8	$	808.3
Purchases		0.1		—		20.5		13.7		5.7		—		—		40.0
Sales		(14.9)		(0.6)		(8.5)		(11.5)		(1.2)		(0.2)		(0.1)		(37.0)
Transfers into Level 3(1)		—		—		18.8		—		—		—		—		18.8
Transfers out of Level 3(2)		—		(4.7)		(10.4)		(16.3)		(0.2)		—		—		(31.6)
Realized gains (losses)   included in earnings		(0.2)		—		(0.2)		(1.0)		—		—		0.1		(1.3)
Unrealized gains (losses)   included in OCI		(2.1)		(0.5)		4.3		1.0		(0.2)		(3.5)		0.3		(0.7)
Amortization/accretion		0.8		0.1		0.1		—		—		—		—		1.0
Balance, end of period	$	237.5	$	48.0	$	293.7	$	63.9	$	77.8	$	46.5	$	30.1	$	797.5

———————

⁽¹⁾

Transfers into Level 3 for the three months ended June 30, 2011 represent securities for which Level 2 input assumptions for valuation pricing were no longer applicable.

⁽²⁾

Transfers out of Level 3 for the three months ended June 30, 2011 represent securities for which reliable Level 2 input assumptions for valuation pricing became obtainable.

Level 3 Financial Assets:	Six Months Ended June 30, 2011
($ in millions)					Corp &		Asset-				Common		Fair Value		Total
	CDO/CLO		RMBS		Other		Backed		CMBS		Stock		Options		Assets
Balance, beginning of period	$	251.6	$	50.6	$	268.4	$	67.9	$	56.3	$	46.3	$	38.2	$	779.3
Purchases		0.2		4.4		31.1		36.8		20.7		3.9		—		97.1
Sales		(24.4)		(1.3)		(24.4)		(15.3)		(1.8)		(0.3)		(8.5)		(76.0)
Transfers into Level 3(1)		—		—		21.6		—		—		0.9		—		22.5
Transfers out of Level 3(2)		—		(4.6)		(10.4)		(24.6)		(0.2)		—		—		(39.8)
Realized gains (losses)   included in earnings		(0.6)		—		(0.6)		(1.5)		—		—		(1.4)		(4.1)
Unrealized gains (losses)   included in OCI		9.7		(1.3)		7.8		0.6		2.8		(4.3)		1.8		17.1
Amortization/accretion		1.0		0.2		0.2		—		—		—		—		1.4
Balance, end of period	$	237.5	$	48.0	$	293.7	$	63.9	$	77.8	$	46.5	$	30.1	$	797.5

———————

⁽¹⁾

Transfers into Level 3 for the six months ended June 30, 2011 represent securities for which Level 2 input assumptions for valuation pricing were no longer applicable.

⁽²⁾

Transfers out of Level 3 for the six months ended June 30, 2011 represent securities for which reliable Level 2 input assumptions for valuation pricing became obtainable.

Level 3 Financial Liabilities:	Embedded Derivative Liabilities
($ in millions)	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2012		2011		2012		2011
Balance, beginning of period	$	114.5	$	27.4	$	122.5	$	27.4
Net purchases/(sales)		13.7		10.9		28.3		24.1
Transfers into Level 3		—		—		—		—
Transfers out of Level 3		(1.9)		—		(3.5)		—
Realized (gains) losses		18.7		5.1		(3.0)		(7.5)
Unrealized (gains) losses included in other comprehensive loss		—		—		—		—
Deposits less benefits		—		—		—		—
Change in fair value(1)		10.4		—		11.1		(0.6)
Amortization/accretion		—		—		—		—
Balance, end of period	$	155.4	$	43.4	$	155.4	$	43.4

———————

⁽¹⁾

Represents change in fair value related to fixed index credits recognized in policy benefits, excluding policy holder dividends, on the consolidated statements of comprehensive income.

34

10.

Fair Value of Financial Instruments (continued)

The unobservable inputs used in the fair value measurement of CDO/CLO and fair value options are prepayment rates, default rates, recovery rates, and reinvestment spread. Significant changes in any of these inputs on its own may result in a significant change in the fair value measurement, particularly for subordinated tranches. Generally, for a CDO/CLO whose collateral’s weighted-average spread is higher than the assumed reinvestment spread, an increase in prepayment rates would decrease the fair value while the deal remains within its reinvestment period. If the weighted-average spread is lower than the assumed reinvestment spread, an increase in prepayment rates would increase the fair value. Keeping all other inputs unchanged, a significant increase in the annual default rates would likely result in a decrease to fair value.

The following table presents quantitative information about unobservable inputs used in the fair value measurement of internally priced assets.

Level 3 Assets:	As of June 30, 2012
($ in millions)	Fair Value		Valuation Technique(s)	Unobservable Input	Range
CDO/CLO	$	198.8	Discounted cash flow	Prepayment rate	20% (CLOs)
				Default rate	2.5% (CLOs)
				Recovery rate	65% (Loans), 35% (High yield bonds),   45% (Investment grade bonds)
				Reinvestment spread	3 mo LIBOR + 400bps (CLOs)
Fair value option	$	20.6	Discounted cash flow	Default rate	0.6% - 0.8% (CDOs)
investments				Recovery rate	45% (Investment grade bonds)
		8.1	Benchmark to index	Barclays US high yield other   finance return	100%
Other asset-backed	$	2.5	Discounted cash flow	Discount margin based on   forward 1mo LIBOR curve	.3% - 1.8%
		7.4	Discounted cash flow	Prepayment rate	20% (CLOs)
				Default rate	2.53% for 48 mos then .33% thereafter
				Recovery rate	65% (Loans)
				Reinvestment spread	3mo LIBOR + 400bps (CLOs)
Total Level 3 assets(1)	$	237.4

———————

⁽¹⁾

Excludes $425.4 million of Level 3 assets which are valued based upon non-binding independent third-party valuations for which unobservable inputs are not reasonably available to us.

Significant unobservable inputs used in the fair value measurement of variable annuity GMAB and GMWB liabilities are volatility surface, swap curve, mortality and lapse rates and an adjustment for non-performance risk. Keeping other inputs unchanged, an increase in the volatility surface would increase the fair value of the liability while a decrease in the swap curve or CSA would result in a decrease the fair value of the liability. The impact of changes in mortality and lapse rates are dependent on overall market conditions. Significant unobservable inputs used in the fair value measurement of the GPAF liability are interest and mortality rates. Increases in either of these inputs would result in a decrease of the GPAF fair value liability. The fair value of fixed indexed annuity embedded derivative related to index credits is calculated using the swap curve, mortality and lapse rates, as well as an adjustment for non-performance risk. Keeping other inputs unchanged, an increase in any of these significant unobservable inputs would result in a decrease of the fixed indexed annuity embedded derivative liability.

35

10.

Fair Value of Financial Instruments (continued)

The following table presents quantitative information about unobservable inputs used in the fair value measurement of internally priced liabilities.

Level 3 Liabilities:	As of June 30, 2012
($ in millions)	Fair Value		Valuation Technique(s)	Unobservable Input	Range
Embedded derivatives (GMAB / GMWB)	$	38.9	Risk neutral stochastic   valuation methodology	Volatility surface	12.26% - 48.88%
				Swap curve	0.17% - 2.61%
				Mortality rate	75% of A2000 basic table
				Lapse rate	0.00% - 60.00%
				CSA	5.03%
Embedded derivatives (GPAF)	$	1.3	Real world single scenario   cash flow projection	Interest rate	3.46%
				Mortality rate	70% 1994 MGDB
Embedded derivatives	$	115.2	Budget method	Swap curve	0.17% - 2.61%
(Index credits)				Mortality rate	75% of A2000 basic table
				Lapse rate	1.00% - 35.00%
				CSA	5.03%
Total Level 3 liabilities	$	155.4

Fair value of financial instruments

The Company is required by GAAP to disclose the fair value of certain financial instruments including those that are not carried at fair value. The following table discloses the Company’s financial instruments where the carrying amounts and fair values differ:

Carrying Amounts and Fair Values of Financial Instruments:	As of June 30, 2012				As of December 31, 2011
($ in millions)	Carrying		Fair		Carrying		Fair
	Value		Value		Value		Value
Financial liabilities:
Investment contracts	$	2,767.1	$	2,776.8	$	2,429.4	$	2,440.7
Indebtedness		426.9		344.9		426.9		322.0

Fair value of investment contracts

We determine the fair value of guaranteed interest contracts by using a discount rate based upon the appropriate U.S. Treasury rate to calculate the present value of projected contractual liability payments through final maturity. We determine the fair value of deferred annuities and supplementary contracts without life contingencies with an interest guarantee of one year or less at the amount of the policy reserve. In determining the fair value of deferred annuities and supplementary contracts without life contingencies with interest guarantees greater than one year, we use a discount rate based upon the appropriate U.S. Treasury rate to calculate the present value of the projected account value of the policy at the end of the current guarantee period.

Deposit type funds, including pension deposit administration contracts, dividend accumulations, and other funds left on deposit not involving life contingencies, have interest guarantees of less than one year for which interest credited is closely tied to rates earned on owned assets. For these liabilities, we assume fair value to be equal to the stated liability balances.

The fair value of these investment contracts are categorized as Level 3.

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10.

Fair Value of Financial Instruments (continued)

Indebtedness

Fair value of our senior unsecured bonds is based upon quoted market prices. The fair value of surplus notes is determined by professional judgment and readily available market data. Senior unsecured bonds are classified as Level 1 and surplus notes are classified as Level 3 within the fair value hierarchy.

11.

Income Taxes

It is our policy to estimate taxes for interim periods based on estimated annual effective tax rates which are derived, in part, from expected annual pre-tax income. However, the change in the deferred income taxes and related valuation allowance for the three and six months ended June 30, 2012 has been computed based on the first six months of 2012 as a discrete period. Similarly, the current tax expense of $4.6 million and $13.5 million for the three and six months ended June 30, 2012, respectively, is determined based upon the first six months of 2012 as a discrete period. The current tax provision represents the estimated tax liability under the alternative minimum tax (“AMT”) system. Despite our net operating loss carryforwards, certain provisions of the Internal Revenue Code place limits on the ability to fully offset current period taxable income under the AMT system.

We recorded a deferred tax asset, net of deferred tax liabilities and valuation allowances, of $91.7 million as of June 30, 2012. Consistent with the prior period, the deferred tax asset not offset by a valuation allowance relates to gross unrealized losses on available-for-sale debt securities. For the three months ended June 30, 2012, we recognized a net increase in the valuation allowance of $5.4 million. For the six months ended June 30, 2012, excluding  the increase in the valuation allowance related to the adoption of a new accounting standard of $58.8 million (see Note 2 to these financial statements), we recognized a net increase in the valuation allowance of $31.2 million. Accounting guidance requires that changes in the valuation allowance be allocated to various financial statement components of income or loss. The net increase to the valuation allowance for the three months ended June 30, 2012 corresponds to an increase of $8.4 million in income statement related deferred tax balances and a decrease of $3.0 million in OCI related deferred tax balances. The net increase to the valuation allowance for the six months ended June 30, 2012 corresponds to an increase of $17.6 million in income statement related deferred tax balances and an increase of $13.6 million in OCI related deferred tax balances.

We believe it is reasonably possible that the Company will begin to record positive three-year cumulative income during the second half of 2012, which would represent positive evidence of our ability to realize deferred tax assets that are presently offset by a valuation allowance. During the second quarter, the Company generated taxable income sufficient to fully utilize its life group related net operating loss carryforwards; however, significant net operating losses attributable to the non-life group remain. The Company will continue to assess this accumulating positive evidence, which may result in a reduction of the existing valuation allowance and a corresponding benefit to the income tax provision reflected in continuing operations during the second half of 2012.

We have concluded that a valuation allowance on the deferred tax assets attributable to available-for-sale debt securities with gross unrealized losses was not required due to our ability and intent to hold these securities until recovery of fair value or contractual maturity, thereby avoiding realization of taxable capital losses. This conclusion is consistent with prior periods.

The Company and its subsidiaries file consolidated, combined, unitary or separate income tax returns in the U.S. federal, various state and foreign jurisdictions. The Company is no longer subject to U.S. federal income tax examinations by tax authorities for years before 2010.

Based upon the timing and status of our current examinations by taxing authorities, we do not believe that it is reasonably possible that any changes to the balance of unrecognized tax benefits occurring within the next 12 months will result in a significant change to the results of operations, financial condition or liquidity. In addition, we do not anticipate that there will be additional payments made or refunds received within the next 12 months with respect to the years under audit. We do not anticipate any increases to the existing unrecognized tax benefits that would have a significant impact on the financial position of the Company.

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12.

Other Comprehensive Income

Sources of Other Comprehensive Income:	Three Months Ended June 30,
($ in millions)	2012				2011
	Gross		Net		Gross		Net
Unrealized gains on investments	$	128.1	$	24.3	$	99.7	$	11.2
Adjustments for net realized investment gains (losses) on   available-for-sale securities included in net income		1.5		1.0		(1.4)		(0.4)
Net unrealized investment gains		129.6		25.3		98.3		10.8
Pension liability adjustment		(21.2)		(13.8)		3.0		2.0
Other assets		—		—		0.1		—
Net unrealized gains (losses) on derivative instruments		0.6		0.4		(0.4)		(0.3)
Other comprehensive income		109.0	$	11.9		101.0	$	12.5
Applicable policyholder dividend obligation		64.5				64.0
Applicable deferred policy acquisition cost amortization		25.8				19.2
Applicable future policyholder benefits		4.5				—
Applicable deferred income tax expense		2.3				5.3
Offsets to other comprehensive income		97.1				88.5
Other comprehensive income	$	11.9			$	12.5

Sources of Other Comprehensive Income:	Six Months Ended June 30,
($ in millions)	2012				2011
	Gross		Net		Gross		Net
Unrealized gains on investments	$	203.2	$	13.9	$	143.6	$	6.2
Adjustments for net realized investment gains on   available-for-sale securities included in net income		6.5		8.3		2.3		2.8
Net unrealized investment gains		209.7		22.2		145.9		9.0
Pension liability adjustment		(19.1)		(12.5)		4.1		2.7
Other assets		—		—		1.7		1.0
Net unrealized gains (losses) on derivative instruments		0.3		0.2		(1.2)		(0.8)
Other comprehensive income		190.9	$	9.9		150.5	$	11.9
Applicable policyholder dividend obligation		93.5				78.7
Applicable deferred policy acquisition cost amortization		42.4				30.7
Applicable future policyholder benefits		18.3				—
Applicable deferred income tax expense		26.8				29.2
Offsets to other comprehensive income		181.0				138.6
Other comprehensive income	$	9.9			$	11.9

13.

Employee Benefits

Pension and other postretirement benefits

We provide our employees with postretirement benefits that include retirement benefits, primarily through a savings plan, and other benefits, including health care and life insurance. The components of pension and postretirement benefit costs follow:

Components of Pension Benefit Costs:	Three Months Ended				Six Months Ended
($ in millions)	June 30,				June 30,
	2012		2011		2012		2011
Service cost	$	0.2	$	0.2	$	0.4	$	0.5
Interest cost		8.7		8.9		17.3		17.9
Expected return on plan assets		(8.7)		(9.1)		(17.3)		(18.2)
Net loss amortization		2.6		1.6		5.2		3.3
Pension benefit cost	$	2.8	$	1.6	$	5.6	$	3.5

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13.

Employee Benefits (continued)

Components of Other Postretirement Benefit Costs:	Three Months Ended				Six Months Ended
($ in millions)	June 30,				June 30,
	2012		2011		2012		2011
Service cost	$	0.1	$	0.1	$	0.2	$	0.2
Interest cost		0.6		0.7		1.2		1.3
Prior service cost amortization		(0.3)		(0.5)		(0.7)		(1.0)
Other postretirement benefit cost	$	0.4	$	0.3	$	0.7	$	0.5

For the three months ended June 30, 2012, other comprehensive loss includes unrealized gains of $13.7 million, net of taxes, relating to the amortization of net prior service costs and net gains/losses. For the six months ended June 30, 2012, other comprehensive loss includes unrealized gains of $12.4 million, net of taxes, relating to the amortization of net prior service costs and net gains/losses. Effective March 31, 2010, the benefit accruals under all defined benefit pension plans were frozen.

During the three months ended June 30, 2012, we made contributions of $3.6 million to the pension plan. During the six months ended June 30, 2012, we made contributions of $7.0 million to the pension plan. We expect to make additional contributions of approximately $9.4 million by December 31, 2012. On July 6, 2012, the Surface Transportation Extension Act of 2012, Part II, was enacted into law and is effective immediately. The law includes certain pension funding stabilization provisions. We are evaluating its impact.

Savings plans

During the three months ended June 30, 2012 and 2011, we incurred costs of $1.1 million and $1.5 million, respectively, for contributions to our savings plans. During the six months ended June 30, 2012 and 2011, we incurred costs of $2.4 million and $2.7 million, respectively, for contributions to our savings plans.

Effective April 1, 2010, employees (except Saybrus employees) participating in the Company savings plans are eligible to receive an employer discretionary contribution according to the plan terms.

14.

Share-Based Payment

We provide share-based compensation to certain of our employees and non-employee directors, as further described below. The compensation cost that has been charged against income for these plans is summarized in the following table:

Share-Based Compensation Plans:	Three Months Ended				Six Months Ended
($ in millions)	June 30,				June 30,
	2012		2011		2012		2011
Compensation cost charged to income from continuing operations	$	0.5	$	0.9	$	2.0	$	2.1
Income tax expense (benefit) before valuation allowance	$	(0.2)	$	(0.3)	$	(0.7)	$	(0.1)

We did not capitalize any of the cost of stock-based compensation during the three and six month periods ended June 30, 2012 and 2011. In satisfaction of stock-based compensation, shares issued may be made available from authorized but unissued shares or shares may be purchased on the open market.

Stock options

We have stock option plans under which we grant options for a fixed number of common shares to employees and non-employee directors. Our options have an exercise price equal to the market value of the shares at the date of grant. Each option, once vested, entitles the holder to purchase one share of our common stock. The employees’ options generally vest over a three-year period while the directors’ options vest immediately. Certain options involve both service and market criteria and vest at the later of a stated number of years from the grant date or when the market criterion has been met. If the market criterion has not been met within five years from the grant date, options are forfeited. The fair values of options granted are measured as of the grant date and expensed ratably over the vesting period.

39

14.

Share-Based Payment (continued)

As of June 30, 2012, 1,921,337 of outstanding stock options were exercisable, with a weighted-average exercise price of $9.93 per share. There were no options granted during the three and six months ended June 30, 2012.

Restricted stock units

We have restricted stock unit (“RSU”) plans under which we grant RSUs to employees and non-employee directors. RSUs granted to employees are performance-vested, time-vested or a combination thereof. Each RSU, once vested, entitles the holder to one share of our common stock when the restriction expires. We recognize compensation expense over the vesting period of the RSUs, which is generally three years for each employee award. Director RSU awards vest immediately.

During the six months ended June 30, 2012, 144,978 director RSUs were awarded. As of June 30, 2012, there were 2,576,756 time-vested RSUs outstanding with a weighted-average grant price of $2.79 and 340,476 performance-vested RSUs outstanding with a weighted-average grant price of $2.75.

Liability awards

During the six months ended June 30, 2012 and 2011, the Company issued awards that are intended to be settled in cash. As a result, these awards are remeasured at the end of each reporting period until settlement. As of June 30, 2012, $2.4 million was accrued for these awards.

15.

Earnings Per Share

The following table presents a reconciliation of shares used in calculating basic earnings (loss) per common share to those used in calculating diluted earnings (loss) per common share.

Shares Used in Calculation of Basic and Diluted	Three Months Ended		Six Months Ended
Earnings per Share:	June 30,		June 30,
(in thousands)	2012	2011	2012	2011
Weighted-average common shares outstanding	116,232	116,325	116,272	116,265
Weighted-average effect of dilutive potential common shares:
Restricted stock units	1,544	1,520	1,510	1,519
Stock options	—	5	—	5
Potential common shares	1,544	1,525	1,510	1,524
Less: Potential common shares excluded from calculation   due to operating losses	1,544	—	1,510	—
Dilutive potential common shares	—	1,525	—	1,524
Weighted-average common shares outstanding,   including dilutive potential common shares	116,232	117,850	116,272	117,789

As a result of the net loss from continuing operations for the three and six months ended June 30, 2012, the Company is required to use basic weighted-average common shares outstanding in the calculation of diluted earnings per share for those periods, since the inclusion of shares of restricted stock units and options would have been anti-dilutive to the earnings per share calculation.

16.

Segment Information

In managing our business, we analyze segment performance on the basis of operating income. Operating income, as well as components of and financial measures derived from operating income, are non-GAAP financial measures.

Management believes that these measures provide additional insight into the underlying trends in our operations and are the internal performance measures we use in the management of our operations, including our compensation plans and planning processes. However, our non-GAAP financial measures should not be considered as substitutes for net income or measures that are derived from or incorporate net income and may be different from similarly titled measures of other companies. Investors should evaluate both GAAP and non-GAAP financial measures when reviewing our performance.

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16.

Segment Information (continued)

Operating income is calculated by excluding realized investment gains (losses) as their amount and timing may be subject to management’s investment decisions. Changes in net income related to fixed indexed annuity options purchased to fund annual index credits are included within the adjustment for realized investment gains (losses) as they fluctuate from quarter to quarter based upon the changes in fair value. Also excluded from net income are changes related to fixed index annuity embedded derivatives as they vary from quarter to quarter based upon the assumptions used to discount those liabilities. Operating income is also adjusted to include amortization of option premium and proceeds received upon options expiring specific to fixed indexed annuities.

The accounting policies of the reportable operating segments are the same as those described in our Significant Accounting Policies in Note 2 in our 2011 Annual Report on Form 10-K. We allocate net investment income based on the assets allocated to the segments. We allocate certain costs and expenses to the segments based on a review of the nature of the costs, time studies and other methodologies.

Segment Information	Three Months Ended				Six Months Ended
on Revenues:	June 30,				June 30,
($ in millions)	2012		2011		2012		2011
Life and Annuity(1)	$	449.2	$	476.2	$	888.1	$	924.3
Saybrus Partners		5.0		4.2		10.2		8.0
Less: intercompany revenues(2)		2.7		2.2		5.8		4.1
Total revenues	$	451.5	$	478.2	$	892.5	$	928.2

———————

⁽¹⁾

Includes intercompany interest revenue of $0.1 million and $0.2 million for the three months ended June 30, 2012 and 2011, respectively, and $0.3 million and $0.5 million for the six months ended June 30, 2012 and 2011, respectively.

⁽²⁾

All intercompany balances are eliminated in consolidating the financial statements.

Results of Operations by Segment as Reconciled to	Three Months Ended				Six Months Ended
to Consolidated Net Income:	June 30,				June 30,
($ in millions)	2012		2011		2012		2011
Life and Annuity operating income	$	8.0	$	24.5	$	28.4	$	47.4
Saybrus Partners operating income (loss)		(0.1)		(0.4)		0.4		(1.5)
Less: Applicable income tax expense		4.6		7.6		13.5		9.0
Income (loss) from discontinued operations, net of income taxes		(6.3)		(0.7)		(6.8)		(2.2)
Net realized investment gains (losses)		(8.2)		3.1		(23.8)		(13.1)
Fixed indexed annuity derivatives		(4.8)		—		(3.5)		—
Deferred policy acquisition cost and policy dividend obligation   impacts, net of taxes		2.8		(3.7)		(2.5)		(2.8)
Net income (loss)	$	(13.2)	$	15.2	$	(21.3)	$	18.8

We have not provided asset information for the segments as the assets attributable to Saybrus are not significant relative to the assets of our consolidated balance sheet. All third-party interest revenue and interest expense of the Company reside within the Life and Annuity segment.

17.

Discontinued Operations

PFG Holdings, Inc.

On January 4, 2010, we signed a definitive agreement to sell PFG and its subsidiaries, including AGL Life Assurance Company, to Tiptree. Because of the divestiture, these operations are reflected as discontinued operations. On June 23, 2010, we completed the divestiture of PFG and closed the transaction.

The definitive agreement contains a provision requiring us to indemnify Tiptree for any losses due to actions resulting from certain specified acts or omissions associated with the divested business prior to closing. There has been litigation filed that falls within this provision of the agreement but does not name the Company as a party to the litigation. We intend to defend these matters vigorously based on our indemnity commitment. See Note 18 to these financial statements related to contingencies remaining from the sale.

41

17.

Discontinued Operations (continued)

Net losses of $0.5 million and $0.7 million were recognized during the three months ended June 30, 2012 and 2011, respectively, primarily related to accrued legal fees attributable to these matters. Net losses of $1.0 million and $2.2 million were recognized during the six months ended June 30, 2012 and 2011, respectively, primarily related to accrued legal fees attributable to these matters.

Phoenix Life and Reassurance Company of New York

Included in the January 4, 2010 agreement with Tiptree was a provision for the purchase of PLARNY pending regulatory approval. On September 24, 2010, approval was obtained from the NYDFS for Tiptree and PFG Holdings Acquisition Corporation to acquire PLARNY. The transaction closed on October 6, 2010. Because of the divestiture, these operations are reflected as discontinued operations. We have reclassified prior period financial statements to conform to this change.

No net income related to PLARNY was recognized during the three and six months ended June 30, 2012 and 2011.

Discontinued Reinsurance Operations

In 1999, we discontinued our reinsurance operations through a combination of sale, reinsurance and placement of certain retained group accident and health reinsurance business into run-off. We adopted a formal plan to stop writing new contracts covering these risks and to end the existing contracts as soon as those contracts would permit. However, we remain liable for claims under contracts which have not been commuted.

We have established reserves for claims and related expenses that we expect to pay on our discontinued group accident and health reinsurance business. These reserves are 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 from our retrocessionaires and the likely legal and administrative costs of winding down the business. Net losses of $5.8 million were recognized during the three and six months ended June 30, 2012 primarily due to the commutation of certain contracts. There was no net income recognized during the three and six months ended June 30, 2011. See Note 18 to these financial statements for additional discussion on remaining liabilities of our discontinued reinsurance operations.

18.

Contingent Liabilities

Litigation and Arbitration

We are regularly involved in litigation and arbitration, both as a defendant and as a plaintiff. The litigation and arbitration naming us as a defendant ordinarily involves our activities as an insurer, employer, investor or investment advisor.

It is not feasible to predict or determine the ultimate outcome of all legal or arbitration proceedings or to provide reasonable ranges of potential losses. Based on current information, we believe that the outcomes of our litigation and arbitration matters are not likely, either individually or in the aggregate, to have a material adverse effect on our consolidated financial condition. However, given the large or indeterminate amounts sought in certain of these matters and the inherent unpredictability of litigation and arbitration, it is possible that an adverse outcome in certain matters could, from time to time, have a material adverse effect on our consolidated financial statements in particular quarterly or annual periods.

On June 5, 2012, Wilmington Savings Fund Society, FSB, as successor in interest to Christiana Bank & Trust Company and as trustee of 60 unnamed trusts, filed a complaint against PHL Variable, Phoenix Life and The Phoenix Companies, Inc. in the United States District Court for the Central District of California (Case No. CV12-04926). The plaintiffs allege that the Company promoted certain policy sales knowing that the policies would ultimately be owned by investors and then challenging the validity of these policies or denying claims submitted on same. Plaintiffs are seeking damages, including punitive and treble damages, attorneys’ fees and a declaratory judgment. We have meritorious defenses against the lawsuit and we intend to vigorously defend against these claims. The outcome of this litigation and any potential losses are uncertain.

42

18.

Contingent Liabilities (continued)

The definitive agreement to sell PFG contains a provision requiring us to indemnify Tiptree for any losses due to actions resulting from certain specified acts or omissions associated with the divested business prior to closing. There has been litigation filed that falls within this provision of the agreement but does not name the Company as a party to the litigation. We intend to defend these matters vigorously based on our indemnity commitment.

Carol Curran, et al. v. AGL Life Assurance Co. et al. is a case filed in the state district court in Boulder County, Colorado that falls under the indemnification with Tiptree. The Company is not a party to the lawsuit. On August 8, 2011, the state district court judge certified a class action. The parties are engaged in pre-trial discovery. The outcome of this litigation is uncertain and the amount of potential loss in the event of an adverse outcome cannot be estimated.

Regulatory Matters

State regulatory bodies, the Securities and Exchange Commission (the “SEC”), the Financial Industry Regulatory Authority (“FINRA”), the IRS and other regulatory bodies regularly make inquiries of us and, from time to time, conduct examinations or investigations concerning our compliance with laws and regulations related to, among other things, our insurance and broker-dealer subsidiaries, securities offerings and registered products. We endeavor to respond to such inquiries in an appropriate way and to take corrective action if warranted.

Regulatory actions may be difficult to assess or quantify. The nature and magnitude of their outcomes may remain unknown for substantial periods of time. It is not feasible to predict or determine the ultimate outcome of all pending inquiries, investigations, legal proceedings and other regulatory actions, or to provide reasonable ranges of potential losses. Based on current information, we believe that the outcomes of our regulatory matters are not likely, either individually or in the aggregate, to have a material adverse effect on our consolidated financial condition. However, given the inherent unpredictability of regulatory matters, it is possible that an adverse outcome in certain matters could, from time to time, have a material adverse effect on our consolidated financial statements in particular quarterly or annual periods.

Unclaimed Property Inquiry

On July 5, 2011, the NYDFS issued a letter (“308 Letter”) requiring life insurers doing business in New York to use data available on the U.S. Social Security Administration’s Death Master File or a similar database to identify instances where death benefits under life insurance policies, annuities, and retained asset accounts are payable, to locate and pay beneficiaries under such contracts, and to report the results of the use of the data. Additionally, the insurers are required to report on their success in finding and making payments to beneficiaries or escheatment of funds deemed abandoned under state laws. We estimate the remaining amount of claim and interest payments to beneficiaries or state(s) to be $2.2 million ($0.3 million after policy dividend obligation and deferred policy acquisition cost offsets). This amount has been recorded in policy liabilities and accruals.

Discontinued Reinsurance Operations

In 1999, we discontinued our reinsurance operations through a combination of sale, reinsurance and placement of certain retained group accident and health reinsurance business into run-off. We adopted a formal plan to stop writing new contracts covering these risks and to end the existing contracts as soon as those contracts would permit. However, we remain liable for claims under contracts which have not been commuted.

For example, we participate in a workers’ compensation reinsurance pool formerly managed by Unicover Managers, Inc. (“Unicover”). The pool ceased accepting new risks in early 1999. Further, we were a retrocessionaire (meaning a reinsurer of other reinsurers) of the Unicover pool. We have been involved in disputes relating to the activities of Unicover. These disputes have been substantially resolved or settled.

Our discontinued group accident and health reinsurance operations also include other (non-Unicover) workers’ compensation reinsurance contracts and personal accident reinsurance contracts, including contracts assumed in the London market. We have been engaged in arbitrations, disputes or investigations with several ceding companies over the validity of, or amount of liabilities assumed under, their contracts. These arbitrations, disputes or investigations have been substantially resolved or settled.

43

18.

Contingent Liabilities (continued)

We bought retrocessional reinsurance for a significant portion of our assumed reinsurance liabilities. Some of the retrocessionaires have disputed the validity of, or amount of liabilities assumed under, their contracts with us. Most of these disputes with retrocessionaires have been resolved or settled.

We have established reserves for claims and related expenses that we expect to pay on our discontinued group accident and health reinsurance business. These reserves are 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 from our retrocessionaires and the likely legal and administrative costs of winding down the business.

We expect our reserves and reinsurance to cover the run-off of the business; however, unfavorable or favorable claims and/or reinsurance recovery experience is reasonably possible and could result in our recognition of additional losses or gains, respectively, in future years. Given the uncertainty associated with litigation and other dispute resolution proceedings, as well as the lack of sufficient claims information, the range of any reasonably possible additional future losses or gains is not currently estimable. However, it is our opinion, based on current information and after consideration of the provisions made in these consolidated financial statements, that any future adverse or favorable development of recorded reserves and/or reinsurance recoverables will not have a material adverse effect on our consolidated financial position. Nevertheless, it is possible that future developments could have a material adverse effect on our consolidated financial statements in particular quarterly or annual periods.

Our total policy liabilities and accruals were $34.8 million as of June 30, 2012 and $59.1 million as of December 31, 2011. The decrease to policy liabilities and accruals was primarily related to cash settlements due to the commutation of certain contracts in the second quarter of 2012. Our total amounts recoverable from retrocessionaires related to paid losses were $0.3 million as of June 30, 2012 and $2.5 million as of December 31, 2011.

19.

Other Commitments

As part of its normal investment activities, the Company enters into agreements to fund limited partnerships that make debt and equity investments. As of June 30, 2012, the Company had unfunded commitments of $210.0 million under such agreements, of which $68.8 million is expected to be funded by December 31, 2012.

In addition, the Company enters into agreements to purchase private placement investments. At June 30, 2012, the Company had open commitments of $85.4 million under such agreements which are expected to be funded by December 31, 2012.

20.

Subsequent Events

On June 28, 2012, the Company issued a press release announcing a 1-for-20 reverse stock split of the Company’s common stock effective August 10, 2012 and an odd lot program that may be conducted following the reverse stock split. The reverse stock split is expected to reduce the shares of common stock outstanding from approximately 116.0 million to approximately 5.8 million.

On August 2, 2012, the Company and its subsidiaries, PHL Variable and Phoenix Life were named in a lawsuit brought by Lima LS PLC. The suit alleges that the Company sold policies knowing that the policies would ultimately be owned by investors and then challenging the validity of these policies or denying claims submitted on same. The suit names certain current and former executive officers in addition to the corporate defendants. The Company intends to defend against these claims vigorously. The outcome of this case and any potential losses are uncertain.

44

Item 2.

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

FORWARD-LOOKING STATEMENTS

The discussion in this Quarterly Report on Form 10-Q may contain “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. We intend for these forward-looking statements to be covered by the safe harbor provisions of the federal securities laws relating to forward-looking statements. These forward-looking statements include statements relating to trends in, or representing management’s beliefs about our future transactions, strategies, operations and financial results, and often contain words such as “will,” “anticipate,” “believe,” “plan,” “estimate,” “expect,” “intend,” “is targeting,” “may,” “should” and other similar words or expressions. Forward-looking statements are made based upon management’s current expectations and beliefs concerning trends and future developments and their potential effects on us. They are not guarantees of future performance. Our actual business, financial condition or results of operations may differ materially from those suggested by forward-looking statements as a result of risks and uncertainties which include, among others: (i) unfavorable general economic developments including, but not limited to, specific related factors such as the performance of the debt and equity markets; (ii) the potential adverse affect of interest rate fluctuations on our business and results of operations; (iii) the impact on our results of operations and financial condition of any required increase in our reserves for future policyholder benefits and claims if such reserves prove to be inadequate; (iv) the possibility that mortality rates, persistency rates, funding levels or other factors may differ significantly from our assumptions used in pricing products; (v) the effect of limited access to external sources of liquidity and financing; (vi) the effect of guaranteed benefits within our products; (vii) potential exposure to unidentified or unanticipated risk that could adversely affect our businesses or result in losses; (viii) the consequences related to variations in the amount of our statutory capital could adversely affect our business; (ix) the possibility that we may not be successful in our efforts to implement a business plan focused on new market segments; (x) changes in our investment valuations based on changes in our valuation methodologies, estimations and assumptions; (xi) the impact of downgrades in our debt or financial strength ratings; (xii) the availability, pricing and terms of reinsurance coverage generally and the inability or unwillingness of our reinsurers to meet their obligations to us specifically; (xiii) our ability to attract and retain key personnel in a competitive environment; (xiv) our dependence on third parties to maintain critical business and administrative functions; (xv) the strong competition we face in our business from banks, insurance companies and other financial services firms; (xvi) our reliance, as a holding company, on dividends and other payments from our subsidiaries to meet our financial obligations and pay future dividends, particularly since our insurance subsidiaries’ ability to pay dividends is subject to regulatory restrictions; (xvii) the potential need to fund deficiencies in our closed block; (xviii) tax developments may affect us directly or indirectly through the cost of, the demand for or profitability of our products or services; (xix) the possibility that the actions and initiatives of the federal and state governments, including those that we elect to participate in, may not improve adverse economic and market conditions generally or our business, financial condition and results of operations specifically; (xx) regulatory developments or actions may harm our business; (xxi) legal actions could adversely affect our business or reputation; (xxii) potential future material losses from our discontinued reinsurance business; (xxiii) changes in accounting standards; (xxiv) the potential effect of a material weakness in our internal control over financial reporting on the accuracy of our reported financial results; (xxv) the expected benefits of the reverse stock split may not be realized or maintained; and (xxvi) other risks and uncertainties described herein or in any of our filings with the SEC. Certain other factors which may impact our business, financial condition or results of operations or which may cause actual results to differ from such forward-looking statements are discussed or included in our periodic reports filed with the SEC and are available on our website at www.phoenixwm.com under “Investor Relations.” You are urged to carefully consider all such factors. We do not undertake or plan to update or revise forward-looking statements to reflect actual results, changes in plans, assumptions, estimates or projections, or other circumstances occurring after the date of this Form 10-Q, even if such results changes or circumstances make it clear that any forward-looking information will not be realized. If we make any future public statements or disclosures which modify or impact any of the forward-looking statements contained in or accompanying this Form 10-Q, such statements or disclosures will be deemed to modify or supersede such statements in this Form 10-Q.

MANAGEMENT’S DISCUSSION AND ANALYSIS

This section reviews our consolidated financial condition as of June 30, 2012 as compared with December 31, 2011; our consolidated results of operations for the three and six months ended June 30, 2012 and 2011; and, where appropriate, factors that may affect our future financial performance. This discussion should be read in conjunction with the unaudited interim financial statements and notes contained in this filing as well as in conjunction with our consolidated financial statements for the year ended December 31, 2011 in our 2011 Annual Report on Form 10-K.

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Executive Overview

Business

The Phoenix Companies, Inc. (“we,” “our,” “us,” the “Company,” or “Phoenix”) is a holding company incorporated in Delaware. Our operating subsidiaries provide life insurance and annuity products through independent agents and financial advisors. Our policyholder base includes both affluent and middle market consumers, with our more recent business concentrated in the middle market. Most of our life insurance in force is permanent life insurance (whole life, universal life and variable universal life) insuring one or more lives. Our annuity products include deferred fixed and variable annuities with a variety of death benefit and guaranteed living benefit options.

We believe our competitive strengths include:

·

competitive and innovative products;

·

underwriting and mortality risk management expertise;

·

ability to develop business partnerships; and

·

value-added support provided to distributors by our wholesalers and operating personnel.

Since 2009, we have focused on selling products and services that are less capital intensive and less sensitive to our ratings. In 2011 and the first six months of 2012, Phoenix product sales were primarily in fixed indexed annuities. Sales of other insurance companies’ policies were expanded through our distribution subsidiary, Saybrus Partners, Inc. (“Saybrus”).

We operate two businesses segments: Life and Annuity and Saybrus. The Life and Annuity segment includes individual life insurance and annuity products, including our closed block. Saybrus provides dedicated life insurance and other consulting services to financial advisors in partner companies, as well as support for sales of Phoenix’s product line through independent distribution organizations.

Earnings Drivers

A substantial but gradually declining amount of our Life and Annuity segment earnings derive from the closed block, which consists primarily of participating life insurance policies sold prior to our demutualization and initial public offering in 2001. We do not expect the net income contribution from the closed block to deviate materially from its actuarially projected path as long as actual cumulative earnings meet or exceed expected cumulative earnings. See Note 4 to our consolidated financial statements in this Form 10-Q for more information on the closed block.

Our Life and Annuity segment’s profitability is driven by interaction of the following elements:

·

Fees on life and annuity products. Fees consist primarily of (1) cost of insurance charges, which are based on the difference between policy face amounts and the account values (referred to as the net amount at risk); (2) asset-based fees (including mortality and expense charges for variable annuities) which are calculated as a percentage of assets under management within our separate accounts; (3) premium-based fees to cover premium taxes and renewal commissions; and (4) surrender charges.

·

Policy benefits include death claims net of reinsurance cash flows, including ceded premiums and recoverables, interest credited to policyholders and changes in reserves for future claims payments. Certain universal life reserves are based on management’s assumptions about future cost of insurance fees and interest margins which, in turn, are affected by future premium payments, surrenders, lapses and mortality rates. Actual experience can vary significantly from these assumptions, resulting in greater or lesser changes in reserves. In addition, we regularly review and reset our assumptions in light of actual experience, which can result in material changes to these reserves.

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For fixed indexed annuities, policy benefits include the change in the liability associated with guaranteed minimum withdrawal benefits and the fair value of an embedded derivative liability. The assumptions used to calculate the guaranteed minimum withdrawal liability are consistent with those used for amortizing deferred policy acquisition costs. The fair value of the embedded derivative liability is calculated using significant management estimates, including (1) the expected value of index credits on the next policy anniversary dates, (2) the interest rate used to project the future growth in the contract liability, (3) the discount rate used to discount future benefit payments, which includes an adjustment for our credit worthiness; and (4) the expected costs of annual call options that will be purchased in the future to fund index credits beyond the next policy anniversary. These factors can vary significantly from period to period.

Certain of our variable annuity contracts include guaranteed minimum death and income benefits. The change in the liability associated with these guarantees is included in policy benefits. The value of these liabilities is sensitive to changes in equity markets, equity market volatility and interest rates, as well as subject to management assumptions regarding future surrenders, rider utilization rates and mortality.

·

Interest margins. Interest margins consist of net investment income earned on universal life, fixed indexed annuities and other policyholder funds, gains on options purchased to fund index credits less the interest or index credits applied to policyholders on those funds. Interest margins also include investment income on assets supporting the Company’s surplus.

·

Non-deferred operating expenses are expenses related to servicing policies, premium taxes, reinsurance allowances, non-deferrable acquisition expenses and commissions and general overhead. They also include pension and other benefit costs which involve significant estimates and assumptions.

·

Deferred policy acquisition cost amortization is based on the amount of expenses deferred, actual results in each quarter and management’s assumptions about the future performance of the business. The amount of future profit or margin is dependent principally on investment returns in our separate accounts, interest and default rates, reinsurance costs and recoveries, mortality, surrender rates, premium persistency and expenses. These factors enter into management’s estimates of gross profits or margins, which generally are used to amortize deferred policy acquisition costs. Actual equity market movements, net investment income in excess of amounts credited to policyholders, claims payments and other key factors can vary significantly from our assumptions, resulting in a misestimate of gross profits or margins, and a change in amortization, with a resulting impact to income. In addition, we regularly review and reset our assumptions in light of actual experience, which can result in material changes in amortization.

·

Net realized investment gains or losses related to investments and hedging programs include transaction gains and losses, OTTIs and changes in the value of certain derivatives. Certain of our variable annuity contracts include guaranteed minimum withdrawal and accumulation benefits that are accounted for as embedded derivatives. The change in fair value related to these embedded derivatives is also included in net realized gains or losses.

·

Income tax expense/benefit consists of both current and deferred tax provisions. Computation of these amounts is a function of pre-tax income and the application of relevant tax law and GAAP accounting guidance. In valuing our deferred tax assets, we make significant judgments with respect to the reversal of certain temporary book-to-tax differences, specifically estimates of future taxable income over the periods in which the deferred tax assets are expected to reverse, including consideration of the expiration dates and amounts of carryforwards related to net operating losses, capital losses, foreign tax credits and general business tax credits. We have recorded a valuation allowance against a significant portion of our deferred tax assets based on our assessment of the realizability of those assets. This assessment could change in the future, resulting in a release of the valuation allowance and a benefit to income.

Under GAAP, premiums and deposits for variable life, universal life and annuity products are not recorded as revenues. For certain investment options of variable products, deposits are reflected on our balance sheet as an increase in separate account liabilities. Premiums and deposits for universal life, fixed annuities and certain investment options of variable annuities are reflected on our balance sheet as an increase in policyholder deposit funds. Premiums and deposits for other products are reflected on our balance sheet as an increase in policy liabilities and accruals.

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Saybrus is a fee-based business driven by the commission revenue earned on consultation services provided to partner companies as well as on sales of Phoenix Life Insurance Company (“Phoenix Life”) and PHL Variable Insurance Company (“PHL Variable”) product lines. These fees are offset by compensation-related expenses attributable to our sales force.

Recent Trends on Earnings Drivers

·

Fees on life and annuity products and other fee income. Fees on our life and annuity products decreased $13.6 million in the quarter ended June 30, 2012 compared with the quarter ended June 30, 2011. Lower fees were primarily a result of a decrease of $9.6 million in cost of insurance charges related to declining life insurance in force and a decrease of $2.6 million in surrender charges consistent with lower policy surrenders. Other fee income decreased $3.8 million in the quarter ended June 30, 2012 compared with the quarter ended June 30, 2011, primarily attributable to a decrease in investment management fees subsequent to the sale of Goodwin Capital Advisers, Inc. in the fourth quarter of 2011.

·

Policy benefits. Policy benefits decreased $11.8 million in the quarter ended June 30, 2012 compared with the quarter ended June 30, 2011. The decrease in policy benefit expense on life insurance products was primarily a result of claims within a certain policy year cohort during the second quarter of 2012 which resulted in a release of other insurance benefit reserves. This decrease was partially offset by $12.6 million of higher expenses in the quarter ended June 30, 2012 compared with the quarter ended June 30, 2011 related to changes in the fair value of the fixed indexed annuity embedded derivatives and the liabilities associated with guarantees.

·

Interest margins. Universal life interest margins remained relatively flat during the quarter ended June 30, 2012 compared with June 30, 2011 as a result of lower interest credited with declining funds under management, offset by lower net investment income. Annuity interest margins increased primarily as a result of higher investment income attributable to growth in fixed indexed annuity funds under management. Investment income on assets backing surplus was $7.5 million compared with $9.3 million in the quarters ended June 30, 2012 and 2011, respectively. The decrease of $1.8 million related to valuations on partnership investments.

·

Operating expenses. Non-deferred operating expenses increased $0.7 million to $55.8 million for the quarter ended June 30, 2012 from $55.1 million for the quarter ended June 30, 2011. The increase in operating expenses was a result of additional expenses associated with a previously announced policy administration system conversion and higher employee benefits.

·

Deferred policy acquisition cost. Excluding the impact of net realized investment losses, policy acquisition cost amortization increased $4.1 million to $46.8 million from $42.7 million in the quarters ended June 30, 2012 and 2011, respectively. Amortization increased $3.5 million related to fixed indexed annuities as deferred expenses related to new sales continue to amortize and $1.4 million related to variable annuities as a result of lower market performance for the second quarter of 2012 as compared with the prior year period. Partially offsetting these increases was lower amortization related to variable universal life policies as a result of lower mortality margins.

·

Net realized investment gains or losses on investments. Net realized investment losses of $8.2 million were recognized during the quarter ended June 30, 2012 compared with net realized investment gains of $3.1 million during the quarter ended June 30, 2011. Realized investment losses for the quarter ended June 30, 2012 primarily related to a loss of $7.0 million on derivative assets backing our fixed indexed annuity guarantees. In addition, we recognized $5.1 million of impairments on debt and equity securities, partially offset by $3.4 million of net transaction gains. Realized investment gains of $3.1 million for the quarter ended June 30, 2011 primarily consisted of $4.4 million in net transaction gains partially offset by $3.0 million of debt security impairments.

·

Income taxes. The Company recorded income tax expense of $4.6 million to continuing operations for the quarter ended June 30, 2012 compared with $7.6 million as of June 30, 2011. The decrease was driven by lower alternative minimum tax (“AMT”) expense resulting from lower taxable income.

Inclusive of intercompany transactions, Saybrus revenue during the quarter ended June 30, 2012 was $5.0 million, compared with $4.2 million during the quarter ended June 30, 2011. Operating income, which excludes realized investment gains (losses) and certain other items not considered to be related to the operating performance of our segments improved to a loss of $0.1 million for the quarter ended June 30, 2012 from a loss of $0.5 million during the quarter ended June 30, 2011. EBITDA (earnings before interest, taxes, depreciation and amortization), including intercompany revenues, was $0.1 million compared with $0.7 million for the quarter ended June 30, 2012 and 2011, respectively. For further discussion of operating income and reconciliation to GAAP net income, see Note 16 to our consolidated financial statements in this Form 10-Q.

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Strategy and Outlook

Since 2009, we have taken significant actions to reduce expenses, effectively manage our in force business, reduce balance sheet risk, increase liquidity and pursue new growth opportunities. These actions are beginning to have their intended effect and, we believe, position us for profitability in 2012 and beyond. However, our business and results from operations are sensitive to general economic conditions as well as capital market trends, including equity markets and interest rates.

We expect to continue to focus on the following key strategic pillars in 2012:

·

Balance sheet strength;

·

Policyholder service;

·

Operational efficiency; and

·

Profitable growth.

We believe there is significant demand for our products among middle market households seeking to accumulate assets and secure lifetime income during retirement. The current low interest rate environment provides limited opportunities for consumers to protect principal and generate predictable income. Our indexed annuity products are positioned favorably vis-à-vis traditional investments such as bank certificates of deposits.

Recent trends in the life insurance industry may affect our mortality, policy persistency and premium persistency. The evolution of the financial needs of policyholders, the emergence of a secondary market for life insurance, and increased availability and subsequent contraction of premium financing suggest that the reasons for purchasing our products changed. Deviations in experience from our assumptions have had, and could continue to have, an adverse effect on the profitability of certain universal life products. Most of our current products permit us to increase charges and adjust crediting rates during the life of the policy or contract (subject to guarantees in the policies and contracts). We have made, and may in the future make, such adjustments.

During June and August of 2012, the Company and its subsidiaries, PHL Variable and Phoenix Life, were named in two lawsuits brought by Wilmington Savings Fund Society, FSB, and Lima LS PLC, respectively. The suits allege that the Company sold policies knowing that the policies would ultimately be owned by investors and then challenging the validity of these policies or denying claims submitted on same. The Lima case names certain current and former executive officers in addition to the corporate defendants. The Company intends to defend against these claims vigorously. The outcomes of these cases and any potential losses are uncertain. See Part II – Legal Proceedings for additional information.

Recent Acquisitions and Dispositions

See Note 3 to our consolidated financial statements in this Form 10-Q for a discussion of our recent acquisitions and dispositions.

Impact of New Accounting Standards

For a discussion of new accounting standards, see Note 2 to our consolidated financial statements in this Form 10-Q.

Critical Accounting Estimates

The discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements, which have been prepared in accordance with GAAP. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Critical accounting estimates are reflective of significant judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain.

A complete description of our critical accounting estimates is set forth in our 2011 Annual Report on Form 10-K. Management believes that those critical accounting estimates as set forth in the 2011 Annual Report on Form 10-K are important to understanding our financial condition and consolidated financial statements.

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Consolidated Results of Operations

Summary Consolidated Financial Data:	Three Months Ended				Increase (decrease) and
($ in millions)	June 30,				percentage change
	2012		2011		2012 vs. 2011
REVENUES:
Premiums	$	104.3	$	109.3	$	(5.0)	(5%)
Fee income		137.2		154.6		(17.4)	(11%)
Net investment income		218.2		211.2		7.0	3%
Net realized investment losses:
Total other-than-temporary impairment (“OTTI”) losses		(15.0)		(6.6)		(8.4)	(127%)
Portion of OTTI losses recognized in     other comprehensive income (“OCI”)		9.9		3.6		6.3	175%
Net OTTI losses recognized in earnings		(5.1)		(3.0)		(2.1)	(70%)
Net realized investment gains (losses), excluding OTTI losses		(3.1)		6.1		(9.2)	(151%)
Net realized investment gains (losses)		(8.2)		3.1		(11.3)	NM
Total revenues		451.5		478.2		(26.7)	(6%)
BENEFITS AND EXPENSES:
Policy benefits, excluding policyholder dividends		259.0		270.8		(11.8)	(4%)
Policyholder dividends		84.3		73.6		10.7	15%
Policy acquisition cost amortization		41.8		42.8		(1.0)	(2%)
Interest expense on indebtedness		7.9		7.9		—	NM
Other operating expenses		60.8		59.6		1.2	2%
Total benefits and expenses		453.8		454.7		(0.9)	NM
Income from continuing operations before income taxes		(2.3)		23.5		(25.8)	(110%)
Income tax expense		4.6		7.6		(3.0)	(39%)
Income (loss) from continuing operations		(6.9)		15.9		(22.8)	(143%)
Loss from discontinued operations, net of income taxes		(6.3)		(0.7)		(5.6)	NM
Net income (loss)	$	(13.2)	$	15.2	$	(28.4)	(187%)

Summary Consolidated Financial Data:	Six Months Ended				Increase (decrease) and
($ in millions)	June 30,				percentage change
	2012		2011		2012 vs. 2011
REVENUES:
Premiums	$	204.5	$	220.3	$	(15.8)	(7%)
Fee income		283.7		308.4		(24.7)	(8%)
Net investment income		428.1		412.6		15.5	4%
Net realized investment losses:
Total other-than-temporary impairment (“OTTI”) losses		(26.7)		(14.0)		(12.7)	(91%)
Portion of OTTI losses recognized in     other comprehensive income (“OCI”)		15.4		5.3		10.1	191%
Net OTTI losses recognized in earnings		(11.3)		(8.7)		(2.6)	(30%)
Net realized investment losses, excluding OTTI losses		(12.5)		(4.4)		(8.1)	(184%)
Net realized investment losses		(23.8)		(13.1)		(10.7)	(82%)
Total revenues		892.5		928.2		(35.7)	(4%)
BENEFITS AND EXPENSES:
Policy benefits, excluding policyholder dividends		513.1		531.2		(18.1)	(3%)
Policyholder dividends		149.3		137.2		12.1	9%
Policy acquisition cost amortization		92.0		94.1		(2.1)	(2%)
Interest expense on indebtedness		15.9		15.9		0.1	1%
Other operating expenses		123.2		119.8		3.3	3%
Total benefits and expenses		893.5		898.2		(4.7)	(1%)
Income from continuing operations before income taxes		(1.0)		30.0		(31.0)	(103%)
Income tax expense		13.5		9.0		4.5	50%
Income (loss) from continuing operations		(14.5)		21.0		(35.5)	(169%)
Loss from discontinued operations, net of income taxes		(6.8)		(2.2)		(4.6)	(209%)
Net income (loss)	$	(21.3)	$	18.8	$	(40.1)	(213%)

———————

Not meaningful (NM)

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Analysis of Consolidated Results of Operations

Three months ended June 30, 2012 compared with three months ended June 30, 2011

Our loss from continuing operations for the three months ended June 30, 2012 was $6.9 million, or ($0.06) per share, compared with income from continuing operations of $15.9 million, or $0.14 per share for the three months ended June 30, 2011. The decrease reflects declines in fee income and net realized investment gains in addition to an increase in operating expenses. These declines in results were partially offset by higher net investment income and lower income tax expense.

Fees on our life and annuity products decreased $13.6 million in the quarter ended June 30, 2012 compared with the quarter ended June 30, 2011. Lower fees were primarily a result of a decrease of $9.6 million in cost of insurance charges related to declining life insurance in force and a decrease of $2.6 million in surrender charges consistent with lower policy surrenders. Other fee income decreased $3.8 million in the quarter ended June 30, 2012 compared with the quarter ended June 30, 2011, primarily attributable to a decrease in investment management fees subsequent to the sale of Goodwin Capital Advisers, Inc. in the fourth quarter of 2011.

Net realized investment losses of $8.2 million were recognized during the quarter ended June 30, 2012 compared with net gains of $3.1 million during the quarter ended June 30, 2011. Realized investment losses for the quarter ended June 30, 2012 primarily related to a net loss of $6.0 million on derivative assets and embedded derivative liabilities. This was primarily attributable to a loss of $7.0 million on our embedded derivatives associated with our fixed indexed annuity guarantees, partially offset by a gain of $1.1 million related to our surplus hedge which utilizes futures and options to hedge against declines in equity markets and the resulting statutory capital and surplus impact. Also offsetting derivative losses was a $0.6 million gain associated with embedded derivatives related to variable annuity guarantees, which included a $5.9 million gain associated with the non-performance risk factor for the quarter ended June 30, 2012. In addition, we recognized $5.1 million of impairments on debt and equity securities, partially offset by $3.4 million of net transaction gains. Realized investment gains of $3.1 million for the quarter ended June 30, 2011 primarily consisted of $4.4 million in net transaction gains partially offset by $3.0 million of debt security impairments.

Other operating expenses increased $1.2 million to $60.8 million for the quarter ended June 30, 2012, compared with $59.6 million for the quarter ended June 30, 2011. The increase in operating expenses was a result of additional expenses associated with a previously announced policy administration system conversion and higher employee benefits.

The Company recorded income tax expense of $4.6 million to continuing operations for the quarter ended June 30, 2012 compared with $7.6 million as of June 30, 2011. The decrease was driven by lower AMT expense resulting from lower taxable income.

A net loss from discontinued operations of $6.3 million was recognized for the quarter ended June 30, 2012, primarily due to the commutation of certain contracts. See Note 17 to our consolidated financial statements in this Form 10-Q for more information on discontinued operations.

Six months ended June 30, 2012 compared with six months ended June 30, 2011

Our loss from continuing operations for the six months ended June 30, 2012 was $14.5 million, or ($0.12) per share, compared with income of $21.0 million, or $0.18 per share for the six months ended June 30, 2011. The decrease reflects lower fee income and higher expenses. These declines were partially offset by higher net investment income.

Debt and Equity Securities

We invest in a variety of debt and equity securities. We classify these investments into various sectors using industry conventions; however, our classifications may differ from similarly titled classifications of other companies. We classify debt securities into investment grade and below-investment-grade securities based on ratings prescribed by the National Association of Insurance Commissioners (“NAIC”). In a majority of cases, these classifications will coincide with ratings assigned by one or more Nationally Recognized Standard Ratings Organizations (“NRSROs”); however, for certain structured securities, the NAIC designations may differ from NRSRO designations based on the amortized cost of the securities in our portfolio.

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Our debt securities portfolio consists primarily of investment grade publicly traded and privately placed corporate bonds, residential mortgage-backed securities (“RMBS”), commercial mortgage-backed securities (“CMBS”) and other asset-backed securities. As of June 30, 2012, our debt securities, with a fair value of $12,335.3 million, represented 78.9% of total investments.

Debt Securities Ratings by Percentage:
($ in millions)		As of June 30, 2012
				% of				% of
NAIC	S&P Equivalent	Fair		Fair		Amortized		Amortized
Rating	Designation	Value		Value		Cost		Cost
1	AAA/AA/A	$	7,035.8		57.0%	$	6,492.6		56.0%
2	BBB		4,260.7		34.6%		3,960.0		34.2%
	Total investment grade		11,296.5		91.6%		10,452.6		90.2%
3	BB		629.2		5.1%		682.4		5.9%
4	B		215.6		1.7%		236.4		2.0%
5	CCC and lower		134.0		1.1%		156.7		1.4%
6	In or near default		60.0		0.5%		60.8		0.5%
	Total debt securities	$	12,335.3		100.0%	$	11,588.9		100.0%

Debt Securities by Type:	As of June 30, 2012
($ in millions)					Unrealized Gains (Losses)
	Fair		Amortized		Gross		Gross
	Value		Cost		Gains		Losses		Net
U.S. government and agency	$	956.3	$	877.5	$	84.6	$	(5.8)	$	78.8
State and political subdivision		322.2		292.4		32.6		(2.8)		29.8
Foreign government		207.1		180.4		27.0		(0.3)		26.7
Corporate		7,083.1		6,527.4		683.9		(128.2)		555.7
CMBS		1,032.9		982.5		64.1		(13.7)		50.4
RMBS		2,016.1		1,986.5		90.7		(61.1)		29.6
CDO/CLO		234.5		272.3		5.4		(43.2)		(37.8)
Other asset-backed		483.1		469.9		20.8		(7.6)		13.2
Total debt securities	$	12,335.3	$	11,588.9	$	1,009.1	$	(262.7)	$	746.4
Debt securities outside closed block:
Unrealized gains	$	5,047.3	$	4,662.5	$	384.8	$	—	$	384.8
Unrealized losses		908.9		1,084.8		—		(175.9)		(175.9)
Total outside the closed block		5,956.2		5,747.3		384.8		(175.9)		208.9
Debt securities in closed block:
Unrealized gains		5,728.1		5,103.8		624.3		—		624.3
Unrealized losses		651.0		737.8		—		(86.8)		(86.8)
Total in the closed block		6,379.1		5,841.6		624.3		(86.8)		537.5
Total debt securities	$	12,335.3	$	11,588.9	$	1,009.1	$	(262.7)	$	746.4

We manage credit risk through industry and issuer diversification. Maximum exposure to an issuer is defined by quality ratings, with higher quality issuers having larger exposure limits. Our investment approach emphasizes a high level of industry diversification. The top five industry holdings as of June 30, 2012 in our debt securities portfolio were banking (6.0%), electric utilities (5.6%), oil (3.7%), insurance (3.5%) and diversified financial services (3.1%).

52

Eurozone Exposure

The following table presents exposure to European debt. We have focused on the countries experiencing significant economic, fiscal or political strain that could increase the likelihood of default.

Fair Value of Eurozone Exposure by Country:	As of June 30, 2012
($ in millions)	Sovereign		Financial						% of Debt
	Debt		Institutions		All Other		Total		Securities
Spain	$	—	$	11.7	$	48.0	$	59.7		0.5%
Ireland		—		5.3		42.3		47.6		0.4%
Italy		—		—		17.4		17.4		0.1%
Portugal		—		—		13.9		13.9		0.1%
Greece		—		—		—		—		—
Total		—		17.0		121.6		138.6		1.1%
All other Eurozone(1)		—		56.6		194.7		251.3		2.0%
Total	$	—	$	73.6	$	316.3	$	389.9		3.1%

———————

⁽¹⁾

Includes Belgium, Finland, France, Germany, Luxembourg and Netherlands.

Residential Mortgage-Backed Securities

We invest directly in RMBS. To the extent these assets deteriorate in credit quality and decline in value for an extended period, we may realize impairment losses. When making investment decisions, we have been focused on identifying those securities that could withstand significant increases in delinquencies and foreclosures in the underlying mortgage pools before incurring a loss of principal.

Most of our RMBS portfolio is highly rated. At June 30, 2012, 95.9% of the total residential portfolio was rated investment grade. We hold $426.0 million of RMBS investments backed by prime rated mortgages, $299.8 million backed by Alt-A mortgages and $142.6 million backed by sub-prime mortgages, which combined amount to 5.5% of our total investments. The majority of our prime, Alt-A and sub-prime exposure is investment grade, with 73.9% rated NAIC-1 and 16.7% rated NAIC-2. We have employed a disciplined approach in the analysis and monitoring of our mortgage-backed securities. Our approach involves a monthly review of each security. Underlying mortgage data is obtained from the security’s trustee and analyzed for performance trends. A security-specific stress analysis is performed using the most recent trustee information. This analysis forms the basis for our determination of whether the security will pay in accordance with the contractual cash flows. RMBS impairments during the six months ended June 30, 2012 totaled $7.4 million. These impairments consist of $1.3 million from prime, $5.0 million from Alt-A and $1.1 million from sub-prime securities.

Residential Mortgage-Backed Securities:
($ in millions)	As of June 30, 2012
						NAIC Rating
						1	2	3	4	5	6
						AAA/					In or
	Amortized		Market		% General	AA/				CCC and	Near	% Closed
	Cost(1)		Value(1)		Account(2)	A	BBB	BB	B	Below	Default	Block
Collateral
Agency	$	1,067.1	$	1,147.7	7.2%	100.0%	0.0%	0.0%	0.0%	0.0%	0.0%	45.2%
Prime		428.0		426.0	2.7%	84.6%	10.4%	4.6%	0.0%	0.2%	0.2%	41.3%
Alt-A		327.7		299.8	1.9%	55.6%	31.8%	6.5%	2.6%	3.3%	0.2%	28.9%
Sub-prime		163.7		142.6	0.9%	80.3%	4.0%	9.5%	4.1%	1.8%	0.3%	10.8%
Total	$	1,986.5	$	2,016.1	12.7%	88.7%	7.2%	2.6%	0.7%	0.7%	0.1%	39.5%

———————

⁽¹⁾

Individual categories may not agree with the Debt Securities by Type table on previous page due to nature of underlying collateral.

⁽²⁾

Percentages based on Market Value.

53

Prime Mortgage-Backed Securities:
($ in millions)		As of June 30, 2012
							Year of Issue
	S&P Equivalent	Amortized		Market		% General	Post-					2003 and
Rating	Designation	Cost		Value		Account(1)	2007	2007	2006	2005	2004	Prior
NAIC-1	AAA/AA/A	$	359.6	$	360.4	2.3%	0.0%	2.4%	14.8%	17.0%	32.1%	33.7%
NAIC-2	BBB		44.6		44.2	0.3%	0.0%	0.0%	3.5%	77.6%	18.9%	0.0%
NAIC-3	BB		20.6		19.5	0.1%	0.0%	0.0%	70.8%	12.5%	13.1%	3.6%
NAIC-4	B		—		—	0.0%	0.0%	0.0%	0.0%	0.0%	0.0%	0.0%
NAIC-5	CCC and below		1.4		1.1	0.0%	0.0%	0.0%	0.0%	0.0%	0.0%	100.0%
NAIC-6	In or near default		1.8		0.8	0.0%	0.0%	0.0%	0.0%	37.8%	0.0%	62.2%
Total		$	428.0	$	426.0	2.7%	0.0%	2.0%	16.1%	23.1%	29.7%	29.1%

———————

⁽¹⁾

Percentages based on Market Value.

Alt-A Mortgage-Backed Securities:
($ in millions)		As of June 30, 2012
							Year of Issue
	S&P Equivalent	Amortized		Market		% General	Post-					2003 and
Rating	Designation	Cost		Value		Account(1)	2007	2007	2006	2005	2004	Prior
NAIC-1	AAA/AA/A	$	185.6	$	166.6	1.1%	4.9%	2.5%	23.5%	22.5%	33.8%	12.8%
NAIC-2	BBB		98.9		95.3	0.6%	0.0%	0.0%	0.0%	22.1%	58.6%	19.3%
NAIC-3	BB		21.5		19.6	0.1%	0.0%	0.0%	0.0%	0.0%	56.1%	43.9%
NAIC-4	B		8.5		7.9	0.0%	0.0%	0.0%	0.0%	100.0%	0.0%	0.0%
NAIC-5	CCC and below		12.7		9.9	0.1%	0.0%	0.0%	53.9%	0.0%	46.1%	0.0%
NAIC-6	In or near default		0.5		0.5	0.0%	0.0%	0.0%	100.0%	0.0%	0.0%	0.0%
Total		$	327.7	$	299.8	1.9%	2.7%	1.4%	15.0%	22.2%	42.6%	16.1%

———————

⁽¹⁾

Percentages based on Market Value.

Sub-Prime Mortgage-Backed Securities:
($ in millions)		As of June 30, 2012
							Year of Issue
	S&P Equivalent	Amortized		Market		% General	Post-					2003 and
Rating	Designation	Cost		Value		Account(1)	2007	2007	2006	2005	2004	Prior
NAIC-1	AAA/AA/A	$	123.0	$	114.4	0.7%	0.0%	6.1%	7.8%	42.7%	26.0%	17.4%
NAIC-2	BBB		5.7		5.7	0.0%	0.0%	79.8%	0.0%	20.2%	0.0%	0.0%
NAIC-3	BB		21.6		13.6	0.1%	0.0%	52.2%	16.6%	19.3%	0.0%	11.9%
NAIC-4	B		8.8		5.9	0.1%	0.0%	0.0%	37.6%	41.8%	0.0%	20.6%
NAIC-5	CCC and below		3.0		2.5	0.0%	0.0%	0.0%	0.0%	100.0%	0.0%	0.0%
NAIC-6	In or near default		1.6		0.5	0.0%	0.0%	0.0%	0.0%	0.0%	0.0%	100.0%
Total		$	163.7	$	142.6	0.9%	0.0%	13.0%	9.4%	40.4%	20.9%	16.3%

———————

⁽¹⁾

Percentages based on Market Value.

54

Commercial Mortgage-Backed Securities

We invest directly in CMBS. To the extent these assets deteriorate in credit quality and decline in value for an extended period, we may realize impairment losses. When making investment decisions, we have been focused on identifying those securities that could withstand significant increases in delinquencies and foreclosures in the underlying mortgage pools before incurring a loss of principal.

Commercial Mortgage-Backed Securities:
($ in millions)		As of June 30, 2012
							Year of Issue
	S&P Equivalent	Amortized		Market		% General	Post-				2004 and	% Closed
Rating	Designation	Cost		Value(1)		Account(2)	2007	2007	2006	2005	Prior	Block
NAIC-1	AAA/AA/A	$	938.6	$	999.9	6.3%	25.4%	5.5%	14.2%	9.2%	45.7%	49.3%
NAIC-2	BBB		16.6		14.0	0.1%	0.0%	0.0%	22.2%	77.8%	0.0%	27.4%
NAIC-3	BB		22.4		20.3	0.1%	0.0%	39.6%	16.1%	44.3%	0.0%	21.8%
NAIC-4	B		8.2		7.9	0.1%	0.0%	0.0%	0.0%	100.0%	0.0%	50.0%
NAIC-5	CCC and below		29.1		13.9	0.1%	0.0%	0.0%	26.2%	0.0%	73.8%	63.3%
NAIC-6	In or near default		7.9		4.3	0.0%	0.0%	71.3%	0.0%	0.0%	28.7%	28.6%
Total		$	1,022.8	$	1,060.3	6.7%	24.0%	6.2%	14.4%	11.2%	44.2%	48.6%

———————

⁽¹⁾

Includes commercial mortgage-backed CDOs with amortized cost and market values of $40.3 million and $27.4 million, respectively.

⁽²⁾

Percentages based on Market Value.

55

Realized Gains and Losses

The following table presents certain information with respect to realized investment gains and losses, including those on debt securities pledged as collateral, with losses from OTTI charges reported separately in the table. These impairment charges were determined based on our assessment of factors enumerated below, as they pertain to the individual securities determined to be other-than-temporarily impaired.

Sources and Types of	Three Months Ended				Six Months Ended
Net Realized Investment Gains (Losses):	June 30,				June 30,
($ in millions)	2012		2011		2012		2011
Total other-than-temporary debt impairment losses	$	(13.5)	$	(6.6)	$	(25.2)	$	(14.0)
Portion of loss recognized in OCI		9.9		3.6		15.4		5.3
Net debt impairment losses recognized in earnings	$	(3.6)	$	(3.0)	$	(9.8)	$	(8.7)
Debt security impairments:
U.S. government and agency	$	—	$	—	$	—	$	—
State and political subdivision		—		—		—		—
Foreign government		—		—		—		—
Corporate		—		(0.2)		(0.6)		(4.6)
CMBS		(1.0)		—		(1.2)		—
RMBS		(2.3)		(2.7)		(7.4)		(4.0)
CDO/CLO		(0.1)		—		(0.1)		—
Other asset-backed		(0.2)		(0.1)		(0.5)		(0.1)
Net debt security impairments		(3.6)		(3.0)		(9.8)		(8.7)
Equity security impairments		(1.5)		—		(1.5)		—
Limited partnerships and other investment impairments		—		—		—		—
Impairment losses		(5.1)		(3.0)		(11.3)		(8.7)
Debt security transaction gains(1)		5.8		5.5		8.0		9.4
Debt security transaction losses(1)		(2.4)		(1.2)		(3.4)		(3.1)
Equity security transaction gains		—		0.1		—		0.1
Equity security transaction losses		—		—		—		—
Limited partnerships and other investment transaction gains		0.6		—		1.4		—
Limited partnerships and other investment transaction losses		—		—		—		(1.6)
Net transaction gains		4.0		4.4		6.0		4.8
Derivative instruments		13.1		5.0		(23.0)		(15.1)
Embedded derivatives(2)		(19.1)		(4.7)		3.7		4.9
Fair value option investments		(1.1)		1.4		0.8		1.0
Net realized investment gains (losses),   excluding impairment losses		(3.1)		6.1		(12.5)		(4.4)
Net realized investment gains (losses),   including impairment losses	$	(8.2)	$	3.1	$	(23.8)	$	(13.1)

———————

⁽¹⁾

Proceeds from the sale of available-for-sale debt securities were $296.0 million and $396.1 million for the three months ended June 30, 2012 and 2011, respectively. Proceeds from the sale of available-for-sale debt securities were $402.3 million and $693.1 million for the six months ended June 30, 2012 and 2011, respectively.

⁽²⁾

Includes the change in fair value of embedded derivatives associated with variable annuity GMWB, GMAB, GPAF and COMBO riders. See Note 8 to our consolidated financial statements in this Form 10-Q for additional disclosures.

56

Other-than-Temporary Impairments

Management assessed all securities in an unrealized loss position in determining whether impairments were temporary or other than temporary. In reaching its conclusions, management exercised significant judgment and used a number of issuer-specific quantitative indicators and qualitative judgments to assess the probability of receiving a given security’s contractual cash flows. This included the issue’s implied yield to maturity, cumulative default rate based on rating, comparisons of issue-specific spreads to industry or sector spreads, specific trading activity in the issue, and other market data such as recent debt tenders and upcoming refinancing requirements. Management also reviewed fundamentals such as issuer credit and liquidity metrics, business outlook and industry conditions. Management maintains a watch list of securities that is reviewed for impairments. Each security on the watch list was evaluated, analyzed and discussed, with the positive and negative factors weighed in the ultimate determination of whether or not the security was other-than-temporarily impaired. For securities for which no OTTI was ultimately indicated at June 30, 2012, management does not have the intention to sell, nor does it expect to be required to sell, these securities prior to their recovery.

Fixed income OTTIs recorded in the first half of 2012 were primarily concentrated in structured securities. These impairments were driven primarily by increased collateral default rates. In our judgment, these credit events or other adverse conditions of the issuers have caused, or will most likely lead to, a deficiency in the contractual cash flows related to the investment. Therefore, based upon these credit events, we have determined that OTTIs exist. Total debt impairments recognized through earnings related to such credit-related circumstances were $3.6 million for the second quarter of 2012 and $3.0 million for the second quarter of 2011 and $9.8 million for the first half of 2012 and $8.7 million for the first half of 2011. There were equity security OTTIs of $1.5 million for the three and six months ended June 30, 2012 and no equity security OTTIs for the first quarter of 2011 or for the first half of 2011. There were no limited partnership and other investment OTTIs for the first quarter of 2012 and 2011 or for the first half of 2012 or 2011.

In addition to these credit-related impairments recognized through earnings, we impaired securities to fair value through other comprehensive loss for any impairments related to non-credit related factors. These types of impairments were driven primarily by market or sector credit spread widening or by a lack of liquidity in the securities. The amount of impairments recognized as an adjustment to other comprehensive loss due to these factors was $9.9 million for the second quarter of 2012, $3.6 million for the second quarter of 2011, $15.4 million for the first half of 2012 and $5.3 million for the first half of 2011.

The following table presents a roll-forward of pre-tax credit losses recognized in earnings related to debt securities for which a portion of the OTTI was recognized in OCI.

Credit Losses Recognized in Earnings on Debt Securities for	Three Months Ended				Six Months Ended
which a Portion of the OTTI Loss was Recognized in OCI:	June 30,				June 30,
($ in millions)	2012		2011		2012		2011
Balance, beginning of period	$	(79.1)	$	(62.6)	$	(73.8)	$	(60.4)
Add: Credit losses on securities not previously impaired(1)		(1.5)		(1.8)		(3.6)		(5.9)
Add: Credit losses on securities previously impaired(1)		(3.3)		(1.1)		(6.5)		(2.3)
Less: Credit losses on securities impaired due to intent to sell		—		—		—		—
Less: Credit losses on securities sold		0.2		—		0.2		3.1
Less: Increases in cash flows expected on   previously impaired securities		—		—		—		—
Balance, end of period	$	(83.7)	$	(65.5)	$	(83.7)	$	(65.5)

———————

⁽¹⁾

Additional credit losses on securities for which a portion of the OTTI loss was recognized in AOCI are included within net OTTI losses recognized in earnings on the statements of comprehensive income.

57

Unrealized Gains and Losses

The following tables present certain information with respect to our gross unrealized gains and losses related to our investments in debt securities as of June 30, 2012. We separately present information that is applicable to unrealized losses both outside and inside the closed block. See Note 4 to our consolidated financial statements in this Form 10-Q for more information regarding the closed block. Applicable deferred policy acquisition costs and deferred income taxes further reduce the effect of unrealized gains and losses on our comprehensive income.

Gross and Net	As of June 30, 2012
Unrealized Gains (Losses):	Total				Outside Closed Block				Closed Block
($ in millions)	Gains		Losses		Gains		Losses		Gains		Losses
Debt securities
Number of positions		3,955		799		2,783		625		1,172		174
Unrealized gains (losses)	$	1,009.1	$	(262.7)	$	384.8	$	(175.9)	$	624.3	$	(86.8)
Applicable policyholder dividend obligation   (reduction)		624.3		(86.8)		—		—		624.3		(86.8)
Applicable deferred policy acquisition costs   (benefit)		208.7		(84.0)		208.7		(84.0)		—		—
Applicable deferred income taxes (benefit)		61.7		(32.2)		61.7		(32.2)		—		—
Offsets to net unrealized gains (losses)		894.7		(203.0)		270.4		(116.2)		624.3		(86.8)
Unrealized gains (losses) after offsets	$	114.4	$	(59.7)	$	114.4	$	(59.7)	$	—	$	—
Net unrealized gains after offsets	$	54.7			$	54.7			$	—
Equity securities
Number of positions		57		17		34		9		23		8
Unrealized gains (losses)	$	13.4	$	(5.7)	$	8.4	$	(2.7)	$	5.0	$	(3.0)
Applicable policyholder dividend obligation   (reduction)		5.0		(3.0)		—		—		5.0		(3.0)
Applicable deferred income taxes (benefit)		2.9		(0.9)		2.9		(0.9)		—		—
Offsets to net unrealized gains (losses)		7.9		(3.9)		2.9		(0.9)		5.0		(3.0)
Unrealized gains (losses) after offsets	$	5.5	$	(1.8)	$	5.5	$	(1.8)	$	—	$	—
Net unrealized gains after offsets	$	3.7			$	3.7			$	—

Net unrealized investment gains and losses on securities classified as available-for-sale and certain other assets are included in our consolidated balance sheet as a component of AOCI. The table below presents the special category of AOCI for debt securities that are other-than-temporarily impaired when the impairment loss has been split between the credit loss component (in earnings) and the non-credit component (separate category of AOCI).

Fixed Maturity Non-Credit OTTI Losses in AOCI, by Security Type:	June 30,		Dec 31,
($ in millions)	2012(1)		2011(1)
U.S. government and agency	$	—	$	—
State and political subdivision		—		—
Foreign government		—		—
Corporate		(5.7)		(5.7)
CMBS		(18.8)		(28.0)
RMBS		(99.4)		(89.6)
CDO/CLO		(24.2)		(24.2)
Other asset-backed		(1.2)		(1.2)
Total fixed maturity non-credit OTTI losses in AOCI	$	(149.3)	$	(148.7)

———————

⁽¹⁾

Represents the amount of non-credit OTTI losses recognized in AOCI excluding net unrealized gains or losses subsequent to the date of impairment.

58

Duration of Gross Unrealized Losses on	As of June 30, 2012
Securities Outside Closed Block:			0 – 6		6 – 12		Over 12
($ in millions)	Total		Months		Months		Months
Debt securities outside closed block
Total fair value	$	908.9	$	150.5	$	82.8	$	675.6
Total amortized cost		1,084.8		154.9		88.5		841.4
Unrealized losses	$	(175.9)	$	(4.4)	$	(5.7)	$	(165.8)
Unrealized losses after offsets(1)	$	(59.7)	$	(1.9)	$	(2.2)	$	(55.6)
Number of securities		625		90		71		464
Investment grade:
Unrealized losses	$	(64.4)	$	(2.4)	$	(3.3)	$	(58.7)
Unrealized losses after offsets(1)	$	(24.0)	$	(1.0)	$	(1.3)	$	(21.7)
Below investment grade:
Unrealized losses	$	(111.5)	$	(2.0)	$	(2.4)	$	(107.1)
Unrealized losses after offsets(1)	$	(35.7)	$	(0.9)	$	(0.9)	$	(33.9)
Equity securities outside closed block
Unrealized losses	$	(2.7)	$	—	$	(2.3)	$	(0.4)
Unrealized losses after offsets(1)	$	(1.5)	$	—	$	(1.3)	$	(0.2)
Number of securities		9		—		5		4

———————

⁽¹⁾

Offsets to AOCI are recorded each period to the extent that, had unrealized holding gains or losses from securities classified as available-for-sale actually been realized, a shadow loss adjustment to future policy benefits or deferred policy acquisition costs amortized using gross profits or gross margins would result.

For debt securities outside of the closed block with gross unrealized losses, 40.2% of the unrealized losses after offsets pertain to investment grade securities and 59.8% of the unrealized losses after offsets pertain to below-investment-grade securities at June 30, 2012.

59

The following table represents those securities whose fair value is less than 80% of amortized cost (significant unrealized loss) that have been at a significant unrealized loss position on a continuous basis.

Duration of Gross Unrealized Losses on	As of June 30, 2012
Securities Outside Closed Block:			0 – 6		6 – 12		Over 12
($ in millions)	Total		Months		Months		Months
Debt securities outside closed block
Unrealized losses over 20% of cost	$	(126.5)	$	(18.1)	$	(14.5)	$	(93.9)
Unrealized losses over 20% of cost after offsets(1)	$	(41.7)	$	(7.9)	$	(5.9)	$	(27.9)
Number of securities		158		28		40		90
Investment grade:
Unrealized losses over 20% of cost	$	(32.9)	$	(16.1)	$	(3.2)	$	(13.6)
Unrealized losses over 20% of cost after offsets(1)	$	(12.7)	$	(7.0)	$	(1.5)	$	(4.2)
Below investment grade:
Unrealized losses over 20% of cost	$	(93.6)	$	(2.0)	$	(11.3)	$	(80.3)
Unrealized losses over 20% of cost after offsets(1)	$	(29.0)	$	(0.9)	$	(4.4)	$	(23.7)
Equity securities outside closed block
Unrealized losses over 20% of cost	$	(2.6)	$	—	$	(2.2)	$	(0.4)
Unrealized losses over 20% of cost after offsets(1)	$	(1.4)	$	—	$	(1.2)	$	(0.2)
Number of securities		5		—		2		3

———————

⁽¹⁾

Offsets to AOCI are recorded each period to the extent that, had unrealized holding gains or losses from securities classified as available-for-sale actually been realized, a shadow loss adjustment to future policy benefits or deferred policy acquisition costs amortized using gross profits or gross margins would result.

Duration of Gross Unrealized Losses on	As of June 30, 2012
Securities Inside Closed Block:			0 – 6		6 – 12		Over 12
($ in millions)	Total		Months		Months		Months
Debt securities inside closed block
Total fair value	$	651.0	$	101.9	$	56.4	$	492.7
Total amortized cost		737.8		106.0		60.3		571.5
Unrealized losses	$	(86.8)	$	(4.1)	$	(3.9)	$	(78.8)
Unrealized losses after offsets(1)	$	—	$	—	$	—	$	—
Number of securities		174		28		16		130
Investment grade:
Unrealized losses	$	(44.5)	$	(1.6)	$	(1.6)	$	(41.3)
Unrealized losses after offsets(1)	$	—	$	—	$	—	$	—
Below investment grade:
Unrealized losses	$	(42.3)	$	(2.5)	$	(2.3)	$	(37.5)
Unrealized losses after offsets(1)	$	—	$	—	$	—	$	—
Equity securities inside closed block
Unrealized losses	$	(3.0)	$	—	$	(2.6)	$	(0.4)
Unrealized losses after offsets(1)	$	—	$	—	$	—	$	—
Number of securities		8		1		4		3

———————

⁽¹⁾

Offsets to AOCI are recorded each period to the extent that, had unrealized holding gains or losses from securities classified as available-for-sale actually been realized, a shadow loss adjustment to future policy benefits or deferred policy acquisition costs amortized using gross profits or gross margins would result.

60

For debt securities inside the closed block with gross unrealized losses, there were no unrealized losses after offsets at June 30, 2012.

The following table represents those securities whose fair value is less than 80% of amortized cost (significant unrealized loss) that have been at a significant unrealized loss position on a continuous basis.

Duration of Gross Unrealized Losses on	As of June 30, 2012
Securities Inside Closed Block:			0 – 6		6 – 12		Over 12
($ in millions)	Total		Months		Months		Months
Debt securities inside closed block
Unrealized losses over 20% of cost	$	(47.3)	$	(10.9)	$	(18.5)	$	(17.9)
Unrealized losses over 20% of cost after offsets(1)	$	—	$	—	$	—	$	—
Number of securities		38		10		11		17
Investment grade:
Unrealized losses over 20% of cost	$	(20.1)	$	(10.1)	$	(9.5)	$	(0.5)
Unrealized losses over 20% of cost after offsets(1)	$	—	$	—	$	—	$	—
Below investment grade:
Unrealized losses over 20% of cost	$	(27.2)	$	(0.8)	$	(9.0)	$	(17.4)
Unrealized losses over 20% of cost after offsets(1)	$	—	$	—	$	—	$	—
Equity securities inside closed block
Unrealized losses over 20% of cost	$	(2.7)	$	—	$	(2.3)	$	(0.4)
Unrealized losses over 20% of cost after offsets(1)	$	—	$	—	$	—	$	—
Number of securities		6		1		3		2

———————

⁽¹⁾

Offsets to AOCI are recorded each period to the extent that, had unrealized holding gains or losses from securities classified as available-for-sale actually been realized, a shadow loss adjustment to future policy benefits or deferred policy acquisition costs amortized using gross profits or gross margins would result.

Liquidity and Capital Resources

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

Liquidity refers to the ability of a company to generate sufficient cash flow to meet its cash requirements. The following discussion includes both liquidity and capital resources as these subjects are interrelated.

The Phoenix Companies, Inc. (consolidated)

Summary Consolidated Cash Flows:	Six Months Ended				Increase (decrease) and
($ in millions)	June 30,				percentage change
	2012		2011		2012 vs. 2011
Continuing operations
Cash used for operating activities	$	(69.2)	$	(65.8)	$	(3.4)	(5%)
Cash used for investing activities		(204.4)		(279.2)		74.8	27%
Cash provided by financing activities		326.2		353.6		(27.4)	(8%)
	$	52.6	$	8.6	$	44.0	NM
Discontinued operations
Cash provided by (used for) operating activities	$	(2.0)	$	4.9	$	(6.9)	(141%)
Cash provided by (used for) investing activities		4.0		(0.3)		4.3	NM
	$	2.0	$	4.6	$	(2.6)	(57%)

———————

Not meaningful (NM)

61

Six months ended June 30, 2012 compared with six months ended June 30, 2011

Continuing Operations

Cash flows used for operating activities increased by $3.4 million during the six months ended June 30, 2012 compared with the six months ended June 30, 2011.

Cash flows used for investing activities decreased $74.8 million during the six months ended June 30, 2012 compared with the six months ended June 30, 2011. The primary driver of this fluctuation was a decrease in purchases of available-for-sale debt securities.

Cash flows provided by financing activities decreased $27.4 million during the six months ended June 30, 2012 compared with the six months ended June 30, 2011. This decline was primarily a result of lower withdrawals, partially offset by decrease in policyholder deposits. See Note 7 to our consolidated financial statements in this Form 10-Q for additional information on financing activities.

Discontinued Operations

Cash flows provided by operations related to discontinued operations decreased as a result of the decrease in assets and liabilities as a result of the commutation of certain contracts during the second quarter of 2012. See Note 17 to our consolidated financial statements in this Form 10-Q for additional information on discontinued operations.

The Phoenix Companies, Inc. Sources and Uses of Cash (parent company only)

In addition to existing cash and securities, our primary source of liquidity consist of dividends from Phoenix Life. Under New York Insurance Law, Phoenix Life is permitted to pay stockholder dividends to the holding company in any calendar year without prior approval from the New York Department of Financial Services (“NYDFS”) (formerly known as the State of New York Insurance Department) in the amount of the lesser of 10% of Phoenix Life’s surplus to policyholders as of the immediately preceding calendar year or Phoenix Life’s statutory net gain from operations for the immediately preceding calendar year, not including realized capital gains. Based on this calculation, Phoenix Life would be able to pay a dividend of $71.8 million in 2012. During the three and six months ended June 30, 2012, Phoenix Life paid $15.0 million and $24.0 million in dividends, respectively. In assessing our ability to pay dividends from Phoenix Life, we also consider the level of statutory capital and risk-based capital (“RBC”) of that entity. Our capitalization increased in the current and prior year; however, Phoenix Life may have less flexibility to pay dividends to the parent company if we experience declines in the future. As of June 30, 2012, we had $964.2 million of statutory capital, surplus and asset valuation reserve (“AVR”). Our estimated RBC ratio was in excess of 200% at Phoenix Life.

Our principal needs at the holding company level are debt service (net of amounts due on bonds repurchased), income taxes and operating expenses. Interest expense on senior unsecured bonds for the six months ended June 30, 2012 and 2011 was $9.6 million and $9.6 million, respectively. As of June 30, 2012, future minimum annual principal payments on senior unsecured bonds are $252.8 million in 2032.

Life Companies

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

Historically, our Life Companies have used cash flow from operations and investing activities to fund liquidity requirements. Their principal cash inflows from life insurance and annuities activities come from premiums, annuity deposits and charges on insurance policies and annuity contracts. In the case of Phoenix Life, cash inflows also include dividends, distributions and other payments from subsidiaries. Principal cash inflows from investing activities result from repayments of principal, proceeds from maturities, sales of invested assets and investment income. The principal cash inflows from our discontinued group accident and health reinsurance operations come from our reinsurance, recoveries from other retrocessionaires and investing activities.

62

Aggregate life surrenders in 2011 were 6.6% of related reserves, but improved in the six months ended June 30, 2012, dropping to 5.9%. Cash, treasuries and agency mortgage-backed securities accounted for 9.3% of fixed income investments as of June 30, 2012, as compared with 8.7% at year end 2011. A strong liquidity profile remains a priority for the Company, but as financial markets and the economy continue to improve the size and composition of this liquid asset portfolio will change to better meet the needs of the Company. These actions, along with resources the Company devotes to monitoring and managing surrender activity, are key components of liquidity management within the Company.

The primary liquidity risks regarding cash inflows from the investing activities of our Life Companies are the risks of default by debtors, interest rate and other market volatility and potential illiquidity of investments. We closely monitor and manage these risks.

We believe that the existing and expected sources of liquidity for our Life Companies are adequate to meet both current and anticipated needs.

Ratings

Rating agencies assign Phoenix Life financial strength ratings and assign the holding company debt ratings based in each case on their opinions of the relevant company’s ability to meet its financial obligations.

On January 13, 2012, A.M. Best Company, Inc. affirmed our financial strength rating of B+ and our senior debt rating of bb-. They changed their outlook on our ratings from stable to positive. On February 8, 2011, A.M. Best Company, Inc. affirmed our financial strength rating of B+ and our senior debt rating of bb-. They changed their outlook on our ratings from negative to stable.

On December 16, 2011, Moody’s Investor Services affirmed our financial strength rating of Ba2 and our senior debt rating of B3. They changed their outlook on our ratings from stable to positive.

On April 5, 2012, Standard & Poor’s affirmed our financial strength rating of BB- and raised our senior debt rating to B- from CCC+. They maintained their stable outlook on our ratings. On March 24, 2011, Standard & Poor’s affirmed our financial strength rating of BB- and our senior debt rating of CCC+. They changed their outlook on our ratings from negative to stable.

The financial strength and debt ratings as of August 6, 2012 were as follows:

	Financial Strength Rating		Senior Debt Rating of
Rating Agency	of Phoenix Life	Outlook	The Phoenix Companies, Inc.	Outlook
A.M. Best Company, Inc.	B+	Positive	bb-	Positive
Moody’s	Ba2	Positive	B3	Positive
Standard & Poor’s	BB-	Stable	B-	Stable

Reference in this report to any credit rating is intended for the limited purposes of discussing or referring to changes in our credit ratings or aspects of our liquidity or costs of funds. Such reference cannot be relied on for any other purposes, or used to make any inference concerning future performance, future liquidity or any future credit rating.

63

Consolidated Financial Condition

Consolidated Balance Sheet:					Increase (decrease) and
($ in millions)	June 30,		Dec 31,		percentage change
	2012		2011		2012 vs. 2011
ASSETS
Available-for-sale debt securities, at fair value	$	12,335.3	$	11,890.0	$	445.3	4%
Available-for-sale equity securities, at fair value		42.1		35.7		6.4	18%
Limited partnerships and other investments		618.5		601.3		17.2	3%
Policy loans, at unpaid principal balances		2,362.4		2,379.3		(16.9)	(1%)
Derivative instruments		186.6		174.8		11.8	7%
Fair value option investments		87.0		86.6		0.4	NM
Total investments		15,631.9		15,167.7		464.2	3%
Cash and cash equivalents		248.9		194.3		54.6	28%
Accrued investment income		186.6		175.6		11.0	6%
Receivables		422.5		415.1		7.4	2%
Deferred policy acquisition costs		1,076.0		1,162.8		(86.8)	(7%)
Deferred income taxes		91.7		118.2		(26.5)	(22%)
Other assets		156.8		164.6		(7.8)	(5%)
Discontinued operations assets		43.6		69.2		(25.6)	(37%)
Separate account assets		3,336.8		3,817.6		(480.8)	(13%)
Total assets	$	21,194.8	$	21,285.1	$	(90.3)	NM
LIABILITIES
Policy liabilities and accruals	$	13,040.1	$	12,981.1	$	59.0	NM
Policyholder deposit funds		2,767.1		2,429.4		337.7	14%
Indebtedness		426.9		426.9		—	NM
Other liabilities		642.7		613.8		28.9	5%
Discontinued operations liabilities		34.6		58.3		(23.7)	(41%)
Separate account liabilities		3,336.8		3,817.6		(480.8)	(13%)
Total liabilities		20,248.2		20,327.1		(78.9)	NM
STOCKHOLDERS’ EQUITY
Common stock and additional paid in capital		2,632.3		2,631.8		0.5	NM
Accumulated other comprehensive loss		(124.9)		(134.8)		9.9	7%
Accumulated deficit		(1,380.8)		(1,359.5)		(21.3)	(2%)
Treasury stock		(180.0)		(179.5)		(0.5)	NM
Total stockholders’ equity		946.6		958.0		(11.4)	(1%)
Total liabilities and stockholders’ equity	$	21,194.8	$	21,285.1	$	(90.3)	NM

———————

Not meaningful (NM)

June 30, 2012 compared with December 31, 2011

Assets

The increase in total investments was the result of purchases of securities associated with positive cash flow generated by continued sales of fixed indexed annuities. In addition, limited partnerships and other investments increased primarily as a result of private equity valuations. Partially offsetting these increases was a decline in policy loans outstanding.

Deferred policy acquisition costs decreased primarily related to universal life as a result of amortization during the six months ended June 30, 2012. The deferred policy acquisition cost balance associated with the fixed annuities increased related to the deferral of commissions on sales of our fixed indexed annuities, partially offset by amortization of previously deferred expenses. The table below presents deferred policy acquisition cost by product.

64

Composition of Deferred Policy Acquisition Costs					Increase (decrease) and
by Product:	June 30,		Dec 31,		percentage change
($ in millions)	2012		2011		2012 vs. 2011
Variable universal life	$	149.5	$	158.0	$	(8.5)	(5%)
Universal life		245.1		333.3		(88.2)	(26%)
Variable annuities		127.0		135.9		(8.9)	(7%)
Fixed annuities		154.6		131.3		23.3	18%
Traditional life		399.8		404.3		(4.5)	(1%)
Total deferred policy acquisition costs	$	1,076.0	$	1,162.8	$	(86.8)	(7%)

Discontinued assets and liabilities declined as a result of the commutation of certain contracts during the second quarter of 2012.

Separate accounts decreased as a result of the transfer of pension assets from a Phoenix separate account to the direct control of the plan’s trustee. Variable annuity surrenders and lower market performance also contributed to the decline.

Liabilities and Stockholders’ Equity

Policyholder deposit funds increased during the six months ended June 30, 2012 primarily as a result of continued sales growth of fixed indexed annuities as illustrated in the table below entitled “Annuity Funds on Deposit.”

The decrease in total stockholders’ equity was primarily a result of the net loss recognized for the quarter. The net loss was partially offset by a decrease in accumulated other comprehensive loss related to appreciation of investments offset by an increase in the projected benefit obligation on the employee benefit plan.

Funds on Deposit

Annuity Funds on Deposit:	Three Months Ended				Six Months Ended
($ in millions)	June 30,				June 30,
	2012		2011		2012		2011
Deposits	$	196.4	$	191.3	$	423.7	$	396.6
Performance and interest credited		(72.0)		50.5		190.3		211.9
Fees		(14.0)		(14.2)		(28.9)		(28.6)
Benefits and surrenders		(160.7)		(139.6)		(322.0)		(291.5)
Change in funds on deposit		(50.3)		88.0		263.1		288.4
Funds on deposit, beginning of period		4,808.8		4,283.7		4,495.4		4,083.3
Annuity funds on deposit, end of period	$	4,758.5	$	4,371.7	$	4,758.5	$	4,371.7

Three and six months ended June 30, 2012 compared with three and six months ended June 30, 2011

Annuity funds on deposit decreased $50.3 million during the three months ended June 30, 2012 and increased $88.0 million during the three months ended June 30, 2011. The decrease in the second quarter of 2012 reflected surrenders of variable annuity contracts and lower market performance partially offset by deposits from sales of fixed indexed annuity contracts. This compared with the increase in the second quarter of 2011 that reflected positive market performance.

Annuity funds on deposit increased $263.1 million and $288.4 million during the six months ended June 30, 2012 and 2011, respectively. The increase in funds during the six months ended June 30, 2012 and 2011 were both a result of deposits from sales of fixed indexed annuity contracts and positive market performance partially offset by variable annuity surrenders.

65

Variable Universal Life Funds on Deposit:	Three Months Ended				Six Months Ended
($ in millions)	June 30,				June 30,
	2012		2011		2012		2011
Deposits	$	20.1	$	22.9	$	42.2	$	47.4
Performance and interest credited		(33.2)		9.0		62.9		61.9
Fees and cost of insurance		(19.1)		(20.9)		(39.8)		(42.4)
Benefits and surrenders		(26.8)		(34.8)		(68.4)		(81.5)
Change in funds on deposit		(59.0)		(23.8)		(3.1)		(14.6)
Funds on deposit, beginning of period		1,075.0		1,160.8		1,019.1		1,151.6
Variable universal life funds on deposit, end of period	$	1,016.0	$	1,137.0	$	1,016.0	$	1,137.0

Three and six months ended June 30, 2012 compared with three and six months ended June 30, 2011

Variable universal life funds on deposit decreased $59.0 million and $23.8 million during the three months ended June 30, 2012 and 2011, respectively. The decrease in the second quarter of 2012 was primarily a result of surrenders and negative market performance as compared with the decrease during second quarter of 2011 that had positive market performance which partially offset impact of surrenders.

Variable universal life funds on deposit decreased $3.1 million and $14.6 million during the six months ended June 30, 2012 and 2011, respectively. The decrease in 2012 as compared with 2011 as positive market performance was offset by surrenders and death benefits.

Universal Life Funds on Deposit:	Three Months Ended				Six Months Ended
($ in millions)	June 30,				June 30,
	2012		2011		2012		2011
Deposits	$	89.4	$	100.6	$	178.7	$	190.8
Interest credited		19.0		20.5		38.0		40.8
Fees and cost of insurance		(94.0)		(103.2)		(190.3)		(206.5)
Benefits and surrenders		(25.7)		(30.1)		(54.4)		(60.5)
Change in funds on deposit		(11.3)		(12.2)		(28.0)		(35.4)
Funds on deposit, beginning of period		1,836.1		1,895.7		1,852.8		1,918.9
Universal life funds on deposit, end of period	$	1,824.8	$	1,883.5	$	1,824.8	$	1,883.5

Three and six months ended June 30, 2012 compared with three and six months ended June 30, 2011

Universal life funds on deposit decreased $11.3 million and $12.2 million during the three months ended June 30, 2012 and 2011, respectively. Universal life funds on deposit also decreased for the six months ended June 30, 2012 and 2011. The decrease during these periods was primarily a result of surrenders exceeding lower deposits as a result of minimal new sales.

Contractual Obligations and Commercial Commitments

As part of its normal investment activities, the Company enters into agreements to fund limited partnerships that make debt and equity investments. As of June 30, 2012, the Company had unfunded commitments of $210.0 million under such agreements, of which $68.8 million is expected to be funded by December 31, 2012.

In addition, the Company enters into agreements to purchase private placement investments. At June 30, 2012, the Company had open commitments of $85.4 million under such agreements which are expected to be funded by December 31, 2012.

Commitments Related to Recent Business Combinations

Under the terms of purchase agreements related to certain business combinations, we are subject to certain contractual obligations, commitments and other purchase arrangements as described in our 2011 Annual Report on Form 10-K.

66

Obligations Related to Pension and Postretirement Employee Benefit Plans

As of June 30, 2012, there were no material changes to our obligations related to pension and postretirement employee benefit plans as described in our 2011 Annual Report on Form 10-K.

We made contributions to the pension plan of $3.4 million in the first quarter of 2012 and $3.6 million in the second quarter of 2012. We made contributions totaling $17.4 million during 2011. Currently, we expect to make additional contributions to the plans of approximately $9.4 million over the next six months. However, on July 6, 2012, the Surface Transportation Extension Act of 2012, Part II, was enacted into law and is effective immediately. The law includes certain pension funding stabilization provisions. We are evaluating its impact.

Effective March 31, 2010, all benefit accruals under our funded and unfunded defined benefit plans were frozen.

See Note 13 to our consolidated financial statements in this Form 10-Q for additional information.

Off-Balance Sheet Arrangements

As of June 30, 2012 and December 31, 2011, we did not have any significant off-balance sheet arrangements as defined by Item 303(a)(4)(ii) of SEC Regulation S-K.

Reinsurance

We maintain reinsurance agreements to limit potential losses, reduce exposure to larger risks and provide additional capacity for growth. We remain liable to the extent that reinsuring companies may not be able to meet their obligations under reinsurance agreements in effect. Failure of the reinsurers to honor their obligations could result in losses to the Company. Since we bear the risk of nonpayment, we evaluate the financial condition of our reinsurers and monitor concentrations of credit risk.

Statutory Capital and Surplus

Phoenix Life’s statutory basis capital and surplus (including AVR) increased from $845.7 million at December 31, 2011 to $958.8 million at June 30, 2012. The principal factor resulting in this increase was consolidated net income of $134.7 million, offset by $39.0 million of dividends paid during 2012.

Enterprise Risk Management

We have a comprehensive, enterprise-wide risk management program. Our Chief Risk Officer reports to the Chief Financial Officer and monitors our risk management activities. The Chief Risk Officer provides regular reports to our Board of Directors without the presence of other members of management. Our risk management governance consists of several management committees to oversee and address issues pertaining to all our major risks—operational, market and product—as well as capital management. In all cases, these committees include one or more of our Chief Executive Officer, Chief Financial Officer, Chief Investment Officer and Chief Risk Officer.

See our 2011 Annual Report on Form 10-K for information regarding our enterprise risk management. There were no material changes in our exposure to operational or market risk at June 30, 2012 compared with December 31, 2011.

Item 3.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

For information about our management of market risk, see the Enterprise Risk Management section of Management’s Discussion and Analysis of Financial Condition and Results of Operations in our 2011 Annual Report on Form 10-K. There were no material changes in our market risk exposure at June 30, 2012 compared with December 31, 2011.

67

Item 4.

CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

We have carried out an evaluation under the supervision and with the participation of our management, including our Chief Executive Officer and our Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures. There are inherent limitations to the effectiveness of any system of disclosure controls and procedures, including the possibility of human error and the circumvention or overriding of the controls and procedures. Accordingly, even effective disclosure controls and procedures can only provide reasonable assurance of achieving their control objectives. Based upon our evaluation, these officers have concluded that, as of June 30, 2012, our disclosure controls and procedures (as defined in Rule 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) were effective to provide reasonable assurance that information required to be disclosed in the reports we file and submit under the Exchange Act is recorded, processed, summarized and reported within the time period specified in the SEC’s rules and forms and that such information is accumulated and communicated to our management, including our Chief Executive Officer and our Chief Financial Officer, as appropriate, to allow to allow timely decisions regarding required disclosures.

Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting during the quarter ended June 30, 2012 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

68

PART II. OTHER INFORMATION

Item 1.

LEGAL PROCEEDINGS

We are regularly involved in litigation and arbitration, both as a defendant and as a plaintiff. In addition, various 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, laws governing the activities of broker-dealers and other laws and regulations affecting our SEC registered products. It is not feasible to predict or determine the ultimate outcome of all legal or regulatory proceedings or to provide reasonable ranges of potential losses. We believe that the outcomes of our litigation and regulatory matters are not likely, either individually or in the aggregate, to have a material adverse effect on our consolidated financial statements. However, given the large or indeterminate amounts sought in certain of these matters and the inherent unpredictability of litigation and regulatory matters, it is possible that an adverse outcome in certain matters could, from time to time, have a material adverse effect on our financial condition, liquidity or consolidated financial statements in particular quarterly or annual periods.

On June 5, 2012, Wilmington Savings Fund Society, FSB, as successor in interest to Christiana Bank & Trust Company and as trustee of 60 unnamed trusts, filed a complaint against PHL Variable, Phoenix Life and The Phoenix Companies, Inc. in the United States District Court for the Central District of California (Case No. CV12-04926). The plaintiffs allege that the Company promoted certain policy sales knowing that the policies would ultimately be owned by investors and then challenging the validity of these policies or denying claims submitted on same. Plaintiffs are seeking damages, including punitive and treble damages, attorneys’ fees and a declaratory judgment. We have meritorious defenses against the lawsuit and we intend to vigorously defend against these claims. The outcome of this litigation and any potential losses are uncertain.

See Item 1A, “Risk Factors” in Part I, Item 1A of our 2011 Annual Report on Form 10-K and Note 18 to our consolidated financial statements in this Form 10-Q for additional information.

Item 1A.

RISK FACTORS

The Company is subject to risks and uncertainties, any of which could have a significant or material adverse effect on our business, financial condition, liquidity or consolidated financial statements. Before investing in our securities, you should carefully consider the risk factor included below and the risk factors disclosed in Part I, Item 1A of our 2011 Annual Report on Form 10-K. The risks described herein and therein are not the only ones we face. This information should be considered carefully together with the other information contained in this report and the other reports and materials the Company files with the SEC.

Except as set forth below, there were no material changes to the Company’s risk factors disclosed in Part I, Item 1A of our 2011 Annual Report on Form 10-K:

The Company may not realize the anticipated benefits of its anticipated reverse stock split.

On June 28, 2012, the Company announced a 1-for-20 reverse stock split of Phoenix common stock, which the Company expects will be effective after the close of trading on August 10, 2012. Some of the benefits that the Company expects to derive from the reverse stock split may not be realized or maintained by the Company.

The market price of the Company’s common stock will continue to be based, in part, on the Company’s performance and other factors unrelated to the number of shares outstanding. If the reverse stock split is affected and the market price of Company common stock subsequently declines, the percentage decline may be greater than would occur in the absence of the reverse stock split. The market price of Company common stock will, however, continue to be based on the Company’s performance, financial results, market conditions, the market perception of the Company’s business and other factors that are unrelated to the number of shares of common stock outstanding. As a result, there can be no assurance that the market price of Company common stock will increase following the reverse stock split or will not decrease in the future. Accordingly, the total market capitalization of Company common stock after the reverse stock split may be lower than the total market capitalization before the reverse stock split. In addition, in the future, the market price of Company common stock following the reverse stock split may not exceed or remain higher than the market price prior to the reverse stock split.

69

The liquidity of Company common stock could also be adversely affected by the reduced number of shares that would be outstanding after the reverse stock split. In addition, there can be no assurance that the reverse stock split will result in a per share price that will attract institutional and other investors or satisfy such investors’ investing guidelines.

Item 2.

UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

(a)

Not applicable.

(b)

Not applicable.

(c)

Not applicable.

Item 3.

DEFAULTS UPON SENIOR SECURITIES

Not applicable.

Item 4.

MINE SAFETY DISCLOSURES

Not applicable.

Item 5.

OTHER INFORMATION

(a)

Not applicable.

(b)

No material changes.

Item 6.

EXHIBITS

Exhibit
3.1	Amendment to The Phoenix Companies, Inc. Bylaws effective May 15, 2012 (incorporated by reference to Exhibit 3.1 to The Phoenix Companies, Inc. Current Report on Form 8-K filed May 18, 2012)
3.2	By-Laws of The Phoenix Companies, Inc., as amended May 15, 2012*
12	Ratio of Earnings to Fixed Charges*
31.1	Certification of James D. Wehr, Chief Executive Officer, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002*
31.2	Certification of Peter A. Hofmann, Chief Financial Officer, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002*
32	Certification by James D. Wehr, Chief Executive Officer and Peter A. Hofmann, Chief Financial Officer, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002*
101.INS	XBRL Instance Document*
101.SCH	XBRL Taxonomy Extension Schema Document*
101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document*
101.LAB	XBRL Taxonomy Extension Label Linkbase Document*

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101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document*
101.DEF	XBRL Taxonomy Extension Definition Linkbase Document*
*	Filed herewith

In accordance with Rule 406T of Regulation S-T, the XBRL related information in Exhibit 101 to the Quarterly Report on Form 10-Q shall not be deemed to be “filed” for purposes of Section 18 of the Exchange Act, or otherwise subject to the liability of that section, and shall not be part of any registration statement or other document filed under the Securities Act or the Exchange Act, except as shall be expressly set forth by specific reference in such filing.

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

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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.
Date:  August 9, 2012	By:	/s/ Peter A. Hofmann
	Peter A. Hofmann
	Senior Executive Vice President and Chief Financial Officer

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EX-3.2

EXHIBIT 3.2

BY LAWS

OF

THE PHOENIX COMPANIES, INC.

As Adopted on November 13, 2000

and As Amended on June 5, 2003

and As Further Amended on May 15, 2012

BYLAWS

OF

THE PHOENIX COMPANIES, INC.

ARTICLE I - STOCKHOLDERS
Section 1.01	Annual Meeting	1
Section 1.02	Special Meetings	1
Section 1.03	Notice of Meetings; Waiver	1
Section 1.04	Quorum	2
Section 1.05	Voting	2
Section 1.06	Voting by Ballot	3
Section 1.07	Adjournment	3
Section 1.08	Proxies	3
Section 1.09	Organization; Procedure	4
Section 1.10	Notice of Stockholder Business and Nominations	4
Section 1.11	Inspectors of Elections	6
Section 1.12	Opening and Closing of Polls	7
Section 1.13	No Stockholder Action by Written Consent	7
ARTICLE II - BOARD OF DIRECTORS
Section 2.01	General Powers	8
Section 2.02	Number of Directors	8
Section 2.03	Classified Board of Directors; Election of Directors	8
Section 2.04	Annual and Regular Meetings	8
Section 2.05	Special Meetings; Notice	9
Section 2.06	Quorum; Voting	9
Section 2.07	Adjournment	9
Section 2.08	Action Without a Meeting	9
Section 2.09	Regulations; Manner of Acting	9
Section 2.10	Action by Telephonic Communications	10
Section 2.11	Resignations	10
Section 2.12	Removal of Directors	10
Section 2.13	Vacancies and Newly Created Directorships	10
Section 2.14	Compensation	10
Section 2.15	Reliance on Accounts and Reports, etc	10

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ARTICLE III – COMMITTEES
Section 3.01	Standing Committees	11
Section 3.02	Designation of Members and Chairpersons of Committees	11
Section 3.03	Notices of Times of Meetings of Committees and Presiding Officers	11
Section 3.04	Executive Committee	12
Section 3.05	Compensation Committee	12
Section 3.06	Audit Committee	12
Section 3.07	Other Committees	12
Section 3.08	Powers	12
Section 3.09	Proceedings	13
Section 3.10	Quorum and Manner of Acting	13
Section 3.11	Actions by Telephone Communications	13
Section 3.12	Absent or Disqualified Members	13
Section 3.13	Resignations	13
Section 3.14	Removal	13
Section 3.15	Vacancies	13
ARTICLE IV – OFFICERS
Section 4.01	Number	14
Section 4.02	Election	14
Section 4.03	Salaries	14
Section 4.04	Removal and Resignation; Vacancies	14
Section 4.05	Authority and Duties of Officers	14
Section 4.06	The Chairperson	14
Section 4.07	The Vice Chairperson	14
Section 4.08	The Chief Executive Officer	15
Section 4.09	The President	15
Section 4.10	The Vice Presidents	15
Section 4.11	The Secretary	16
Section 4.12	The Chief Financial Officer	16
Section 4.13	The Treasurer	17
Section 4.14	Additional Officers	17
ARTICLE V – CAPITAL STOCK
Section 5.01	Certificates of Stock; Uncertified Shares	18
Section 5.02	Signatures; Facsimile	18
Section 5.03	Lost, Stolen or Destroyed Certificates	18
Section 5.04	Transfer of Stock	18
Section 5.05	Record Date	19
Section 5.06	Registered Stockholders	19
Section 5.07	Transfer Agent and Registrar	19

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ARTICLE VI – INDEMNIFICATION
Section 6.01	Nature of Indemnity	20
Section 6.02	Successful Defense	20
Section 6.03	Determination that Indemnification is Proper	21
Section 6.04	Advance Payment of Expenses	21
Section 6.05	Procedure for Indemnification of Directors and Officers	21
Section 6.06	Survival; Preservation of Other Rights	22
Section 6.07	Insurance	22
Section 6.08	Severability	22
ARTICLE VII – OFFICES
Section 7.01	Initial Registered Office	23
Section 7.02	Other Offices	23
ARTICLE VIII – GENERAL PROVISIONS
Section 8.01	Dividends	23
Section 8.02	Execution of Instruments	23
Section 8.03	Corporate Indebtedness	23
Section 8.04	Deposits	24
Section 8.05	Checks, Drafts, etc.	24
Section 8.06	Sale, Transfer, etc. of Securities	24
Section 8.07	Voting as Stockholder	24
Section 8.08	Fiscal Year	24
Section 8.09	Seal	24
Section 8.10	Books and Records; Inspection	25
ARTICLE IX – AMENDMENT OF BYLAWS
Section 9.01	Amendment	25
ARTICLE X – CONSTRUCTION
Section 10.01	Construction	25

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BY LAWS

OF

THE PHOENIX COMPANIES, INC.

As adopted on November 13, 2000

and As Amended on June 5, 2003

ARTICLE I

STOCKHOLDERS

Section 1.01. Annual Meeting. The annual meeting of the stockholders of the Corporation for the election of Directors and for the transaction of such other business as properly may come before such meeting shall be held at such place, either within or without the State of Delaware, or, within the sole discretion of the Board of Directors, by remote electronic communication technologies and at such date and at such time, as may be fixed from time to time by resolution of the Board of Directors and set forth in the notice or waiver of notice of the meeting.

Section 1.02. Special Meetings. Special meetings of the stockholders may be called at any time by the Chief Executive Officer (or, in the event of his or her absence or disability, by the President or, in the event of his or her absence or disability, the Executive or Senior Vice Presidents in order designated by the Board of Directors, but if not so designated, then in the order of their rank), or by the Board of Directors. Such special meetings of the stockholders shall be held at such places, within or without the State of Delaware, or, within the sole discretion of the Board of Directors, by remote electronic communication technologies, as shall be specified in the respective notices or waivers of notice thereof. Any power of stockholders of the Corporation to call a special meeting is specifically denied.

Section 1.03. Notice of Meetings; Waiver.

(a)           The Secretary or any Assistant Secretary shall cause written notice of the place, if any, date and hour of each meeting of the stockholders, and, in the case of a special meeting, the purpose or purposes for which such meeting is called, and the means of remote communications, if any, by which stockholders and proxy holders may be deemed to be present in person and vote at such meeting, to be given personally, by mail or by electronic transmission, not fewer than ten (10) nor more than sixty (60) days prior to the meeting, to each stockholder of record entitled to vote at such meeting. If such notice is mailed, it shall be deemed to have been given to a stockholder when deposited in the United States mail, postage prepaid, directed to the stockholder at his or her address as it appears on the record of stockholders of the Corporation, or, if a stockholder shall have filed with the Secretary of the Corporation a written request that notices to such stockholder be mailed to some other address, then directed to such stockholder at such other address. Such further notice shall be given as may be required by law.

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(b)A written waiver of any notice of any annual or special meeting signed by the person entitled thereto, or a waiver by electronic transmission by the person entitled to notice, shall be deemed equivalent to notice. Neither the business to be transacted at, nor the purpose of, any regular or special meeting of the stockholders need be specified in a written waiver of notice. Attendance of a stockholder at a meeting of stockholders shall constitute a waiver of notice of such meeting, except when the stockholder attends a meeting for the express purpose of objecting, at the beginning of the meeting, to the transaction of any business on the ground that the meeting is not lawfully called or convened.

(c)For notice given by electronic transmission to a stockholder to be effective, such stockholder must consent to the Corporation's giving notice by that particular form of electronic transmission. A stockholder may revoke consent to receive notice by electronic transmission by written notice to the Corporation. A stockholder's consent to notice by electronic transmission is automatically revoked if the Corporation is unable to deliver two consecutive electronic transmission notices and such inability becomes known to the Secretary, Assistant Secretary, the transfer agent or other person responsible for giving notice.

(d)Notices are deemed given (i) if by facsimile, when faxed to a number where the stockholder has consented to receive notice; (ii) if by electronic mail, when mailed electronically to an electronic mail address at which the stockholder has consented to receive such notice; (iii) if by posting on an electronic network (such as a website or chatroom) together with a separate notice to the stockholder of such specific posting, upon the later to occur of (A) such posting or (B) the giving of the separate notice of such posting; or (iv) if by any other form of electronic communication, when directed to the stockholders in the manner consented to by the stockholder.

(e)If a stockholder meeting is to be held via electronic communications and stockholders will take action at such meeting, the notice of such meeting must: (i) specify the means of remote communications, if any, by which stockholders and proxy holders may be deemed to be present and vote at such meeting; and (ii) provide the information required to access the stockholder list. A waiver of notice may be given by electronic transmission.

Section 1.04. Quorum. Except as otherwise required by law or by the Certificate of Incorporation, the presence in person or by proxy of the holders of record of one-third of the shares entitled to vote at a meeting of stockholders shall constitute a quorum for the transaction of business as such meeting.

Section 1.05. Voting. If, pursuant to Section 5.05 of these Bylaws, a record date has been fixed, every holder of record of shares entitled to vote at a meeting of stockholders shall be entitled to one (1) vote for each share outstanding in his or her name on the books of the Corporation at the close of business on such record date. If no record date has been fixed, then every holder of record of shares entitled to vote at a meeting of stockholders shall be entitled to one (1) vote for each share of stock standing in his or her name on the books of the Corporation at the close of business on the day next preceding the day on which notice of the meeting is given, or, if notice is waived, at the close of business on the day next preceding the day on which the meeting is held. Except as otherwise required by law, the Certificate of Incorporation or these Bylaws, the vote of a majority of the shares represented in person or by proxy at any meeting at which a quorum is present shall be sufficient for the transaction of any business at such meeting.

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Section 1.06. Voting by Ballot. No vote of the stockholders on an election of Directors need be taken by written ballot or by electronic transmission unless otherwise required by law. Any vote not required to be taken by ballot or by electronic transmission may be conducted in any manner approved by the Board of Directors prior to the meeting at which such vote is taken.

Section 1.07. Adjournment. If a quorum is not present at any meeting of the stockholders, the stockholders present in person or by proxy shall have the power to adjourn any such meeting from time to time until a quorum is present. Notice of any adjourned meeting of the stockholders of the Corporation need not be given if the place, if any, date and hour thereof are announced at the meeting at which the adjournment is taken, provided, however, that if the adjournment is for more than thirty (30) days, or if after the adjournment a new record date for the adjourned meeting is fixed pursuant to Section 5.05 of these Bylaws, a notice of the adjourned meeting, conforming to the requirements of Section 1.03 hereof, shall be given to each stockholder of record entitled to vote at such meeting. At any adjourned meeting at which a quorum is present, any business may be transacted that might have been transacted on the original date of the meeting.

Section 1.08. Proxies. Any stockholder entitled to vote at any meeting of the stockholders may authorize another person or persons to vote at any such meeting and express such consent or dissent for him or her by proxy. A stockholder may authorize a valid proxy by executing a written instrument signed by such stockholder, or by causing his or her signature to be affixed to such writing by any reasonable means including, but not limited to, by facsimile signature, or by transmitting or authorizing the transmission if a telegram, cablegram or other means of electronic transmission to the person designated as the holder of the proxy, a proxy solicitation firm or a like authorized agent. No such proxy shall be voted or acted upon after the expiration of one (1) year from the date of such proxy, unless such proxy provides for a longer period. Every proxy shall be revocable at the pleasure of the stockholder executing it, except in those cases where applicable law provides that a proxy shall be irrevocable. A stockholder may revoke any proxy which is not irrevocable by attending the meeting and voting in person or by filing with the Secretary either an instrument in writing revoking the proxy or another duly executed proxy bearing a later date. Proxies by telegram, cablegram or other electronic transmission must either set forth or be submitted with information from which it can be determined that the telegram, cablegram or other electronic transmission was authorized by the stockholder. Any copy, facsimile telecommunication or other reliable reproduction of a writing or transmission created pursuant to this section may be substituted or used in lieu of the original writing or transmission for any and all purposes for which the original writing or transmission could be used, provided that such copy, facsimile telecommunication or other reproduction shall be a complete reproduction of the entire original writing or transmission.

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Section 1.09 Organization; Procedure. At every meeting of stockholders the presiding officer shall be the Chairperson or, in the event of his or her absence or disability, the Vice Chairperson, or in the event of his or her absence or disability, the Chief Executive Officer or the President or in the event of their absence or disability, the Executive or Senior Vice Presidents in order designated by the Board of Directors, but if not so designated, then in the order of their rank. The Secretary, or in the event of his or her absence or disability, an Assistant Secretary, if any, or if there be no Assistant Secretary, in the absence of the Secretary, an appointee of the presiding officer shall act as Secretary of the meeting. The order of business and all other matters of procedure at every meeting of the stockholders may be determined by such presiding officer.

Section 1.10. Notice of Stockholder Business and Nominations.

(a)           Annual Meetings of Stockholders.

(i)           Nomination of persons for election to the Board of Directors of the Corporation and the proposal of business to be considered by the stockholders may be made at an annual meeting of stockholders (A) by or at the direction of the Board of Directors or the Chairperson of the Board of Directors or, in the event of his or her absence or disability, the Vice Chairperson, or, in the event of his or her absence or disability, the Chief Executive Officer or the President, or, in the event of their absence or disability, the Executive or Senior Vice Presidents in the order designated by the Board of Directors, but if not so designated, then in order of their rank, or (B) by any stockholder of the Corporation who is entitled to vote at the meeting, who complies with the notice procedures set forth in clauses (ii) and (iii) of this paragraph and who was a stockholder of record at the time such notice is delivered to the Secretary of the Corporation.

(ii)          For nominations or other business to be properly brought before an annual meeting by a stockholder, pursuant to clause (B) of paragraph (a)(i) of this Section 1.10, the stockholder must have given timely notice thereof in writing or by electronic transmission to the Secretary of the Corporation. To be timely, a stockholder's notice shall be delivered to the Secretary at the principal executive offices of the Corporation not fewer than ninety (90) days nor more than one hundred twenty (120) days prior to the first anniversary of the preceding year's annual meeting and in any event at least forty-five (45) days prior to the first anniversary of the date on which the registrant first mailed its proxy materials for the prior year's annual meeting of shareholders; provided that if the date of the annual meeting is advanced by more than thirty (30) days or delayed by more than seventy (70) days from such anniversary date, notice by the stockholder to be timely must be so delivered not earlier than one hundred twenty (120) days prior to such annual meeting and not later than the close of business on the later of the ninetieth day prior to such annual meeting or the tenth day following the date on which public announcement of the date of such meeting is first made. In no event shall the adjournment of an annual meeting commence a new time period for the giving of a stockholder's notice as described above. Such stockholder's notice shall set forth (A) as to each person whom the stockholder proposes to nominate for election or reelection as a Director, all information relating to such person that is required to be disclosed in solicitations of proxies for election of Directors, or is otherwise required, in each case pursuant to Regulation 14A of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and Rule 14a-11 thereunder, or any successor provisions, including such person's written consent to being named in the proxy statement as a nominee and to serving as a Director if elected; (B) as to any other business that the stockholder proposes to bring before the meeting, a brief description of the business desired to be brought before the meeting, the reasons for conducting such business at the meeting and any material interest in such business of such stockholder and of any beneficial owner on whose behalf the proposal is made; and (C) as to the stockholder giving the notice and any beneficial owner on whose behalf the nomination or proposal is made (1) the name and address of such stockholder, as they appear on the Corporation's books, and of such beneficial owner and (2) the class and number of shares of the Corporation which are owned beneficially and of record by such stockholder and such beneficial owner.

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(iii)         Notwithstanding anything in the second sentence of paragraph (a)(ii) of this Section 1.10 to the contrary, in the event that the number of Directors to be elected to the Board of Directors of the Corporation is increased and there is no public announcement naming all of the nominees for Director or specifying the size of the increased Board of Directors made by the Corporation at least one hundred (100) days prior to the first anniversary of the preceding year's annual meeting, a stockholder's notice under this paragraph shall also be considered timely, but only with respect to nominees for any new positions created by such increase, if it shall be delivered to the Secretary at the principal executive offices of the Corporation not later than the close of business on the tenth day following the day on which such public announcement is first made by the Corporation.

(b)          Special Meetings of Stockholders. Only such business as shall have been brought before the special meeting of the stockholders pursuant to the Corporation's notice of meeting pursuant to Section 1.03 of these Bylaws shall be conducted at such meeting. Nominations of persons for election to the Board of Directors may be made at a special meeting of stockholders at which Directors are to be elected pursuant to the Corporation's notice of meeting (1) by or at the direction of the Board of Directors or (2) by any stockholder of the Corporation who is entitled to vote at the meeting, who complies with the notice procedures set forth in this Section 1.10 and who is a stockholder of record at the time such notice is delivered to the Secretary of the Corporation. Nominations by stockholders of persons for election to the Board of Directors may be made at such special meeting of stockholders if the stockholder's notice as required by paragraph (a)(ii) of this Section 1.10 shall be delivered to the Secretary at the principal executive offices of the Corporation not earlier than the one hundred twentieth day prior to such special meeting or the tenth day following the date on which public announcement is first made of the date of the special meeting and of the nominees proposed by the Board of Directors to be elected as such meeting. In no event shall the adjournment of a special meeting commence a new time period for the giving of a stockholder's notice as described above.

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(c)           General.

(i)           Only persons who are nominated in accordance with the procedures set forth in this Section 1.10 shall be eligible to serve as Directors and only such business shall be conducted at a meeting of stockholders as shall have been brought before the meeting in accordance with the procedures set forth in this Section 1.10. Except as otherwise provided by law, the Certificate of Incorporation or these Bylaws, the Chairperson of the meeting shall have the power and duty to determine whether a nomination or any business proposed to be brought before the meeting was made in accordance with the procedures set forth in this Section 1.10 and, if any proposed nomination or business is not in compliance with this Section 1.10, to declare that such defective proposal or nomination shall be disregarded.

(ii)          For purposes of this Section 1.10, "public announcement" shall mean disclosure in a press release reported by the Dow Jones News Service, Associated Press or comparable national news service or in a document publicly filed by the Corporation with the Securities and Exchange Commission pursuant to Sections 13, 14 or 15(d) of the Exchange Act.

(iii)         Notwithstanding the foregoing provisions of this Section 1.10, a stockholder shall also comply with all applicable requirements of the Exchange Act and the rules and regulations thereunder with respect to the matters set forth in this Section 1.10. Nothing in this Section 1.10 shall be deemed to affect any rights (A) of stockholders to request inclusion of proposals in the Corporation's proxy statement pursuant to Rule 14a-8 under the Exchange Act, or (B) of the holders of any series of Preferred Stock, if any, to elect Directors if so provided under any applicable Preferred Stock Certificate of Designation (as defined in the Certificate of Incorporation).

Section 1.11. Inspectors of Elections. Preceding any meeting of the stockholders, the Board of Directors shall appoint one (1) or more persons to act as Inspectors of Elections, and may designate one (1) or more alternate inspectors. In the event no inspector or alternate is able to act, the person presiding at the meeting shall appoint one (1) or more inspectors to act at the meeting. Each inspector, before entering upon the discharge of the duties of an inspector, shall take and sign an oath faithfully to execute the duties of inspector with strict impartiality and according to the best of his or her ability. The inspector shall:

(a)ascertain the number of shares outstanding and the voting power of each;

(b)determine the shares represented at a meeting and the validity of proxies and ballots;

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(c)specify the information relied upon to determine the validity of electronic transmissions in accordance with Section 1.08 hereof;

(d)count all votes and ballots;

(e)determine and retain for a reasonable period a record of the disposition of any challenges made to any determination by the inspectors;

(f)certify his or her determination of the number of shares represented at the meeting, and his or her count of all votes and ballots;

(g)appoint or retain, if he or she so desires, other persons or entities to assist in the performance of the duties of inspector; and

(h)           when determining the shares represented and the validity of proxies and ballots, be limited to an examination of the proxies, any envelopes submitted with those proxies, any information provided in accordance with Section 1.08 of these Bylaws, ballots and the regular books and records of the Corporation. The inspector may consider other reliable information for the limited purpose of reconciling proxies and ballots submitted by or on behalf of banks, brokers or their nominees or a similar person which represent more votes than the holder of a proxy is authorized by the record owner to cast or more votes than the stockholder holds of record. If the inspector considers other reliable information as outlined in this section, the inspector, at the time of his or her certification pursuant to paragraph (f) of this section, shall specify the precise information considered, the person or persons from whom the information was obtained, when this information was obtained, the means by which the information was obtained, and the basis for the inspector's belief that such information is accurate and reliable.

Section 1.12. Opening and Closing of Polls. The date and time for the opening and the closing of the polls for each matter to be voted upon at a stockholder meeting shall be announced at the meeting. The inspector shall be prohibited from accepting any ballots, proxies or votes or any revocations thereof or changes thereto after the closing of the polls, unless the Court of Chancery upon application by a stockholder shall determine otherwise.

Section 1.13. No Stockholder Action by Written Consent. Effective as of the time the Common Stock shall be registered pursuant to the provisions of the Exchange Act, any action required or permitted to be taken by the stockholders of the Corporation must be effected at a duly called annual or special meeting of the stockholders of the Corporation, and the ability of the stockholders to consent in writing to the taking of any action is specifically denied.

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ARTICLE II

BOARD OF DIRECTORS

Section 2.01. General Powers. Except as may otherwise be provided by law, the Certificate of Incorporation or these Bylaws, the property, affairs and business of the Corporation shall be managed by or under the direction of the Board of Directors and the Board of Directors may exercise all the powers of the Corporation.

Section 2.02. Number of Directors. Subject to the rights of the holders of any class or series of Preferred Stock, if any, the number of Directors shall be fixed from time to time exclusively pursuant to a resolution adopted by a majority of the entire Board of Directors; provided, however, that the Board of Directors shall at no time consist of fewer than three (3) Directors.

Section 2.03. Classified Board of Directors; Election of Directors. The Directors of the Corporation, subject to the rights of the holders of shares of any class or series of Preferred Stock, shall be classified with respect to the time which they severally hold office, into three (3) classes, as nearly equal in number as possible, one class ("Class I") whose initial term expires at the 2002 annual meeting of stockholders, another class ("Class II") whose initial term expires at the 2003 annual meeting of stockholders, and another class ("Class III") whose initial term expires at the 2004 annual meeting of stockholders, with each class to hold office until its successors are elected and qualified. Except as otherwise provided in Sections 2.12 and 2.13 of these Bylaws, at each annual meeting of stockholders of the Corporation, and subject to the rights of holders of shares of any class or series of Preferred Stock, the successors of the class of Directors whose term expires at that meeting shall be elected to hold office for a term expiring at the annual meeting of stockholders held in the third year following the year of their election.

Section 2.04. Annual and Regular Meetings. The annual meeting of the Board of Directors for the purpose of electing officers and for the transaction of such other business as may come before the meeting shall be held as soon as reasonably practicable following adjournment of the annual meeting of the stockholders at the place of such annual meeting of the stockholders. Notice of such annual meeting of the Board of Directors need not be given. The Board of Directors from time to time may by resolution provide for the holding of regular meetings and fix the place (which may be within or without the State of Delaware) and the date and hour of such meetings. Notice of regular meetings need not be given, provided, however, that if the Board of Directors shall fix or change the time or place of any regular meeting, notice of such action shall be mailed promptly, or sent by telephone, including a voice messaging system or other system or technology designated to record and communicate messages, telegraph, facsimile, electronic mail or other electronic means, to each Director who shall not have been present at the meeting at which such action was taken, addressed to him or her at his or her usual place of business or to such other addresses as any Director may request by notice to the Secretary, or shall be delivered to him or her personally. Notice of such action need not be given to any Director who attends the first regular meeting after such action is taken without protesting the lack of notice to him or her, prior to or at the commencement of such meeting, or to any Director who submits a signed waiver of notice, whether before or after such meeting.

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Section 2.05. Special Meetings; Notice. Special meetings of the Board of Directors shall be held whenever called by the Chairperson or, in the event of his or her absence or disability, by the Vice Chairperson or, in the event of his or her absence or disability, by the Chief Executive Officer or, in the event of his or her absence or disability, by the President or, in the event of his or her absence, by the Executive or Senior Vice Presidents in the order designated by the Board of Directors, but if not so designated, then in order of their rank, at such place (within or without the State of Delaware), date and hour as may be specified in the respective notices or waivers of notice of such meetings. Special meetings of the Board of Directors also may be held whenever called by the Chairperson of the Executive Committee of the Board of Directors or by any three (3) Directors. Special meetings of the Board of Directors may be called on twenty-four (24) hours' notice, if notice is given to each Director personally or by telephone, including a voice messaging system, or other system or technology designed to record and communicate messages, telegraph, facsimile, electronic mail or other electronic means, or on five (5) days' notice, if notice is mailed to each Director, addressed to him or her at his or her usual place of business or to such other address as any Director may request by notice to the Secretary. Notice of any special meeting need not be given to any Director who attends such meeting without protesting the lack of notice to him or her, prior to or at the commencement of such meeting, or to any Director who submits a signed waiver of notice, whether before or after such meeting, and any business may be transacted thereat.

Section 2.06. Quorum; Voting. At all meetings of the Board of Directors, the presence of at least a majority of the total authorized number of Directors shall constitute a quorum for the transaction of business. Except as otherwise required by law, the vote of at least a majority of the Directors present at any meeting at which a quorum is present shall be the act of the Board of Directors.

Section 2.07. Adjournment. A majority of the Directors present, whether or not a quorum is present, may adjourn any meeting of the Board of Directors to another time or place. No notice need be given of any adjourned meeting unless the time and place of the adjourned meeting are not announced at the time of adjournment, in which case notice conforming to the requirements of Section 2.05 of these Bylaws shall be given to each Director.

Section 2.08. Action Without a Meeting. Any action required or permitted to be taken at any meeting of the Board of Directors may be taken without a meeting if all members of the Board of Directors consent thereto in writing or by electronic transmission, and such writing or writings or electronic transmissions are filed with the minutes of proceedings of the Board of Directors. Such filing shall be in paper form if the minutes are maintained in paper form and shall be in electronic form if the minutes are maintained in electronic form.

Section 2.09. Regulations; Manner of Acting. To the extent consistent with applicable law, the Certificate of Incorporation and these Bylaws, the Board of Directors may adopt such rules and regulations for the conduct of meetings of the Board of Directors and for the management of the property, affairs and business of the Corporation as the Board of Directors may deem appropriate. The Directors shall act only as a Board of Directors and the individual

Directors shall have no power in their individual capacities unless expressly authorized by the Board of Directors.

Section 2.10. Action by Telephonic Communications. Members of the Board of Directors may participate in a meeting of the Board of Directors by means of conference telephone or other communications equipment by means of which all persons participating in the meeting can hear each other, and participation in a meeting pursuant to this provision shall constitute presence in person at such meeting.

Section 2.11. Resignations. Any Director may resign at any time by submitting an electronic transmission or by delivering a written notice of resignation, signed by such Director, to the Chairperson, the Vice Chairperson, the Chief Executive Officer, the President or the Secretary. Unless otherwise specified therein, such resignation shall take effect upon delivery.

Section 2.12. Removal of Directors. Subject to the rights of the holders of any class or series of Preferred Stock, if any, to elect additional Directors under specified circumstances, any Director may be removed at any time, but only for cause, upon the affirmative vote of the holders of a majority of the combined voting power of the then outstanding stock of the Corporation entitled to vote generally in the election of Directors. Any vacancy in the Board of Directors caused by any such removal may be filled at such meeting by the stockholders entitled to vote for the election of the Director so removed. If such stockholders do not fill any vacancy at such meeting, such vacancy may be filled in the manner provided in Section 2.13 of these Bylaws.

Section 2.13. Vacancies and Newly Created Directorships. Subject to the rights of the holders of any class or series of Preferred Stock, if any, to elect additional Directors under specified circumstances, and except as provided in Section 2.12, if any vacancies shall occur in the Board of Directors, by reason of death, resignation, removal or otherwise, or if the authorized number of Directors shall be increased, the Directors then in office shall continue to act, and such vacancies and newly created directorships may be filled by a majority of the Directors then in office, although less than a quorum. Any Director filling a vacancy shall be of the same class as that of the Director whose death, resignation, removal or other event caused the vacancy, and any Director filling a newly created directorship shall be of the class specified by the Board of Directors at the time the newly created directorships were created. A Director elected to fill a vacancy or a newly created directorship shall hold office until his or her successor has been elected and qualified or until his or her earlier death, resignation or removal.

Section 2.14. Compensation. The amount, if any, which each Director shall be entitled to receive as compensation for such Director's services as such shall be fixed from time to time by resolution of the Board of Directors.

Section 2.15. Reliance on Accounts and Reports, etc. A Director or a member of any committee designated by the Board of Directors shall, in the performance of such Director's or member's duties, be fully protected in relying in good faith upon the records of the Corporation and upon information, opinions, reports or statements presented to the Corporation by any of the Corporation's officers or employees, or committees designated by the Board of Directors, or by any other person as to the matters the Director or the member reasonably believes are within such other person's professional or expert competence and who has been selected with reasonable care by or on behalf of the Corporation.

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ARTICLE III

COMMITTEES

Section 3.01. Standing Committees. The Board of Directors shall have the following standing committees, each consisting of not fewer than three (3) Directors, as shall be determined by the Board of Directors:

Executive Committee

Compensation Committee

Audit Committee

Section 3.02. Designation of Members and Chairpersons of Committees. At the annual meeting each year, the Board of Directors shall by resolution designate from among the Directors the members of the standing committees and the members of each committee established pursuant to Section 3.07 which will continue in existence and from among the members of each such committee a chairperson thereof, which members and chairperson shall each serve, at the pleasure of the Board of Directors, so long as they shall continue in office as Directors, until the next annual meeting of the Board of Directors and thereafter until the appointment of their respective successors. The Board of Directors may by similar resolution designate one (1) or more Directors as alternate members of such committees, who may replace any absent member or members at any meeting of such committees. No officer or employee may be designated as a member or alternate member of the Audit Committee or the Compensation Committee. Vacancies among members or chairpersons of any committee may be filled in the same manner as original designations at any regular or special meeting of the Board of Directors, and the Chief Executive Officer may designate from among the remaining members of any committee whose chairperson is vacant a chairperson who shall serve until a successor is designated by the Board of Directors.

Section 3.03. Notices of Times of Meetings of Committees and Presiding Officers. Meetings of each standing committee shall be held upon call of the Chief Executive Officer or upon call of the chairperson of such committee or of two (2) members of such committee. Meetings of such committee may also be held at such other times as it may determine. Meetings of a committee shall be held at such places and upon such notice as it shall determine or as shall be specified in the calls of such meetings. Any such chairperson, if present, or such member or members of each committee as may be designated by the Chief Executive Officer shall preside at meetings thereof of, in the event of an absence or disability of any thereof or failing such designation, the committee shall select from among its members present a presiding officer. Meetings of a committee may be attended by Directors who are not members of such committee unless the Chief Executive Officer or the chairperson of such committee requests otherwise.

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Section 3.04. Executive Committee. The Executive Committee may, to the extent permitted by law, exercise all powers of the Board of Directors during intervals between meetings of the Board of Directors and shall provide advice with respect to the Company's operations.

Section 3.05. Compensation Committee. The Compensation Committee shall exercise general supervision over compensation, personnel administration and other activities carried on by the Corporation and its subsidiaries in the interest of the health, welfare and safety of the employees of the Corporation, if any, and those of its subsidiaries. The Compensation Committee shall nominate for election by the Board of Directors all officers as such Committee may determine. In addition, in the absence of any Nominating Committee or of any other committee exercising such function, the Compensation Committee shall make recommendations to the Board of Directors with respect to filling of vacancies on the Board of Directors.

Section 3.06. Audit Committee. The Audit Committee shall exercise general supervision of accounting and auditing controls over cash, securities, receipts, disbursements and other financial transactions; shall make such examinations thereof as it may deem necessary through certified public accountants or otherwise; shall review the financial condition of the Corporation and the scope and results of the independent audit and any internal audits; shall recommend the selection of independent certified public accountants; and, in respect to such matters, may require such reports from the officer in charge of Auditing for the Corporation as it may deem necessary or desirable. The Audit Committee shall also exercise general supervision of the Corporation's policies on ethical business conduct and compliance therewith.

Section 3.07. Other Committees. The Board of Directors by resolution may designate one (1) or more other committees, and the powers and purposes thereof, each such committee to consist of such number of Directors as from time to time may be fixed by the Board of Directors. The Board of Directors, at the time of such designation or at any time thereafter before the next annual meeting, shall by resolution designate from among the Directors the members and alternate members of such committees, as well as the chairperson thereof. Any such committee may be abolished or re-designated from time to time by the Board of Directors. Each member (and each alternate member) of any such committee (whether designated at an annual meeting of the Board of Directors or to fill a vacancy or otherwise) shall hold office until such committee is abolished or if earlier, until his or her successor shall have been designated or until he or she shall cease to be a Director, or until his or her earlier death, resignation or removal.

Section 3.08. Powers. Each committee, except as otherwise provided in this section, shall have and may exercise such powers of the Board of Directors as may be provided by resolution or resolutions of the Board of Directors. Neither the Executive nor any other committee shall have the power or authority:

(a)           to approve or adopt, or recommend to the stockholders, any action or matter expressly required by the Delaware General Corporation Law to be submitted to stockholders for approval; or

(b)           to adopt, amend or repeal the Bylaws of the Corporation.

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Section 3.09. Proceedings. Each such committee may fix its own rules of procedure and may meet at such place (within or without the State of Delaware), at such time and upon such notice, if any, as it shall determine from time to time. Each such committee shall keep minutes of its proceedings and shall report such proceedings to the Board of Directors at the meeting of the Board of Directors next following any such proceedings.

Section 3.10. Quorum and Manner of Acting. Except as may be otherwise provided in the resolution creating such committee, at all meetings of any committee, the presence of members (or alternate members) constituting a majority of the total authorized membership of such committee shall constitute a quorum for the transaction of business. The act of the majority of the members present at any meeting at which a quorum is present shall be the act of such committee. Any action required or permitted to be taken at any meeting of any such committee may be taken without a meeting, if all members of such committee shall consent to such action in writing or by electronic transmission and such writing or writings or electronic transmission or transmissions are filed with the minutes of the proceedings of the committee. Such filing shall be in paper form if the minutes are in paper form and shall be in electronic form if the minutes are maintained in electronic form. The members of any such committee shall act only as a committee, and the individual members of such committee shall no power in their individual capacities unless expressly authorized by the Board of Directors.

Section 3.11. Action by Telephone Communications. Unless otherwise provided by the Board of Directors, members of any committee may participate in a meeting of such committee by means of conference telephone or other communications equipment by means of which all persons participating in the meeting can hear each other, and participation in a meeting pursuant to this provision shall constitute presence in person at such meeting.

Section 3.12. Absent or Disqualified Members. In the absence or disqualification of a member of any committee, if no alternate member is present to act in his or her stead, the member or members thereof present at any meeting and not disqualified from voting, whether or not he, she or they constitute a quorum, may unanimously appoint another member of the Board of Directors to act at the meeting in the place of any such absent or disqualified member.

Section 3.13. Resignations. Any member (and any alternate member) of any committee may resign at any time by delivering a written notice of resignation, signed by such member, to the Chairperson, the Vice Chairperson, the Chief Executive Officer, the President or the Secretary. Unless otherwise specified therein, such resignation shall take effect upon delivery.

Section 3.14. Removal. Any member (and any alternate member) of any committee may be removed at any time, either for or without cause, by resolution adopted by a majority of the whole Board of Directors.

Section 3.15. Vacancies. If any vacancy shall occur in any committee by reason of disqualification, death, resignation, removal or otherwise, the remaining members (and any alternate members) shall continue to act, and any such vacancy may be filled by the Board of Directors.

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ARTICLE VI

OFFICERS

Section 4.01. Numbers. The officers of the Corporation shall be chosen by the Board of Directors and shall be a Chairperson of the Board of Directors, a Chief Executive Officer, a President, one or more Vice Presidents, a Chief Financial Officer, a Secretary and a Treasurer. The Board of Directors also may elect a Vice Chairperson, one or more Assistant Vice Presidents, Assistant Secretaries and Assistant Treasurers in such numbers as the Board of Directors may from time to time determine. Any number of offices may be held by the same person. No officer need be a Director of the Corporation.

Section 4.02. Election. Unless otherwise determined by the Board of Directors, the officers of the Corporation shall be elected by the Board of Directors at the annual meeting of the Board of Directors, and shall be elected to hold office until the next succeeding annual meeting of the Board of Directors. Officers may be elected and qualified at any regular or special meeting of the Board of Directors. Each officer shall hold office until his or her successor has been elected and qualified, or until his or her earlier death, resignation or removal.

Section 4.03. Salaries. The salaries, if any, of all officers of the Corporation shall be fixed by, or in accordance with procedures established by, the Board of Directors.

Section 4.04. Removal and Resignation; Vacancies. Any officer may be removed for or without cause at any time by the Board of Directors. Any officer may resign at any time by delivering a written notice of resignation, signed by such officer, to the Chairperson, the Chief Executive Officer, the President, or the Secretary, or, if permitted by law, by submitting an electronic transmission. Unless otherwise specified therein, such resignation shall take effect upon delivery. Any vacancy occurring in any office of the Corporation by the death, resignation, removal or otherwise, shall be filled by the Board of Directors or, in its discretion, may be left vacant.

Section 4.05. Authority and Duties of Officers. The officers of the Corporation shall have such authority and shall exercise such powers and perform such duties as may be specified in these Bylaws, except that in any event each officer shall exercise such powers and perform such duties as may be required by law.

Section 4.06. The Chairperson. The Directors shall elect from among the members of the Board of Directors a Chairperson of the Board of Directors. The Chairperson shall have such duties and powers as set forth in these Bylaws or as shall otherwise be conferred upon him or her from time to time by the Board of Directors. The Chairperson shall preside over all meetings of the stockholders and of the Board of Directors.

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Section 4.07. The Vice Chairperson. The Directors may, but need not, elect from among the members of the Board of Directors a Vice Chairperson of the Board of Directors. The Vice Chairperson shall have such duties and powers as set forth in these Bylaws or as shall otherwise be conferred upon him or her from time to time by the Board of Directors. In the absence or disability of the Chairperson, the Vice Chairperson shall preside over all meetings of the stockholders and of the Board of Directors.

Section 4.08. The Chief Executive Officer. The Chief Executive Officer shall have general control and supervision of the policies and operations of the Corporation and shall see that all orders and resolutions of the Board of Directors are carried into effect. He or she shall manage and administer the Corporation's business and affairs and shall also perform all duties and exercise all powers usually pertaining to the office of a chief executive officer of a corporation. Subject to such limitations as the Board of Directors may from time to time impose, he or she shall have the authority to sign, in the name and on behalf of the Corporation, checks, orders, contracts, leases, notes, drafts and other documents and instruments in connection with the business of the Corporation, and together with the Secretary or an Assistant Secretary, conveyances of real estate or other documents and instruments to which the seal of the Corporation is affixed. He or she shall have the authority to cause the employment or appointment of such employees and agents of the Corporation as the conduct of the business of the Corporation may require, to fix their compensation, and to remove or suspend any employee or agent appointed by the Chief Executive Officer or any subordinate officer or elected by the Board of Directors other than the Chairperson or the Vice Chairperson. The Chief Executive Officer shall perform such duties and have such other powers as the Board of Directors may from time to time prescribe.

Section 4.09. The President. The President, subject to the authority of the Chief Executive Officer, or, if the President is the Chief Executive Officer, then subject to the authority of the Chairperson, shall have primary responsibility for, and authority with respect to, the management of the day-to-day business and affairs of the Corporation. Subject to such limitations as the Board of Directors may from time to time impose, the President shall have the authority to sign, in the name and on behalf of the Corporation, checks, orders, contracts, leases, notes, drafts and other documents and instruments. The President shall have the authority to cause the employment or appointment of such employees and agents of the Corporation as the conduct of the business of the Corporation may require, to fix their compensation, and to remove or suspend any employee or agent elected or appointed by the President or any subordinate officer or elected by the Board of Directors except the Chief Executive Officer, the Chairperson or the Vice Chairperson. The President shall perform such other duties and have such other powers as the Board of Directors may from time to time prescribe.

Section 4.10. The Vice Presidents. In the absence of the Chief Executive Officer and the President or in the event of their inability to act, the Executive or Senior Vice Presidents in the order designated by the Board of Directors, or in the absence of any designation, then in the order of their rank, shall perform the duties of the Chief Executive Officer and the President, and when so acting, shall have all the powers of and be subject to all the restrictions upon the Chief Executive Officer and the President. The Vice Presidents shall have such designations, perform such other duties and have such other powers as the Board of Directors, the Chief Executive Officer or the President may from time to time prescribe.

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Section 4.11. The Secretary. The Secretary shall have the following powers and duties:

(a)he or she shall keep or cause to be kept a record of all the proceedings of the meetings of the stockholders and of the Board of Directors in books provided for that purpose;

(b)he or she shall cause all notices to be duly given in accordance with the provisions of these Bylaws and as required by law;

(c)whenever any committee shall be appointed pursuant to a resolution of the Board of Directors, he or she shall furnish a copy of such resolution to the members of such committee;

(d)he or she shall be the custodian of the records and of the seal of the Corporation and cause such seal (or a facsimile thereof) to be affixed to all certificates representing shares of the Corporation prior to the issuance thereof and to all instruments the execution of which on behalf of the Corporation under its seal shall have been duly authorized in accordance with these Bylaws, and when so affixed he or she may attest the same;

(e)he or she shall properly maintain and file all books, reports, statements, certificates and all other documents and records required by law, the Certificate of Incorporation or these Bylaws;

(f)            he or she shall sign (unless the Chief Financial Officer, the Treasurer, an Assistant Treasurer or an Assistant Secretary shall have signed) certificates representing shares of the Corporation, the issuance of which shall have been authorized by the Board of Directors;

(g)he or she shall have the power to authorize the seal of the Corporation to be affixed to any or all papers that may require it; and

(h)           he or she shall perform, in general, all duties incident to the office of secretary and such other duties as may be specified in these Bylaws or as may be assigned to him or her from time to time by the Board of Directors, the Chief Executive Officer or the President.

Section 4.12.    The Chief Financial Officer.   The Chief Financial Officer of the Corporation shall have the following powers and duties:

(a)he or she shall have charge and supervision over and be responsible for the moneys, securities, receipts and disbursements of the Corporation, and shall keep or cause to be kept full and accurate records of all receipts of the Corporation;

(b)he or she shall cause the moneys and other valuable effects of the Corporation to be deposited in the name and to the credit of the Corporation in such banks or trust companies or with such bankers or other depositories as shall be selected in accordance with Section 8.04 of these Bylaws;

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(c)he or she shall cause the moneys of the Corporation to be disbursed by checks or drafts (signed as provided in Section 8.05 of these Bylaws) upon the authorized depositories of the Corporation and cause to be taken and preserved proper vouchers for all moneys disbursed;

(d)he or she shall render to the Board of Directors, the Chief Executive Officer or the President, whenever requested, a statement of the financial condition of the Corporation and of all his or her transactions as Chief Financial Officer, and render a full financial report at the annual meeting of the stockholders, if called upon to do so;

(e)he or she shall be empowered from time to time to require from all officers or agents of the Corporation reports or statements giving such information as he or she may desire with respect to any and all financial transactions of the Corporation;

(f)he or she may sign (unless the Treasurer, an Assistant Treasurer or the Secretary or an Assistant Secretary shall have signed) certificates representing stock of the Corporation, the issuance of which shall have been authorized by the Board of Directors; and

(g)he or she shall perform, in general, all duties incident to the office of treasurer and such other duties as may be specified in these Bylaws or as may be assigned to him or her from time to time by the Board of Directors or the Chief Executive Officer.

Section 4.13. The Treasurer. The Treasurer shall perform such duties and exercise such powers as may be assigned to him or her from time to time by the Chief Financial Officer or by the Board of Directors. In the absence or disability of the Chief Financial Officer, the duties of the Chief Financial Officer shall be performed and his or her powers may be exercised by the Treasurer; subject in any case to review and superseding action by the Board of Directors, the Chief Executive Officer or the President.

Section 4.14. Additional Officers. The Board of Directors may appoint such other officers and agents as it may deem appropriate, and such other officers and agents shall hold their offices for such terms and shall exercise such powers and perform such duties as may be determined from time to time by the Board of Directors. The Board of Directors from time to time may delegate to the Chief Executive Officer, the President, or any Vice President the power to appoint subordinate officers or agents and to prescribe their respective rights, terms of office, authorities and duties. Any such officer may remove any such subordinate officer or agent appointed by him or her, for or without cause.

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ARTICLE V

CAPITAL STOCK

Section 5.01. Certificates of Stock; Uncertified Shares. The shares of the Corporation shall be represented by certificates, provided that the Board of Directors may provide by resolution or resolutions that some or all of any or all classes or series of the stock of the Corporation shall be uncertificated shares. Any such resolution shall not apply to shares represented by a certificate until such certificate is surrendered to the Corporation. Every holder of stock in the Corporation represented by certificates shall be entitled to have a certificate signed by, or in the name of, the Corporation, by the Chief Executive Officer, the President or a Vice President, and by the Chief Financial Officer, the Treasurer or an Assistant Treasurer, or the Secretary or an Assistant Secretary, representing the number of shares registered in certificate form. Such certificate shall be in such form as the Board of Directors may determine, to the extent consistent with applicable law, the Certificate of Incorporation and these Bylaws.

Section 5.02. Signatures; Facsimile. All signatures on the certificate referred to in Section 5.01 of these Bylaws may be in facsimile, engraved or printed form, to the extent permitted by law. In case any officer, transfer agent or registrar who has signed, or whose facsimile, engraved or imprinted signature has been placed upon, a certificate shall have ceased to be an officer, transfer agent or registrar before such certificate is issued, it may issued by the Corporation with the same effect as if he or she were an officer, transfer agent or registrar at the date of issue.

Section 5.03. Lost, Stolen or Destroyed Certificates. Subject to the right to adopt a resolution or resolutions that some or all of any or all classes or series of the stock of the Corporation shall be uncertificated shares the Board of Directors may direct that a new certificate be issued in place of any certificate theretofore issued by the Corporation alleged to have been lost, stolen or destroyed, upon delivery to the Corporation of an affidavit of the owner or owners of such certificate, setting forth such allegation. The Corporation may require the owner of such lost, stolen or destroyed certificate, or his or her legal representative, to give the Corporation a bond sufficient to indemnify it against any claim that may be made against it on account of the alleged loss, theft or destruction of any such certificate or the issuance of any such new certificate.

Section 5.04. Transfer of Stock. Subject to the right to adopt a resolution or resolutions that some or all of any or all classes or series of the stock of the Corporation shall be uncertificated shares, under surrender to the Corporation or the transfer agent of the Corporation of a certificate for shares, duly endorsed or accompanied by appropriate evidence of succession, assignment or authority to transfer, the Corporation shall issue a new certificate to the person entitled thereto, cancel the old certificate and record the transaction upon its books. Within a reasonable time after the transfer of uncertificated stock, the Corporation shall send to the registered owner thereof a written notice containing the information required to be set forth or stated on certificates pursuant to the laws of the State of Delaware. Subject to the provisions of the Certificate of Incorporation and these Bylaws, the Board of Directors may prescribe such additional rules and regulations as it may deem appropriate relating to the issue, transfer and registration of shares of the Corporation.

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Section 5.05. Record Date. In order to determine the stockholders entitled to notice of or to vote at any meeting of stockholders or any adjournment thereof, the Board of Directors may fix, in advance, a record date, which record date shall not precede the date on which the resolution fixing the record date is adopted by the Board of Directors, and which shall not be more than sixty (60) nor fewer than ten (10) days before the date of such meeting. A determination of stockholders of record entitled to notice of or to vote at a meeting of stockholders shall apply to any adjournment of the meeting, provided, however, that the Board of Directors may fix a new record date for the adjourned meeting.

In order that the Corporation may determine the stockholders entitled to receive payment of any dividend or other distribution or allotment of any rights of the stockholders entitled to exercise any rights in respect of any change, conversion or exchange of stock, or for the purpose of any other lawful action, the Board of Directors may fix a record date, which record date shall not precede the date upon which the resolution fixing the record date is adopted, and which record date shall be not more than sixty (60) days prior to such action. If no record date is fixed, the record date for determining stockholders for any such purpose shall be at the close of business on the day on which the Board of Directors adopts the resolution relating thereto.

Section 5.06. Registered Stockholders. Prior to due surrender of a certificate for registration of transfer, the Corporation may treat the registered owner as the person exclusively entitled to receive dividends and other distributions, to vote, to receive notice and otherwise to exercise all the rights and powers of the owner of the shares represented by such certificate, and the Corporation shall not be bound to recognize any equitable or legal claim to or interest in such shares on the part of any other person, whether or not the Corporation shall have notice of such claim or interests. Whenever any transfer of shares shall be made for collateral security, and not absolutely, it shall be so expressed in the entry of the transfer if, when the certificates are presented to the Corporation for transfer or uncertificated shares are requested to be transferred, both the transferor and transferee request the Corporation to do so.

Section 5.07. Transfer Agent and Registrar. The Board of Directors may appoint one (1) or more transfer agents and one (1) or more registrars, and may require all certificates representing shares to bear the signature of any such transfer agents or registrars.

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ARTICLE VI

INDEMNIFICATION

Section 6.01. Nature of Indemnity. The Corporation shall indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or Proceeding (a "Proceeding"), whether civil, criminal, administrative or investigative, by reason of the fact that he or she is or was or has agreed to become a Director or officer of the Corporation, or is or was serving or has agreed to serve at the request of the Corporation as a Director or officer, of another corporation, partnership, joint venture, trust or other enterprise, or by reason of any action alleged to have been taken or omitted in such capacity, and may indemnify any person who was or is a party or is threatened to be made a party to such a Proceeding by reason of the fact that he or she is or was or has agreed to become an employee or agent of the Corporation, or is or was serving or has agreed to serve at the request of the Corporation, or is or was serving or has agreed to serve at the request of the Corporation as an employee or agent of another corporation, partnership, joint venture, trust or other enterprise, against expenses (including attorneys' fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by him or her or on his or her behalf in connection with such Proceeding and any appeal therefrom, if he or she acted in good faith and in a manner he or she reasonably believed to be in or not opposed to the best interests of the Corporation, and, with respect to any criminal Proceeding, had no reasonable cause to believe his or her conduct was unlawful; except that in the case of a Proceeding by or in the right of the Corporation to procure a judgment in its favor (1) such indemnification shall be limited to expenses (including attorneys' fees) actually and reasonably incurred by such person in the defense or settlement of such Proceeding, and (2) no indemnification shall be made in respect of any claim, issue or matter as to which such person shall have been adjudged to be liable to the Corporation unless and only to the extent that the Delaware Court of Chancery or the court in which such Proceeding was brought shall determine upon application that, despite the adjudication of liability but in view of all the circumstances of the case, such person is fairly and reasonably entitled to indemnify for such expenses which the Delaware Court of Chancery or such other court shall deem proper. Notwithstanding the foregoing, but subject to Section 6.05 of these Bylaws, the Corporation shall not be obligated to indemnify a Director or officer of the Corporation in respect of a Proceeding (or part thereof) instituted by such Director or officer, unless such Proceeding (or part thereof) has been authorized by the Board of Directors.

The termination of any Proceeding by judgment, order settlement, conviction, or upon a plea of nolo contendere or its equivalent, shall not, of itself, create a presumption that the person did not act in good faith and in a manner which he or she reasonably believed to be in or not opposed to the best interests of the Corporation, and, with respect to any criminal Proceeding, had reasonable cause to believe that his or her conduct was unlawful.

Section 6.02. Successful Defense. To the extent that a present or former Director or officers of the Corporation has been successful on the merits or otherwise in defense of any Proceeding referred to in Section 6.01 hereof or in defense of any claim, issue or matter therein, such person shall be indemnified against expenses (including attorneys' fees) actually and reasonably incurred by such person in connection therewith.

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Section 6.03. Determination that Indemnification is Proper. Any indemnification of a present or former Director or officer of the Corporation under Section 6.01 hereof (unless ordered by a court) shall be made by the Corporation unless a determination is made that indemnification of the present or former Director or officer is not proper in the circumstances because he or she has not met the applicable standard of conduct set forth in Section 6.01 hereof. Any indemnification of a present or former employee or agent of the Corporation under Section 6.01 hereof (unless ordered by a court) may be made by the Corporation upon a determination that indemnification of the present or former employee or agent is proper in the circumstances because he or she has met the applicable standard of conduct set forth in Section 6.01 hereof. Any such determination shall be made, with respect to a person who is a Director or officer at the time of such determination, (a) by a majority vote of the Directors who are not parties to such Proceeding, even though less than a quorum, or (b) by a committee of such Directors designated by majority vote of such Directors, even though less than a quorum, or (c) if there are no such Directors, or if such Directors so direct, by independent legal counsel in a written opinion, or (d) by the stockholders.

Section 6.04. Advance Payment of Expenses. Expenses (including attorneys' fees) incurred by a Director or officer in defending any civil, criminal, administrative or investigative Proceeding shall be paid by the Corporation in advance of the final disposition of such Proceeding upon receipt of an undertaking by or on behalf of the Director or officer to repay such amount if it shall ultimately be determined that such person is not entitled to be indemnified by the Corporation as authorized in this Article. Such expenses (including attorneys' fees) incurred by former Directors and officers or other employees and agents may be so paid upon such terms and conditions, if any, as the Corporation deems appropriate. The Board of Directors may authorize the Corporation's counsel to represent such Director, officer, employee or agent in any Proceeding, whether or not the Corporation is a party to such Proceeding.

Section 6.05. Procedures for Indemnification of Directors and Officers. Any indemnification of a Director or officer of the Corporation under Sections 6.01 and 6.02, or advance of costs, charges and expenses to a Director or officer under Section 6.04 of these Bylaws, shall be made promptly, and in any event within thirty (30) days, upon the written request of the Director or officer. If a determination by the Corporation that the Director or officer is entitled to indemnification pursuant to this Article VI is required, and the Corporation fails to respond within thirty (30) days to a written request for indemnity, the Corporation shall be deemed to have approved such request. If the Corporation denies a written request for indemnity or advancement of expenses, in whole or in part, or if payment in full pursuant to such request is not made within thirty (30) days, the right to indemnification or advances as granted by this Article VI shall be enforceable by the Director or officer in any court of competent jurisdiction. Such person's costs and expenses incurred in connection with successfully establishing his or her right to indemnification, in whole or in part, in any such Proceeding shall also be indemnified by the Corporation. It shall be a defense to any such Proceeding (other than an action brought to enforce a claim for the advance of costs, charges and expenses under Section 6.04 of these Bylaws where the required undertaking, if any, has been received by the Corporation) that the claimant has not met the standard of conduct set forth in Section 6.01 of these Bylaws, but the burden of proving such defense shall be on the Corporation. Neither the failure of the Corporation (including its Board of Directors, its independent legal counsel, and its stockholders) to have made a determination prior to the commencement of such action that indemnification of the claimant is proper in the circumstances because he or she has met the applicable standard of conduct set forth in Section 6.01 of these Bylaws, nor the fact that there has been an actual determination by the Corporation (including its Board of Directors, its independent legal counsel, and its stockholders) that the claimant has not met such applicable standard of conduct, shall be a defense to the action or create a presumption that the claimant has not met the applicable standard of conduct.

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Section 6.06. Survival; Preservation of Other Rights. The foregoing indemnification provisions shall be deemed to be a contract between the Corporation and each Director, officer, employee and agent who serves in any such capacity at any time while these provisions as well as the relevant provisions of the Delaware General Corporation Law are in effect and any repeal or modification thereof shall not affect any right or obligations then existing with respect to any state of facts then or previously existing or any Proceeding previously or thereafter brought or threatened based in whole or in part upon any such state of facts. Such a "contract right" may not be modified retroactively without the consent of such Director, officer, employee or agent.

The indemnification provided by this Article VI shall not be deemed exclusive of any other rights to which those indemnified may be entitled under any bylaw, agreement, vote of stockholders or disinterested Directors or otherwise, both as to action in such person's official capacity and as to action in another capacity while holding such office, and shall continue as to a person who has ceased to be a Director, officer, employee or agent and shall inure to the benefit of the heirs, executors and administrators of such a person.

Section 6.07. Insurance. The Corporation may purchase and maintain insurance on behalf of any person who is or was or has agreed to become a Director, officer, employee or agent of the Corporation, or is or was serving at the request of the Corporation as a Director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise against any liability asserted against such person and incurred by such person or on such person's behalf in any such capacity, or arising out of such person's status as such, whether or not the Corporation would have the power to indemnify him or her against such liability under the provisions of this Article VI, provided that such insurance is available on acceptable terms, which determination shall be made by a vote of a majority of the entire Board of Directors.

Section 6.08. Severability. If this Article VI or any portion hereof shall be invalidated on any ground by any court of competent jurisdiction, then the Corporation shall nevertheless indemnify each Director or officer and may indemnify each employee or agent of the Corporation as to costs, charges and expenses (including attorneys' fees), judgments, fines and amounts paid in settlement with respect to a Proceeding, whether civil, criminal, administrative or investigative, including a Proceeding by or in the right of the Corporation, to the fullest extent permitted by any applicable portion of this Article VI that shall not have been invalidated and to the fullest extent permitted by applicable law.

22

ARTICLE VII

OFFICES

Section 7.01. Initial Registered Office. The initial registered office of the Corporation in the State of Delaware shall be located at Corporation Trust Center, 1209 N. Orange Street in the City of Wilmington, County of New Castle.

Section 7.02. Other Offices. The Corporation may maintain offices or places of business at such other locations within or without the State of Delaware as the Board of Directors may from time to time determine or as the business of the Corporation may require.

ARTICLE VIII

GENERAL PROVISIONS

Section 8.01. Dividends.

(a)Subject to any applicable provisions of law and the Certificate of Incorporation, dividends upon the shares of the Corporation may be declared by the Board of Directors at any regular or special meeting of the Board of Directors and any such dividend may be paid in cash, property, or shares of the Corporation's capital stock.

(b)A member of the Board of Directors, or a member of any committee designated by the Board of Directors shall be fully protected in relying in good faith upon the records of the Corporation and upon such information, opinions, reports or statements presented to the Corporation by any of its officers or employees, or committees of the Board of Directors, or by any other person as to matters the Director reasonably believes are within such other person's professional or expert competence and who has been selected with reasonable care by or on behalf of the Corporation, as to the value and amount of the assets, liabilities and/or net profits of the Corporation, or any other facts pertinent to the existence and amount of surplus or other funds from which dividends, might properly be declared and paid.

Section 8.02. Execution of Instruments. Subject to such limitations as the Board of Directors may from time to time impose and subject to Sections 8.05 and 8.06, the Chief Executive Officer, the President, any Vice President, the Secretary, the Chief Financial Officer or the Treasurer may enter into any contract or execute and deliver any instrument in the name and on behalf of the Corporation. The Board of Directors may authorize any other officer or agent to enter into any contract or execute and deliver any instrument in the name and on behalf of the Corporation. Any such authorization must be in writing or by electronic transmission and may be general or limited to specific contracts or instruments.

Section 8.03. Corporate Indebtedness. No loan shall be contracted on behalf of the Corporation, and no evidence of indebtedness shall be issued in its name, unless authorized by the Board of Directors. Such authorization may be general or confined to specific instances. Loans so authorized may be effected at any time for the Corporation from any bank, trust company or other institution, or from any firm, corporation or individual. All bonds, debentures, notes and other obligations or evidences of indebtedness of the Corporation issued for such loans shall be made, executed and delivered as the Board of Directors shall authorize. When so authorized by the Board of Directors, any part of or all the properties, including contract rights, assets, business or good will of the Corporation, whether owned or thereafter acquired, may be mortgaged, pledged, hypothecated or conveyed or assigned in trust as security for the payment of such bonds, debentures, notes and other obligations or evidences of indebtedness of the Corporation, and of the interest thereon, by instruments executed and delivered in the name of the Corporation.

23

Section 8.04. Deposits. Any funds of the Corporation may be deposited from time to time in such banks, trust companies or other depositories as may be determined by the Board of Directors or the Chief Executive Officer, or by such officers or agents as may be authorized by the Board of Directors to make such determination.

Section 8.05. Checks, Drafts, etc.. All checks, drafts or demands for money and notes of the Corporation shall be signed by such officer or officers or such agent or agents of the Corporation, and in such manner, as the Board of Directors may from time to time determine.

Section 8.06. Sale, Transfer, etc. of Securities. To the extent authorized by the Board of Directors, any officer may sell, transfer, endorse, and assign any shares of stock, bonds or other securities owned by or held in the name of the Corporation, and may make, execute and deliver in the name of the Corporation, under its corporate seal, any instruments that may be appropriate to effect any such sale, transfer, endorsement or assignment.

Section 8.07. Voting as Stockholder. Unless otherwise determined by resolution of the Board of Directors, the Chief Executive Officer, the President or any Vice President shall have full power and authority on behalf of the Corporation to attend any meeting of stockholders of any corporation, partnership or other entity, in which the Corporation may hold stock or other equity interests, and to act, vote (or execute proxies to vote) and exercise in person or by proxy all other rights, powers and privileges incident to the ownership of such stock. Such officers acting on behalf of the Corporation shall have full power and authority to execute any instrument expressing consent to or dissent from any action of any such corporation, partnership or other entity, without a meeting. The Board of Directors may by resolution from time to time confer such power and authority upon any other person or persons.

Section 8.08. Fiscal Year. The fiscal year of the Corporation shall commence on the first day of January of each year (except for the Corporation's first fiscal year which shall commence on the date of incorporation) and shall terminate each case on December 31.

Section 8.09 Seal. The seal of Corporation shall be in such form as the Board of Directors may from time to time determine and shall contain the name of the Corporation, the year of its incorporation and the words "Corporate Seal" and "Delaware". The form of such seal shall be subject to alteration by the Board of Directors. The seal may be used by causing it or a facsimile thereof to be impressed, affixed or reproduced, or may be used in any other lawful manner.

Section 8.10. Books and Records; Inspection. Except to the extent otherwise required by law, the books and records of the Corporation shall be kept at such place or places within or without the State of Delaware as may be determined from time to time by the Board of Directors, the Chief Executive Officer or the President.

24

ARTICLE IX

AMENDMENT OF BYLAWS

Section 9.01. Amendment. These Bylaws may be amended, altered or repealed:

(a)by resolution adopted by a majority of the Board of Directors at any special or regular meeting of the Board of Directors if, in the case of such special meeting only, notice of such amendment, alteration or repeal is contained in the notice or waiver of such meeting; or

(b)at any regular or special meeting of the stockholders upon the affirmative vote of the holders of three-fourths (3/4) or more of the combined voting power of the outstanding shares of the Corporation entitled to vote generally in the election of Directors if, in the case of such special meeting only, notice of such amendment, alteration or repeal is contained in the notice or waiver of notice of such meeting.

ARTICLE X

CONSTRUCTION

Section 10.01. Construction. In the event of any conflict between the provisions of these Bylaws as in effect from time to time and the provisions of the Certificate of Incorporation of the Corporation as in effect from time to time, the provisions of such Certificate of Incorporation shall be controlling.

25

EX-12.1

EXHIBIT 12

STATEMENT RE: COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES AND

EARNINGS TO COMBINED FIXED CHARGES AND PREFERRED STOCK DIVIDENDS ⁽¹⁾

($ amounts in millions)

	Three		Six
	Months		Months
	Ended		Ended
	June 30,		June 30,		Years Ended December 31,
	2012		2012		2011		2010		2009			2008
Income (loss) from continuing operations before income taxes	$	(2.3)	$	(1.0)	$	71.7	$	16.3	$	(43.6)	$		(244.5)
Less:  Equity in earnings (losses) of limited partnership and
other investments		1.6		5.0		3.6		(3.2)		(15.5)			(10.7)
Add:  Distributed earnings of limited partnership and
other investments		4.0		7.4		11.3		37.9		13.0			10.8
Income (loss) from continuing operations before income taxes
and equity in undistributed earnings of limited partnership and
other investments	$	0.1	$	1.4	$	79.4	$	57.4	$	(15.1)	$		(223.0)
Fixed Charges:
Interest expense on indebtedness	$	7.9	$	15.9	$	31.8	$	31.8	$	33.1	$		36.7
Interest expense attributable to rentals		0.1		0.2		0.4		0.5		0.7			0.7
Total fixed charges (2		8.0		16.1		32.2		32.3		33.8			37.4
Interest credited on policyholder contract balances		29.9		60.0		116.5		124.2		136.2			152.0
Total fixed charges, including interest credited to policyholders	$	37.9	$	76.1	$	148.7	$	156.5	$	170.0	$		189.4
Income (loss) from continuing operations before income taxes,
equity in undistributed earnings of limited partnership and
other investments and fixed charges	$	38.0	$	77.5	$	228.1	$	213.9	$	154.9	$		(33.6)
Ratio of earnings to fixed charges and preferred stock dividends		1.0		1.0		1.5		1.4		0.9			—
Additional earnings required to achieve 1:1 ratio coverage	$	—	$	—	$	—	$	—	$	15.1	$		223.0
SUPPLEMENTAL RATIO (3) — Ratio of earnings to
fixed charges and preferred stock dividends exclusive of
interest credited on policyholder contract balances:
Income (loss) from continuing operations before income taxes
and equity in undistributed earnings of limited partnership and
other investments	$	0.1	$	1.4	$	79.4	$	57.4	$	(15.1)	$		(223.0)
Fixed Charges:
Total fixed charges, as above	$	8.0	$	16.1	$	32.2	$	32.3	$	33.8	$		37.4
Income (loss) from continuing operations before income taxes
and equity in undistributed earnings of limited partnerships and
other investments and fixed charges	$	8.1	$	17.5	$	111.6	$	89.7	$	18.7	$		(185.6)
Ratio of earnings to fixed charges and preferred stock dividends		1.0		1.1		3.5		2.8		0.6			—
Additional earnings required to achieve 1:1 ratio coverage	$	—	$	—	$	—	$	—	$	15.1	$		223.0

_______

⁽¹⁾

We had no dividends on preferred stock for the three and six months ended June 30, 2012 and years ended December 31, 2011, 2010, 2009 and 2008.

⁽²⁾

Total fixed charges consist of interest expense on indebtedness and an interest factor attributable to rentals. The interest factor attributable to rentals consists of one-third of rental charges, which we deem to be representative of the interest factor inherent in rents.

⁽³⁾

This ratio is disclosed for the convenience of investors and may be more comparable to the ratios disclosed by other issuers of fixed income securities.

EX-31.1

EXHIBIT 31.1

CERTIFICATION

I, the President and Chief Executive Officer of The Phoenix Companies, Inc. (the “registrant”), certify that:

1.

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

2.

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

3.

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

4.

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

(a)

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

(b)

designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c)

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

(d)

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

5.

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

(a)

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

(b)

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

Date: August 9, 2012	/s/ James D. Wehr
	Name: James D. Wehr
	Title: President and Chief Executive Officer

EX-31.2

EXHIBIT 31.2

CERTIFICATION

I, the Chief Financial Officer of The Phoenix Companies, Inc. (the “registrant”), certify that:

1.

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

2.

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

3.

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

4.

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

(a)

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

(b)

designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c)

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

(d)

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

5.

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

(a)

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

(b)

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

Date: August 9, 2012	/s/ Peter A. Hofmann
	Name: Peter A. Hofmann
	Title: Senior Executive Vice President and   Chief Financial Officer

EX-32

EXHIBIT 32

CERTIFICATION

The undersigned hereby certify that the Quarterly Report on Form 10-Q for the fiscal quarter ended June 30, 2012 of The Phoenix Companies, Inc. (the “Company”) filed with the Securities and Exchange Commission on the date hereof fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and that the information contained in such report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ James D. Wehr	/s/ Peter A. Hofmann
Name: James D. Wehr	Name: Peter A. Hofmann
Title: President and Chief Executive Officer	Title: Senior Executive Vice President
	and Chief Financial Officer
Date: August 9, 2012	Date: August 9, 2012

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

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15. Earnings Per Share (Tables)

6 Months Ended

Jun. 30, 2012

Notes to Financial Statements

Shares Used in Calculation of Basic and Diluted

Shares Used in Calculation of Basic and Diluted	Three Months Ended		Six Months Ended
Earnings per Share:	June 30,		June 30,
(in thousands)	2012	2011	2012	2011
Weighted-average common shares outstanding	116,232	116,325	116,272	116,265
Weighted-average effect of dilutive potential common shares:
Restricted stock units	1,544	1,520	1,510	1,519
Stock options	—	5	—	5
Potential common shares	1,544	1,525	1,510	1,524
Less: Potential common shares excluded from calculation   due to operating losses	1,544	—	1,510	—
Dilutive potential common shares	—	1,525	—	1,524
Weighted-average common shares outstanding,   including dilutive potential common shares	116,232	117,850	116,272	117,789

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7. Indebtedness at Carrying Value (Details) (USD $) In Millions, unless otherwise specified	Jun. 30, 2012	Dec. 31, 2011
Indebtedness At Carrying Value Details
7.15% surplus notes	$ 174.1	$ 174.1
7.45% senior unsecured bonds	252.8	252.8
Total indebtedness	$ 426.9	$ 426.9

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6. Credit Losses Recognized in Earnings (Details) (USD $) In Millions, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2012	Jun. 30, 2011	Jun. 30, 2012	Jun. 30, 2011
Credit Losses Recognized In Earnings Details
Balance, beginning of period	$ (79.1)	$ (62.6)	$ (73.8)	$ (60.4)
Add: Credit losses on securities not previously impaired	(1.5)	(1.8)	(3.6)	(5.9)
Add: Credit losses on securities previously impaired	(3.3)	(1.1)	(6.5)	(2.3)
Less: Credit losses on securities impaired due to intent to sell	0	0	0	0
Less: Credit losses on securities sold	0.2	0	0.2	3.1
Less: Increases in cash flows expected on previously impaired securities	0	0	0	0
Balance, end of period	$ (83.7)	$ (65.5)	$ (83.7)	$ (65.5)

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13. Components of Other Postretirement Benefit Costs (Details) (USD $) In Millions, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2012	Jun. 30, 2011	Jun. 30, 2012	Jun. 30, 2011
Components Of Other Postretirement Benefit Costs Details
Service cost	$ 0.1	$ 0.1	$ 0.2	$ 0.2
Interest cost	0.6	0.7	1.2	1.3
Prior service cost amortization	(0.3)	(0.5)	(0.7)	(1.0)
Other postretirement benefit cost	$ 0.4	$ 0.3	$ 0.7	$ 0.5

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7. Interest Expense on Indebtedness (Details) (USD $) In Millions, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2012	Jun. 30, 2011	Jun. 30, 2012	Jun. 30, 2011
Interest Expense On Indebtedness Details
Surplus notes	$ 3.1	$ 3.1	$ 6.3	$ 6.3
Senior unsecured bonds	4.8	4.8	9.6	9.6
Interest expense on indebtedness	$ 7.9	$ 7.9	$ 15.9	$ 15.9

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7. Financing Activities (Details Narrative) (USD $) In Millions, unless otherwise specified	Jun. 30, 2012
Financing Activities Details Narrative
Cumulative amount of bonds repurchased	$ 47.3
Future minimum annual payments on indebtedness	$ 252.8

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6. Aging of Temporary Impaired Securities (Details) (USD $) In Millions, unless otherwise specified	Jun. 30, 2012	Dec. 31, 2011
Commercial mortgage-backed (“CMBS”)	$ 6.7	$ 11.6
Less than 12 months | AgingOfTemporarilyImpairedDebtSecuritesFairValueMember
U.S. government and agency	1.2	0
State and political subdivision	10.0	26.1
Foreign government	7.6	25.6
Corporate	259.1	373.0
Commercial mortgage-backed (“CMBS”)	15.9	141.3
Residential mortgage-backed (“RMBS”)	54.4	174.6
CDO/CLO	17.3	9.3
Other asset-backed	26.1	103.6
Debt securities	391.6	853.5
Equity securities	2.7	4.2
Total temporarily impaired securities	394.3	857.7
Amounts inside the closed block	159.8	317.6
Amounts outside the closed block	234.5	540.1
Amounts outside the closed block that are below investment grade	63.5	61.5
Less than 12 months | Unrealized Losses
U.S. government and agency	0	0
State and political subdivision	(0.1)	(0.1)
Foreign government	(0.3)	(1.7)
Corporate	(14.1)	(20.1)
Commercial mortgage-backed (“CMBS”)	(0.1)	(2.5)
Residential mortgage-backed (“RMBS”)	(2.1)	(6.4)
CDO/CLO	(0.3)	(0.1)
Other asset-backed	(1.1)	(2.4)
Debt securities	(18.1)	(33.3)
Equity securities	(4.9)	(5.2)
Total temporarily impaired securities	(23.0)	(38.5)
Amounts inside the closed block	(10.6)	(18.0)
Amounts outside the closed block	(12.4)	(20.5)
Amounts outside the closed block that are below investment grade	(4.4)	(4.5)
Number of securities	215	502
Greater than 12 months | AgingOfTemporarilyImpairedDebtSecuritesFairValueMember
U.S. government and agency	40.7	41.2
State and political subdivision	6.4	6.3
Foreign government	0	0
Corporate	452.5	512.1
Commercial mortgage-backed (“CMBS”)	63.9	56.8
Residential mortgage-backed (“RMBS”)	420.2	432.5
CDO/CLO	143.0	165.0
Other asset-backed	41.6	68.4
Debt securities	1,168.3	1,282.3
Equity securities	0.4	0.4
Total temporarily impaired securities	1,168.7	1,282.7
Amounts inside the closed block	492.9	556.8
Amounts outside the closed block	675.8	725.9
Amounts outside the closed block that are below investment grade	227.9	260.0
Greater than 12 months | Unrealized Losses
U.S. government and agency	(5.8)	(5.3)
State and political subdivision	(2.7)	(2.8)
Foreign government	0	0
Corporate	(114.1)	(151.4)
Commercial mortgage-backed (“CMBS”)	(13.6)	(17.8)
Residential mortgage-backed (“RMBS”)	(59.0)	(75.5)
CDO/CLO	(42.9)	(48.0)
Other asset-backed	(6.5)	(3.9)
Debt securities	(244.6)	(304.7)
Equity securities	(0.8)	(0.8)
Total temporarily impaired securities	(245.4)	(305.5)
Amounts inside the closed block	(79.2)	(108.6)
Amounts outside the closed block	(166.2)	(196.9)
Amounts outside the closed block that are below investment grade	(107.1)	(128.8)
Number of securities	601	664
AgingOfTemporarilyImpairedDebtSecuritesTotalMember | AgingOfTemporarilyImpairedDebtSecuritesFairValueMember
U.S. government and agency	41.9	41.2
State and political subdivision	16.4	32.4
Foreign government	7.6	25.6
Corporate	711.6	885.1
Commercial mortgage-backed (“CMBS”)	79.8	198.1
Residential mortgage-backed (“RMBS”)	474.6	607.1
CDO/CLO	160.3	174.3
Other asset-backed	67.7	172.0
Debt securities	1,559.9	2,135.8
Equity securities	3.1	4.6
Total temporarily impaired securities	1,563.0	2,140.4
Amounts inside the closed block	652.7	874.4
Amounts outside the closed block	910.3	1,266.0
Amounts outside the closed block that are below investment grade	291.4	321.5
AgingOfTemporarilyImpairedDebtSecuritesTotalMember | Unrealized Losses
U.S. government and agency	(5.8)	(5.3)
State and political subdivision	(2.8)	(2.9)
Foreign government	(0.3)	(1.7)
Corporate	(128.2)	(171.5)
Commercial mortgage-backed (“CMBS”)	(13.7)	(20.3)
Residential mortgage-backed (“RMBS”)	(61.1)	(81.9)
CDO/CLO	(43.2)	(48.1)
Other asset-backed	(7.6)	(6.3)
Debt securities	(262.7)	(338.0)
Equity securities	(5.7)	(6.0)
Total temporarily impaired securities	(268.4)	(344.0)
Amounts inside the closed block	(89.8)	(126.6)
Amounts outside the closed block	(178.6)	(217.4)
Amounts outside the closed block that are below investment grade	$ (111.5)	$ (133.3)
Number of securities	816	1,166

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8. Separate Accounts, Death and Insurance Benefits (Tables)

6 Months Ended

Jun. 30, 2012

Notes to Financial Statements

Separate Account Investments of Account Balances of Variable Annuity Contracts with Guarantees:

Separate Account Investments of Account Balances of Variable Annuity Contracts with Guarantees:	June 30,		Dec 31,
($ in millions)	2012		2011
Debt securities	$	492.2	$	515.4
Equity funds		1,860.9		1,883.3
Other		78.9		81.7
Total	$	2,432.0	$	2,480.4

Investments of Account Balances of Fixed Indexed Annuity Contracts with Guarantees:

Investments of Account Balances of Fixed Indexed Annuity Contracts with Guarantees:	June 30,		Dec 31,
($ in millions)	2012		2011
Debt securities	$	1,227.9	$	972.4
Equity funds		—		—
Other		—		—
Total	$	1,227.9	$	972.4

Changes in Guaranteed Liability Balances:

Changes in Guaranteed Liability Balances:	As of
($ in millions)	June 30, 2012
	Variable Annuity
	GMDB		GMIB
Liability balance as of January 1, 2012	$	4.9	$	17.8
Incurred		(0.6)		3.7
Paid		0.7		—
Liability balance as of June 30, 2012	$	5.0	$	21.5

Changes in Guaranteed Liability Balances:	Year Ended
($ in millions)	December 31, 2011
	Variable Annuity
	GMDB		GMIB
Liability balance as of January 1, 2011	$	4.6	$	18.1
Incurred		(1.8)		(0.3)
Paid		2.1		—
Liability balance as of December 31, 2011	$	4.9	$	17.8

Variable Annuity GMDB Benefits by Type:

Variable Annuity GMDB Benefits by Type:			Net Amount		Average
($ in millions)	Account		at Risk after		Attained Age
	Value		Reinsurance		of Annuitant
GMDB return of premium	$	832.8	$	13.5		62
GMDB step up		1,371.7		73.7		63
GMDB earnings enhancement benefit (“EEB”)		38.7		0.2		63
GMDB greater of annual step up and roll up		26.7		8.2		66
Total GMDB at June 30, 2012	$	2,269.9	$	95.6
GMDB return of premium	$	870.2	$	23.4		61
GMDB step up		1,398.4		118.6		63
GMDB earnings enhancement benefit (“EEB”)		39.8		0.4		62
GMDB greater of annual step up and roll up		27.1		8.8		66
Total GMDB at December 31, 2011	$	2,335.5	$	151.2

Additional Insurance Benefits:

Additional Insurance Benefits:			Average
($ in millions)	Account		Attained Age
	Value		of Annuitant
GMWB	$	557.9	63
GMIB		425.1	63
GMAB		389.3	57
GPAF		16.8	77
COMBO		9.9	61
Total at June 30, 2012	$	1,399.0
GMWB	$	555.4	62
GMIB		442.1	63
GMAB		385.6	57
GPAF		21.8	77
COMBO		10.1	61
Total at December 31, 2011	$	1,415.0

Variable Annuity Embedded Derivative Liabilities:

Variable Annuity Embedded Derivative Liabilities:	June 30,		Dec 31,
($ in millions)	2012		2011
GMWB	$	18.3	$	17.0
GMAB		20.9		25.2
GPAF		1.3		2.3
COMBO		(0.3)		(0.3)
Total variable annuity embedded derivative liabilities	$	40.2	$	44.2

Changes in Guaranteed Liability Balances:

Changes in Guaranteed Liability Balances:	Fixed Indexed Annuity
($ in millions)	GMWB & GMDB
	June 30,		Dec 31,
	2012		2011
Liability balance, beginning of period	$	5.6	$	0.2
Incurred		6.2		5.4
Paid		—		—
Liability balance, end of period	$	11.8	$	5.6

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8. Separate Accounts, Death and Benefits (Details Narrative) (USD $) In Millions, unless otherwise specified	3 Months Ended	6 Months Ended
	Jun. 30, 2012	Jun. 30, 2012	Dec. 31, 2011
Separate Accounts Death And Benefits Details Narrative
Assets transferred to pension plan trustee	$ 464.2	$ 464.2
Benefit payments made for GPAF riders	0.1	0.1
Fixed annuity embedded derivatives	115.2	115.2	78.3
Additional universal life benefit reserves	$ 145.3	$ 145.3	$ 146.6

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16. Segment Information on Revenues (Details) (USD $) In Millions, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2012	Jun. 30, 2011	Jun. 30, 2012	Jun. 30, 2011
Segment Information On Revenues Details
Life and Annuity	$ 449.2	$ 476.2	$ 888.1	$ 924.3
Saybrus Partners	5.0	4.2	10.2	8.0
Less: intercompany revenues	2.7	2.2	5.8	4.1
Total revenues	$ 451.5	$ 478.2	$ 892.5	$ 928.2

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8. Fixed Indexed Annuity Contracts with Guarantees (Details) (USD $) In Millions, unless otherwise specified	Jun. 30, 2012	Dec. 31, 2011
Fixed Indexed Annuity Contracts With Guarantees Details
Debt securities	$ 1,227.9	$ 972.4
Equity funds	0	0
Other	0	0
Total	$ 1,227.9	$ 972.4

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4. Demutualization and Closed Block (Details Narrative) (USD $) In Millions, unless otherwise specified	Jun. 30, 2012
Demutualization And Closed Block Details Narrative
Policyholder dividend obligation for cumulative closed block	$ 120.7
Unrealized gains in investments included in policyholder dividend obligation for cumulative closed block	$ 539.5

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18. Contingent Liabilities (Details Narrative) (USD $) In Millions, unless otherwise specified	Jun. 30, 2012	Dec. 31, 2011
Contingent Liabilities Details Narrative
Policy liability accruals	$ 34.8	$ 59.1
Amounts recoverable from retrocessionaires related to paid losses	$ 0.3	$ 2.5

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10. Fair Value of Financial Instruments (Details Narrative) (USD $) In Millions, unless otherwise specified	Jun. 30, 2012	Dec. 31, 2011
Fair Value Of Financial Instruments Details Narrative
Impact of credit standing adjustment related to variable annuity on reduction of reserves	$ 26.7	$ 36.0

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19. Other Commitments (Details Narrative) (USD $) In Millions, unless otherwise specified	Dec. 31, 2012	Jun. 30, 2012
Other Commitments Details Narrative
Unfunded commitments	$ 0	$ 210.0
Amount of unfunded commitments expected to be funded	68.8	0
Open Commitments	0	85.4
Amount of open commitments expected to be funded	$ 85.4	$ 0

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6. Investing Activities (Details Narrative) (USD $) In Millions, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2012	Jun. 30, 2011	Jun. 30, 2012	Jun. 30, 2011	Dec. 31, 2011
Investing Activities Details Narrative
Unrealized losses on below-investment-grade debt securities outside the closed block with a fair value of less than 80% of amortized cost	$ 93.6		$ 93.6		$ 113.3
Unrealized losses on below-investment-grade debt securities outside the closed block with a fair value of less than 80% of amortized cost of which the amount was below 80% of amortized cost for more than 12 months	80.3		80.3		88.0
Unrealized losses on below-investment-grade debt securities in the closed block with a fair value of less than 80% of amortized cost	27.2		27.2		37.8
Unrealized losses on below-investment-grade debt securities in the closed block with a fair value of less than 80% of amortized cost of which the amount was below 80% of amortized cost for more than 12 months	17.4		17.4		16.0
Debt impairments recognized through earnings	3.6	3.0	9.8	8.7
Equity security OTTIs	1.5	0	1.5	0
Debt impairments recognized through comprehensive income	9.9	3.6	15.4	5.3
Asset value of Variable Interest Entities	602.7		602.7
Net derivative assets of issuer and counterpary credit exposure	144.9		144.9
Debt securities of issuer and counterpary credit exposure	160.3		160.3
Maximum amount of loss due to issuer and counterparty credit exposure	$ 305.2		$ 305.2

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14. Share-Based Payment (Details) (USD $) In Millions, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2012	Jun. 30, 2011	Jun. 30, 2012	Jun. 30, 2011
Share-Based Payment Details
Compensation cost charged to income from continuing operations	$ 0.5	$ 0.9	$ 2.0	$ 2.1
Income tax expense (benefit) before valuation allowance	$ (0.2)	$ (0.3)	$ (0.7)	$ (0.1)

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19. Other Commitments

6 Months Ended

Jun. 30, 2012

Notes to Financial Statements

Note 19 - Other Commitments

19. Other Commitments

As part of its normal investment activities, the Company enters into agreements to fund limited partnerships that make debt and equity investments. As of June 30, 2012, the Company had unfunded commitments of $210.0 million under such agreements, of which $68.8 million is expected to be funded by December 31, 2012.

In addition, the Company enters into agreements to purchase private placement investments. At June 30, 2012, the Company had open commitments of $85.4 million under such agreements which are expected to be funded by December 31, 2012.

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6. Sources of Net Investment Income (Details) (USD $) In Millions, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2012	Jun. 30, 2011	Jun. 30, 2012	Jun. 30, 2011
Sources Of Net Investment Income Details
Debt securities	$ 152.4	$ 155.8	$ 305.1	$ 304.0
Equity securities	1.2	0	1.9	0.6
Limited partnerships and other investments	69.0	57.5	128.4	110.0
Fair value option investments	(1.0)	(0.2)	0.8	2.2
Total investment income	221.6	213.1	436.2	416.8
Less: Discontinued operations	0.5	0.5	1.2	1.0
Less: Investment expenses	2.9	1.4	6.9	3.2
Net investment income	218.2	211.2	428.1	412.6
Amounts applicable to the closed block	$ 121.0	$ 118.0	$ 234.8	$ 235.6

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4. Closed Block Revenues and Expenses (Details) (USD $) In Millions, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2012	Jun. 30, 2011	Jun. 30, 2012	Jun. 30, 2011
Closed block revenues
Premiums	$ 97.2	$ 103.8	$ 188.9	$ 207.0
Net investment income	121.0	118.0	234.8	235.6
Net realized investment gains (losses)	2.9	3.2	2.0	1.6
Total revenues	221.1	225.0	425.7	444.2
Policy benefits, excluding dividends	124.8	137.5	251.9	279.1
Other operating expenses	1.1	1.5	2.7	3.0
Total benefits and expenses, excluding policyholder dividends	125.9	139.0	254.6	282.1
Closed block contribution to income before dividends and income taxes	95.2	86.0	171.1	162.1
Policyholder dividends	84.2	73.5	149.2	137.1
Closed block contribution to income before income taxes	11.0	12.5	21.9	25.0
Applicable income tax expense	3.8	4.4	7.6	8.7
Closed block contribution to income	$ 7.2	$ 8.1	$ 14.3	$ 16.3

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2. Basis of Presentation and Significant (Details Narrative) (USD $) In Millions, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2012	Jun. 30, 2011	Jun. 30, 2012	Jun. 30, 2011
Basis Of Presentation And Significant Details Narrative
Net loss	$ (6.9)	$ 15.9	$ (14.5)	$ 21.0
Correction of prior years' errors impacting net loss			$ 3.0

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13. Employee Benefits (Tables)

6 Months Ended

Jun. 30, 2012

Notes to Financial Statements

Components of Pension Benefit Costs

Components of Pension Benefit Costs:	Three Months Ended				Six Months Ended
($ in millions)	June 30,				June 30,
	2012		2011		2012		2011
Service cost	$	0.2	$	0.2	$	0.4	$	0.5
Interest cost		8.7		8.9		17.3		17.9
Expected return on plan assets		(8.7)		(9.1)		(17.3)		(18.2)
Net loss amortization		2.6		1.6		5.2		3.3
Pension benefit cost	$	2.8	$	1.6	$	5.6	$	3.5

Components of Other Postretirement Benefit Costs:

Components of Other Postretirement Benefit Costs:	Three Months Ended				Six Months Ended
($ in millions)	June 30,				June 30,
	2012		2011		2012		2011
Service cost	$	0.1	$	0.1	$	0.2	$	0.2
Interest cost		0.6		0.7		1.2		1.3
Prior service cost amortization		(0.3)		(0.5)		(0.7)		(1.0)
Other postretirement benefit cost	$	0.4	$	0.3	$	0.7	$	0.5

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6. Sources of Changes in Unrealized Investment Gains (Details) (USD $) In Millions, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2012	Jun. 30, 2011	Jun. 30, 2012	Jun. 30, 2011
Sources Of Changes In Unrealized Investment Gains Details
Debt securities	$ 129.5	$ 102.0	$ 208.2	$ 149.8
Equity securities	0.1	(3.7)	1.5	(3.9)
Other investments	0	0	0	0
Net unrealized investment gains	129.6	98.3	209.7	145.9
Applicable closed block policyholder dividend obligation	64.5	64.0	93.5	78.7
Applicable deferred policy acquisition cost	25.8	19.2	42.4	30.7
Applicable future policyholder benefits	4.5	0	18.3	0
Applicable deferred income tax expense	9.5	4.3	33.3	27.5
Offsets to net unrealized investment gains	104.3	87.5	187.5	136.9
Net unrealized investment gains (losses) included in OCI	$ 25.3	$ 10.8	$ 22.2	$ 9.0

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10. Carrying Amounts and Fair Value of Instruments (Details) (USD $) In Millions, unless otherwise specified	Jun. 30, 2012	Dec. 31, 2011
Financial liabilities:
Investment contracts	$ 2,767.1	$ 2,429.4
Carrying Value
Financial liabilities:
Investment contracts	2,767.1	2,429.4
Indebtedness	426.9	426.9
Fair Value
Financial liabilities:
Investment contracts	2,776.8	2,440.7
Indebtedness	$ 344.9	$ 322.0

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8. Variable Annuity Embedded Derivative Liabilities (Details) (USD $) In Millions, unless otherwise specified	Jun. 30, 2012	Dec. 31, 2011
Variable Annuity Embedded Derivative Liabilities Details
GMWB	$ 18.3	$ 17.0
GMAB	20.9	25.2
GPAF	1.3	2.3
COMBO	(0.3)	(0.3)
Total variable annuity embedded derivative liabilities	$ 40.2	$ 44.2

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6. Maturities of Debt Securities (Details) (USD $) In Millions, unless otherwise specified	Jun. 30, 2012	Dec. 31, 2011
Maturities Of Debt Securities Details
Due in one year or less Amortized Cost	$ 823.9	$ 519.9
Due after one year through five years Amortized Cost	2,113.4	2,139.3
Due after five years through ten years Amortized Cost	2,485.8	2,229.0
Due after ten years Amortized Cost	2,454.6	2,425.0
CMBS/RMBS/ABS/CDO/CLO Amortized Cost	3,711.2	4,038.6
Total Amortized Cost	11,588.9	11,351.8
Due in one year or less Fair Value	833.9	525.3
Due after one year through five years Fair Value	2,268.5	2,292.8
Due after five years through ten years Fair Value	2,720.8	2,405.2
Due after ten years Fair Value	2,745.5	2,635.3
CMBS/RMBS/ABS/CDO/CLO Fair Value	3,766.6	4,031.4
Total Fair Value	$ 12,335.3	$ 11,890.0

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3. Business Combinations and Dispositions

6 Months Ended

Jun. 30, 2012

Notes to Financial Statements

Note 3 - Business Combinations and Dispositions

3. Business Combinations and Dispositions

Goodwin Capital Advisers, Inc.

On September 14, 2011, we entered into a definitive agreement to sell Goodwin Capital Advisers, Inc. (“Goodwin”) to Conning Holdings Corp. (“Conning Holdings”). Also, on September 14, 2011, we entered into multi-year investment management agreements with Conning, Inc. (“Conning”) under which Conning will manage the Company’s publicly-traded fixed income assets. Because of the ongoing cash flows associated with the investment management agreements, results of these operations have been reflected within continuing operations. The transaction closed on November 18, 2011.

Private placement and limited partnership portfolios previously managed under Goodwin continue to be managed by Phoenix under its subsidiary, Phoenix Life.

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9. Derivative Instruments Fair Value (Details) (USD $) In Millions, unless otherwise specified	Jun. 30, 2012	Dec. 31, 2011
Interest rate swaps
Fair Value Notional Amount	$ 156.0	$ 131.0
Fair Value Assets	17.2	15.0
Fair Value Liabilities	6.9	5.2
Variance Swaps
Fair Value Notional Amount	0.9	0.9
Fair Value Assets	0	3.2
Fair Value Liabilities	1.3	0
Swaptions
Fair Value Notional Amount	25.0	25.0
Fair Value Assets	0.1	0.3
Fair Value Liabilities	0	0
Put options
Fair Value Notional Amount	406.0	406.0
Fair Value Assets	100.1	109.6
Fair Value Liabilities	0	0
Call options
Fair Value Notional Amount	635.5	355.0
Fair Value Assets	50.8	28.0
Fair Value Liabilities	33.5	19.0
Equity futures
Fair Value Notional Amount	207.7	70.0
Fair Value Assets	18.0	18.5
Fair Value Liabilities	0	0
Cross currency swaps
Fair Value Notional Amount	10.0	15.0
Fair Value Assets	0.4	0.2
Fair Value Liabilities	0	0
Total derivative instruments
Fair Value Notional Amount	1,441.1	1,002.9
Fair Value Assets	186.6	174.8
Fair Value Liabilities	$ 41.7	$ 24.2

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4. Closed Block Policyholder dividend obligation (Details) (USD $) In Millions, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2012	Jun. 30, 2011	Jun. 30, 2012	Jun. 30, 2011
Policyholder dividend obligation
Policyholder dividends provided through earnings	$ 84.2	$ 73.5	$ 149.2	$ 137.1
Policyholder dividends provided through OCI	64.5	64.0	93.5	78.7
Additions to policyholder dividend liabilities	148.7	137.5	242.7	215.8
Policyholder dividends paid	(54.1)	(62.3)	(106.5)	(122.8)
Increase in policyholder dividend liabilities	94.6	75.2	136.2	93.0
Policyholder dividend liabilities, beginning of period	801.4	620.1	759.8	602.3
Policyholder dividend liabilities, end of period	896.0	695.3	896.0	695.3
Policyholder dividends payable, end of period	(235.8)	(261.8)	(235.8)	(261.8)
Policyholder dividend obligation, end of period	$ 660.2	$ 433.5	$ 660.2	$ 433.5

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4. Demutualization and Closed Block (Tables)

6 Months Ended

Jun. 30, 2012

Notes to Financial Statements

Closed Block Assets And Liabilities

Closed Block Assets and Liabilities:	June 30,		Dec 31,
($ in millions)	2012		2011		Inception
Debt securities	$	6,379.1	$	6,353.1	$	4,773.1
Equity securities		14.8		12.0		—
Limited partnerships and other investments		372.4		352.8		399.0
Policy loans		1,258.0		1,280.4		1,380.0
Fair value option investments		11.2		10.6		—
Total closed block investments		8,035.5		8,008.9		6,552.1
Cash and cash equivalents		34.7		14.2		—
Accrued investment income		90.6		94.2		106.8
Receivables		50.7		52.2		35.2
Deferred income taxes		228.7		223.9		389.4
Other closed block assets		17.8		14.5		6.2
Total closed block assets		8,458.0		8,407.9		7,089.7
Policy liabilities and accruals		8,521.4		8,644.5		8,301.7
Policyholder dividends payable		235.8		240.1		325.1
Policy dividend obligation		660.2		519.7		—
Other closed block liabilities		55.6		32.8		12.3
Total closed block liabilities		9,473.0		9,437.1		8,639.1
Excess of closed block liabilities over closed block assets(1)	$	1,015.0	$	1,029.2	$	1,549.4

———————

(1) The maximum future earnings summary to inure to the benefit of the stockholders is represented by the excess of closed block liabilities over closed block assets. All unrealized investment gains (losses), net of income tax, have been allocated to the policyholder dividend obligation.

Closed Block Revenues and Expenses

Closed Block Revenues and Expenses:	Three Months Ended				Six Months Ended
	June 30,				June 30,
($ in millions)	2012		2011		2012		2011
Closed block revenues
Premiums	$	97.2	$	103.8	$	188.9	$	207.0
Net investment income		121.0		118.0		234.8		235.6
Net realized investment gains (losses)		2.9		3.2		2.0		1.6
Total revenues		221.1		225.0		425.7		444.2
Policy benefits, excluding dividends		124.8		137.5		251.9		279.1
Other operating expenses		1.1		1.5		2.7		3.0
Total benefits and expenses, excluding policyholder dividends		125.9		139.0		254.6		282.1
Closed block contribution to income   before dividends and income taxes		95.2		86.0		171.1		162.1
Policyholder dividends		84.2		73.5		149.2		137.1
Closed block contribution to income before income taxes		11.0		12.5		21.9		25.0
Applicable income tax expense		3.8		4.4		7.6		8.7
Closed block contribution to income	$	7.2	$	8.1	$	14.3	$	16.3

Closed Block Policyholder Dividend Obligation

Changes in Policyholder Dividend Obligations:	Three Months Ended				Six Months Ended
	June 30,				June 30,
($ in millions)	2012		2011		2012		2011
Policyholder dividend obligation
Policyholder dividends provided through earnings	$	84.2	$	73.5	$	149.2	$	137.1
Policyholder dividends provided through OCI		64.5		64.0		93.5		78.7
Additions to policyholder dividend liabilities		148.7		137.5		242.7		215.8
Policyholder dividends paid		-54.1		-62.3		-106.5		-122.8
Increase in policyholder dividend liabilities		94.6		75.2		136.2		93.0
Policyholder dividend liabilities, beginning of period		801.4		620.1		759.8		602.3
Policyholder dividend liabilities, end of period		896.0		695.3		896.0		695.3
Policyholder dividends payable, end of period		-235.8		-261.8		-235.8		-261.8
Policyholder dividend obligation, end of period	$	660.2	$	433.5	$	660.2	$	433.5

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2. Basis of Presentation and Significant Accounting (Tables)

6 Months Ended

Jun. 30, 2012

Notes to Financial Statements

Selected financial data as adjusted for the retrospective adoption

Summarized Selected Annual Financial Data:	Year Ended December 31,
($ in millions)	2011		2010		2009		2008
Deferred policy acquisition costs, as previously reported	$	1,317.6	$	1,444.3	$	1,916.0	$	2,708.3
Impact of adoption		(154.8)		(197.8)		(279.4)		(355.5)
Deferred policy acquisition costs, as revised	$	1,162.8	$	1,246.5	$	1,636.6	$	2,352.8
Deferred tax asset, as previously reported	$	118.3	$	116.4	$	166.2	$	435.2
Impact of adoption		(0.1)		—		9.9		129.6
Deferred tax asset, as revised	$	118.2	$	116.4	$	176.1	$	564.8
Policy liabilities and accruals, as previously reported	$	12,967.8	$	12,992.5	$	13,151.1	$	13,932.9
Impact of adoption		13.3		14.6		15.9		14.9
Policy liabilities and accruals, as revised	$	12,981.1	$	13,007.1	$	13,167.0	$	13,947.8
Total equity, as previously reported	$	1,126.2	$	1,155.5	$	1,131.1	$	865.1
Impact of adoption		(168.2)		(212.5)		(285.4)		(240.7)
Total equity, as revised	$	958.0	$	943.0	$	845.7	$	624.4

Summarized Selected Quarterly Financial Data:	Quarter Ended
($ in millions)	Dec 31,		Sept 30,		June 30,		Mar 31,
	2011
Policy benefits, excluding policyholder dividends, as previously reported	$	283.2	$	268.2	$	271.1	$	260.7
Impact of adoption		(0.3)		(0.4)		(0.3)		(0.3)
Policy benefits, excluding policyholder dividends, as revised	$	282.9	$	267.8	$	270.8	$	260.4
Policy acquisition cost amortization, as previously reported	$	38.7	$	57.5	$	51.8	$	62.7
Impact of adoption		(8.1)		(11.0)		(9.0)		(11.6)
Policy acquisition cost amortization, as revised	$	30.6	$	46.5	$	42.8	$	51.1
Operating expenses, as previously reported	$	69.7	$	57.2	$	58.9	$	59.3
Impact of adoption		0.3		0.4		0.3		0.4
Operating expenses, as revised	$	70.0	$	57.6	$	59.2	$	59.7
Income (loss) from continuing operations, before income tax,   as previously reported	$	(7.4)	$	29.8	$	14.5	$	(4.9)
Impact of adoption		8.1		11.0		9.0		11.5
Income from continuing operations, before income tax, as revised	$	0.7	$	40.8	$	23.5	$	6.6
Income tax expense (benefit), as previously reported	$	(0.5)	$	(6.7)	$	9.4	$	(0.3)
Impact of adoption		0.1		—		(1.8)		1.8
Income tax expense (benefit), as revised	$	(0.4)	$	(6.7)	$	7.6	$	1.5
Net income (loss), as previously reported	$	(22.0)	$	31.8	$	4.4	$	(6.1)
Impact of adoption		8.0		11.0		10.8		9.7
Net income (loss), as revised	$	(14.0)	$	42.8	$	15.2	$	3.6
Earnings (loss) per share, as previously reported	$	(0.19)	$	0.27	$	0.04	$	(0.05)
Impact of adoption		0.07		0.10		0.09		0.08
Earnings (loss) per share, as revised	$	(0.12)	$	0.37	$	0.13	$	0.03

Summarized Selected Annual Financial Data:	Year Ended December 31,
($ in millions)	2011		2010		2009		2008
Policy benefits, excluding policyholder dividends, as previously reported	$	1,083.2	$	1,090.0	$	1,179.6	$	1,260.7
Impact of adoption		(1.3)		(1.3)		(1.4)		(0.5)
Policy benefits, excluding policyholder dividends, as revised	$	1,081.9	$	1,088.7	$	1,178.2	$	1,260.2
Policy acquisition cost amortization, as previously reported	$	210.6	$	298.2	$	260.6	$	406.0
Impact of adoption		(39.7)		(51.9)		(57.9)		(116.2)
Policy acquisition cost amortization, as revised	$	170.9	$	246.3	$	202.7	$	289.8
Operating expenses, as previously reported	$	245.2	$	291.2	$	303.5	$	254.9
Impact of adoption		1.3		2.2		15.8		65.9
Operating expenses, as revised	$	246.5	$	293.4	$	319.3	$	320.8
Income (loss) from continuing operations, before income tax,   as previously reported	$	32.0	$	(34.7)	$	(87.1)	$	(295.3)
Impact of adoption		39.7		51.0		43.5		50.8
Income (loss) from continuing operations, before income tax, as revised	$	71.7	$	16.3	$	(43.6)	$	(244.5)
Income tax expense (benefit), as previously reported	$	1.9	$	(10.1)	$	108.9	$	(118.5)
Impact of adoption		0.1		12.1		123.9		(108.6)
Income tax expense (benefit), as revised	$	2.0	$	2.0	$	232.8	$	(227.1)
Net income (loss), as previously reported	$	8.1	$	(12.6)	$	(319.0)	$	(726.0)
Impact of adoption		39.6		38.9		(80.4)		159.4
Net income (loss), as revised	$	47.7	$	26.3	$	(399.4)	$	(566.6)
Earnings (loss) per share, as previously reported	$	0.07	$	(0.11)	$	(2.74)	$	(6.35)
Impact of adoption		0.34		0.33		(0.69)		1.39
Earnings (loss) per share, as revised	$	0.41	$	0.22	$	(3.43)	$	(4.96)

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8. Variable Annuity Contracts with Guarantees (Details) (USD $) In Millions, unless otherwise specified	Jun. 30, 2012	Dec. 31, 2011
Variable Annuity Contracts With Guarantees Details
Debt securities	$ 492.2	$ 515.4
Equity funds	1,860.9	1,883.3
Other	78.9	81.7
Total	$ 2,432.0	$ 2,480.4

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5. Deferred Policy Acquisition Costs (Details) (USD $) In Millions, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2012	Jun. 30, 2011	Jun. 30, 2012	Jun. 30, 2011
Deferred Policy Acquisition Costs:
Policy acquisition costs deferred	$ 21.5	$ 29.0	$ 47.6	$ 63.2
Costs amortized to expenses:
Recurring costs	(46.8)	(42.7)	(93.2)	(93.8)
Realized investment gains (losses)	5.0	(0.1)	1.2	(0.3)
Offsets to net unrealized investment gains or losses included in AOCI	(25.8)	(19.2)	(42.4)	(30.7)
Change in deferred policy acquisition costs	(46.1)	(33.0)	(86.8)	(61.6)
Deferred policy acquisition costs, beginning of period	1,122.1	1,217.9	1,162.8	1,246.5
Deferred policy acquisition costs, end of period	$ 1,076.0	$ 1,184.9	$ 1,076.0	$ 1,184.9

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5. Deferred Policy Acquisition Costs (Tables)

6 Months Ended

Jun. 30, 2012

Notes to Financial Statements

Deferred Policy Acquisition Costs:

Deferred Policy Acquisition Costs:	Three Months Ended				Six Months Ended
($ in millions)	June 30,				June 30,
	2012		2011		2012		2011
Policy acquisition costs deferred	$	21.5	$	29.0	$	47.6	$	63.2
Costs amortized to expenses:
Recurring costs		(46.8)		(42.7)		(93.2)		(93.8)
Realized investment gains (losses)		5.0		(0.1)		1.2		(0.3)
Offsets to net unrealized investment gains or losses   included in AOCI(1)		(25.8)		(19.2)		(42.4)		(30.7)
Change in deferred policy acquisition costs		(46.1)		(33.0)		(86.8)		(61.6)
Deferred policy acquisition costs, beginning of period		1,122.1		1,217.9		1,162.8		1,246.5
Deferred policy acquisition costs, end of period	$	1,076.0	$	1,184.9	$	1,076.0	$	1,184.9

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6. Investing Activities (Tables)

6 Months Ended

Jun. 30, 2012

Notes to Financial Statements

Fair Value and Cost of Securities

Fair Value and Cost of Securities:	June 30, 2012
($ in millions)			Gross		Gross				OTTI
	Amortized		Unrealized		Unrealized		Fair		Recognized
	Cost		Gains		Losses		Value		in AOCI(1)
U.S. government and agency	$	877.5	$	84.6	$	(5.8)	$	956.3	$	—
State and political subdivision		292.4		32.6		(2.8)		322.2		—
Foreign government		180.4		27.0		(0.3)		207.1		—
Corporate		6,527.4		683.9		(128.2)		7,083.1		(5.7)
Commercial mortgage-backed (“CMBS”)		982.5		64.1		(13.7)		1,032.9		(18.8)
Residential mortgage-backed (“RMBS”)		1,986.5		90.7		(61.1)		2,016.1		(99.4)
CDO/CLO		272.3		5.4		(43.2)		234.5		(24.2)
Other asset-backed		469.9		20.8		(7.6)		483.1		(1.2)
Available-for-sale debt securities	$	11,588.9	$	1,009.1	$	(262.7)	$	12,335.3	$	(149.3)
Amounts applicable to the closed block	$	5,841.6	$	624.3	$	(86.8)	$	6,379.1	$	(48.2)
Available-for-sale equity securities	$	34.4	$	13.4	$	(5.7)	$	42.1	$	(1.9)
Amounts applicable to the closed block	$	12.8	$	5.0	$	(3.0)	$	14.8	$	(1.0)

———————

⁽¹⁾ Represents the amount of non-credit OTTI losses recognized in AOCI excluding net unrealized gains or losses subsequent to the date of impairment.

Fair Value and Cost of Securities:	December 31, 2011
($ in millions)			Gross		Gross				OTTI
	Amortized		Unrealized		Unrealized		Fair		Recognized
	Cost		Gains		Losses		Value		in AOCI(1)
U.S. government and agency	$	708.6	$	80.1	$	(5.3)	$	783.4	$	—
State and political subdivision		251.9		21.6		(2.9)		270.6		—
Foreign government		185.7		21.2		(1.7)		205.2		—
Corporate		6,167.0		603.9		(171.5)		6,599.4		(5.7)
CMBS		1,109.9		53.5		(20.3)		1,143.1		(28.0)
RMBS		2,132.9		80.3		(81.9)		2,131.3		(89.6)
CDO/CLO		294.2		4.5		(48.1)		250.6		(24.2)
Other asset-backed		501.6		11.1		(6.3)		506.4		(1.2)
Available-for-sale debt securities	$	11,351.8	$	876.2	$	(338.0)	$	11,890.0	$	(148.7)
Amounts applicable to the closed block	$	5,908.2	$	568.4	$	(123.5)	$	6,353.1	$	(48.5)
Available-for-sale equity securities	$	29.5	$	12.2	$	(6.0)	$	35.7	$	—
Amounts applicable to the closed block	$	10.8	$	4.3	$	(3.1)	$	12.0	$	—

———————

(1) Represents the amount of non-credit OTTI losses recognized in AOCI excluding net unrealized gains or losses subsequent to the date of impairment.

Aging of Temporarily Impaired Securities

Aging of Temporarily Impaired Securities:	As of June 30, 2012
($ in millions)	Less than 12 months				Greater than 12 months				Total
	Fair		Unrealized		Fair		Unrealized		Fair		Unrealized
	Value		Losses		Value		Losses		Value		Losses
Debt Securities
U.S. government and agency	$	1.2	$	—	$	40.7	$	(5.8)	$	41.9	$	(5.8)
State and political subdivision		10.0		(0.1)		6.4		(2.7)		16.4		(2.8)
Foreign government		7.6		(0.3)		—		—		7.6		(0.3)
Corporate		259.1		(14.1)		452.5		(114.1)		711.6		(128.2)
CMBS		15.9		(0.1)		63.9		(13.6)		79.8		(13.7)
RMBS		54.4		(2.1)		420.2		(59.0)		474.6		(61.1)
CDO/CLO		17.3		(0.3)		143.0		(42.9)		160.3		(43.2)
Other asset-backed		26.1		(1.1)		41.6		(6.5)		67.7		(7.6)
Debt securities		391.6		(18.1)		1,168.3		(244.6)		1,559.9		(262.7)
Equity securities		2.7		(4.9)		0.4		(0.8)		3.1		(5.7)
Total temporarily impaired securities	$	394.3	$	(23.0)	$	1,168.7	$	(245.4)	$	1,563.0	$	(268.4)
Amounts inside the closed block	$	159.8	$	(10.6)	$	492.9	$	(79.2)	$	652.7	$	(89.8)
Amounts outside the closed block	$	234.5	$	(12.4)	$	675.8	$	(166.2)	$	910.3	$	(178.6)
Amounts outside the closed block   that are below investment grade	$	63.5	$	(4.4)	$	227.9	$	(107.1)	$	291.4	$	(111.5)
Number of securities				215				601				816

Aging of Temporarily Impaired Securities:	As of December 31, 2011
($ in millions)	Less than 12 months				Greater than 12 months				Total
	Fair		Unrealized		Fair		Unrealized		Fair		Unrealized
	Value		Losses		Value		Losses		Value		Losses
Debt Securities
U.S. government and agency	$	—	$	—	$	41.2	$	(5.3)	$	41.2	$	(5.3)
State and political subdivision		26.1		(0.1)		6.3		(2.8)		32.4		(2.9)
Foreign government		25.6		(1.7)		—		—		25.6		(1.7)
Corporate		373.0		(20.1)		512.1		(151.4)		885.1		(171.5)
CMBS		141.3		(2.5)		56.8		(17.8)		198.1		(20.3)
RMBS		174.6		(6.4)		432.5		(75.5)		607.1		(81.9)
CDO/CLO		9.3		(0.1)		165.0		(48.0)		174.3		(48.1)
Other asset-backed		103.6		(2.4)		68.4		(3.9)		172.0		(6.3)
Debt securities		853.5		(33.3)		1,282.3		(304.7)		2,135.8		(338.0)
Equity securities		4.2		(5.2)		0.4		(0.8)		4.6		(6.0)
Total temporarily impaired securities	$	857.7	$	(38.5)	$	1,282.7	$	(305.5)	$	2,140.4	$	(344.0)
Amounts inside the closed block	$	317.6	$	(18.0)	$	556.8	$	(108.6)	$	874.4	$	(126.6)
Amounts outside the closed block	$	540.1	$	(20.5)	$	725.9	$	(196.9)	$	1,266.0	$	(217.4)
Amounts outside the closed block   that are below investment grade	$	61.5	$	(4.5)	$	260.0	$	(128.8)	$	321.5	$	(133.3)
Number of securities				502				664				1,166

Maturities of debt securities

Maturities of Debt Securities:	June 30, 2012				December 31, 2011
($ in millions)	Amortized		Fair		Amortized		Fair
	Cost		Value		Cost		Value
Due in one year or less	$	823.9	$	833.9	$	519.9	$	525.3
Due after one year through five years		2,113.4		2,268.5		2,139.3		2,292.8
Due after five years through ten years		2,485.8		2,720.8		2,229.0		2,405.2
Due after ten years		2,454.6		2,745.5		2,425.0		2,635.3
CMBS/RMBS/ABS/CDO/CLO		3,711.2		3,766.6		4,038.6		4,031.4
Total	$	11,588.9	$	12,335.3	$	11,351.8	$	11,890.0

Credit Losses Recognized in Earnings on Debt Securities

Credit Losses Recognized in Earnings on Debt Securities for	Three Months Ended				Six Months Ended
which a Portion of the OTTI Loss was Recognized in OCI:	June 30,				June 30,
($ in millions)	2012		2011		2012		2011
Balance, beginning of period	$	(79.1)	$	(62.6)	$	(73.8)	$	(60.4)
Add: Credit losses on securities not previously impaired(1)		(1.5)		(1.8)		(3.6)		(5.9)
Add: Credit losses on securities previously impaired(1)		(3.3)		(1.1)		(6.5)		(2.3)
Less: Credit losses on securities impaired due to intent to sell		—		—		—		—
Less: Credit losses on securities sold		0.2		—		0.2		3.1
Less: Increases in cash flows expected on   previously impaired securities		—		—		—		—
Balance, end of period	$	(83.7)	$	(65.5)	$	(83.7)	$	(65.5)

Limited Partnerships and Other Investments

Limited Partnerships and Other Investments:	June 30,		Dec 31,
($ in millions)	2012		2011
Private equity	$	255.8	$	241.3
Mezzanine funds		196.1		189.9
Infrastructure funds		36.3		35.7
Hedge funds		30.0		30.0
Leverage lease		19.9		20.3
Mortgage and real estate		6.7		11.6
Direct equity		26.7		25.4
Other alternative assets		47.0		47.1
Limited partnerships and other investments	$	618.5	$	601.3
Amounts applicable to the closed block	$	372.4	$	352.8

Sources of Net Investment Income

Sources of Net Investment Income:	Three Months Ended				Six Months Ended
($ in millions)	June 30,				June 30,
	2012		2011		2012		2011
Debt securities	$	152.4	$	155.8	$	305.1	$	304.0
Equity securities		1.2		—		1.9		0.6
Limited partnerships and other investments		69.0		57.5		128.4		110.0
Fair value option investments		(1.0)		(0.2)		0.8		2.2
Total investment income		221.6		213.1		436.2		416.8
Less: Discontinued operations		0.5		0.5		1.2		1.0
Less: Investment expenses		2.9		1.4		6.9		3.2
Net investment income	$	218.2	$	211.2	$	428.1	$	412.6
Amounts applicable to the closed block	$	121.0	$	118.0	$	234.8	$	235.6

Sources and Types of Net Realized Investment Gains (Losses)

Sources and Types of	Three Months Ended				Six Months Ended
Net Realized Investment Gains (Losses):	June 30,				June 30,
($ in millions)	2012		2011		2012		2011
Total other-than-temporary debt impairment losses	$	(13.5)	$	(6.6)	$	(25.2)	$	(14.0)
Portion of loss recognized in OCI		9.9		3.6		15.4		5.3
Net debt impairment losses recognized in earnings	$	(3.6)	$	(3.0)	$	(9.8)	$	(8.7)
Debt security impairments:
U.S. government and agency	$	—	$	—	$	—	$	—
State and political subdivision		—		—		—		—
Foreign government		—		—		—		—
Corporate		—		(0.2)		(0.6)		(4.6)
CMBS		(1.0)		—		(1.2)		—
RMBS		(2.3)		(2.7)		(7.4)		(4.0)
CDO/CLO		(0.1)		—		(0.1)		—
Other asset-backed		(0.2)		(0.1)		(0.5)		(0.1)
Net debt security impairments		(3.6)		(3.0)		(9.8)		(8.7)
Equity security impairments		(1.5)		—		(1.5)		—
Limited partnerships and other investment impairments		—		—		—		—
Impairment losses		(5.1)		(3.0)		(11.3)		(8.7)
Debt security transaction gains(1)		5.8		5.5		8.0		9.4
Debt security transaction losses(1)		(2.4)		(1.2)		(3.4)		(3.1)
Equity security transaction gains		—		0.1		—		0.1
Equity security transaction losses		—		—		—		—
Limited partnerships and other investment transaction gains		0.6		—		1.4		—
Limited partnerships and other investment transaction losses		—		—		—		(1.6)
Net transaction gains		4.0		4.4		6.0		4.8
Derivative instruments		13.1		5.0		(23.0)		(15.1)
Embedded derivatives(2)		(19.1)		(4.7)		3.7		4.9
Fair value option investments		(1.1)		1.4		0.8		1.0
Net realized investment gains (losses),   excluding impairment losses		(3.1)		6.1		(12.5)		(4.4)
Net realized investment gains (losses),   including impairment losses	$	(8.2)	$	3.1	$	(23.8)	$	(13.1)

———————

⁽¹⁾ Proceeds from the sale of available-for-sale debt securities were $296.0 million and $396.1 million for the three months ended June 30, 2012 and 2011, respectively. Proceeds from the sale of available-for-sale debt securities were $402.3 million and $693.1 million for the six months ended June 30, 2012 and 2011, respectively.

(2) Includes the change in fair value of embedded derivatives associated with variable annuity GMWB, GMAB, GPAF and COMBO riders. See Note 8 to these financial statements for additional disclosures.

Sources of Changes in Net Unrealized Investment Gains (Losses)

Sources of Changes in	Three Months Ended				Six Months Ended
Net Unrealized Investment Gains (Losses):	June 30,				June 30,
($ in millions)	2012		2011		2012		2011
Debt securities	$	129.5	$	102.0	$	208.2	$	149.8
Equity securities		0.1		(3.7)		1.5		(3.9)
Other investments		—		—		—		—
Net unrealized investment gains	$	129.6	$	98.3	$	209.7	$	145.9
Net unrealized investment gains	$	129.6	$	98.3	$	209.7	$	145.9
Applicable closed block policyholder dividend obligation		64.5		64.0		93.5		78.7
Applicable deferred policy acquisition cost		25.8		19.2		42.4		30.7
Applicable future policyholder benefits		4.5		—		18.3		—
Applicable deferred income tax expense		9.5		4.3		33.3		27.5
Offsets to net unrealized investment gains		104.3		87.5		187.5		136.9
Net unrealized investment gains included in OCI	$	25.3	$	10.8	$	22.2	$	9.0

Carrying Value of Assets and Liabilities

Carrying Value of Assets and Liabilities	June 30, 2012						December 31, 2011
and Maximum Exposure Loss Relating					Maximum						Maximum
to Variable Interest Entities:					Exposure						Exposure
($ in millions)	Assets		Liabilities		to Loss		Assets		Liabilities		to Loss
Limited partnerships	$	568.7	$	—	$	568.7	$	552.1	$	—	$	552.1
Direct equity investments		26.7		—		26.7		25.4		—		25.4
Receivable		7.3		—		7.3		6.6		—		6.6
Total	$	602.7	$	—	$	602.7	$	584.1	$	—	$	584.1

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2. Basis of Presentation and Significant Accounting Policies

6 Months Ended

Jun. 30, 2012

Notes to Financial Statements

Note 2 - Basis of Presentation and Significant Accounting Policies

2. Basis of Presentation and Significant Accounting Policies

We have prepared these unaudited financial statements in accordance with accounting principles generally accepted in the United States of America (“GAAP”), which differ materially from the accounting practices prescribed by various insurance regulatory authorities. Our interim consolidated financial statements include the accounts of the Company and its subsidiaries. Intercompany balances and transactions have been eliminated in consolidating these financial statements. As of December 31, 2011, the Company changed from the direct to the indirect method of reporting its consolidated cash flow statement. Prior year consolidated cash flow statements, as well as other prior year amounts, have been reclassified to conform to the current year presentation.

These financial statements include all adjustments (consisting primarily of accruals) considered necessary for the fair statement of the consolidated balance sheet, consolidated statements of comprehensive income, and consolidated statements of cash flows for the interim periods. Certain financial information that is not required for interim reporting has been omitted. The interim financial statements should be read in conjunction with the consolidated financial statements included in our 2011 Annual Report on Form 10-K. Financial results for the three and six months ended June 30, 2012 are not necessarily indicative of full year results.

Adjustments Related to Prior Years

A net loss from continuing operations of $14.5 million was recognized during the six months ended June 30, 2012. This reflects approximately $3.0 million associated with the correction of errors related to 2011, which decreased income from continuing operations recognized during 2012. We have assessed the impact of these errors and have determined that the errors were not material to any prior periods or previously issued financial statements.

Use of estimates

In preparing these financial statements in conformity with GAAP, we are required to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting periods. Significant estimates and assumptions are made in the determination of estimated gross profits (“EGPs”) used in the valuation and amortization of assets and liabilities associated with universal life and annuity contracts; policyholder liabilities and accruals; valuation of investments in debt and equity securities; limited partnerships and other investments; valuation of deferred tax assets; pension and other post-employment benefits liabilities; and accruals for contingent liabilities. Actual results could differ from these estimates.

Adoption of new accounting standards

Amendments to the Presentation of Comprehensive Income

In June 2011, the Financial Accounting Standards Board (the “FASB”) issued amended guidance to ASC 220, Comprehensive Income, with respect to the presentation of comprehensive income as part of the effort to establish common requirements in accordance with GAAP and International Financial Reporting Standards (“IFRS”). This amended guidance requires entities to present all non-owner changes in stockholders’ equity either in a single continuous statement of comprehensive income or in two separate but consecutive statements. The amendments do not affect which components of comprehensive income are recognized in net income or comprehensive income, or when an item of other comprehensive income must be classified to net income. The computation and presentation of earnings per share also does not change. This guidance was adopted in the first quarter of 2012. Disclosures in Note 12 reflect the retrospective adoption of this guidance. Other than additional disclosures, adoption of this guidance did not have a material effect on our consolidated financial statements.

Amendments to Fair Value Measurement and Disclosure Requirements

In May 2011, the FASB issued amended guidance to ASC 820, Fair Value Measurement, with respect to measuring fair value and related disclosures as part of the effort to establish common requirements in accordance with GAAP and IFRS. The amended guidance clarifies that the concept of highest and best use should only be used in the valuation of non-financial assets, specifies how to apply fair value measurements to instruments classified in stockholders’ equity and requires that premiums or discounts be applied consistent with what market participants would use absent Level 1 inputs. The amendment also explicitly requires additional disclosures related to the valuation of assets categorized as Level 3 within the fair value hierarchy. Additional disclosures include quantitative information about unobservable inputs, the sensitivity of fair value measurement to changes in unobservable outputs and information on the valuation process used. This guidance was adopted in the first quarter of 2012. Disclosures in Note 10 reflect the prospective adoption of this guidance. Other than additional disclosures, adoption of this guidance did not have a material effect on our consolidated financial statements.

Accounting for Costs Associated with Acquiring or Renewing Insurance Contracts

In October 2010, the FASB issued amended guidance to ASC 944, Financial Services – Insurance, to address the diversity in practice for accounting for costs associated with acquiring or renewing insurance contracts. The amendment clarifies the definition of acquisition costs (i.e., costs which qualify for deferral) to incremental direct costs that result directly from, and are essential to, a contract and would not have been incurred by the insurance entity had the contract transaction not occurred. Therefore, only costs related to successful efforts of acquiring a new, or renewal, contract should be deferred. This guidance was retrospectively adopted on January 1, 2012. The cumulative effect of retrospective adoption reduced deferred policy acquisition costs and beginning stockholders’ equity as of January 1, 2012 by $168.2 million primarily related to lower deferrals associated with expenses not directly related to new policy sales.

The tables below show selected financial data as adjusted for the retrospective adoption noted above. Adoption of the standard did not affect the previously reported totals for net cash flows provided by (used for) operating, investing or financing activities.

Summarized Selected Annual Financial Data:	Year Ended December 31,
($ in millions)	2011		2010		2009		2008
Deferred policy acquisition costs, as previously reported	$	1,317.6	$	1,444.3	$	1,916.0	$	2,708.3
Impact of adoption		(154.8)		(197.8)		(279.4)		(355.5)
Deferred policy acquisition costs, as revised	$	1,162.8	$	1,246.5	$	1,636.6	$	2,352.8
Deferred tax asset, as previously reported	$	118.3	$	116.4	$	166.2	$	435.2
Impact of adoption		(0.1)		—		9.9		129.6
Deferred tax asset, as revised	$	118.2	$	116.4	$	176.1	$	564.8
Policy liabilities and accruals, as previously reported	$	12,967.8	$	12,992.5	$	13,151.1	$	13,932.9
Impact of adoption		13.3		14.6		15.9		14.9
Policy liabilities and accruals, as revised	$	12,981.1	$	13,007.1	$	13,167.0	$	13,947.8
Total equity, as previously reported	$	1,126.2	$	1,155.5	$	1,131.1	$	865.1
Impact of adoption		(168.2)		(212.5)		(285.4)		(240.7)
Total equity, as revised	$	958.0	$	943.0	$	845.7	$	624.4

Summarized Selected Quarterly Financial Data:	Quarter Ended
($ in millions)	Dec 31,		Sept 30,		June 30,		Mar 31,
	2011
Policy benefits, excluding policyholder dividends, as previously reported	$	283.2	$	268.2	$	271.1	$	260.7
Impact of adoption		(0.3)		(0.4)		(0.3)		(0.3)
Policy benefits, excluding policyholder dividends, as revised	$	282.9	$	267.8	$	270.8	$	260.4
Policy acquisition cost amortization, as previously reported	$	38.7	$	57.5	$	51.8	$	62.7
Impact of adoption		(8.1)		(11.0)		(9.0)		(11.6)
Policy acquisition cost amortization, as revised	$	30.6	$	46.5	$	42.8	$	51.1
Operating expenses, as previously reported	$	69.7	$	57.2	$	58.9	$	59.3
Impact of adoption		0.3		0.4		0.3		0.4
Operating expenses, as revised	$	70.0	$	57.6	$	59.2	$	59.7
Income (loss) from continuing operations, before income tax,   as previously reported	$	(7.4)	$	29.8	$	14.5	$	(4.9)
Impact of adoption		8.1		11.0		9.0		11.5
Income from continuing operations, before income tax, as revised	$	0.7	$	40.8	$	23.5	$	6.6
Income tax expense (benefit), as previously reported	$	(0.5)	$	(6.7)	$	9.4	$	(0.3)
Impact of adoption		0.1		—		(1.8)		1.8
Income tax expense (benefit), as revised	$	(0.4)	$	(6.7)	$	7.6	$	1.5
Net income (loss), as previously reported	$	(22.0)	$	31.8	$	4.4	$	(6.1)
Impact of adoption		8.0		11.0		10.8		9.7
Net income (loss), as revised	$	(14.0)	$	42.8	$	15.2	$	3.6
Earnings (loss) per share, as previously reported	$	(0.19)	$	0.27	$	0.04	$	(0.05)
Impact of adoption		0.07		0.10		0.09		0.08
Earnings (loss) per share, as revised	$	(0.12)	$	0.37	$	0.13	$	0.03

Summarized Selected Annual Financial Data:	Year Ended December 31,
($ in millions)	2011		2010		2009		2008
Policy benefits, excluding policyholder dividends, as previously reported	$	1,083.2	$	1,090.0	$	1,179.6	$	1,260.7
Impact of adoption		(1.3)		(1.3)		(1.4)		(0.5)
Policy benefits, excluding policyholder dividends, as revised	$	1,081.9	$	1,088.7	$	1,178.2	$	1,260.2
Policy acquisition cost amortization, as previously reported	$	210.6	$	298.2	$	260.6	$	406.0
Impact of adoption		(39.7)		(51.9)		(57.9)		(116.2)
Policy acquisition cost amortization, as revised	$	170.9	$	246.3	$	202.7	$	289.8
Operating expenses, as previously reported	$	245.2	$	291.2	$	303.5	$	254.9
Impact of adoption		1.3		2.2		15.8		65.9
Operating expenses, as revised	$	246.5	$	293.4	$	319.3	$	320.8
Income (loss) from continuing operations, before income tax,   as previously reported	$	32.0	$	(34.7)	$	(87.1)	$	(295.3)
Impact of adoption		39.7		51.0		43.5		50.8
Income (loss) from continuing operations, before income tax, as revised	$	71.7	$	16.3	$	(43.6)	$	(244.5)
Income tax expense (benefit), as previously reported	$	1.9	$	(10.1)	$	108.9	$	(118.5)
Impact of adoption		0.1		12.1		123.9		(108.6)
Income tax expense (benefit), as revised	$	2.0	$	2.0	$	232.8	$	(227.1)
Net income (loss), as previously reported	$	8.1	$	(12.6)	$	(319.0)	$	(726.0)
Impact of adoption		39.6		38.9		(80.4)		159.4
Net income (loss), as revised	$	47.7	$	26.3	$	(399.4)	$	(566.6)
Earnings (loss) per share, as previously reported	$	0.07	$	(0.11)	$	(2.74)	$	(6.35)
Impact of adoption		0.34		0.33		(0.69)		1.39
Earnings (loss) per share, as revised	$	0.41	$	0.22	$	(3.43)	$	(4.96)

Accounting standards not yet adopted

Disclosures about Offsetting Assets and Liabilities

In December 2011, the FASB issued amended guidance to ASC 210, Balance Sheet, with respect to disclosure of offsetting assets and liabilities as part of the effort to establish common requirements in accordance with GAAP and IFRS. This amended guidance requires the disclosure of both gross information and net information about both financial instruments and derivative instruments eligible for offset in our consolidated balance sheet and instruments and transactions subject to an agreement similar to a master netting arrangement. This guidance is effective for periods beginning on or after January 1, 2013, with respective disclosures required retrospectively for all comparative periods presented. The adoption of this guidance effective January 1, 2013 is not expected to have a material effect on our consolidated financial statements.

Significant Accounting Policies

Our significant accounting policies are presented in the notes to our consolidated financial statements in our 2011 Annual Report on Form 10-K. With the exception of our adoption of new guidance related to accounting for costs associated with acquiring or renewing insurance contracts effective January 1, 2012, there have been no significant changes since year end December 31, 2011. See Note 5 to these financial statements for our updated accounting policy related to this new guidance.

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7. Financing Activities (Tables)

6 Months Ended

Jun. 30, 2012

Notes to Financial Statements

Indebtedness at Carrying Value:

Indebtedness at Carrying Value:	June 30,		Dec 31,
($ in millions)	2012		2011
7.15% surplus notes	$	174.1	$	174.1
7.45% senior unsecured bonds		252.8		252.8
Total indebtedness	$	426.9	$	426.9

Interest Expense on Indebtedness, including

Interest Expense on Indebtedness, including	Three Months Ended				Six Months Ended
Amortization of Debt Issuance Costs:	June 30,				June 30,
($ in millions)	2012		2011		2012		2011
Surplus notes	$	3.1	$	3.1	$	6.3	$	6.3
Senior unsecured bonds		4.8		4.8		9.6		9.6
Interest expense on indebtedness	$	7.9	$	7.9	$	15.9	$	15.9

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13. Employee Benefits Future Contributions (Details Narrative) (USD $) In Millions, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2012	Jun. 30, 2011	Jun. 30, 2012	Jun. 30, 2011	Dec. 31, 2012
Employee Benefits Future Contributions Details Narrative
Amortization of prior service costs included in OCI	$ 13.7		$ 12.4
Contributions to pension plan	3.6		7.0
Contributions to savings plan	1.1	1.5	2.4	2.7
Contributions to be made					$ 9.4

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16. Segment Information (Tables)

6 Months Ended

Jun. 30, 2012

Notes to Financial Statements

Segment Information on Revenues:

Segment Information	Three Months Ended				Six Months Ended
on Revenues:	June 30,				June 30,
($ in millions)	2012		2011		2012		2011
Life and Annuity(1)	$	449.2	$	476.2	$	888.1	$	924.3
Saybrus Partners		5.0		4.2		10.2		8.0
Less: intercompany revenues(2)		2.7		2.2		5.8		4.1
Total revenues	$	451.5	$	478.2	$	892.5	$	928.2

———————

⁽¹⁾ Includes intercompany interest revenue of $0.1 million and $0.2 million for the three months ended June 30, 2012 and 2011, respectively, and $0.3 million and $0.5 million for the six months ended June 30, 2012 and 2011, respectively.

(2) All intercompany balances are eliminated in consolidating the financial statements.

Results of Operations by Segment as Reconciled to Consolidated Net Income:

Results of Operations by Segment as Reconciled to	Three Months Ended				Six Months Ended
to Consolidated Net Income:	June 30,				June 30,
($ in millions)	2012		2011		2012		2011
Life and Annuity operating income	$	8.0	$	24.5	$	28.4	$	47.4
Saybrus Partners operating income (loss)		(0.1)		(0.4)		0.4		(1.5)
Less: Applicable income tax expense		4.6		7.6		13.5		9.0
Income (loss) from discontinued operations, net of income taxes		(6.3)		(0.7)		(6.8)		(2.2)
Net realized investment gains (losses)		(8.2)		3.1		(23.8)		(13.1)
Fixed indexed annuity derivatives		(4.8)		—		(3.5)		—
Deferred policy acquisition cost and policy dividend obligation   impacts, net of taxes		2.8		(3.7)		(2.5)		(2.8)
Net income (loss)	$	(13.2)	$	15.2	$	(21.3)	$	18.8

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6. Carrying Value of Assets and Liabilities (Details) (USD $) In Millions, unless otherwise specified	Jun. 30, 2012	Dec. 31, 2011
Limited Partnerships
Assets	$ 568.7	$ 552.1
Liabilities	0	0
Maximum Exposure to Loss	568.7	552.1
Direct Equity Investments
Assets	26.7	25.4
Liabilities	0	0
Maximum Exposure to Loss	26.7	25.4
Receivables
Assets	7.3	6.6
Liabilities	0	0
Maximum Exposure to Loss	7.3	6.6
Total
Assets	602.7	584.1
Liabilities	0	0
Maximum Exposure to Loss	$ 602.7	$ 584.1

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15. Earnings Per Share (Details)	3 Months Ended		6 Months Ended
	Jun. 30, 2012	Jun. 30, 2011	Jun. 30, 2012	Jun. 30, 2011
EARNINGS (LOSS) PER SHARE:
Weighted-average common shares outstanding	116,232	116,325	116,272	116,265
Weighted-average effect of dilutive potential common shares:
Restricted stock units	1,544	1,520	1,510	1,519
Stock options	0	5	0	5
Potential common shares	1,544	1,525	1,510	1,524
Less: Potential common shares excluded from calculation due to operating losses	1,544	0	1,510	0
Dilutive potential common shares	0	1,525	0	1,524
Weighted-average common shares outstanding, including dilutive potential common shares	116,232	117,850	116,272	117,789

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Consolidated Balance Sheets (Unaudited) (USD $) In Millions, unless otherwise specified	Jun. 30, 2012	Dec. 31, 2011
ASSETS:
Available-for-sale debt securities, at fair value (amortized cost of $11,588.9 and $11,351.8)	$ 12,335.3	$ 11,890.0
Available-for-sale equity securities, at fair value (cost of $34.4 and $29.5)	42.1	35.7
Limited partnerships and other investments	618.5	601.3
Policy loans, at unpaid principal balances	2,362.4	2,379.3
Derivative instruments	186.6	174.8
Fair value option investments	87.0	86.6
Total investments	15,631.9	15,167.7
Cash and cash equivalents	248.9	194.3
Accrued investment income	186.6	175.6
Receivables	422.5	415.1
Deferred policy acquisition costs	1,076.0	1,162.8
Deferred income taxes	91.7	118.2
Other assets	156.8	164.6
Discontinued operations assets	43.6	69.2
Separate account assets	3,336.8	3,817.6
Total assets	21,194.8	21,285.1
LIABILITIES:
Policy liabilities and accruals	13,040.1	12,981.1
Policyholder deposit funds	2,767.1	2,429.4
Indebtedness	426.9	426.9
Other liabilities	642.7	613.8
Discontinued operations liabilities	34.6	58.3
Separate account liabilities	3,336.8	3,817.6
Total liabilities	20,248.2	20,327.1
STOCKHOLDERS' EQUITY:
Common stock, $.01 par value: 116.0 million and 116.3 million shares outstanding	1.3	1.3
Additional paid-in capital	2,631.0	2,630.5
Accumulated other comprehensive loss	(124.9)	(134.8)
Accumulated deficit	(1,380.8)	(1,359.5)
Treasury stock, at cost: 11.7 million and 11.3 million shares	(180.0)	(179.5)
Total stockholders' equity	946.6	958.0
Total liabilities and stockholders' equity	$ 21,194.8	$ 21,285.1

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6. Fair Value and Cost of Securities (Details) (USD $) In Millions, unless otherwise specified	Jun. 30, 2012	Dec. 31, 2011	Jun. 25, 2011
Commercial mortgage-backed (“CMBS”)	$ 6.7	$ 11.6
Available-for-sale debt securities	12,335.3	11,890.0
Amounts applicable to the closed block	6,379.1	6,353.1	4,773.1
Available-for-sale equity securities	42.1	35.7
Amounts applicable to the closed block	14.8	12.0	0
Amortized Cost
U.S. government and agency	877.5	708.6
State and political subdivision	292.4	251.9
Foreign government	180.4	185.7
Corporate	6,527.4	6,167.0
Commercial mortgage-backed (“CMBS”)	982.5	1,109.9
Residential mortgage-backed (“RMBS”)	1,986.5	2,132.9
CDO/CLO	272.3	294.2
Other asset-backed	469.9	501.6
Available-for-sale debt securities	11,588.9	11,351.8
Amounts applicable to the closed block	5,841.6	5,908.2
Available-for-sale equity securities	34.4	29.5
Amounts applicable to the closed block	12.8	10.8
Gross Unrealized Gains
U.S. government and agency	84.6	80.1
State and political subdivision	32.6	21.6
Foreign government	27.0	21.2
Corporate	683.9	603.9
Commercial mortgage-backed (“CMBS”)	64.1	53.5
Residential mortgage-backed (“RMBS”)	90.7	80.3
CDO/CLO	5.4	4.5
Other asset-backed	20.8	11.1
Available-for-sale debt securities	1,009.1	876.2
Amounts applicable to the closed block	624.3	568.4
Available-for-sale equity securities	13.4	12.2
Amounts applicable to the closed block	5.0	4.3
Gross Unrealized Loss
U.S. government and agency	(5.8)	(5.3)
State and political subdivision	(2.8)	(2.9)
Foreign government	(0.3)	(1.7)
Corporate	(128.2)	(171.5)
Commercial mortgage-backed (“CMBS”)	(13.7)	(20.3)
Residential mortgage-backed (“RMBS”)	(61.1)	(81.9)
CDO/CLO	(43.2)	(48.1)
Other asset-backed	(7.6)	(6.3)
Available-for-sale debt securities	(262.7)	(338.0)
Amounts applicable to the closed block	(86.8)	(123.5)
Available-for-sale equity securities	(5.7)	(6.0)
Amounts applicable to the closed block	(3.0)	(3.1)
Fair Value
U.S. government and agency	956.3	783.4
State and political subdivision	322.2	270.6
Foreign government	207.1	205.2
Corporate	7,083.1	6,599.4
Commercial mortgage-backed (“CMBS”)	1,032.9	1,143.1
Residential mortgage-backed (“RMBS”)	2,016.1	2,131.3
CDO/CLO	234.5	250.6
Other asset-backed	483.1	506.4
Available-for-sale debt securities	12,335.3	11,890.0
Amounts applicable to the closed block	6,379.1	6,353.1
Available-for-sale equity securities	42.1	35.7
Amounts applicable to the closed block	14.8	12.0
OTTI Recognized In AOCI
U.S. government and agency	0	0
State and political subdivision	0	0
Foreign government	0	0
Corporate	(5.7)	(5.7)
Commercial mortgage-backed (“CMBS”)	(18.8)	(28.0)
Residential mortgage-backed (“RMBS”)	(99.4)	(89.6)
CDO/CLO	(24.2)	(24.2)
Other asset-backed	(1.2)	(1.2)
Available-for-sale debt securities	(149.3)	(148.7)
Amounts applicable to the closed block	(48.2)	(48.5)
Available-for-sale equity securities	(1.9)	0
Amounts applicable to the closed block	$ (1.0)	$ 0

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Consolidated Statements of Changes in Stockholders' Equity (USD $) In Millions	COMMON STOCK	ADDITIONAL PAID-IN CAPITAL	Accumulated Other Comprehensive Loss	ACCUMULATED DEFICIT	Treasury Stock, At Cost
Beginning balance, Amount at Dec. 31, 2010	$ 1.3	$ 2,631.0	$ (133.8)	$ (1,163.5)	$ (179.5)
Issuance of shares and compensation expense on stock compensation awards		1.4
Adjustment for cumulative effect of accounting change			31.1	(243.6)
Other comprehensive income (loss)			11.9
Net income (loss)				18.8
Ending balance, Amount at Jun. 30, 2011	1.3	2,632.4	(90.8)	(1,388.3)	(179.5)
Beginning balance, Amount at Dec. 31, 2011	1.3	2,630.5	(134.8)	(1,359.5)	(179.5)
Issuance of shares and compensation expense on stock compensation awards		0.5
Other comprehensive income (loss)			9.9
Change in treasury stock					(0.5)
Net income (loss)				(21.3)
Ending balance, Amount at Jun. 30, 2012	$ 1.3	$ 2,631.0	$ (124.9)	$ (1,380.8)	$ (180.0)

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8. GMDB Benefits By Type (Details) (USD $) In Millions, unless otherwise specified	6 Months Ended	12 Months Ended
	Jun. 30, 2012	Dec. 31, 2011
Account Value	$ 2,269.9	$ 2,335.5
Net Amount at Risk After Reinsurance	95.6	151.2
Return of premium
Account Value	832.8	870.2
Net Amount at Risk After Reinsurance	13.5	23.4
Average Attained Age Of Annuitant	62 years	61 years
Step up
Account Value	1,371.7	1,398.4
Net Amount at Risk After Reinsurance	73.7	118.6
Average Attained Age Of Annuitant	63 years	63 years
Earnings enhancement benefit ("EEB")
Account Value	38.7	39.8
Net Amount at Risk After Reinsurance	0.2	0.4
Average Attained Age Of Annuitant	63 years	62 years
Greater of annual step up and roll up
Account Value	26.7	27.1
Net Amount at Risk After Reinsurance	$ 8.2	$ 8.8
Average Attained Age Of Annuitant	66 years	66 years

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10. Fair Value of Financial Instruments (Tables)

6 Months Ended

Jun. 30, 2012

Notes to Financial Statements

Financial instruments carried at fair value by ASC 820-10 valuation hierarchy

Fair Values of Financial Instruments by Level:	As of June 30, 2012
($ in millions)	Level 1		Level 2		Level 3		Total
Assets
Available-for-sale debt securities
U.S. government and agency	$	570.7	$	385.6	$	—	$	956.3
State and political subdivision		—		322.2		—		322.2
Foreign government		—		207.1		—		207.1
Corporate		—		6,861.3		221.8		7,083.1
CMBS		—		1,001.0		31.9		1,032.9
RMBS		—		1,975.5		40.6		2,016.1
CDO/CLO		—		8.3		226.2		234.5
Other asset-backed		—		446.5		36.6		483.1
Available-for-sale equity securities		1.5		—		40.6		42.1
Derivative assets		18.0		168.6		—		186.6
Separate account assets		3,336.8		—		—		3,336.8
Fair value option investments(1)		21.9		—		65.1		87.0
Total assets	$	3,948.9	$	11,376.1	$	662.8	$	15,987.8
Liabilities
Derivative liabilities	$	—	$	41.7	$	—	$	41.7
Embedded derivatives		—		—		155.4		155.4
Total liabilities	$	—	$	41.7	$	155.4	$	197.1

———————

⁽¹⁾ Fair value option investments at June 30, 2012 include $65.1 million of available-for-sale debt securities in which the fair value option has been elected. In addition, we have also elected the fair value option for available-for-sale equity securities backing our deferred compensation liabilities at $21.9 million as of June 30, 2012. Changes in the fair value of these assets are reflected in results from continuing operations.

There were no transfers of assets between Level 1 and Level 2 during the quarter ended June 30, 2012.

Fair Values of Financial Instruments by Level:	As of December 31, 2011
($ in millions)	Level 1		Level 2		Level 3		Total
Assets
Available-for-sale debt securities
U.S. government and agency	$	385.2	$	398.2	$	—	$	783.4
State and political subdivision		—		270.6		—		270.6
Foreign government		—		205.2		—		205.2
Corporate		—		6,389.8		209.6		6,599.4
CMBS		—		1,084.4		58.7		1,143.1
RMBS		—		2,090.1		41.2		2,131.3
CDO/CLO		—		7.5		243.1		250.6
Other asset-backed		—		460.2		46.2		506.4
Available-for-sale equity securities		1.5		0.3		33.9		35.7
Derivative assets		18.5		156.3		—		174.8
Separate account assets(1)		3,690.3		78.3		—		3,768.6
Fair value option investments(2)		22.2		—		64.4		86.6
Total assets	$	4,117.7	$	11,140.9	$	697.1	$	15,955.7
Liabilities
Derivative liabilities	$	—	$	24.2	$	—	$	24.2
Embedded derivatives		—		—		122.5		122.5
Total liabilities	$	—	$	24.2	$	122.5	$	146.7

———————

⁽¹⁾ Excludes $40.1 million in limited partnerships and real estate investments accounted for on the equity method as well as $8.9 million in cash and cash equivalents and money market funds.

(2)Fair value option investments at December 31, 2011 include $64.4 million of available-for-sale debt securities in which the fair value option has been elected. In addition, we have also elected the fair value option for available-for-sale equity securities backing our deferred compensation liabilities at $22.2 million as of December 31, 2011. Changes in the fair value of these assets are reflected in results from continuing operations.

Fair value hierarchy

Level 3 Financial Assets:	Three Months Ended June 30, 2012
($ in millions)					Corp &		Asset-				Common		Fair Value		Total
	CDO/CLO		RMBS		Other		Backed		CMBS		Stock		Options		Assets
Balance, beginning of period	$	249.1	$	46.9	$	210.5	$	38.5	$	51.4	$	35.5	$	66.2	$	698.1
Purchases		15.9		—		5.4		0.2		—		1.7		—		23.2
Sales		(32.3)		(0.3)		(3.5)		(1.3)		(1.7)		—		(0.1)		(39.2)
Transfers into Level 3(1)		—		—		44.6		—		—		4.9		—		49.5
Transfers out of Level 3(2)		(8.3)		(0.3)		(37.7)		—		(18.6)		—		—		(64.9)
Realized gains (losses)   included in earnings		—		—		—		(0.7)		(1.0)		—		(0.1)		(1.8)
Unrealized gains (losses)   included in OCI		1.5		(5.8)		2.5		(0.1)		1.8		(1.5)		—		(1.6)
Amortization/accretion		0.3		0.1		—		—		—		—		(0.9)		(0.5)
Balance, end of period	$	226.2	$	40.6	$	221.8	$	36.6	$	31.9	$	40.6	$	65.1	$	662.8

———————

⁽¹⁾ Transfers into Level 3 for the three months ended June 30, 2012 represent securities for which Level 2 input assumptions for valuation pricing were no longer applicable.

⁽²⁾ Transfers out of Level 3 for the three months ended June 30, 2012 represent securities for which reliable Level 2 input assumptions for valuation pricing became obtainable.

Level 3 Financial Assets:	Six Months Ended June 30, 2012
($ in millions)					Corp &		Asset-				Common		Fair Value		Total
	CDO/CLO		RMBS		Other		Backed		CMBS		Stock		Options		Assets
Balance, beginning of period	$	243.1	$	41.2	$	209.6	$	46.2	$	58.7	$	33.9	$	64.4	$	697.1
Purchases		16.1		—		38.5		0.2		—		6.3		—		61.1
Sales		(33.3)		(0.7)		(17.9)		(5.0)		(6.1)		—		(0.1)		(63.1)
Transfers into Level 3(1)		2.5		—		24.5		—		—		0.3		—		27.3
Transfers out of Level 3(2)		(8.4)		(0.2)		(38.5)		—		(24.2)		—		—		(71.3)
Realized gains (losses)   included in earnings		0.2		—		(0.6)		(1.0)		(1.0)		0.1		(0.1)		(2.4)
Unrealized gains (losses)   included in OCI		5.4		0.2		6.2		(3.8)		4.5		—		—		12.5
Amortization/accretion		0.6		0.1		—		—		—		—		0.9		1.6
Balance, end of period	$	226.2	$	40.6	$	221.8	$	36.6	$	31.9	$	40.6	$	65.1	$	662.8

———————

⁽¹⁾ Transfers into Level 3 for the six months ended June 30, 2012 represent securities for which Level 2 input assumptions for valuation pricing were no longer applicable.

⁽²⁾ Transfers out of Level 3 for the six months ended June 30, 2012 represent securities for which reliable Level 2 input assumptions for valuation pricing became obtainable.

Level 3 Financial Assets:	Three Months Ended June 30, 2011
($ in millions)					Corp &		Asset-				Common		Fair Value		Total
	CDO/CLO		RMBS		Other		Backed		CMBS		Stock		Options		Assets
Balance, beginning of period	$	253.8	$	53.7	$	269.1	$	78.0	$	73.7	$	50.2	$	29.8	$	808.3
Purchases		0.1		—		20.5		13.7		5.7		—		—		40.0
Sales		(14.9)		(0.6)		(8.5)		(11.5)		(1.2)		(0.2)		(0.1)		(37.0)
Transfers into Level 3(1)		—		—		18.8		—		—		—		—		18.8
Transfers out of Level 3(2)		—		(4.7)		(10.4)		(16.3)		(0.2)		—		—		(31.6)
Realized gains (losses)   included in earnings		(0.2)		—		(0.2)		(1.0)		—		—		0.1		(1.3)
Unrealized gains (losses)   included in OCI		(2.1)		(0.5)		4.3		1.0		(0.2)		(3.5)		0.3		(0.7)
Amortization/accretion		0.8		0.1		0.1		—		—		—		—		1.0
Balance, end of period	$	237.5	$	48.0	$	293.7	$	63.9	$	77.8	$	46.5	$	30.1	$	797.5

———————

⁽¹⁾ Transfers into Level 3 for the three months ended June 30, 2011 represent securities for which Level 2 input assumptions for valuation pricing were no longer applicable.

⁽²⁾ Transfers out of Level 3 for the three months ended June 30, 2011 represent securities for which reliable Level 2 input assumptions for valuation pricing became obtainable.

Level 3 Financial Assets:	Six Months Ended June 30, 2011
($ in millions)					Corp &		Asset-				Common		Fair Value		Total
	CDO/CLO		RMBS		Other		Backed		CMBS		Stock		Options		Assets
Balance, beginning of period	$	251.6	$	50.6	$	268.4	$	67.9	$	56.3	$	46.3	$	38.2	$	779.3
Purchases		0.2		4.4		31.1		36.8		20.7		3.9		—		97.1
Sales		(24.4)		(1.3)		(24.4)		(15.3)		(1.8)		(0.3)		(8.5)		(76.0)
Transfers into Level 3(1)		—		—		21.6		—		—		0.9		—		22.5
Transfers out of Level 3(2)		—		(4.6)		(10.4)		(24.6)		(0.2)		—		—		(39.8)
Realized gains (losses)   included in earnings		(0.6)		—		(0.6)		(1.5)		—		—		(1.4)		(4.1)
Unrealized gains (losses)   included in OCI		9.7		(1.3)		7.8		0.6		2.8		(4.3)		1.8		17.1
Amortization/accretion		1.0		0.2		0.2		—		—		—		—		1.4
Balance, end of period	$	237.5	$	48.0	$	293.7	$	63.9	$	77.8	$	46.5	$	30.1	$	797.5

———————

⁽¹⁾ Transfers into Level 3 for the six months ended June 30, 2011 represent securities for which Level 2 input assumptions for valuation pricing were no longer applicable.

⁽²⁾ Transfers out of Level 3 for the six months ended June 30, 2011 represent securities for which reliable Level 2 input assumptions for valuation pricing became obtainable.

Level 3 Financial Liabilities:	Embedded Derivative Liabilities
($ in millions)	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2012		2011		2012		2011
Balance, beginning of period	$	114.5	$	27.4	$	122.5	$	27.4
Net purchases/(sales)		13.7		10.9		28.3		24.1
Transfers into Level 3		—		—		—		—
Transfers out of Level 3		(1.9)		—		(3.5)		—
Realized (gains) losses		18.7		5.1		(3.0)		(7.5)
Unrealized (gains) losses included in other comprehensive loss		—		—		—		—
Deposits less benefits		—		—		—		—
Change in fair value(1)		10.4		—		11.1		(0.6)
Amortization/accretion		—		—		—		—
Balance, end of period	$	155.4	$	43.4	$	155.4	$	43.4

———————

⁽¹⁾ Represents change in fair value related to fixed index credits recognized in policy benefits, excluding policy holder dividends, on the consolidated statements of comprehensive income.

Quantitative information about unobservable inputs

Level 3 Assets:	As of June 30, 2012
($ in millions)	Fair Value		Valuation Technique(s)	Unobservable Input	Range
CDO/CLO	$	198.8	Discounted cash flow	Prepayment rate	20% (CLOs)
				Default rate	2.5% (CLOs)
				Recovery rate	65% (Loans), 35% (High yield bonds),   45% (Investment grade bonds)
				Reinvestment spread	3 mo LIBOR + 400bps (CLOs)
Fair value option	$	20.6	Discounted cash flow	Default rate	0.6% - 0.8% (CDOs)
investments				Recovery rate	45% (Investment grade bonds)
		8.1	Benchmark to index	Barclays US high yield other   finance return	100%
Other asset-backed	$	2.5	Discounted cash flow	Discount margin based on   forward 1mo LIBOR curve	.3% - 1.8%
		7.4	Discounted cash flow	Prepayment rate	20% (CLOs)
				Default rate	2.53% for 48 mos then .33% thereafter
				Recovery rate	65% (Loans)
				Reinvestment spread	3mo LIBOR + 400bps (CLOs)
Total Level 3 assets(1)	$	237.4

———————

⁽¹⁾ Excludes $425.4 million of Level 3 assets which are valued based upon non-binding independent third-party valuations for which unobservable inputs are not reasonably available to us.

Level 3 Liabilities:	As of June 30, 2012
($ in millions)	Fair Value		Valuation Technique(s)	Unobservable Input	Range
Embedded derivatives (GMAB / GMWB)	$	38.9	Risk neutral stochastic   valuation methodology	Volatility surface	12.26% - 48.88%
				Swap curve	0.17% - 2.61%
				Mortality rate	75% of A2000 basic table
				Lapse rate	0.00% - 60.00%
				CSA	5.03%
Embedded derivatives (GPAF)	$	1.3	Real world single scenario   cash flow projection	Interest rate	3.46%
				Mortality rate	70% 1994 MGDB
Embedded derivatives	$	115.2	Budget method	Swap curve	0.17% - 2.61%
(Index credits)				Mortality rate	75% of A2000 basic table
				Lapse rate	1.00% - 35.00%
				CSA	5.03%
Total Level 3 liabilities	$	155.4

Company's financial instruments where the carrying amounts and fair values differ

Carrying Amounts and Fair Values of Financial Instruments:	As of June 30, 2012				As of December 31, 2011
($ in millions)	Carrying		Fair		Carrying		Fair
	Value		Value		Value		Value
Financial liabilities:
Investment contracts	$	2,767.1	$	2,776.8	$	2,429.4	$	2,440.7
Indebtedness		426.9		344.9		426.9		322.0

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10. Level 3 Financial Assets (Details) (USD $) In Millions, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2012	Jun. 30, 2011	Jun. 30, 2012	Jun. 30, 2011
CDO/CLO
Balance, beginning of period	$ 249.1	$ 253.8	$ 243.1	$ 251.6
Purchases	15.9	0.1	16.1	0.2
Sales	(32.3)	(14.9)	(33.3)	(24.4)
Transfers into Level 3	0	0	2.5	0
Transfers out of Level 3	(8.3)	0	(8.4)	0
Realized (gains) losses	0	(0.2)	0.2	(0.6)
Unrealized (gains) losses included in other comprehensive loss	1.5	(2.1)	5.4	9.7
Amortization/accretion	0.3	0.8	0.6	1.0
Balance, end of period	226.2	237.5	226.2	237.5
RMBS
Balance, beginning of period	46.9	53.7	41.2	50.6
Purchases	0	0	0	4.4
Sales	(0.3)	(0.6)	(0.7)	(1.3)
Transfers into Level 3	0	0	0	0
Transfers out of Level 3	(0.3)	(4.7)	(0.2)	(4.6)
Realized (gains) losses	0	0	0	0
Unrealized (gains) losses included in other comprehensive loss	(5.8)	(0.5)	0.2	(1.3)
Amortization/accretion	0.1	0.1	0.1	0.2
Balance, end of period	40.6	48.0	40.6	48.0
Corp & Other
Balance, beginning of period	210.5	269.1	209.6	268.4
Purchases	5.4	20.5	38.5	31.1
Sales	(3.5)	(8.5)	(17.9)	(24.4)
Transfers into Level 3	44.6	18.8	24.5	21.6
Transfers out of Level 3	(37.7)	(10.4)	(38.5)	(10.4)
Realized (gains) losses	0	(0.2)	(0.6)	(0.6)
Unrealized (gains) losses included in other comprehensive loss	2.5	4.3	6.2	7.8
Amortization/accretion	0	0.1	0	0.2
Balance, end of period	221.8	293.7	221.8	293.7
Asset-Backed
Balance, beginning of period	38.5	78.0	46.2	67.9
Purchases	0.2	13.7	0.2	36.8
Sales	(1.3)	(11.5)	(5.0)	(15.3)
Transfers into Level 3	0	0	0	0
Transfers out of Level 3	0	(16.3)	0	(24.6)
Realized (gains) losses	(0.7)	(1.0)	(1.0)	(1.5)
Unrealized (gains) losses included in other comprehensive loss	(0.1)	1.0	(3.8)	0.6
Amortization/accretion	0	0	0	0
Balance, end of period	36.6	63.9	36.6	63.9
CMBS
Balance, beginning of period	51.4	73.7	58.7	56.3
Purchases	0	5.7	0	20.7
Sales	(1.7)	(1.2)	(6.1)	(1.8)
Transfers into Level 3	0	0	0	0
Transfers out of Level 3	(18.6)	(0.2)	(24.2)	(0.2)
Realized (gains) losses	(1.0)	0	(1.0)	0
Unrealized (gains) losses included in other comprehensive loss	1.8	(0.2)	4.5	2.8
Amortization/accretion	0	0	0	0
Balance, end of period	31.9	77.8	31.9	77.8
Common Stock
Balance, beginning of period	35.5	50.2	33.9	46.3
Purchases	1.7	0	6.3	3.9
Sales	0	(0.2)	0	(0.3)
Transfers into Level 3	4.9	0	0.3	0.9
Transfers out of Level 3	0	0	0	0
Realized (gains) losses	0	0	0.1	0
Unrealized (gains) losses included in other comprehensive loss	(1.5)	(3.5)	0	(4.3)
Amortization/accretion	0	0	0	0
Balance, end of period	40.6	46.5	40.6	46.5
Fair Value Options
Balance, beginning of period	66.2	29.8	64.4	38.2
Purchases	0	0	0	0
Sales	(0.1)	(0.1)	(0.1)	(8.5)
Transfers into Level 3	0	0	0	0
Transfers out of Level 3	0	0	0	0
Realized (gains) losses	(0.1)	0.1	(0.1)	(1.4)
Unrealized (gains) losses included in other comprehensive loss	0	0.3	0	1.8
Amortization/accretion	(0.9)	0	0.9	0
Balance, end of period	65.1	30.1	65.1	30.1
FinancialAssetsTotalMember
Balance, beginning of period	698.1	808.3	697.1	779.3
Purchases	23.2	40.0	61.1	97.1
Sales	(39.2)	(37.0)	(63.1)	(76.0)
Transfers into Level 3	49.5	18.8	27.3	22.5
Transfers out of Level 3	(64.9)	(31.6)	(71.3)	(39.8)
Realized (gains) losses	(1.8)	(1.3)	(2.4)	(4.1)
Unrealized (gains) losses included in other comprehensive loss	(1.6)	(0.7)	12.5	17.1
Amortization/accretion	(0.5)	1.0	1.6	1.4
Balance, end of period	$ 662.8	$ 797.5	$ 662.8	$ 797.5

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16. Segment Information

6 Months Ended

Jun. 30, 2012

Notes to Financial Statements

Note 16 - Segment Information

16. Segment Information

In managing our business, we analyze segment performance on the basis of operating income. Operating income, as well as components of and financial measures derived from operating income, are non-GAAP financial measures.

Management believes that these measures provide additional insight into the underlying trends in our operations and are the internal performance measures we use in the management of our operations, including our compensation plans and planning processes. However, our non-GAAP financial measures should not be considered as substitutes for net income or measures that are derived from or incorporate net income and may be different from similarly titled measures of other companies. Investors should evaluate both GAAP and non-GAAP financial measures when reviewing our performance.

Operating income is calculated by excluding realized investment gains (losses) as their amount and timing may be subject to management’s investment decisions. Changes in net income related to fixed indexed annuity options purchased to fund annual index credits are included within the adjustment for realized investment gains (losses) as they fluctuate from quarter to quarter based upon the changes in fair value. Also excluded from net income are changes related to fixed index annuity embedded derivatives as they vary from quarter to quarter based upon the assumptions used to discount those liabilities. Operating income is also adjusted to include amortization of option premium and proceeds received upon options expiring specific to fixed indexed annuities.

The accounting policies of the reportable operating segments are the same as those described in our Significant Accounting Policies in Note 2 in our 2011 Annual Report on Form 10-K. We allocate net investment income based on the assets allocated to the segments. We allocate certain costs and expenses to the segments based on a review of the nature of the costs, time studies and other methodologies.

Segment Information	Three Months Ended				Six Months Ended
on Revenues:	June 30,				June 30,
($ in millions)	2012		2011		2012		2011
Life and Annuity(1)	$	449.2	$	476.2	$	888.1	$	924.3
Saybrus Partners		5.0		4.2		10.2		8.0
Less: intercompany revenues(2)		2.7		2.2		5.8		4.1
Total revenues	$	451.5	$	478.2	$	892.5	$	928.2

———————

⁽¹⁾ Includes intercompany interest revenue of $0.1 million and $0.2 million for the three months ended June 30, 2012 and 2011, respectively, and $0.3 million and $0.5 million for the six months ended June 30, 2012 and 2011, respectively.

⁽²⁾ All intercompany balances are eliminated in consolidating the financial statements.

Results of Operations by Segment as Reconciled to	Three Months Ended				Six Months Ended
to Consolidated Net Income:	June 30,				June 30,
($ in millions)	2012		2011		2012		2011
Life and Annuity operating income	$	8.0	$	24.5	$	28.4	$	47.4
Saybrus Partners operating income (loss)		(0.1)		(0.4)		0.4		(1.5)
Less: Applicable income tax expense		4.6		7.6		13.5		9.0
Income (loss) from discontinued operations, net of income taxes		(6.3)		(0.7)		(6.8)		(2.2)
Net realized investment gains (losses)		(8.2)		3.1		(23.8)		(13.1)
Fixed indexed annuity derivatives		(4.8)		—		(3.5)		—
Deferred policy acquisition cost and policy dividend obligation   impacts, net of taxes		2.8		(3.7)		(2.5)		(2.8)
Net income (loss)	$	(13.2)	$	15.2	$	(21.3)	$	18.8

We have not provided asset information for the segments as the assets attributable to Saybrus are not significant relative to the assets of our consolidated balance sheet. All third-party interest revenue and interest expense of the Company reside within the Life and Annuity segment.

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12. Other Comprehensive Income (Tables)

6 Months Ended

Jun. 30, 2012

Notes to Financial Statements

Sources of Other Comprehensive Income ($ in millions)

Sources of Other Comprehensive Income:	Three Months Ended June 30,
($ in millions)	2012				2011
	Gross		Net		Gross		Net
Unrealized gains on investments	$	128.1	$	24.3	$	99.7	$	11.2
Adjustments for net realized investment gains (losses) on   available-for-sale securities included in net income		1.5		1.0		(1.4)		(0.4)
Net unrealized investment gains		129.6		25.3		98.3		10.8
Pension liability adjustment		(21.2)		(13.8)		3.0		2.0
Other assets		—		—		0.1		—
Net unrealized gains (losses) on derivative instruments		0.6		0.4		(0.4)		(0.3)
Other comprehensive income		109.0	$	11.9		101.0	$	12.5
Applicable policyholder dividend obligation		64.5				64.0
Applicable deferred policy acquisition cost amortization		25.8				19.2
Applicable future policyholder benefits		4.5				—
Applicable deferred income tax expense		2.3				5.3
Offsets to other comprehensive income		97.1				88.5
Other comprehensive income	$	11.9			$	12.5

Sources of Other Comprehensive Income:	Six Months Ended June 30,
($ in millions)	2012				2011
	Gross		Net		Gross		Net
Unrealized gains on investments	$	203.2	$	13.9	$	143.6	$	6.2
Adjustments for net realized investment gains on   available-for-sale securities included in net income		6.5		8.3		2.3		2.8
Net unrealized investment gains		209.7		22.2		145.9		9.0
Pension liability adjustment		(19.1)		(12.5)		4.1		2.7
Other assets		—		—		1.7		1.0
Net unrealized gains (losses) on derivative instruments		0.3		0.2		(1.2)		(0.8)
Other comprehensive income		190.9	$	9.9		150.5	$	11.9
Applicable policyholder dividend obligation		93.5				78.7
Applicable deferred policy acquisition cost amortization		42.4				30.7
Applicable future policyholder benefits		18.3				—
Applicable deferred income tax expense		26.8				29.2
Offsets to other comprehensive income		181.0				138.6
Other comprehensive income	$	9.9			$	11.9

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18. Contingent Liabilities

6 Months Ended

Jun. 30, 2012

Notes to Financial Statements

Note 18 - Contingent Liabilities

18. Contingent Liabilities

Litigation and Arbitration

We are regularly involved in litigation and arbitration, both as a defendant and as a plaintiff. The litigation and arbitration naming us as a defendant ordinarily involves our activities as an insurer, employer, investor or investment advisor.

It is not feasible to predict or determine the ultimate outcome of all legal or arbitration proceedings or to provide reasonable ranges of potential losses. Based on current information, we believe that the outcomes of our litigation and arbitration matters are not likely, either individually or in the aggregate, to have a material adverse effect on our consolidated financial condition. However, given the large or indeterminate amounts sought in certain of these matters and the inherent unpredictability of litigation and arbitration, it is possible that an adverse outcome in certain matters could, from time to time, have a material adverse effect on our consolidated financial statements in particular quarterly or annual periods.

On June 5, 2012, Wilmington Savings Fund Society, FSB, as successor in interest to Christiana Bank & Trust Company and as trustee of 60 unnamed trusts, filed a complaint against PHL Variable, Phoenix Life and The Phoenix Companies, Inc. in the United States District Court for the Central District of California (Case No. CV12-04926). The plaintiffs allege that the Company promoted certain policy sales knowing that the policies would ultimately be owned by investors and then challenging the validity of these policies or denying claims submitted on same. Plaintiffs are seeking damages, including punitive and treble damages, attorneys’ fees and a declaratory judgment. We have meritorious defenses against the lawsuit and we intend to vigorously defend against these claims. The outcome of this litigation and any potential losses are uncertain.

The definitive agreement to sell PFG contains a provision requiring us to indemnify Tiptree for any losses due to actions resulting from certain specified acts or omissions associated with the divested business prior to closing. There has been litigation filed that falls within this provision of the agreement but does not name the Company as a party to the litigation. We intend to defend these matters vigorously based on our indemnity commitment.

Carol Curran, et al. v. AGL Life Assurance Co. et al. is a case filed in the state district court in Boulder County, Colorado that falls under the indemnification with Tiptree. The Company is not a party to the lawsuit. On August 8, 2011, the state district court judge certified a class action. The parties are engaged in pre-trial discovery. The outcome of this litigation is uncertain and the amount of potential loss in the event of an adverse outcome cannot be estimated.

Regulatory Matters

State regulatory bodies, the Securities and Exchange Commission (the “SEC”), the Financial Industry Regulatory Authority (“FINRA”), the IRS and other regulatory bodies regularly make inquiries of us and, from time to time, conduct examinations or investigations concerning our compliance with laws and regulations related to, among other things, our insurance and broker-dealer subsidiaries, securities offerings and registered products. We endeavor to respond to such inquiries in an appropriate way and to take corrective action if warranted.

Regulatory actions may be difficult to assess or quantify. The nature and magnitude of their outcomes may remain unknown for substantial periods of time. It is not feasible to predict or determine the ultimate outcome of all pending inquiries, investigations, legal proceedings and other regulatory actions, or to provide reasonable ranges of potential losses. Based on current information, we believe that the outcomes of our regulatory matters are not likely, either individually or in the aggregate, to have a material adverse effect on our consolidated financial condition. However, given the inherent unpredictability of regulatory matters, it is possible that an adverse outcome in certain matters could, from time to time, have a material adverse effect on our consolidated financial statements in particular quarterly or annual periods.

Unclaimed Property Inquiry

On July 5, 2011, the NYDFS issued a letter (“308 Letter”) requiring life insurers doing business in New York to use data available on the U.S. Social Security Administration’s Death Master File or a similar database to identify instances where death benefits under life insurance policies, annuities, and retained asset accounts are payable, to locate and pay beneficiaries under such contracts, and to report the results of the use of the data. Additionally, the insurers are required to report on their success in finding and making payments to beneficiaries or escheatment of funds deemed abandoned under state laws. We estimate the remaining amount of claim and interest payments to beneficiaries or state(s) to be $2.2 million ($0.3 million after policy dividend obligation and deferred policy acquisition cost offsets). This amount has been recorded in policy liabilities and accruals.

Discontinued Reinsurance Operations

In 1999, we discontinued our reinsurance operations through a combination of sale, reinsurance and placement of certain retained group accident and health reinsurance business into run-off. We adopted a formal plan to stop writing new contracts covering these risks and to end the existing contracts as soon as those contracts would permit. However, we remain liable for claims under contracts which have not been commuted.

For example, we participate in a workers’ compensation reinsurance pool formerly managed by Unicover Managers, Inc. (“Unicover”). The pool ceased accepting new risks in early 1999. Further, we were a retrocessionaire (meaning a reinsurer of other reinsurers) of the Unicover pool. We have been involved in disputes relating to the activities of Unicover. These disputes have been substantially resolved or settled.

Our discontinued group accident and health reinsurance operations also include other (non-Unicover) workers’ compensation reinsurance contracts and personal accident reinsurance contracts, including contracts assumed in the London market. We have been engaged in arbitrations, disputes or investigations with several ceding companies over the validity of, or amount of liabilities assumed under, their contracts. These arbitrations, disputes or investigations have been substantially resolved or settled.

We bought retrocessional reinsurance for a significant portion of our assumed reinsurance liabilities. Some of the retrocessionaires have disputed the validity of, or amount of liabilities assumed under, their contracts with us. Most of these disputes with retrocessionaires have been resolved or settled.

We have established reserves for claims and related expenses that we expect to pay on our discontinued group accident and health reinsurance business. These reserves are 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 from our retrocessionaires and the likely legal and administrative costs of winding down the business.

We expect our reserves and reinsurance to cover the run-off of the business; however, unfavorable or favorable claims and/or reinsurance recovery experience is reasonably possible and could result in our recognition of additional losses or gains, respectively, in future years. Given the uncertainty associated with litigation and other dispute resolution proceedings, as well as the lack of sufficient claims information, the range of any reasonably possible additional future losses or gains is not currently estimable. However, it is our opinion, based on current information and after consideration of the provisions made in these consolidated financial statements, that any future adverse or favorable development of recorded reserves and/or reinsurance recoverables will not have a material adverse effect on our consolidated financial position. Nevertheless, it is possible that future developments could have a material adverse effect on our consolidated financial statements in particular quarterly or annual periods.

Our total policy liabilities and accruals were $34.8 million as of June 30, 2012 and $59.1 million as of December 31, 2011. The decrease to policy liabilities and accruals was primarily related to cash settlements due to the commutation of certain contracts in the second quarter of 2012. Our total amounts recoverable from retrocessionaires related to paid losses were $0.3 million as of June 30, 2012 and $2.5 million as of December 31, 2011.

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12. Sources of Other Comprehensive Income (Details) (USD $) In Millions, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2012	Jun. 30, 2011	Jun. 30, 2012	Jun. 30, 2011
Net unrealized investment gains (losses) included in OCI	$ 25.3	$ 10.8	$ 22.2	$ 9.0
Other comprehensive income	11.9	12.5	9.9	11.9
Gross
Unrealized gains on investments	128.1	99.7	203.2	143.6
Adjustments for net realized investment losses on available-for-sale securities included in net income	1.5	(1.4)	6.5	2.3
Net unrealized investment gains (losses) included in OCI	129.6	98.3	209.7	145.9
Pension liability adjustment	(21.2)	3.0	(19.1)	4.1
Other Assets	0	0.1	0	1.7
Net unrealized gains (losses) on derivative instruments	0.6	(0.4)	0.3	(1.2)
Other comprehensive income	109.0	101.0	190.9	150.5
Applicable policyholder dividend obligation	64.5	64.0	93.5	78.7
Applicable deferred policy acquisition cost amortization	25.8	19.2	42.4	30.7
Applicable future policyholder benefits	4.5	0	18.3	0
Applicable deferred income tax expense	2.3	5.3	26.8	29.2
Offsets to other comprehensive income	97.1	88.5	181.0	138.6
Other comprehensive income	11.9	12.5	9.9	11.9
Net
Unrealized gains on investments	24.3	11.2	13.9	6.2
Adjustments for net realized investment losses on available-for-sale securities included in net income	1.0	(0.4)	8.3	2.8
Net unrealized investment gains (losses) included in OCI	25.3	10.8	22.2	9.0
Pension liability adjustment	(13.8)	2.0	(12.5)	2.7
Other Assets	0	0	0	1.0
Net unrealized gains (losses) on derivative instruments	0.4	(0.3)	0.2	(0.8)
Other comprehensive income	$ 11.9	$ 12.5	$ 9.9	$ 11.9

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1. Organization and Description of Business

6 Months Ended

Jun. 30, 2012

Notes to Financial Statements

Note 1 - Organization and Description of Business

1. Organization and Description of Business

The Phoenix Companies, Inc. (“we,” “our,” “us,” the “Company,” or “Phoenix”) is a holding company and our operations are conducted through subsidiaries, principally Phoenix Life Insurance Company (“Phoenix Life”) and PHL Variable Insurance Company (“PHL Variable”). We provide life insurance and annuity products through independent agents and financial advisors. Our policyholder base includes both affluent and middle market consumers, with our more recent business concentrated in the middle market. Most of our life insurance in force is permanent life insurance insuring one or more lives. Our annuity products include fixed and variable annuities with a variety of death benefit and guaranteed living benefit options.

We operate two business segments: Life and Annuity and Saybrus. The Life and Annuity segment includes individual life insurance and annuity products including universal life and variable universal life and fixed and variable annuities. It also includes the results of our closed block, which consists primarily of participating whole life products. Saybrus is our distribution company that provides dedicated consulting services to partner companies as well as wholesaling support for the Phoenix Life and PHL Variable product lines.

Since 2009, we have focused on selling products and services that are less capital intensive and less sensitive to our ratings. In 2011 and the first six months of 2012, Phoenix product sales were primarily in fixed indexed annuities. Sales of other insurance companies’ policies through Saybrus were also expanded during the same period.

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Consolidated Balance Sheets (Parenthetical) (USD $) In Millions, except Per Share data, unless otherwise specified	Jun. 30, 2012	Dec. 31, 2011
Consolidated Balance Sheets Parenthetical
Available-for-sale debt securities, amortized cost	$ 11,588.9	$ 11,351.8
Available-for-sale equity securities, at cost	$ 34.4	$ 29.5
Common stock Par value	$ 0.01	$ 0.01
Shares outstanding	116.0	116.3
Treasury stock, Shares	11.7	11.3

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11. Income Taxes

6 Months Ended

Jun. 30, 2012

Notes to Financial Statements

Note 11 - Income Taxes

11. Income Taxes

It is our policy to estimate taxes for interim periods based on estimated annual effective tax rates which are derived, in part, from expected annual pre-tax income. However, the change in the deferred income taxes and related valuation allowance for the three and six months ended June 30, 2012 has been computed based on the first six months of 2012 as a discrete period. Similarly, the current tax expense of $4.6 million and $13.5 million for the three and six months ended June 30, 2012, respectively, is determined based upon the first six months of 2012 as a discrete period. The current tax provision represents the estimated tax liability under the alternative minimum tax (“AMT”) system. Despite our net operating loss carryforwards, certain provisions of the Internal Revenue Code place limits on the ability to fully offset current period taxable income under the AMT system.

We recorded a deferred tax asset, net of deferred tax liabilities and valuation allowances, of $91.7 million as of June 30, 2012. Consistent with the prior period, the deferred tax asset not offset by a valuation allowance relates to gross unrealized losses on available-for-sale debt securities. For the three months ended June 30, 2012, we recognized a net increase in the valuation allowance of $5.4 million. For the six months ended June 30, 2012, excluding the increase in the valuation allowance related to the adoption of a new accounting standard of $58.8 million (see Note 2 to these financial statements), we recognized a net increase in the valuation allowance of $31.2 million. Accounting guidance requires that changes in the valuation allowance be allocated to various financial statement components of income or loss. The net increase to the valuation allowance for the three months ended June 30, 2012 corresponds to an increase of $8.4 million in income statement related deferred tax balances and a decrease of $3.0 million in OCI related deferred tax balances. The net increase to the valuation allowance for the six months ended June 30, 2012 corresponds to an increase of $17.6 million in income statement related deferred tax balances and an increase of $13.6 million in OCI related deferred tax balances.

We believe it is reasonably possible that the Company will begin to record positive three-year cumulative income during the second half of 2012, which would represent positive evidence of our ability to realize deferred tax assets that are presently offset by a valuation allowance. During the second quarter, the Company generated taxable income sufficient to fully utilize its life group related net operating loss carryforwards; however, significant net operating losses attributable to the non-life group remain. The Company will continue to assess this accumulating positive evidence, which may result in a reduction of the existing valuation allowance and a corresponding benefit to the income tax provision reflected in continuing operations during the second half of 2012.

We have concluded that a valuation allowance on the deferred tax assets attributable to available-for-sale debt securities with gross unrealized losses was not required due to our ability and intent to hold these securities until recovery of fair value or contractual maturity, thereby avoiding realization of taxable capital losses. This conclusion is consistent with prior periods.

The Company and its subsidiaries file consolidated, combined, unitary or separate income tax returns in the U.S. federal, various state and foreign jurisdictions. The Company is no longer subject to U.S. federal income tax examinations by tax authorities for years before 2010.

Based upon the timing and status of our current examinations by taxing authorities, we do not believe that it is reasonably possible that any changes to the balance of unrecognized tax benefits occurring within the next 12 months will result in a significant change to the results of operations, financial condition or liquidity. In addition, we do not anticipate that there will be additional payments made or refunds received within the next 12 months with respect to the years under audit. We do not anticipate any increases to the existing unrecognized tax benefits that would have a significant impact on the financial position of the Company.

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Document and Entity Information	6 Months Ended
	Jun. 30, 2012	Jul. 31, 2012
Document And Entity Information
Entity Registrant Name	PHOENIX COMPANIES INC/DE
Entity Central Index Key	0001129633
Document Type	10-Q
Document Period End Date	Jun. 30, 2012
Amendment Flag	false
Current Fiscal Year End Date	--12-31
Is Entity a Well-known Seasoned Issuer?	No
Is Entity a Voluntary Filer?	No
Is Entity's Reporting Status Current?	Yes
Entity Filer Category	Accelerated Filer
Entity Common Stock, Shares Outstanding		116.0
Document Fiscal Period Focus	Q2
Document Fiscal Year Focus	2012

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12. Other Comprehensive Income

6 Months Ended

Jun. 30, 2012

Notes to Financial Statements

Note 12 - Other Comprehensive Income

12. Other Comprehensive Income

Sources of Other Comprehensive Income:	Three Months Ended June 30,
($ in millions)	2012				2011
	Gross		Net		Gross		Net
Unrealized gains on investments	$	128.1	$	24.3	$	99.7	$	11.2
Adjustments for net realized investment gains (losses) on   available-for-sale securities included in net income		1.5		1.0		(1.4)		(0.4)
Net unrealized investment gains		129.6		25.3		98.3		10.8
Pension liability adjustment		(21.2)		(13.8)		3.0		2.0
Other assets		—		—		0.1		—
Net unrealized gains (losses) on derivative instruments		0.6		0.4		(0.4)		(0.3)
Other comprehensive income		109.0	$	11.9		101.0	$	12.5
Applicable policyholder dividend obligation		64.5				64.0
Applicable deferred policy acquisition cost amortization		25.8				19.2
Applicable future policyholder benefits		4.5				—
Applicable deferred income tax expense		2.3				5.3
Offsets to other comprehensive income		97.1				88.5
Other comprehensive income	$	11.9			$	12.5

Sources of Other Comprehensive Income:	Six Months Ended June 30,
($ in millions)	2012				2011
	Gross		Net		Gross		Net
Unrealized gains on investments	$	203.2	$	13.9	$	143.6	$	6.2
Adjustments for net realized investment gains on   available-for-sale securities included in net income		6.5		8.3		2.3		2.8
Net unrealized investment gains		209.7		22.2		145.9		9.0
Pension liability adjustment		(19.1)		(12.5)		4.1		2.7
Other assets		—		—		1.7		1.0
Net unrealized gains (losses) on derivative instruments		0.3		0.2		(1.2)		(0.8)
Other comprehensive income		190.9	$	9.9		150.5	$	11.9
Applicable policyholder dividend obligation		93.5				78.7
Applicable deferred policy acquisition cost amortization		42.4				30.7
Applicable future policyholder benefits		18.3				—
Applicable deferred income tax expense		26.8				29.2
Offsets to other comprehensive income		181.0				138.6
Other comprehensive income	$	9.9			$	11.9

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9. Derivative Instruments (Details Narrative) (USD $) In Millions, unless otherwise specified	Jun. 30, 2012	Dec. 31, 2011
Derivative Instruments Details Narrative
Cash and cash equivalents held at collateral by a third party related to derivative transactions	$ 8.6	$ 8.0

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Consolidated Statements of Comprehensive Income (USD $) In Millions, except Share data, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2012	Jun. 30, 2011	Jun. 30, 2012	Jun. 30, 2011
REVENUES:
Premiums	$ 104.3	$ 109.3	$ 204.5	$ 220.3
Fee income	137.2	154.6	283.7	308.4
Net investment income	218.2	211.2	428.1	412.6
Net realized investment losses:
Total other-than-temporary impairment ('OTTI') losses	(15.0)	(6.6)	(26.7)	(14.0)
Portion of OTTI losses recognized in other comprehensive income ('OCI')	9.9	3.6	15.4	5.3
Net OTTI losses recognized in earnings	(5.1)	(3.0)	(11.3)	(8.7)
Net realized investment losses, excluding OTTI losses	(3.1)	6.1	(12.5)	(4.4)
Net realized investment gains (losses)	(8.2)	3.1	(23.8)	(13.1)
Total revenues	451.5	478.2	892.5	928.2
BENEFITS AND EXPENSES:
Policy benefits, excluding policyholder dividends	259.0	270.8	513.1	531.2
Policyholder dividends	84.3	73.6	149.3	137.2
Policy acquisition cost amortization	41.8	42.8	92.0	94.1
Interest expense on indebtedness	7.9	7.9	15.9	15.9
Other operating expenses	60.8	59.6	123.2	119.8
Total benefits and expenses	453.8	454.7	893.5	898.2
Income from continuing operations before income taxes	(2.3)	23.5	(1.0)	30.0
Income tax expense	4.6	7.6	13.5	9.0
Income (loss) from continuing operations	(6.9)	15.9	(14.5)	21.0
Loss from discontinued operations, net of income taxes	(6.3)	(0.7)	(6.8)	(2.2)
Net income (loss)	(13.2)	15.2	(21.3)	18.8
EARNINGS (LOSS) PER SHARE:
Earnings (loss) from continuing operations - basic	$ (0.06)	$ 0.14	$ (0.12)	$ 0.18
Earnings (loss) from continuing operations - diluted	$ (0.06)	$ 0.14	$ (0.12)	$ 0.18
Earnings (loss) from discontinued operations - basic	$ (0.05)	$ (0.01)	$ (0.06)	$ (0.02)
Earnings (loss) from discontinued operations - diluted	$ (0.05)	$ (0.01)	$ (0.06)	$ (0.02)
Net earnings (loss) - basic	$ (0.11)	$ 0.13	$ (0.18)	$ 0.16
Net earnings (loss) - diluted	$ (0.11)	$ 0.13	$ (0.18)	$ 0.16
Basic weighted-average common shares outstanding (in thousands)	116,232	116,325	116,272	116,265
Diluted weighted-average common shares outstanding (in thousands)	116,232	117,850	116,272	117,789
COMPREHENSIVE INCOME (LOSS):
Net income (loss)	(13.2)	15.2	(21.3)	18.8
Net unrealized investment gains	31.7	13.1	32.2	12.4
Net pension liability adjustment	(6.4)	(2.3)	(10.0)	(3.4)
Non-credit portion of OTTI losses recognized in OCI	(13.8)	2.0	(12.5)	2.7
Net unrealized other assets	0	0	0	1.0
Net unrealized derivative instruments gains (losses)	0.4	(0.3)	0.2	(0.8)
Other comprehensive income (loss)	11.9	12.5	9.9	11.9
Comprehensive income (loss)	$ (1.3)	$ 27.7	$ (11.4)	$ 30.7

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6. Investing Activities

6 Months Ended

Jun. 30, 2012

Notes to Financial Statements

Note 6 - Investing Activities

6. Investing Activities

Debt and equity securities

We invest in a variety of debt and equity securities. We classify these investments into various sectors using industry conventions; however, our classifications may differ from similarly titled classifications of other companies.

Net unrealized investment gains and losses on securities classified as available-for-sale and certain other assets are included in our consolidated balance sheet as a component of AOCI.

Fair Value and Cost of Securities:	June 30, 2012
($ in millions)			Gross		Gross				OTTI
	Amortized		Unrealized		Unrealized		Fair		Recognized
	Cost		Gains		Losses		Value		in AOCI(1)
U.S. government and agency	$	877.5	$	84.6	$	(5.8)	$	956.3	$	—
State and political subdivision		292.4		32.6		(2.8)		322.2		—
Foreign government		180.4		27.0		(0.3)		207.1		—
Corporate		6,527.4		683.9		(128.2)		7,083.1		(5.7)
Commercial mortgage-backed (“CMBS”)		982.5		64.1		(13.7)		1,032.9		(18.8)
Residential mortgage-backed (“RMBS”)		1,986.5		90.7		(61.1)		2,016.1		(99.4)
CDO/CLO		272.3		5.4		(43.2)		234.5		(24.2)
Other asset-backed		469.9		20.8		(7.6)		483.1		(1.2)
Available-for-sale debt securities	$	11,588.9	$	1,009.1	$	(262.7)	$	12,335.3	$	(149.3)
Amounts applicable to the closed block	$	5,841.6	$	624.3	$	(86.8)	$	6,379.1	$	(48.2)
Available-for-sale equity securities	$	34.4	$	13.4	$	(5.7)	$	42.1	$	(1.9)
Amounts applicable to the closed block	$	12.8	$	5.0	$	(3.0)	$	14.8	$	(1.0)

———————

⁽¹⁾ Represents the amount of non-credit OTTI losses recognized in AOCI excluding net unrealized gains or losses subsequent to the date of impairment.

Fair Value and Cost of Securities:	December 31, 2011
($ in millions)			Gross		Gross				OTTI
	Amortized		Unrealized		Unrealized		Fair		Recognized
	Cost		Gains		Losses		Value		in AOCI(1)
U.S. government and agency	$	708.6	$	80.1	$	(5.3)	$	783.4	$	—
State and political subdivision		251.9		21.6		(2.9)		270.6		—
Foreign government		185.7		21.2		(1.7)		205.2		—
Corporate		6,167.0		603.9		(171.5)		6,599.4		(5.7)
CMBS		1,109.9		53.5		(20.3)		1,143.1		(28.0)
RMBS		2,132.9		80.3		(81.9)		2,131.3		(89.6)
CDO/CLO		294.2		4.5		(48.1)		250.6		(24.2)
Other asset-backed		501.6		11.1		(6.3)		506.4		(1.2)
Available-for-sale debt securities	$	11,351.8	$	876.2	$	(338.0)	$	11,890.0	$	(148.7)
Amounts applicable to the closed block	$	5,908.2	$	568.4	$	(123.5)	$	6,353.1	$	(48.5)
Available-for-sale equity securities	$	29.5	$	12.2	$	(6.0)	$	35.7	$	—
Amounts applicable to the closed block	$	10.8	$	4.3	$	(3.1)	$	12.0	$	—

———————

⁽¹⁾ Represents the amount of non-credit OTTI losses recognized in AOCI excluding net unrealized gains or losses subsequent to the date of impairment.

Aging of Temporarily Impaired Securities:	As of June 30, 2012
($ in millions)	Less than 12 months				Greater than 12 months				Total
	Fair		Unrealized		Fair		Unrealized		Fair		Unrealized
	Value		Losses		Value		Losses		Value		Losses
Debt Securities
U.S. government and agency	$	1.2	$	—	$	40.7	$	(5.8)	$	41.9	$	(5.8)
State and political subdivision		10.0		(0.1)		6.4		(2.7)		16.4		(2.8)
Foreign government		7.6		(0.3)		—		—		7.6		(0.3)
Corporate		259.1		(14.1)		452.5		(114.1)		711.6		(128.2)
CMBS		15.9		(0.1)		63.9		(13.6)		79.8		(13.7)
RMBS		54.4		(2.1)		420.2		(59.0)		474.6		(61.1)
CDO/CLO		17.3		(0.3)		143.0		(42.9)		160.3		(43.2)
Other asset-backed		26.1		(1.1)		41.6		(6.5)		67.7		(7.6)
Debt securities		391.6		(18.1)		1,168.3		(244.6)		1,559.9		(262.7)
Equity securities		2.7		(4.9)		0.4		(0.8)		3.1		(5.7)
Total temporarily impaired securities	$	394.3	$	(23.0)	$	1,168.7	$	(245.4)	$	1,563.0	$	(268.4)
Amounts inside the closed block	$	159.8	$	(10.6)	$	492.9	$	(79.2)	$	652.7	$	(89.8)
Amounts outside the closed block	$	234.5	$	(12.4)	$	675.8	$	(166.2)	$	910.3	$	(178.6)
Amounts outside the closed block   that are below investment grade	$	63.5	$	(4.4)	$	227.9	$	(107.1)	$	291.4	$	(111.5)
Number of securities				215				601				816

Unrealized losses on below-investment-grade debt securities outside the closed block with a fair value of less than 80% of amortized cost totaled $93.6 million at June 30, 2012, of which $80.3 million was below 80% of amortized cost for more than 12 months.

Unrealized losses on below-investment-grade debt securities held in the closed block with a fair value of less than 80% of amortized cost totaled $27.2 million at June 30, 2012, of which $17.4 million was below 80% of amortized cost for more than 12 months.

These securities were considered to be temporarily impaired at June 30, 2012 because each of these securities had performed, and is expected to perform, in accordance with original contractual terms. In addition, management does not have the intention to sell, nor does it expect to be required to sell, these securities prior to their recovery.

Aging of Temporarily Impaired Securities:	As of December 31, 2011
($ in millions)	Less than 12 months				Greater than 12 months				Total
	Fair		Unrealized		Fair		Unrealized		Fair		Unrealized
	Value		Losses		Value		Losses		Value		Losses
Debt Securities
U.S. government and agency	$	—	$	—	$	41.2	$	(5.3)	$	41.2	$	(5.3)
State and political subdivision		26.1		(0.1)		6.3		(2.8)		32.4		(2.9)
Foreign government		25.6		(1.7)		—		—		25.6		(1.7)
Corporate		373.0		(20.1)		512.1		(151.4)		885.1		(171.5)
CMBS		141.3		(2.5)		56.8		(17.8)		198.1		(20.3)
RMBS		174.6		(6.4)		432.5		(75.5)		607.1		(81.9)
CDO/CLO		9.3		(0.1)		165.0		(48.0)		174.3		(48.1)
Other asset-backed		103.6		(2.4)		68.4		(3.9)		172.0		(6.3)
Debt securities		853.5		(33.3)		1,282.3		(304.7)		2,135.8		(338.0)
Equity securities		4.2		(5.2)		0.4		(0.8)		4.6		(6.0)
Total temporarily impaired securities	$	857.7	$	(38.5)	$	1,282.7	$	(305.5)	$	2,140.4	$	(344.0)
Amounts inside the closed block	$	317.6	$	(18.0)	$	556.8	$	(108.6)	$	874.4	$	(126.6)
Amounts outside the closed block	$	540.1	$	(20.5)	$	725.9	$	(196.9)	$	1,266.0	$	(217.4)
Amounts outside the closed block   that are below investment grade	$	61.5	$	(4.5)	$	260.0	$	(128.8)	$	321.5	$	(133.3)
Number of securities				502				664				1,166

Unrealized losses on below-investment-grade debt securities outside the closed block with a fair value of less than 80% of amortized cost totaled $113.3 million at December 31, 2011, of which $88.0 million was below 80% of amortized cost for more than 12 months.

Unrealized losses on below-investment-grade debt securities held in the closed block with a fair value of less than 80% of amortized cost totaled $37.8 million at December 31, 2011, of which $16.0 million was below 80% of amortized cost for more than 12 months.

These securities were considered to be temporarily impaired at December 31, 2011 because each of these securities had performed, and is expected to perform, in accordance with original contractual terms. In addition, management does not have the intention to sell, nor does it expect to be required to sell, these securities prior to their recovery.

Maturities of Debt Securities:	June 30, 2012				December 31, 2011
($ in millions)	Amortized		Fair		Amortized		Fair
	Cost		Value		Cost		Value
Due in one year or less	$	823.9	$	833.9	$	519.9	$	525.3
Due after one year through five years		2,113.4		2,268.5		2,139.3		2,292.8
Due after five years through ten years		2,485.8		2,720.8		2,229.0		2,405.2
Due after ten years		2,454.6		2,745.5		2,425.0		2,635.3
CMBS/RMBS/ABS/CDO/CLO		3,711.2		3,766.6		4,038.6		4,031.4
Total	$	11,588.9	$	12,335.3	$	11,351.8	$	11,890.0

The maturities of debt securities, as of June 30, 2012, are summarized in the table above by contractual maturity. Actual maturities may differ from contractual maturities as certain borrowers have the right to call or prepay obligations with or without call or prepayment penalties, and we have the right to put or sell certain obligations back to the issuers.

Other-than-temporary impairments

Management assessed all securities in an unrealized loss position in determining whether impairments were temporary or other than temporary. In reaching its conclusions, management exercised significant judgment and used a number of issuer-specific quantitative indicators and qualitative judgments to assess the probability of receiving a given security’s contractual cash flows. This included the issue’s implied yield to maturity, cumulative default rate based on rating, comparisons of issue-specific spreads to industry or sector spreads, specific trading activity in the issue, and other market data such as recent debt tenders and upcoming refinancing requirements. Management also reviewed fundamentals such as issuer credit and liquidity metrics, business outlook and industry conditions. Management maintains a watch list of securities that is reviewed for impairments. Each security on the watch list was evaluated, analyzed and discussed, with the positive and negative factors weighed in the ultimate determination of whether or not the security was other-than-temporarily impaired. For securities for which no OTTI was ultimately indicated at June 30, 2012, management does not have the intention to sell, nor does it expect to be required to sell, these securities prior to their recovery.

Fixed income OTTIs recorded in the first half of 2012 were primarily concentrated in structured securities. These impairments were driven primarily by increased collateral default rates. In our judgment, these credit events or other adverse conditions of the issuers have caused, or will most likely lead to, a deficiency in the contractual cash flows related to the investment. Therefore, based upon these credit events, we have determined that OTTIs exist. Total debt impairments recognized through earnings related to such credit-related circumstances were $3.6 million for the second quarter of 2012 and $3.0 million for the second quarter of 2011 and $9.8 million for the first half of 2012 and $8.7 million for the first half of 2011. There were equity security OTTIs of $1.5 million for the three and six months ended June 30, 2012 and no equity security OTTIs for the first quarter of 2011 or for the first half of 2011. There were no limited partnership and other investment OTTIs for the first quarter of 2012 and 2011 or for the first half of 2012 or 2011.

In addition to these credit-related impairments recognized through earnings, we impaired securities to fair value through other comprehensive loss for any impairments related to non-credit related factors. These types of impairments were driven primarily by market or sector credit spread widening or by a lack of liquidity in the securities. The amount of impairments recognized as an adjustment to other comprehensive loss due to these factors was $9.9 million for the second quarter of 2012, $3.6 million for the second quarter of 2011, $15.4 million for the first half of 2012 and $5.3 million for the first half of 2011.

The following table presents a roll-forward of pre-tax credit losses recognized in earnings related to debt securities for which a portion of the OTTI was recognized in OCI.

Credit Losses Recognized in Earnings on Debt Securities for	Three Months Ended				Six Months Ended
which a Portion of the OTTI Loss was Recognized in OCI:	June 30,				June 30,
($ in millions)	2012		2011		2012		2011
Balance, beginning of period	$	(79.1)	$	(62.6)	$	(73.8)	$	(60.4)
Add: Credit losses on securities not previously impaired(1)		(1.5)		(1.8)		(3.6)		(5.9)
Add: Credit losses on securities previously impaired(1)		(3.3)		(1.1)		(6.5)		(2.3)
Less: Credit losses on securities impaired due to intent to sell		—		—		—		—
Less: Credit losses on securities sold		0.2		—		0.2		3.1
Less: Increases in cash flows expected on   previously impaired securities		—		—		—		—
Balance, end of period	$	(83.7)	$	(65.5)	$	(83.7)	$	(65.5)

———————

⁽¹⁾ Additional credit losses on securities for which a portion of the OTTI loss was recognized in AOCI are included within net OTTI losses recognized in earnings on the statements of comprehensive income.

Limited partnerships and other investments

Limited Partnerships and Other Investments:	June 30,		Dec 31,
($ in millions)	2012		2011
Private equity	$	255.8	$	241.3
Mezzanine funds		196.1		189.9
Infrastructure funds		36.3		35.7
Hedge funds		30.0		30.0
Leverage lease		19.9		20.3
Mortgage and real estate		6.7		11.6
Direct equity		26.7		25.4
Other alternative assets		47.0		47.1
Limited partnerships and other investments	$	618.5	$	601.3
Amounts applicable to the closed block	$	372.4	$	352.8

Net investment income

Sources of Net Investment Income:	Three Months Ended				Six Months Ended
($ in millions)	June 30,				June 30,
	2012		2011		2012		2011
Debt securities	$	152.4	$	155.8	$	305.1	$	304.0
Equity securities		1.2		—		1.9		0.6
Limited partnerships and other investments		69.0		57.5		128.4		110.0
Fair value option investments		(1.0)		(0.2)		0.8		2.2
Total investment income		221.6		213.1		436.2		416.8
Less: Discontinued operations		0.5		0.5		1.2		1.0
Less: Investment expenses		2.9		1.4		6.9		3.2
Net investment income	$	218.2	$	211.2	$	428.1	$	412.6
Amounts applicable to the closed block	$	121.0	$	118.0	$	234.8	$	235.6

Net realized investment gains (losses)

Sources and Types of	Three Months Ended				Six Months Ended
Net Realized Investment Gains (Losses):	June 30,				June 30,
($ in millions)	2012		2011		2012		2011
Total other-than-temporary debt impairment losses	$	(13.5)	$	(6.6)	$	(25.2)	$	(14.0)
Portion of loss recognized in OCI		9.9		3.6		15.4		5.3
Net debt impairment losses recognized in earnings	$	(3.6)	$	(3.0)	$	(9.8)	$	(8.7)
Debt security impairments:
U.S. government and agency	$	—	$	—	$	—	$	—
State and political subdivision		—		—		—		—
Foreign government		—		—		—		—
Corporate		—		(0.2)		(0.6)		(4.6)
CMBS		(1.0)		—		(1.2)		—
RMBS		(2.3)		(2.7)		(7.4)		(4.0)
CDO/CLO		(0.1)		—		(0.1)		—
Other asset-backed		(0.2)		(0.1)		(0.5)		(0.1)
Net debt security impairments		(3.6)		(3.0)		(9.8)		(8.7)
Equity security impairments		(1.5)		—		(1.5)		—
Limited partnerships and other investment impairments		—		—		—		—
Impairment losses		(5.1)		(3.0)		(11.3)		(8.7)
Debt security transaction gains(1)		5.8		5.5		8.0		9.4
Debt security transaction losses(1)		(2.4)		(1.2)		(3.4)		(3.1)
Equity security transaction gains		—		0.1		—		0.1
Equity security transaction losses		—		—		—		—
Limited partnerships and other investment transaction gains		0.6		—		1.4		—
Limited partnerships and other investment transaction losses		—		—		—		(1.6)
Net transaction gains		4.0		4.4		6.0		4.8
Derivative instruments		13.1		5.0		(23.0)		(15.1)
Embedded derivatives(2)		(19.1)		(4.7)		3.7		4.9
Fair value option investments		(1.1)		1.4		0.8		1.0
Net realized investment gains (losses),   excluding impairment losses		(3.1)		6.1		(12.5)		(4.4)
Net realized investment gains (losses),   including impairment losses	$	(8.2)	$	3.1	$	(23.8)	$	(13.1)

———————

⁽¹⁾ Proceeds from the sale of available-for-sale debt securities were $296.0 million and $396.1 million for the three months ended June 30, 2012 and 2011, respectively. Proceeds from the sale of available-for-sale debt securities were $402.3 million and $693.1 million for the six months ended June 30, 2012 and 2011, respectively.

⁽²⁾ Includes the change in fair value of embedded derivatives associated with variable annuity GMWB, GMAB, GPAF and COMBO riders. See Note 8 to these financial statements for additional disclosures.

Unrealized investment gains (losses)

Sources of Changes in	Three Months Ended				Six Months Ended
Net Unrealized Investment Gains (Losses):	June 30,				June 30,
($ in millions)	2012		2011		2012		2011
Debt securities	$	129.5	$	102.0	$	208.2	$	149.8
Equity securities		0.1		(3.7)		1.5		(3.9)
Other investments		—		—		—		—
Net unrealized investment gains	$	129.6	$	98.3	$	209.7	$	145.9
Net unrealized investment gains	$	129.6	$	98.3	$	209.7	$	145.9
Applicable closed block policyholder dividend obligation		64.5		64.0		93.5		78.7
Applicable deferred policy acquisition cost		25.8		19.2		42.4		30.7
Applicable future policyholder benefits		4.5		—		18.3		—
Applicable deferred income tax expense		9.5		4.3		33.3		27.5
Offsets to net unrealized investment gains		104.3		87.5		187.5		136.9
Net unrealized investment gains included in OCI	$	25.3	$	10.8	$	22.2	$	9.0

Non-consolidated variable interest entities

Entities which do not have sufficient equity at risk to allow the entity to finance its activities without additional financial support or in which the equity investors, as a group, do not have the characteristic of a controlling financial interest are referred to as VIEs. We perform ongoing assessments of our investments in VIEs to determine whether we have a controlling financial interest in the VIE and therefore would be considered to be the primary beneficiary. An entity would be considered a primary beneficiary and be required to consolidate a VIE when the entity has both the power to direct the activities of a VIE that most significantly affect the entity’s economic performance and the obligation to absorb losses, or right to receive benefits, that could potentially be significant to the VIE. We reassess our VIE determination with respect to an entity on an ongoing basis.

We are involved with various entities that are deemed to be VIEs primarily as a passive investor in private equity limited partnerships and through direct investments, in which we are not related to the general partner. These investments are accounted for under the equity method of accounting and are included in limited partnerships and other investments on our balance sheet. The following table presents the carrying value of assets and liabilities, and the maximum exposure to loss relating to significant VIEs for which we are not the primary beneficiary.

Carrying Value of Assets and Liabilities	June 30, 2012						December 31, 2011
and Maximum Exposure Loss Relating					Maximum						Maximum
to Variable Interest Entities:					Exposure						Exposure
($ in millions)	Assets		Liabilities		to Loss		Assets		Liabilities		to Loss
Limited partnerships	$	568.7	$	—	$	568.7	$	552.1	$	—	$	552.1
Direct equity investments		26.7		—		26.7		25.4		—		25.4
Receivable		7.3		—		7.3		6.6		—		6.6
Total	$	602.7	$	—	$	602.7	$	584.1	$	—	$	584.1

The asset value of our investments in VIEs (based upon sponsor values and financial statements of the individual entities) for which we are not the primary beneficiary was $602.7 million as of June 30, 2012. Our maximum exposure to loss related to these non-consolidated VIEs is limited to the amount of our investment.

Issuer and counterparty credit exposure

Credit exposure related to issuers and derivatives counterparties is inherent in investments and derivative contracts with positive fair value or asset balances. We manage credit risk through the analysis of the underlying obligors, issuers and transaction structures. We review our debt security portfolio regularly to monitor the performance of obligors and assess the stability of their credit ratings. We also manage credit risk through industry and issuer diversification and asset allocation. Maximum exposure to an issuer or derivative counterparty is defined by quality ratings, with higher quality issuers having larger exposure limits. As of June 30, 2012, we were not exposed to any credit concentration risk of a single issuer greater than 10% of stockholders’ equity other than U.S. government and government agencies backed by the faith and credit of the U.S. government. We have an overall limit on below-investment-grade rated issuer exposure. To further mitigate the risk of loss on derivatives, we enter into contracts in which the counterparty is a financial institution with a rating of A or higher from at least one rating agency.

As of June 30, 2012, we held derivative assets, net of liabilities, with a fair value of $144.9 million. Derivative credit exposure was diversified with nine different counterparties. We also had debt securities of these issuers with a fair value of $160.3 million as of June 30, 2012. Our maximum amount of loss due to credit risk with these issuers was $305.2 million as of June 30, 2012. See Note 9 to these financial statements for more information regarding derivatives.

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5. Deferred Policy Acquisition Costs

6 Months Ended

Jun. 30, 2012

Notes to Financial Statements

Note 5 - Deferred Policy Acquisition Costs

5. Deferred Policy Acquisition Costs

Deferred Policy Acquisition Costs:	Three Months Ended				Six Months Ended
($ in millions)	June 30,				June 30,
	2012		2011		2012		2011
Policy acquisition costs deferred	$	21.5	$	29.0	$	47.6	$	63.2
Costs amortized to expenses:
Recurring costs		(46.8)		(42.7)		(93.2)		(93.8)
Realized investment gains (losses)		5.0		(0.1)		1.2		(0.3)
Offsets to net unrealized investment gains or losses   included in AOCI(1)		(25.8)		(19.2)		(42.4)		(30.7)
Change in deferred policy acquisition costs		(46.1)		(33.0)		(86.8)		(61.6)
Deferred policy acquisition costs, beginning of period		1,122.1		1,217.9		1,162.8		1,246.5
Deferred policy acquisition costs, end of period	$	1,076.0	$	1,184.9	$	1,076.0	$	1,184.9

———————

⁽¹⁾ An offset to deferred policy acquisition costs and AOCI is recorded each period to the extent that, had unrealized holding gains or losses from securities classified as available-for-sale actually been realized, an adjustment to deferred policy acquisition costs amortized using gross profits or gross margins would result.

We defer incremental direct costs related to the successful sale of new or renewal contracts. Incremental direct costs are those costs that result directly from and are essential to the sale of a contract. Costs incurred related directly to acquisition activities performed by the insurer are also deferred. During the three and six months ended June 30, 2012 and 2011, deferred expenses primarily consisted of third-party commissions related to fixed indexed annuity sales.

We amortize deferred policy acquisition costs based on the related policy’s classification. For individual participating life insurance policies, deferred policy acquisition costs are amortized in proportion to estimated gross margins. For universal life, variable universal life and accumulation annuities, deferred policy acquisition costs are amortized in proportion to EGPs. Policies may be surrendered for value or exchanged for a different one of our products (internal replacement). The deferred policy acquisition cost balance associated with the replaced or surrendered policies is adjusted to reflect these surrenders. In addition, an offset to deferred policy acquisition costs and AOCI is recorded each period for unrealized gains or losses on securities classified as available-for-sale as if they had been realized, an adjustment to deferred policy acquisition costs amortized using gross profits or gross margins would result.

The projection of EGPs requires the use of extensive actuarial assumptions, estimates and judgments about the future. Future EGPs are generally projected on a policy-by-policy basis for the estimated lives of the contracts. Assumptions are set separately for each product and are reviewed at least annually based on our current best estimates of future events.

In addition to our quarterly reviews, we conduct a comprehensive assumption review on an annual basis, or as circumstances warrant. Upon completion of these comprehensive assumption reviews, we revise our assumptions to reflect our current best estimates, thereby changing our estimate of EGPs in the deferred policy acquisition cost amortization models. The deferred policy acquisition cost asset is then adjusted in a process known as “unlocking,” with an offsetting benefit or charge to income.

During the three and six months ended June 30, 2012 and 2011, it was determined that an unlocking was not warranted.

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17. Discontinued Operations

6 Months Ended

Jun. 30, 2012

Notes to Financial Statements

Note 17 - Discontinued Operations

17. Discontinued Operations

PFG Holdings, Inc.

On January 4, 2010, we signed a definitive agreement to sell PFG and its subsidiaries, including AGL Life Assurance Company, to Tiptree. Because of the divestiture, these operations are reflected as discontinued operations. On June 23, 2010, we completed the divestiture of PFG and closed the transaction.

The definitive agreement contains a provision requiring us to indemnify Tiptree for any losses due to actions resulting from certain specified acts or omissions associated with the divested business prior to closing. There has been litigation filed that falls within this provision of the agreement but does not name the Company as a party to the litigation. We intend to defend these matters vigorously based on our indemnity commitment. See Note 18 to these financial statements related to contingencies remaining from the sale.

Net losses of $0.5 million and $0.7 million were recognized during the three months ended June 30, 2012 and 2011, respectively, primarily related to accrued legal fees attributable to these matters. Net losses of $1.0 million and $2.2 million were recognized during the six months ended June 30, 2012 and 2011,respectively, primarily related to accrued legal fees attributable to these matters.

Phoenix Life and Reassurance Company of New York

Included in the January 4, 2010 agreement with Tiptree was a provision for the purchase of PLARNY pending regulatory approval. On September 24, 2010, approval was obtained from the NYDFS for Tiptree and PFG Holdings Acquisition Corporation to acquire PLARNY. The transaction closed on October 6, 2010. Because of the divestiture, these operations are reflected as discontinued operations. We have reclassified prior period financial statements to conform to this change.

No net income related to PLARNY was recognized during the three and six months ended June 30, 2012 and 2011.

Discontinued Reinsurance Operations

In 1999, we discontinued our reinsurance operations through a combination of sale, reinsurance and placement of certain retained group accident and health reinsurance business into run-off. We adopted a formal plan to stop writing new contracts covering these risks and to end the existing contracts as soon as those contracts would permit. However, we remain liable for claims under contracts which have not been commuted.

We have established reserves for claims and related expenses that we expect to pay on our discontinued group accident and health reinsurance business. These reserves are 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 from our retrocessionaires and the likely legal and administrative costs of winding down the business. Net losses of $5.8 million were recognized during the three and six months ended June 30, 2012 primarily due to the commutation of certain contracts. There was no net income recognized during the three and six months ended June 30, 2011. See Note 18 to these financial statements for additional discussion on remaining liabilities of our discontinued reinsurance operations.

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13. Employee Benefits

6 Months Ended

Jun. 30, 2012

Notes to Financial Statements

Note 13 - Employee Benefits

13. Employee Benefits

Pension and other postretirement benefits

We provide our employees with postretirement benefits that include retirement benefits, primarily through a savings plan, and other benefits, including health care and life insurance. The components of pension and postretirement benefit costs follow:

Components of Pension Benefit Costs:	Three Months Ended				Six Months Ended
($ in millions)	June 30,				June 30,
	2012		2011		2012		2011
Service cost	$	0.2	$	0.2	$	0.4	$	0.5
Interest cost		8.7		8.9		17.3		17.9
Expected return on plan assets		(8.7)		(9.1)		(17.3)		(18.2)
Net loss amortization		2.6		1.6		5.2		3.3
Pension benefit cost	$	2.8	$	1.6	$	5.6	$	3.5

Components of Other Postretirement Benefit Costs:	Three Months Ended				Six Months Ended
($ in millions)	June 30,				June 30,
	2012		2011		2012		2011
Service cost	$	0.1	$	0.1	$	0.2	$	0.2
Interest cost		0.6		0.7		1.2		1.3
Prior service cost amortization		(0.3)		(0.5)		(0.7)		(1.0)
Other postretirement benefit cost	$	0.4	$	0.3	$	0.7	$	0.5

For the three months ended June 30, 2012, other comprehensive loss includes unrealized gains of $13.7 million, net of taxes, relating to the amortization of net prior service costs and net gains/losses. For the six months ended June 30, 2012, other comprehensive loss includes unrealized gains of $12.4 million, net of taxes, relating to the amortization of net prior service costs and net gains/losses. Effective March 31, 2010, the benefit accruals under all defined benefit pension plans were frozen.

During the three months ended June 30, 2012, we made contributions of $3.6 million to the pension plan. During the six months ended June 30, 2012, we made contributions of $7.0 million to the pension plan. We expect to make additional contributions of approximately $9.4 million by December 31, 2012. On July 6, 2012, the Surface Transportation Extension Act of 2012, Part II, was enacted into law and is effective immediately. The law includes certain pension funding stabilization provisions. We are evaluating its impact.

Savings plans

During the three months ended June 30, 2012 and 2011, we incurred costs of $1.1 million and $1.5 million, respectively, for contributions to our savings plans. During the six months ended June 30, 2012 and 2011, we incurred costs of $2.4 million and $2.7 million, respectively, for contributions to our savings plans.

Effective April 1, 2010, employees (except Saybrus employees) participating in the Company savings plans are eligible to receive an employer discretionary contribution according to the plan terms.

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14. Share-Based Payment (Details Narrative) (USD $) In Millions, except Share data, unless otherwise specified	6 Months Ended
	Jun. 30, 2012
Share-Based Payment Details Narrative
Outstanding excercisable stock options	1,921,337
Weighted-average excercise price of stock options	$ 9.93
Restricted stock units awarded	144,978
Time-Vested restricted stock units outstanding	2,576,756
Weighted average grant price of time-vested restricted stock units	$ 2.79
Performance-Vested restricted stock units outstanding	340,476
Weighted average grant price of performance-vested restricted stock units	$ 2.75
Liability awards accrued	$ 2.4

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9. Derivative Instruments

6 Months Ended

Jun. 30, 2012

Notes to Financial Statements

Note 9 - Derivative Instruments

9. Derivative Instruments

Derivative instruments

We use derivative financial instruments, including options, futures and swaps as a means of hedging exposure to interest rate, equity price change, equity volatility and foreign currency risk. This includes our surplus hedge which utilizes futures and options to hedge against declines in equity markets and the resulting statutory capital and surplus impact. We also use derivative instruments to economically hedge our exposure on living benefits offered on certain of our variable products as well as index credits on our fixed indexed annuity products.

The Company seeks to enter into over-the-counter (“OTC”) derivative transactions pursuant to master agreements that provide for a netting of payments and receipts by counterparty. As of June 30, 2012 and December 31, 2011, $8.6 million and $8.0 million, respectively, of cash and cash equivalents were held as collateral by a third party related to our derivative transactions.

Our derivatives generally do not qualify for hedge accounting, with the exception of cross currency swaps. We do not designate the purchased derivatives related to variable annuity living benefits or fixed indexed annuity index credits as hedges for accounting purposes.

Derivative Instruments:		Fair Value as of June 30, 2012						Fair Value as of December 31, 2011
($ in millions)		Notional						Notional
	Maturity	Amount		Assets		Liabilities		Amount		Assets		Liabilities
Non-hedging derivative instruments
Interest rate swaps	2017-2026	$	156.0	$	17.2	$	6.9	$	131.0	$	15.0	$	5.2
Variance swaps	2015-2017		0.9		—		1.3		0.9		3.2		—
Swaptions	2024		25.0		0.1		—		25.0		0.3		—
Put options	2015-2022		406.0		100.1		—		406.0		109.6		—
Call options	2012-2017		635.5		50.8		33.5		355.0		28.0		19.0
Equity futures	2012		207.7		18.0		—		70.0		18.5		—
			1,431.1		186.2		41.7		987.9		174.6		24.2
Hedging derivative instruments
Cross currency swaps	2016		10.0		0.4		—		15.0		0.2		—
			10.0		0.4		—		15.0		0.2		—
Total derivative instruments		$	1,441.1	$	186.6	$	41.7	$	1,002.9	$	174.8	$	24.2

Derivative Instrument Realized Gains (Losses)	Three Months Ended				Six Months Ended
Recognized in Earnings:	June 30,				June 30,
($ in millions)	2012		2011		2012		2011
Derivative instruments by type
Interest rate swaps	$	2.4	$	1.8	$	0.6	$	1.5
Variance swaps		0.9		(0.3)		(4.5)		(1.7)
Swaptions		—		(0.2)		(0.2)		(0.9)
Put options		15.0		5.4		(9.6)		(8.5)
Call options		(9.8)		(1.6)		0.1		0.1
Equity futures		4.6		(0.1)		(9.4)		(5.6)
Cross currency swaps		—		—		—		—
Total derivative instrument realized gains (losses)   recognized in earnings	$	13.1	$	5.0	$	(23.0)	$	(15.1)

Interest Rate Swaps

We maintain an overall interest rate risk management strategy that primarily incorporates the use of interest rate swaps as hedges of our exposure to changes in interest rates. Our exposure to changes in interest rates primarily results from our commitments to fund interest-sensitive insurance liabilities, as well as from our significant holdings of fixed rate financial instruments. We use interest rate swaps that effectively convert variable rate cash flows to fixed cash flows in order to hedge the interest rate risks associated with guaranteed minimum living benefit (GMAB/GMWB) rider liabilities.

Interest Rate Options

We use interest rate options, such as swaptions, to hedge against market risks to assets or liabilities from substantial changes in interest rates. An interest rate swaption gives us the right but not the obligation to enter into an underlying swap. Swaptions are options on interest rate swaps. All of our swaption contracts are receiver swaptions, which give us the right to enter into a swap where we will receive the agreed-upon fixed rate and pay the floating rate. If the market conditions are favorable and the swap is needed to continue hedging our inforce liability business, we will exercise the swaption and enter into a fixed rate swap. If a swaption contract is not exercised by its option maturity date, it expires with no value.

Exchange Traded Future Contracts

We use equity index futures to hedge the market risks from changes in the value of equity indices, such as S&P 500, associated with guaranteed minimum living benefit (GMAB/GMWB) rider liabilities. Positions are short-dated, exchange-traded futures with maturities of three months.

Equity Index Options

We use equity indexed options to hedge against market risks from changes in equity markets, volatility and interest rates.

An equity index option affords us the right to make or receive payments based on a specified future level of an equity market index. We may use exchange-trade or OTC options.

Generally, we have used a combination of equity index futures, interest rate swaps, variance swaps and long-dated put options to hedge its GMAB and GMWB liabilities and equity index call options to hedge its indexed annuity option liabilities.

Cross Currency Swaps

We use cross currency swaps to hedge against market risks from changes in foreign currency exchange rates. Currency swaps are used to swap bond asset cash flows denominated in a foreign currency back to U.S. dollars. Under foreign currency swaps, we agree with another party (referred to as the counterparty) to exchange principal and periodic interest payments denominated in foreign currency for payments in U.S. dollars.

Contingent features

Derivative counterparty agreements may contain certain provisions that require our insurance companies’ financial strength rating to be above a certain threshold. If our financial strength ratings were to fall below a specified rating threshold, certain derivative counterparties could request immediate payment or demand immediate and ongoing full collateralization on derivative instruments in net liability positions, or trigger a termination of existing derivatives and/or future derivative transactions.

In certain derivative counterparty agreements, our financial strength ratings are below the specified threshold levels. However, the Company held no derivative instruments as of June 30, 2012 in a net aggregate liability position payable to any counterparty (i.e., such derivative instruments have fair values in a net asset position payable to the Company if such holdings were liquidated).

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8. Additional Insurance Benefits (Details) (USD $) In Millions, unless otherwise specified	6 Months Ended	12 Months Ended
	Jun. 30, 2012	Dec. 31, 2011
Additional Insurance Benefits	$ 1,399.0	$ 1,415.0
GMWB
Additional Insurance Benefits	557.9	555.4
Average Attained Age Of Annuitant	63 years	62 years
GMIB
Additional Insurance Benefits	425.1	442.1
Average Attained Age Of Annuitant	63 years	63 years
GMAB
Additional Insurance Benefits	389.3	385.6
Average Attained Age Of Annuitant	57 years	57 years
GPAF
Additional Insurance Benefits	16.8	21.8
Average Attained Age Of Annuitant	77 years	77 years
COMBO
Additional Insurance Benefits	$ 9.9	$ 10.1
Average Attained Age Of Annuitant	61 years	61 years

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7. Financing Activities

6 Months Ended

Jun. 30, 2012

Notes to Financial Statements

Note 7 - Financing Activities

7. Financing Activities

Indebtedness at Carrying Value:	June 30,		Dec 31,
($ in millions)	2012		2011
7.15% surplus notes	$	174.1	$	174.1
7.45% senior unsecured bonds		252.8		252.8
Total indebtedness	$	426.9	$	426.9

Our 7.15% surplus notes are an obligation of Phoenix Life and are due December 15, 2034. The carrying value of the 2034 notes is net of $0.9 million of unamortized original issue discount. Interest payments are at an annual rate of 7.15%, require the prior approval of the New York Department of Financial Services (“NYDFS”) (formerly known as the State of New York Insurance Department) and may be made only out of surplus funds which the NYDFS determines to be available for such payments under New York Insurance Law. The notes may be redeemed at the option of Phoenix Life at any time at the “make-whole” redemption price set forth in the offering circular. New York Insurance Law provides that the notes are not part of the legal liabilities of Phoenix Life.

Our senior unsecured bonds were issued in December 2001 for gross proceeds of $300.0 million (net proceeds of $290.6 million) and mature in January 2032. We pay interest at an annual rate of 7.45%. We may redeem any or all of the bonds at a redemption price equal to 100% of principal plus accrued and unpaid interest to the redemption date. We have repurchased a cumulative amount of $47.3 million of par value of these bonds as of June 30, 2012. During 2011, we purchased $0.8 million of par value of these bonds for $0.6 million, resulting in a gain of $0.2 million. During 2010 and prior years, we repurchased $46.5 million of par value of these bonds for $24.8 million, resulting in a gain of $21.7 million.

We have recorded indebtedness at unpaid principal balances of each instrument net of issue discount. The Company or its subsidiaries may, from time to time, purchase its debt securities in the open market subject to considerations including, but not limited to, market conditions, relative valuations, capital allocation and the determination that it is in the best interest of the Company and its stakeholders.

Future minimum annual principal payments on indebtedness as of June 30, 2012 are $252.8 million in 2032 and $175.0 million in 2034.

Interest Expense on Indebtedness, including	Three Months Ended				Six Months Ended
Amortization of Debt Issuance Costs:	June 30,				June 30,
($ in millions)	2012		2011		2012		2011
Surplus notes	$	3.1	$	3.1	$	6.3	$	6.3
Senior unsecured bonds		4.8		4.8		9.6		9.6
Interest expense on indebtedness	$	7.9	$	7.9	$	15.9	$	15.9

Common stock dividends

During the six months ended June 30, 2012 and the year ended December 31, 2011, we did not pay any stockholder dividends.

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8. Separate Accounts, Death Benefits and Insurance Benefits

6 Months Ended

Jun. 30, 2012

Notes to Financial Statements

Note 8 - Separate Accounts, Death Benefits and Other Insurance Benefit Features

8. Separate Accounts, Death Benefits and Other Insurance Benefit Features

Separate account products are those for which a separate investment and liability account is maintained on behalf of the policyholder. Investment objectives for these separate accounts vary by fund account type, as outlined in the applicable fund prospectus or separate account plan of operations. Our separate account products include variable annuities, fixed indexed annuities and variable life insurance contracts. The assets supporting these contracts are carried at fair value. Assets supporting variable annuity and variable life contracts are reported as separate account assets with an equivalent amount reported as separate account liabilities. The assets supporting fixed indexed annuity contracts are reported within the respective investment line items on the consolidated balance sheet. Amounts assessed against the policyholder for mortality, administration, and other services are included within revenue in fee income. For the three and six month periods ended June 30, 2012 and 2011, there were no gains or losses on transfers of assets from the general account to a separate account.

On May 21, 2012, the employee pension plan surrendered its variable annuity contract with PHL Variable. All assets held within the employee pension plan separate account were subsequently transferred to the direct control of the plan’s trustee. This resulted in a decrease in separate account assets and liabilities of $464.2 million during the quarter ended June 30, 2012.

Separate Account Investments of Account Balances of Variable Annuity Contracts with Guarantees:	June 30,		Dec 31,
($ in millions)	2012		2011
Debt securities	$	492.2	$	515.4
Equity funds		1,860.9		1,883.3
Other		78.9		81.7
Total	$	2,432.0	$	2,480.4

Investments of Account Balances of Fixed Indexed Annuity Contracts with Guarantees:	June 30,		Dec 31,
($ in millions)	2012		2011
Debt securities	$	1,227.9	$	972.4
Equity funds		—		—
Other		—		—
Total	$	1,227.9	$	972.4

Variable annuity guaranteed benefits

Many of our variable annuity contracts offer various guaranteed minimum death, accumulation, withdrawal and income benefits.

We establish policy benefit liabilities for minimum death and income benefit guarantees relating to certain annuity policies as follows:

· Liabilities associated with the guaranteed minimum death benefit (“GMDB”) are determined by estimating the expected value of death benefits in excess of the projected account balance and recognizing the excess ratably over the accumulation period based on total expected assessments. The assumptions used for calculating the liabilities are generally consistent with those used for amortizing deferred policy acquisition costs.

· Liabilities associated with the guaranteed minimum income benefit (“GMIB”) are determined by estimating the expected value of the income benefits in excess of the projected account balance at the date of annuitization and recognizing the excess ratably over the accumulation period based on total expected assessments. The assumptions used for calculating such guaranteed income benefit liabilities are generally consistent with those used for amortizing deferred policy acquisition costs.

For variable annuities with GMDB and GMIB, reserves for these guarantees are calculated and recorded in policy liabilities and accruals on our balance sheet. Changes in the liability are recorded in policy benefits, excluding policyholder dividends, on our statements of comprehensive income. We regularly evaluate estimates used and adjust the additional liability balances, with a related charge or credit to benefit expense if actual experience or other evidence suggests that earlier assumptions should be revised.

Changes in Guaranteed Liability Balances:	As of
($ in millions)	June 30, 2012
	Variable Annuity
	GMDB		GMIB
Liability balance as of January 1, 2012	$	4.9	$	17.8
Incurred		(0.6)		3.7
Paid		0.7		—
Liability balance as of June 30, 2012	$	5.0	$	21.5

Changes in Guaranteed Liability Balances:	Year Ended
($ in millions)	December 31, 2011
	Variable Annuity
	GMDB		GMIB
Liability balance as of January 1, 2011	$	4.6	$	18.1
Incurred		(1.8)		(0.3)
Paid		2.1		—
Liability balance as of December 31, 2011	$	4.9	$	17.8

For those guarantees of benefits that are payable in the event of death, the net amount at risk is generally defined as the benefit payable in excess of the current account balance at our balance sheet date. We have entered into reinsurance agreements to reduce the net amount of risk on certain death benefits. Following are the major types of death benefits currently in-force:

Variable Annuity GMDB Benefits by Type:			Net Amount		Average
($ in millions)	Account		at Risk after		Attained Age
	Value		Reinsurance		of Annuitant
GMDB return of premium	$	832.8	$	13.5		62
GMDB step up		1,371.7		73.7		63
GMDB earnings enhancement benefit (“EEB”)		38.7		0.2		63
GMDB greater of annual step up and roll up		26.7		8.2		66
Total GMDB at June 30, 2012	$	2,269.9	$	95.6
GMDB return of premium	$	870.2	$	23.4		61
GMDB step up		1,398.4		118.6		63
GMDB earnings enhancement benefit (“EEB”)		39.8		0.4		62
GMDB greater of annual step up and roll up		27.1		8.8		66
Total GMDB at December 31, 2011	$	2,335.5	$	151.2

Return of Premium: The death benefit is the greater of current account value or premiums paid (less any adjusted partial withdrawals).

Step Up: The death benefit is the greater of current account value, premiums paid (less any adjusted partial withdrawals) or the annual step up amount prior to the oldest original owner attaining a certain age. On and after the oldest original owner attains that age, the death benefit is the greater of current account value or the death benefit at the end of the contract year prior to the oldest original owner’s attaining that age plus premium payments (less any adjusted partial withdrawals) made since that date.

Earnings Enhancement Benefit: The death benefit is the greater of the premiums paid (less any adjusted partial withdrawals) or the current account value plus the EEB. The EEB is an additional amount designed to reduce the impact of taxes associated with distributing contract gains upon death.

Greater of Annual Step Up and Annual Roll Up: The death benefit is the greatest of premium payments (less any adjusted partial withdrawals), the annual step up amount, the annual roll up amount or the current account value prior to the eldest original owner attaining age 81. On and after the eldest original owner attained age 81, the death benefit is the greater of current account value or the death benefit at the end of the contract year prior to the eldest original owner’s attained age of 81 plus premium payments (less any adjusted partial withdrawals) made since that date.

We also offer certain separate account variable products with a guaranteed minimum withdrawal benefit (“GMWB”), guaranteed minimum accumulation benefit (“GMAB”), guaranteed payout annuity floor (“GPAF”) and combination rider (“COMBO”).

Additional Insurance Benefits:			Average
($ in millions)	Account		Attained Age
	Value		of Annuitant
GMWB	$	557.9	63
GMIB		425.1	63
GMAB		389.3	57
GPAF		16.8	77
COMBO		9.9	61
Total at June 30, 2012	$	1,399.0
GMWB	$	555.4	62
GMIB		442.1	63
GMAB		385.6	57
GPAF		21.8	77
COMBO		10.1	61
Total at December 31, 2011	$	1,415.0

The GMWB rider guarantees the contract owner a minimum amount of withdrawals and benefit payments over time, regardless of the investment performance of the contract, subject to an annual limit. Optional resets are available. In addition, these contracts have a feature that allows the contract owner to receive the guaranteed annual withdrawal amount for as long as they are alive.

The GMAB rider provides the contract owner with a minimum accumulation of the contract owner’s purchase payments deposited within a specific time period, adjusted for withdrawals, after a specified amount of time determined at the time of issuance of the variable annuity contract.

The GPAF rider provides the contract owner with a minimum payment amount if the variable annuity payment falls below this amount on the payment calculation date.

The COMBO rider includes the GMAB and GMWB riders as well as the GMDB rider at the contract owner’s option.

The GMWB, GMAB, GPAF and COMBO represent embedded derivative liabilities in the variable annuity contracts that are required to be reported separately from the host variable annuity contract. These investments are accounted for at fair value within policyholder deposit funds on the consolidated balance sheet with changes in fair value recorded in realized investment gains on the consolidated statements of comprehensive income. The fair value of the GMWB, GMAB, GPAF and COMBO obligation is calculated based on actuarial and capital market assumptions related to the projected cash flows, including benefits and related contract charges, over the lives of the contracts, incorporating expectations concerning policyholder behavior. As markets change, contracts mature and actual policyholder behavior emerges, we continually evaluate and may from time to time adjust these assumptions.

Embedded derivative liabilities for GMWB, GMAB, GPAF and COMBO are shown in the table below. There were no benefit payments made related to the GMWB and GMAB riders during the six months ended June 30 2012 or during the six months ended June 30, 2011. Benefit payments made for GPAF riders were $0.1 million for the six months ended June 30, 2012 and $0.1 million for the six months ended June 30, 2011. In order to manage the risk associated with these variable annuity embedded derivative liabilities, we have established a risk management strategy under which we hedge our GMAB, GMWB and COMBO exposure using equity index options, equity index futures, equity index variance swaps, interest rate swaps and swaptions.

Variable Annuity Embedded Derivative Liabilities:	June 30,		Dec 31,
($ in millions)	2012		2011
GMWB	$	18.3	$	17.0
GMAB		20.9		25.2
GPAF		1.3		2.3
COMBO		(0.3)		(0.3)
Total variable annuity embedded derivative liabilities	$	40.2	$	44.2

Fixed indexed annuity guaranteed benefits

Many of our fixed indexed annuities offer guaranteed minimum withdrawal and death benefits.

Liabilities associated with the GMWB for the fixed indexed annuities differ from those offered on variable annuities in that there is less exposure to capital market risk due to the fixed nature of the underlying contract. These liabilities are determined by estimating the expected value of the withdrawal benefits in excess of the projected account balance at the date of election and recognizing the excess ratably over the accumulation period based on total expected assessments. The assumptions used for calculating such guaranteed withdrawal benefit liabilities are consistent with those used for amortizing deferred policy acquisition costs. Some of these riders also offer a GMDB in addition to the withdrawal benefits.

The GMWB and GMDB guarantees are recorded in policy liabilities and accruals on our balance sheet. Changes in the liability are recorded in policy benefits, excluding policyholder dividends, on our statements of comprehensive income. We regularly evaluate estimates used and adjust the additional liability balances, with a related charge or credit to benefit expense if actual experience or other evidence suggests that earlier assumptions should be revised.

Changes in Guaranteed Liability Balances:	Fixed Indexed Annuity
($ in millions)	GMWB & GMDB
	June 30,		Dec 31,
	2012		2011
Liability balance, beginning of period	$	5.6	$	0.2
Incurred		6.2		5.4
Paid		—		—
Liability balance, end of period	$	11.8	$	5.6

Fixed indexed annuities also offer a variety of index options: policy credits that are calculated based on the performance of an outside equity market or other index over a specified term. The index options represent embedded derivative liabilities that are required to be reported separately from the host contract. These investments are accounted for at fair value within policyholder deposits within the consolidated balance sheet with changes in fair value recorded in policy benefits, excluding dividends, in the consolidated statements of comprehensive income. The fair value of these index options is calculated based on the impact of projected interest rates on the discounted liabilities. Several additional inputs reflect our internally developed assumptions related to lapse rates and policyholder behavior.

Fixed indexed annuity embedded derivatives were $115.2 million and $78.3 million as of June 30, 2012 and December 31, 2011, respectively. In order to manage the risk associated with these fixed indexed annuity options, we hedge using equity index options.

Universal life

Liabilities for universal life are generally determined by estimating the expected value of losses when death benefits exceed revenues and recognizing those benefits ratably over the accumulation period based on total expected assessments. The assumptions used in estimating these liabilities are consistent with those used for amortizing deferred policy acquisition costs. A single set of best estimate assumptions is used since these insurance benefits do not vary significantly with capital market conditions. At June 30, 2012 and December 31, 2011, we held additional universal life benefit reserves in accordance with death benefit and other insurance benefit reserves of $145.3 million and $146.6 million, respectively.

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10. Fair Value of Financial Instruments

6 Months Ended

Jun. 30, 2012

Notes to Financial Statements

Note 10 - Fair Value of Financial Instruments

10. Fair Value of Financial Instruments

ASC 820-10 defines and establishes the framework for measuring fair value. The framework is based on inputs that are used in the valuation and a fair value hierarchy based on the quality of those inputs used to measure fair value. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.

A financial instrument’s categorization within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement. The valuation hierarchy is based upon the transparency of inputs to the valuation of an asset or liability as of the measurement date. The three levels, from highest to lowest, are defined as follows:

· Level 1 – inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets. Level 1 securities include highly liquid government bonds and exchange-traded equities.

· Level 2 – inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument. Examples of such instruments include government-backed mortgage products, certain collateralized mortgage and debt obligations and certain high-yield debt securities.

· Level 3 – inputs to the valuation methodology are unobservable and significant to the fair value measurement. Securities classified within Level 3 include broker quoted investments, certain residual interests in securitizations and other less liquid securities. Most valuations that are based on brokers’ prices are classified as Level 3 due to a lack of transparency in the process they use to develop prices.

A financial instrument’s categorization within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement.

Investments, in which fair value is based upon unadjusted quoted market prices, are reported as Level 1. We receive quoted market prices from an independent third party, nationally recognized pricing vendor (“pricing vendor”). When quoted prices are not available, we use a pricing vendor to give an estimated fair value in which amounts are included in Level 2 of the hierarchy. If quoted prices, or an estimated price from the pricing vendor are not available or we determine that the price is based on disorderly transactions or in inactive markets, fair value is based upon internally developed models. These internal models use primarily market-based or independently-sourced market parameters, including interest rate yield curves, option volatilities and currency rates. Valuation adjustments may be made to ensure that financial instruments are recorded at fair value. These adjustments include amounts to reflect counterparty credit quality, our own creditworthiness, liquidity and unobservable parameters that are applied consistently over time. The majority of the valuations of Level 3 assets were internally calculated or obtained from independent third-party broker quotes.

Management reviews all Level 2 and Level 3 market prices on a quarterly basis. Level 2 prices are grouped by asset class validated by using any combination of the following:

• Yield curve analysis
• Published index data
• Ratings data
• Spread data
• Sector specific economics / performance
• Alternative / comparable price sources (if available)
• Price stratification to prior price
• Similar traded securities

Level 3 prices are validated on an individual security basis using multiple indicators which may include any combination of the following:

• Coupon rate
• Maturity data
• Quality ratings
• Comparison price analysis
• Sector / asset class specific index data
• Vintage year / seasoning of issue (structured products)
• Cash flow analysis
• Alternative / comparable price sources (if available)

The following is a description of our valuation methodologies for assets and liabilities measured at fair value. Such valuation methodologies were applied to all of the assets and liabilities carried at fair value.

Available-for-sale debt securities

We use a pricing vendor to estimate fair value for the majority of our available-for-sale debt securities. The pricing vendor’s evaluations are based on market data and use pricing models that vary by asset class and incorporate available trade, bid and other market information. For investments that are not priced by the pricing vendor, we estimated fair value using an internal matrix. The internal matrix uses underlying source data from independent third parties for treasury yields, market spreads and average life calculations. Because our internal matrix prices are derived from observable market data, we include these estimates in Level 2 of our hierarchy.

Structured Securities

For structured securities, the majority of the fair value estimates are provided by our pricing vendor. When pricing is not available from the pricing vendor, we obtain fair value information from brokers or use internal models. These models consider the best estimate of cash flows until maturity to determine our ability to collect principal and interest and compare this to the anticipated cash flows when the security was purchased. In addition, management judgment is used to assess the probability of collecting all amounts contractually due to us. After consideration is given to the available information relevant to assessing the collectibility, including historical events, current conditions and reasonable forecasts, an estimate of future cash flows is determined. This includes evaluating the remaining payment terms, prepayment speeds, the underlying collateral, expected defaults using current default data and the financial condition of the issuer. Other factors considered are composite credit ratings, industry forecast, analyst reports and other relevant market data are also considered, similar to those the Company believes market participants would use.

To determine fair values for certain structured, collateralized loan obligations (“CLO”) and collateralized debt obligation (“CDO”) assets for which current pricing indications either do not exist, or are based on inactive markets or sparse transactions, we utilize model pricing using a third-party forecasting application that leverages historical trustee information for each modeled security. Principal and interest cash flows are modeled under various default scenarios for a given tranche of a security in accordance with its contractual cash flow priority of claim and subordination with respect to credit losses. The key assumptions include the level of annual default rates, loss-given-default or recovery rate, collateral prepayment rate and reinvestment spread.

Fair value is then determined based on discounted projected cash flows. We use a discount rate based upon a combination of the current U.S. Treasury rate plus the most recent gross CDO/CLO spreads (including the corresponding swap spread) by original tranche rating, which is representative of the inherent credit risk exposure in a deal’s capital structure.

The majority of the internal valuations calculated for structured securities are reported in Level 3 of the valuation hierarchy.

Derivatives

Exchange-traded derivatives valued using quoted prices are classified within Level 1 of the valuation hierarchy. However, few classes of derivative contracts are listed on an exchange. Therefore, the majority of our derivative positions are valued using internally developed models that use as their basis readily observable market parameters. These positions are classified within Level 2 of the valuation hierarchy. Such derivatives include basic interest rate swaps, options and credit default swaps.

Fair values for OTC derivative financial instruments, principally forwards, options and swaps, represent the present value of amounts estimated to be received from or paid to a marketplace participant in settlement of these instruments (i.e., the amount we would expect to receive in a derivative asset assignment or would expect to pay to have a derivative liability assumed). These derivatives are valued using pricing models based on the net present value of estimated future cash flows and directly observed prices from exchange-traded derivatives or other OTC trades, while taking into account the counterparty’s credit ratings, or our own credit ratings, as appropriate. Determining the fair value for OTC derivative contracts can require a significant level of estimation and management judgment.

New and/or complex instruments may have immature or limited markets. As a result, the pricing models used for valuation often incorporate significant estimates and assumptions that market participants would use in pricing the instrument, which may impact the results of operations reported in the consolidated financial statements. For long-dated and illiquid contracts, extrapolation methods are applied to observed market data in order to estimate inputs and assumptions that are not directly observable. This enables us to mark to market all positions consistently when only a subset of prices is directly observable. Values for OTC derivatives are verified using observed information about the costs of hedging the risk and other trades in the market. As the markets for these products develop, we continually refine our pricing models to correlate more closely to the market risk of these instruments.

Retained interest in securitization

Retained interests in securitizations do not trade in an active, open market with readily observable prices. Accordingly, we estimate the fair value of certain retained interests in securitizations using discounted cash flow (“DCF”) models.

For certain other retained interests in securitizations, a single interest rate path DCF model is used and generally includes assumptions based upon projected finance charges related to the securitized assets, estimated net credit losses, prepayment assumptions and contractual interest paid to third-party investors. Changes in the assumptions used may have a significant impact on our valuation of retained interests and such interests are, therefore, typically classified within Level 3 of the valuation hierarchy.

We compare the fair value estimates and assumptions to observable market data where available and to actual portfolio experience.

Private equity investments

The valuation of non-public private equity investments requires significant management judgment due to the absence of quoted market prices, an inherent lack of liquidity and the long-term nature of such assets. Private equity investments are valued initially based upon transaction price. The carrying values of private equity investments are adjusted either upwards or downwards from the transaction price to reflect expected exit values as evidenced by financing and sale transactions with third parties, or when determination of a valuation adjustment is confirmed through ongoing reviews by senior investment managers. A variety of factors are reviewed and monitored to assess positive and negative changes in valuation including, but not limited to, current operating performance and future expectations of the particular investment, industry valuations of comparable public companies, changes in market outlook and the third-party financing environment over time. In determining valuation adjustments resulting from the investment review process, emphasis is placed on current company performance and market conditions. Private equity investments are included in Level 3 of the valuation hierarchy.

Private equity investments may also include publicly held equity securities, generally obtained through the initial public offering of privately held equity investments. Such securities are marked-to-market at the quoted public value less adjustments for regulatory or contractual sales restrictions. Discounts for restrictions are quantified by analyzing the length of the restriction period and the volatility of the equity security.

Valuation of embedded derivatives

We make guarantees on certain variable annuity contracts, including GMAB and GMWB as well as provide credits based on the performance of certain indices (“index credits”) on our fixed indexed annuity contracts that meet the definition of an embedded derivative. The GMAB and GMWB embedded derivative liabilities associated with our variable annuity contracts are accounted for at fair value using a risk neutral stochastic valuation methodology with changes in fair value recorded in realized investment gains. The inputs to our fair value methodology include information derived from the asset derivatives market, including the volatility surface and the swap curve. Several additional inputs are not obtained from independent sources, but instead reflect our internally developed assumptions related to mortality rates, lapse rates and policyholder behavior. The fair value of the embedded derivative liabilities associated with the index credits on our fixed indexed annuity contracts is calculated using the budget method with changes in fair value recorded in policy benefits. The initial value under the budget method is established based on the fair value of the options used to hedge the liabilities. The budget amount for future years is based on the impact of projected interest rates on the discounted liabilities. Several additional inputs reflect our internally developed assumptions related to lapse rates and policyholder behavior. As there are significant unobservable inputs included in our fair value methodology for these embedded derivative liabilities, we consider the above-described methodology as a whole to be Level 3 within the fair value hierarchy.

Our fair value calculation of embedded derivative liabilities includes a credit standing adjustment (the “CSA”). The CSA represents the adjustment that market participants would make to reflect the risk that guaranteed benefit obligations may not be fulfilled (“non-performance risk”). In analyzing various alternatives to the CSA calculation, we determined that we could not use credit default swap spreads as there are no such observable instruments on the Company’s life insurance subsidiaries nor could we consistently obtain an observable price on the surplus notes issued by Phoenix Life, as the surplus notes are not actively traded. Therefore, when discounting cash flows for calculation of the fair value of the liability, we calculated the CSA that reflects the credit spread (based on a Standard & Poor’s BB- credit rating) for financial services companies similar to the Company’s life insurance subsidiaries. This average credit spread is recalculated every quarter and, therefore, the fair value will change with the passage of time even in the absence of any other changes that would affect the valuation. The impact of the CSA related to variable annuity GMAB and GMWB embedded derivatives at June 30, 2012 and December 31, 2011 was a reduction of $26.7 million and $36.0 million in the reserves associated with these riders, respectively.

The following tables present the financial instruments carried at fair value by ASC 820-10 valuation hierarchy (as described above).

Fair Values of Financial Instruments by Level:	As of June 30, 2012
($ in millions)	Level 1		Level 2		Level 3		Total
Assets
Available-for-sale debt securities
U.S. government and agency	$	570.7	$	385.6	$	—	$	956.3
State and political subdivision		—		322.2		—		322.2
Foreign government		—		207.1		—		207.1
Corporate		—		6,861.3		221.8		7,083.1
CMBS		—		1,001.0		31.9		1,032.9
RMBS		—		1,975.5		40.6		2,016.1
CDO/CLO		—		8.3		226.2		234.5
Other asset-backed		—		446.5		36.6		483.1
Available-for-sale equity securities		1.5		—		40.6		42.1
Derivative assets		18.0		168.6		—		186.6
Separate account assets		3,336.8		—		—		3,336.8
Fair value option investments(1)		21.9		—		65.1		87.0
Total assets	$	3,948.9	$	11,376.1	$	662.8	$	15,987.8
Liabilities
Derivative liabilities	$	—	$	41.7	$	—	$	41.7
Embedded derivatives		—		—		155.4		155.4
Total liabilities	$	—	$	41.7	$	155.4	$	197.1

———————

⁽¹⁾ Fair value option investments at June 30, 2012 include $65.1 million of available-for-sale debt securities in which the fair value option has been elected. In addition, we have also elected the fair value option for available-for-sale equity securities backing our deferred compensation liabilities at $21.9 million as of June 30, 2012. Changes in the fair value of these assets are reflected in results from continuing operations.

There were no transfers of assets between Level 1 and Level 2 during the quarter ended June 30, 2012.

Fair Values of Financial Instruments by Level:	As of December 31, 2011
($ in millions)	Level 1		Level 2		Level 3		Total
Assets
Available-for-sale debt securities
U.S. government and agency	$	385.2	$	398.2	$	—	$	783.4
State and political subdivision		—		270.6		—		270.6
Foreign government		—		205.2		—		205.2
Corporate		—		6,389.8		209.6		6,599.4
CMBS		—		1,084.4		58.7		1,143.1
RMBS		—		2,090.1		41.2		2,131.3
CDO/CLO		—		7.5		243.1		250.6
Other asset-backed		—		460.2		46.2		506.4
Available-for-sale equity securities		1.5		0.3		33.9		35.7
Derivative assets		18.5		156.3		—		174.8
Separate account assets(1)		3,690.3		78.3		—		3,768.6
Fair value option investments(2)		22.2		—		64.4		86.6
Total assets	$	4,117.7	$	11,140.9	$	697.1	$	15,955.7
Liabilities
Derivative liabilities	$	—	$	24.2	$	—	$	24.2
Embedded derivatives		—		—		122.5		122.5
Total liabilities	$	—	$	24.2	$	122.5	$	146.7

———————

⁽¹⁾ Excludes $40.1 million in limited partnerships and real estate investments accounted for on the equity method as well as $8.9 million in cash and cash equivalents and money market funds.

⁽²⁾ Fair value option investments at December 31, 2011 include $64.4 million of available-for-sale debt securities in which the fair value option has been elected. In addition, we have also elected the fair value option for available-for-sale equity securities backing our deferred compensation liabilities at $22.2 million as of December 31, 2011. Changes in the fair value of these assets are reflected in results from continuing operations.

There were no transfers of assets between Level 1 and Level 2 during the year ended December 31, 2011.

Level 3 financial assets and liabilities

The following tables set forth a summary of changes in the fair value of our Level 3 financial assets and liabilities. Financial assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement. For example, a hypothetical derivative contract with Level 1, Level 2 and significant Level 3 inputs would be classified as a Level 3 financial instrument in its entirety. Subsequently, even if only Level 1 and Level 2 inputs are adjusted, the resulting gain or loss is classified as Level 3. Further, Level 3 instruments are frequently hedged with instruments that are classified as Level 1 or Level 2 and, accordingly, gains or losses reported as Level 3 in the table below may be offset by gains or losses attributable to instruments classified in Level 1 or 2 of the fair value hierarchy.

Level 3 Financial Assets:	Three Months Ended June 30, 2012
($ in millions)					Corp &		Asset-				Common		Fair Value		Total
	CDO/CLO		RMBS		Other		Backed		CMBS		Stock		Options		Assets
Balance, beginning of period	$	249.1	$	46.9	$	210.5	$	38.5	$	51.4	$	35.5	$	66.2	$	698.1
Purchases		15.9		—		5.4		0.2		—		1.7		—		23.2
Sales		(32.3)		(0.3)		(3.5)		(1.3)		(1.7)		—		(0.1)		(39.2)
Transfers into Level 3(1)		—		—		44.6		—		—		4.9		—		49.5
Transfers out of Level 3(2)		(8.3)		(0.3)		(37.7)		—		(18.6)		—		—		(64.9)
Realized gains (losses)   included in earnings		—		—		—		(0.7)		(1.0)		—		(0.1)		(1.8)
Unrealized gains (losses)   included in OCI		1.5		(5.8)		2.5		(0.1)		1.8		(1.5)		—		(1.6)
Amortization/accretion		0.3		0.1		—		—		—		—		(0.9)		(0.5)
Balance, end of period	$	226.2	$	40.6	$	221.8	$	36.6	$	31.9	$	40.6	$	65.1	$	662.8

———————

⁽¹⁾ Transfers into Level 3 for the three months ended June 30, 2012 represent securities for which Level 2 input assumptions for valuation pricing were no longer applicable.

⁽²⁾ Transfers out of Level 3 for the three months ended June 30, 2012 represent securities for which reliable Level 2 input assumptions for valuation pricing became obtainable.

Level 3 Financial Assets:	Six Months Ended June 30, 2012
($ in millions)					Corp &		Asset-				Common		Fair Value		Total
	CDO/CLO		RMBS		Other		Backed		CMBS		Stock		Options		Assets
Balance, beginning of period	$	243.1	$	41.2	$	209.6	$	46.2	$	58.7	$	33.9	$	64.4	$	697.1
Purchases		16.1		—		38.5		0.2		—		6.3		—		61.1
Sales		(33.3)		(0.7)		(17.9)		(5.0)		(6.1)		—		(0.1)		(63.1)
Transfers into Level 3(1)		2.5		—		24.5		—		—		0.3		—		27.3
Transfers out of Level 3(2)		(8.4)		(0.2)		(38.5)		—		(24.2)		—		—		(71.3)
Realized gains (losses)   included in earnings		0.2		—		(0.6)		(1.0)		(1.0)		0.1		(0.1)		(2.4)
Unrealized gains (losses)   included in OCI		5.4		0.2		6.2		(3.8)		4.5		—		—		12.5
Amortization/accretion		0.6		0.1		—		—		—		—		0.9		1.6
Balance, end of period	$	226.2	$	40.6	$	221.8	$	36.6	$	31.9	$	40.6	$	65.1	$	662.8

———————

⁽¹⁾ Transfers into Level 3 for the six months ended June 30, 2012 represent securities for which Level 2 input assumptions for valuation pricing were no longer applicable.

⁽²⁾ Transfers out of Level 3 for the six months ended June 30, 2012 represent securities for which reliable Level 2 input assumptions for valuation pricing became obtainable.

Level 3 Financial Assets:	Three Months Ended June 30, 2011
($ in millions)					Corp &		Asset-				Common		Fair Value		Total
	CDO/CLO		RMBS		Other		Backed		CMBS		Stock		Options		Assets
Balance, beginning of period	$	253.8	$	53.7	$	269.1	$	78.0	$	73.7	$	50.2	$	29.8	$	808.3
Purchases		0.1		—		20.5		13.7		5.7		—		—		40.0
Sales		(14.9)		(0.6)		(8.5)		(11.5)		(1.2)		(0.2)		(0.1)		(37.0)
Transfers into Level 3(1)		—		—		18.8		—		—		—		—		18.8
Transfers out of Level 3(2)		—		(4.7)		(10.4)		(16.3)		(0.2)		—		—		(31.6)
Realized gains (losses)   included in earnings		(0.2)		—		(0.2)		(1.0)		—		—		0.1		(1.3)
Unrealized gains (losses)   included in OCI		(2.1)		(0.5)		4.3		1.0		(0.2)		(3.5)		0.3		(0.7)
Amortization/accretion		0.8		0.1		0.1		—		—		—		—		1.0
Balance, end of period	$	237.5	$	48.0	$	293.7	$	63.9	$	77.8	$	46.5	$	30.1	$	797.5

———————

⁽¹⁾ Transfers into Level 3 for the three months ended June 30, 2011 represent securities for which Level 2 input assumptions for valuation pricing were no longer applicable.

⁽²⁾ Transfers out of Level 3 for the three months ended June 30, 2011 represent securities for which reliable Level 2 input assumptions for valuation pricing became obtainable.

Level 3 Financial Assets:	Six Months Ended June 30, 2011
($ in millions)					Corp &		Asset-				Common		Fair Value		Total
	CDO/CLO		RMBS		Other		Backed		CMBS		Stock		Options		Assets
Balance, beginning of period	$	251.6	$	50.6	$	268.4	$	67.9	$	56.3	$	46.3	$	38.2	$	779.3
Purchases		0.2		4.4		31.1		36.8		20.7		3.9		—		97.1
Sales		(24.4)		(1.3)		(24.4)		(15.3)		(1.8)		(0.3)		(8.5)		(76.0)
Transfers into Level 3(1)		—		—		21.6		—		—		0.9		—		22.5
Transfers out of Level 3(2)		—		(4.6)		(10.4)		(24.6)		(0.2)		—		—		(39.8)
Realized gains (losses)   included in earnings		(0.6)		—		(0.6)		(1.5)		—		—		(1.4)		(4.1)
Unrealized gains (losses)   included in OCI		9.7		(1.3)		7.8		0.6		2.8		(4.3)		1.8		17.1
Amortization/accretion		1.0		0.2		0.2		—		—		—		—		1.4
Balance, end of period	$	237.5	$	48.0	$	293.7	$	63.9	$	77.8	$	46.5	$	30.1	$	797.5

———————

⁽¹⁾ Transfers into Level 3 for the six months ended June 30, 2011 represent securities for which Level 2 input assumptions for valuation pricing were no longer applicable.

⁽²⁾ Transfers out of Level 3 for the six months ended June 30, 2011 represent securities for which reliable Level 2 input assumptions for valuation pricing became obtainable.

Level 3 Financial Liabilities:	Embedded Derivative Liabilities
($ in millions)	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2012		2011		2012		2011
Balance, beginning of period	$	114.5	$	27.4	$	122.5	$	27.4
Net purchases/(sales)		13.7		10.9		28.3		24.1
Transfers into Level 3		—		—		—		—
Transfers out of Level 3		(1.9)		—		(3.5)		—
Realized (gains) losses		18.7		5.1		(3.0)		(7.5)
Unrealized (gains) losses included in other comprehensive loss		—		—		—		—
Deposits less benefits		—		—		—		—
Change in fair value(1)		10.4		—		11.1		(0.6)
Amortization/accretion		—		—		—		—
Balance, end of period	$	155.4	$	43.4	$	155.4	$	43.4

———————

⁽¹⁾ Represents change in fair value related to fixed index credits recognized in policy benefits, excluding policy holder dividends, on the consolidated statements of comprehensive income.

The unobservable inputs used in the fair value measurement of CDO/CLO and fair value options are prepayment rates, default rates, recovery rates, and reinvestment spread. Significant changes in any of these inputs on its own may result in a significant change in the fair value measurement, particularly for subordinated tranches. Generally, for a CDO/CLO whose collateral’s weighted-average spread is higher than the assumed reinvestment spread, an increase in prepayment rates would decrease the fair value while the deal remains within its reinvestment period. If the weighted-average spread is lower than the assumed reinvestment spread, an increase in prepayment rates would increase the fair value. Keeping all other inputs unchanged, a significant increase in the annual default rates would likely result in a decrease to fair value.

The following table presents quantitative information about unobservable inputs used in the fair value measurement of internally priced assets.

Level 3 Assets:	As of June 30, 2012
($ in millions)	Fair Value		Valuation Technique(s)	Unobservable Input	Range
CDO/CLO	$	198.8	Discounted cash flow	Prepayment rate	20% (CLOs)
				Default rate	2.5% (CLOs)
				Recovery rate	65% (Loans), 35% (High yield bonds),   45% (Investment grade bonds)
				Reinvestment spread	3 mo LIBOR + 400bps (CLOs)
Fair value option	$	20.6	Discounted cash flow	Default rate	0.6% - 0.8% (CDOs)
investments				Recovery rate	45% (Investment grade bonds)
		8.1	Benchmark to index	Barclays US high yield other   finance return	100%
Other asset-backed	$	2.5	Discounted cash flow	Discount margin based on   forward 1mo LIBOR curve	.3% - 1.8%
		7.4	Discounted cash flow	Prepayment rate	20% (CLOs)
				Default rate	2.53% for 48 mos then .33% thereafter
				Recovery rate	65% (Loans)
				Reinvestment spread	3mo LIBOR + 400bps (CLOs)
Total Level 3 assets(1)	$	237.4

———————

⁽¹⁾ Excludes $425.4 million of Level 3 assets which are valued based upon non-binding independent third-party valuations for which unobservable inputs are not reasonably available to us.

Significant unobservable inputs used in the fair value measurement of variable annuity GMAB and GMWB liabilities are volatility surface, swap curve, mortality and lapse rates and an adjustment for non-performance risk. Keeping other inputs unchanged, an increase in the volatility surface would increase the fair value of the liability while a decrease in the swap curve or CSA would result in a decrease the fair value of the liability. The impact of changes in mortality and lapse rates are dependent on overall market conditions. Significant unobservable inputs used in the fair value measurement of the GPAF liability are interest and mortality rates. Increases in either of these inputs would result in a decrease of the GPAF fair value liability. The fair value of fixed indexed annuity embedded derivative related to index credits is calculated using the swap curve, mortality and lapse rates, as well as an adjustment for non-performance risk. Keeping other inputs unchanged, an increase in any of these significant unobservable inputs would result in a decrease of the fixed indexed annuity embedded derivative liability.

The following table presents quantitative information about unobservable inputs used in the fair value measurement of internally priced liabilities.

Level 3 Liabilities:	As of June 30, 2012
($ in millions)	Fair Value		Valuation Technique(s)	Unobservable Input	Range
Embedded derivatives (GMAB / GMWB)	$	38.9	Risk neutral stochastic   valuation methodology	Volatility surface	12.26% - 48.88%
				Swap curve	0.17% - 2.61%
				Mortality rate	75% of A2000 basic table
				Lapse rate	0.00% - 60.00%
				CSA	5.03%
Embedded derivatives (GPAF)	$	1.3	Real world single scenario   cash flow projection	Interest rate	3.46%
				Mortality rate	70% 1994 MGDB
Embedded derivatives	$	115.2	Budget method	Swap curve	0.17% - 2.61%
(Index credits)				Mortality rate	75% of A2000 basic table
				Lapse rate	1.00% - 35.00%
				CSA	5.03%
Total Level 3 liabilities	$	155.4

Fair value of financial instruments

The Company is required by GAAP to disclose the fair value of certain financial instruments including those that are not carried at fair value. The following table discloses the Company’s financial instruments where the carrying amounts and fair values differ:

Carrying Amounts and Fair Values of Financial Instruments:	As of June 30, 2012				As of December 31, 2011
($ in millions)	Carrying		Fair		Carrying		Fair
	Value		Value		Value		Value
Financial liabilities:
Investment contracts	$	2,767.1	$	2,776.8	$	2,429.4	$	2,440.7
Indebtedness		426.9		344.9		426.9		322.0

Fair value of investment contracts

We determine the fair value of guaranteed interest contracts by using a discount rate based upon the appropriate U.S. Treasury rate to calculate the present value of projected contractual liability payments through final maturity. We determine the fair value of deferred annuities and supplementary contracts without life contingencies with an interest guarantee of one year or less at the amount of the policy reserve. In determining the fair value of deferred annuities and supplementary contracts without life contingencies with interest guarantees greater than one year, we use a discount rate based upon the appropriate U.S. Treasury rate to calculate the present value of the projected account value of the policy at the end of the current guarantee period.

Deposit type funds, including pension deposit administration contracts, dividend accumulations, and other funds left on deposit not involving life contingencies, have interest guarantees of less than one year for which interest credited is closely tied to rates earned on owned assets. For these liabilities, we assume fair value to be equal to the stated liability balances.

The fair value of these investment contracts are categorized as Level 3.

Indebtedness

Fair value of our senior unsecured bonds is based upon quoted market prices. The fair value of surplus notes is determined by professional judgment and readily available market data. Senior unsecured bonds are classified as Level 1 and surplus notes are classified as Level 3 within the fair value hierarchy.

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10. Fair Value of Financial Instruments by Level (Details) (USD $) In Millions, unless otherwise specified	Jun. 30, 2012	Dec. 31, 2011
ASSETS:
Separate account assets	$ 3,336.8	$ 3,817.6
Level 1
ASSETS:
U.S. government and agency	570.7	385.2
State and political subdivision	0	0
Foreign government	0	0
Corporate	0	0
Commercial mortgage-backed (“CMBS”)	0	0
Residential mortgage-backed (“RMBS”)	0	0
CDO/CLO	0	0
Other asset-backed	0	0
Available-for-sale equity securities	1.5	1.5
Derivative assets	18.0	18.5
Separate account assets	3,336.8	3,690.3
Fair value option investments	21.9	22.2
Total assets	3,948.9	4,117.7
LIABILITIES:
Derivative liabilities	0	0
Embedded derivatives	0	0
Total liabilities	0	0
Level 2
ASSETS:
U.S. government and agency	385.6	398.2
State and political subdivision	322.2	270.6
Foreign government	207.1	205.2
Corporate	6,861.3	6,389.8
Commercial mortgage-backed (“CMBS”)	1,001.0	1,084.4
Residential mortgage-backed (“RMBS”)	1,975.5	2,090.1
CDO/CLO	8.3	7.5
Other asset-backed	446.5	460.2
Available-for-sale equity securities	0	0.3
Derivative assets	168.6	156.3
Separate account assets	0	78.3
Fair value option investments	0	0
Total assets	11,376.1	11,140.9
LIABILITIES:
Derivative liabilities	41.7	24.2
Embedded derivatives	0	0
Total liabilities	41.7	24.2
Level 3
ASSETS:
U.S. government and agency	0	0
State and political subdivision	0	0
Foreign government	0	0
Corporate	221.8	209.6
Commercial mortgage-backed (“CMBS”)	31.9	58.7
Residential mortgage-backed (“RMBS”)	40.6	41.2
CDO/CLO	226.2	243.1
Other asset-backed	36.6	46.2
Available-for-sale equity securities	40.6	33.9
Derivative assets	0	0
Separate account assets	0	0
Fair value option investments	65.1	64.4
Total assets	662.8	697.1
LIABILITIES:
Derivative liabilities	0	0
Embedded derivatives	155.4	122.5
Total liabilities	155.4	122.5
TotalFairValueMember
ASSETS:
U.S. government and agency	956.3	783.4
State and political subdivision	322.2	270.6
Foreign government	207.1	205.2
Corporate	7,083.1	6,599.4
Commercial mortgage-backed (“CMBS”)	1,032.9	1,143.1
Residential mortgage-backed (“RMBS”)	2,016.1	2,131.3
CDO/CLO	234.5	250.6
Other asset-backed	483.1	506.4
Available-for-sale equity securities	42.1	35.7
Derivative assets	186.6	174.8
Separate account assets	3,336.8	3,768.6
Fair value option investments	87.0	86.6
Total assets	15,987.8	15,955.7
LIABILITIES:
Derivative liabilities	41.7	24.2
Embedded derivatives	155.4	122.5
Total liabilities	$ 197.1	$ 146.7

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17. Discontinued Operations (Details Narrative) (USD $) In Millions, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2012	Jun. 30, 2011	Jun. 30, 2012	Jun. 30, 2011
Discontinued Operations Details Narrative
Net losses	$ 0.5	$ 1.0	$ 0.7	$ 2.2
Net losses due to commutation of contracts	$ 5.8		$ 5.8

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10. Level 3 Financial Liabilities (Details) (USD $) In Millions, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2012	Jun. 30, 2011	Jun. 30, 2012	Jun. 30, 2011
Level 3 Financial Liabilities Details
Balance, beginning of period	$ 114.5	$ 27.4	$ 122.5	$ 27.4
Net purchases/(sales)	13.7	10.9	28.3	24.1
Transfers into Level 3	0	0	0	0
Transfers out of Level 3	(1.9)	0	(3.5)	0
Realized (gains) losses	18.7	5.1	(3.0)	(7.5)
Unrealized (gains) losses included in other comprehensive loss	0	0	0	0
Deposits less benefits	0	0	0	0
Change in fair value	10.4	0	11.1	(0.6)
Amortization/accretion	0	0	0	0
Balance, end of period	$ 155.4	$ 43.4	$ 155.4	$ 43.4

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9. Derivative Instruments Realized Gains (Losses) (Details) (USD $) In Millions, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2012	Jun. 30, 2011	Jun. 30, 2012	Jun. 30, 2011
Derivative Instruments Realized Gains Losses Details
Interest rate swaps	$ 2.4	$ 1.8	$ 0.6	$ 1.5
Variance swaps	0.9	(0.3)	(4.5)	(1.7)
Swaptions	0	(0.2)	(0.2)	(0.9)
Put options	15.0	5.4	(9.6)	(8.5)
Call options	(9.8)	(1.6)	0.1	0.1
Equity futures	4.6	(0.1)	(9.4)	(5.6)
Cross currency swaps	0	0	0	0
Total derivative instrument realized gains (losses) recognized in earnings	$ 13.1	$ 5.0	$ (23.0)	$ (15.1)

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9. Derivative Instruments (Tables)

6 Months Ended

Jun. 30, 2012

Notes to Financial Statements

Derivative Instruments:

Derivative Instruments:		Fair Value as of June 30, 2012						Fair Value as of December 31, 2011
($ in millions)		Notional						Notional
	Maturity	Amount		Assets		Liabilities		Amount		Assets		Liabilities
Non-hedging derivative instruments
Interest rate swaps	2017-2026	$	156.0	$	17.2	$	6.9	$	131.0	$	15.0	$	5.2
Variance swaps	2015-2017		0.9		—		1.3		0.9		3.2		—
Swaptions	2024		25.0		0.1		—		25.0		0.3		—
Put options	2015-2022		406.0		100.1		—		406.0		109.6		—
Call options	2012-2017		635.5		50.8		33.5		355.0		28.0		19.0
Equity futures	2012		207.7		18.0		—		70.0		18.5		—
			1,431.1		186.2		41.7		987.9		174.6		24.2
Hedging derivative instruments
Cross currency swaps	2016		10.0		0.4		—		15.0		0.2		—
			10.0		0.4		—		15.0		0.2		—
Total derivative instruments		$	1,441.1	$	186.6	$	41.7	$	1,002.9	$	174.8	$	24.2

Derivative Instrument Gains (Losses) Recognized in Earnings:

Derivative Instrument Realized Gains (Losses)	Three Months Ended				Six Months Ended
Recognized in Earnings:	June 30,				June 30,
($ in millions)	2012		2011		2012		2011
Derivative instruments by type
Interest rate swaps	$	2.4	$	1.8	$	0.6	$	1.5
Variance swaps		0.9		(0.3)		(4.5)		(1.7)
Swaptions		—		(0.2)		(0.2)		(0.9)
Put options		15.0		5.4		(9.6)		(8.5)
Call options		(9.8)		(1.6)		0.1		0.1
Equity futures		4.6		(0.1)		(9.4)		(5.6)
Cross currency swaps		—		—		—		—
Total derivative instrument realized gains (losses)   recognized in earnings	$	13.1	$	5.0	$	(23.0)	$	(15.1)

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6. Net Realized Investment Gains (Losses) (Details) (USD $) In Millions, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2012	Jun. 30, 2011	Jun. 30, 2012	Jun. 30, 2011
Net Realized Investment Gains Losses Details
Total other-than-temporary debt impairment losses	$ (13.5)	$ (6.6)	$ (25.2)	$ (14.0)
Portion of loss recognized in OCI	9.9	3.6	15.4	5.3
Net debt impairment losses recognized in earnings	(3.6)	(3.0)	(9.8)	(8.7)
Debt security impairments:
U.S. government and agency	0	0	0	0
State and political subdivision	0	0	0	0
Foreign government	0	0	0	0
Corporate	0	(0.2)	(0.6)	(4.6)
CMBS	(1.0)	0	(1.2)	0
RMBS	(2.3)	(2.7)	(7.4)	(4.0)
CDO/CLO	(0.1)	0	(0.1)	0
Other asset-backed	(0.2)	(0.1)	(0.5)	(0.1)
Net debt security impairments	(3.6)	(3.0)	(9.8)	(8.7)
Equity security impairments	(1.5)	0	(1.5)	0
Limited partnerships and other investment impairments	0	0	0	0
Net OTTI losses recognized in earnings	(5.1)	(3.0)	(11.3)	(8.7)
Debt security transaction gains	5.8	5.5	8.0	9.4
Debt security transaction losses	(2.4)	(1.2)	(3.4)	(3.1)
Equity security transaction gains	0	0.1	0	0.1
Equity security transaction losses	0	0	0	0
Limited partnerships and other investment gains	0.6	0	1.4	0
Limited partnerships and other investment losses	0	0	0	(1.6)
Net transaction gains	4.0	4.4	6.0	4.8
Derivative instruments	13.1	5.0	(23.0)	(15.1)
Embedded derivatives	(19.1)	(4.7)	3.7	4.9
Fair value option investments	(1.1)	1.4	0.8	1.0
Net realized investment losses, excluding impairment losses	(3.1)	6.1	(12.5)	(4.4)
Net realized investment gains (losses)	$ (8.2)	$ 3.1	$ (23.8)	$ (13.1)

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15. Earnings Per Share

6 Months Ended

Jun. 30, 2012

Notes to Financial Statements

Note 15 - Earnings Per Share

15. Earnings Per Share

The following table presents a reconciliation of shares used in calculating basic earnings (loss) per common share to those used in calculating diluted earnings (loss) per common share.

Shares Used in Calculation of Basic and Diluted	Three Months Ended		Six Months Ended
Earnings per Share:	June 30,		June 30,
(in thousands)	2012	2011	2012	2011
Weighted-average common shares outstanding	116,232	116,325	116,272	116,265
Weighted-average effect of dilutive potential common shares:
Restricted stock units	1,544	1,520	1,510	1,519
Stock options	—	5	—	5
Potential common shares	1,544	1,525	1,510	1,524
Less: Potential common shares excluded from calculation   due to operating losses	1,544	—	1,510	—
Dilutive potential common shares	—	1,525	—	1,524
Weighted-average common shares outstanding,   including dilutive potential common shares	116,232	117,850	116,272	117,789

As a result of the net loss from continuing operations for the three and six months ended June 30, 2012, the Company is required to use basic weighted-average common shares outstanding in the calculation of diluted earnings per share for those periods, since the inclusion of shares of restricted stock units and options would have been anti-dilutive to the earnings per share calculation.

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20. Subsequent Events

6 Months Ended

Jun. 30, 2012

Notes to Financial Statements

20. Subsequent Events

20. Subsequent Events

On June 28, 2012, the Company issued a press release announcing a 1-for-20 reverse stock split of the Company’s common stock effective August 10, 2012 and an odd lot program that may be conducted following the reverse stock split. The reverse stock split is expected to reduce the shares of common stock outstanding from approximately 116.0 million to approximately 5.8 million.

On August 2, 2012, the Company and its subsidiaries, PHL Variable and Phoenix Life were named in a lawsuit brought by Lima LS PLC. The suit alleges that the Company sold policies knowing that the policies would ultimately be owned by investors and then challenging the validity of these policies or denying claims submitted on same. The suit names certain current and former executive officers in addition to the corporate defendants. The Company intends to defend against these claims vigorously. The outcome of this case and any potential losses are uncertain.

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6. Limited Partnerships and Other Investments (Details) (USD $) In Millions, unless otherwise specified	Jun. 30, 2012	Dec. 31, 2011
Limited Partnerships And Other Investments Details
Private equity	$ 255.8	$ 241.3
Mezzanine funds	196.1	189.9
Infrastructure funds	36.3	35.7
Hedge funds	30.0	30.0
Leverage lease	19.9	20.3
Mortgage and real estate	6.7	11.6
Direct equity	26.7	25.4
Other alternative assets	47.0	47.1
Limited partnerships and other investments	618.5	601.3
Amounts applicable to the closed block	$ 372.4	$ 352.8

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4. Closed Block Assets and Liabilities (Details) (USD $) In Millions, unless otherwise specified	Jun. 30, 2012	Dec. 31, 2011	Jun. 25, 2011
Notes to Financial Statements
Debt securities	$ 6,379.1	$ 6,353.1	$ 4,773.1
Equity securities	14.8	12.0	0
Limited partnerships and other investments	372.4	352.8	399.0
Policy loans	1,258.0	1,280.4	1,380.0
Fair value option investments	11.2	10.6	0
Total closed block investments	8,035.5	8,008.9	6,552.1
Cash and cash equivalents	34.7	14.2	0
Accrued investment income	90.6	94.2	106.8
Receivables	50.7	52.2	35.2
Deferred income taxes	228.7	223.9	389.4
Other closed block assets	17.8	14.5	6.2
Total closed block assets	8,458.0	8,407.9	7,089.7
Policy liabilities and accruals	8,521.4	8,644.5	8,301.7
Policyholder dividends payable	235.8	240.1	325.1
Policy dividend obligation	660.2	519.7	0
Other closed block liabilities	55.6	32.8	12.3
Total closed block liabilities	9,473.0	9,437.1	8,639.1
Excess of closed block liabilities over closed block assets	$ 1,015.0	$ 1,029.2	$ 1,549.4

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Consolidated Statements of Cash Flows (Unaudited) (USD $) In Millions, unless otherwise specified	6 Months Ended
	Jun. 30, 2012	Jun. 30, 2011
OPERATING ACTIVITIES:
Net income (loss)	$ (21.3)	$ 18.8
Net realized investment losses	23.8	13.1
Policy acquisition costs deferred	(47.6)	(63.2)
Amortization of deferred policy acquisition costs	92.0	94.1
Amortization and depreciation	6.9	5.1
Undistributed equity in earnings of limited partnerships and other investments	(41.7)	(23.3)
Change in:
Accrued investment income	(18.0)	(18.1)
Receivables	(8.4)	(26.7)
Policy liabilities and accruals	(46.9)	(78.8)
Other, net	(8.0)	13.2
Cash used for continuing operations	(69.2)	(65.8)
Discontinued operations, net	(2.0)	4.9
Cash used for operating activities	(71.2)	(60.9)
Purchases of:
Available-for-sale debt securities	(1,551.3)	(1,701.1)
Available-for-sale equity securities	(6.0)	(5.7)
Limited partnerships and other investments	(45.0)	(47.9)
Derivative instruments	(29.2)	(21.5)
Fair value option investments	0	0
Sales, repayments and maturities of:
Available-for-sale debt securities	1,323.5	1,367.0
Available-for-sale equity securities	0.4	1.7
Limited partnerships and other investments	75.5	72.3
Derivative instruments	12.1	28.1
Fair value option investments	0.1	8.6
Policy loans, net	16.9	21.5
Proceeds from sale of subsidiary	1.0	0
Premises and equipment additions	(2.4)	(2.2)
Discontinued operations, net	4.0	(0.3)
Cash used for investing activities	(200.4)	(279.5)
FINANCING ACTIVITIES:
Policyholder deposit fund deposits	650.1	959.5
Policyholder deposit fund withdrawals	(323.4)	(605.9)
Treasury stock acquired	(0.5)	0
Cash used for financing activities	326.2	353.6
Change in cash and cash equivalents	54.6	13.2
Cash and cash equivalents, beginning of period	194.3	121.9
Cash and cash equivalents, end of period	248.9	135.1
Supplemental Disclosure of Cash Flow Information
Income taxes paid	(3.3)	(6.9)
Interest expense on indebtedness paid	$ (15.7)	$ (17.4)

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4. Demutualization and Closed Block

6 Months Ended

Jun. 30, 2012

Notes to Financial Statements

Note 4 - Demutualization and Closed Block

4. Demutualization and Closed Block

In 1999, we began the process of reorganizing and demutualizing our then principal operating company, Phoenix Home Life. We completed the process in June 2001, when all policyholder membership interests in this mutual company were extinguished and eligible policyholders of the mutual company received shares of common stock of The Phoenix Companies, Inc., together with cash and policy credits, as compensation. To protect the future dividends of these policyholders, we also established a closed block for their existing policies.

Because closed block liabilities exceed closed block assets, we have a net closed block liability at June 30, 2012 and December 31, 2011. This net liability represents the maximum future earnings contribution to be recognized from the closed block and the change in this net liability each period is in the earnings contribution recognized from the closed block for the period. To the extent that actual cash flows differ from amounts anticipated, we may adjust policyholder dividends. If the closed block has excess funds, those funds will be available only to the closed block policyholders. However, if the closed block has insufficient funds to make policy benefit payments that are guaranteed, the payments will be made from assets outside of the closed block.

Closed Block Assets and Liabilities:	June 30,		Dec 31,
($ in millions)	2012		2011		Inception
Debt securities	$	6,379.1	$	6,353.1	$	4,773.1
Equity securities		14.8		12.0		—
Limited partnerships and other investments		372.4		352.8		399.0
Policy loans		1,258.0		1,280.4		1,380.0
Fair value option investments		11.2		10.6		—
Total closed block investments		8,035.5		8,008.9		6,552.1
Cash and cash equivalents		34.7		14.2		—
Accrued investment income		90.6		94.2		106.8
Receivables		50.7		52.2		35.2
Deferred income taxes		228.7		223.9		389.4
Other closed block assets		17.8		14.5		6.2
Total closed block assets		8,458.0		8,407.9		7,089.7
Policy liabilities and accruals		8,521.4		8,644.5		8,301.7
Policyholder dividends payable		235.8		240.1		325.1
Policy dividend obligation		660.2		519.7		—
Other closed block liabilities		55.6		32.8		12.3
Total closed block liabilities		9,473.0		9,437.1		8,639.1
Excess of closed block liabilities over closed block assets(1)	$	1,015.0	$	1,029.2	$	1,549.4

———————

⁽¹⁾ The maximum future earnings summary to inure to the benefit of the stockholders is represented by the excess of closed block liabilities over closed block assets. All unrealized investment gains (losses), net of income tax, have been allocated to the policyholder dividend obligation.

Closed Block Revenues and Expenses and Changes in	Three Months Ended				Six Months Ended
Policyholder Dividend Obligations:	June 30,				June 30,
($ in millions)	2012		2011		2012		2011
Closed block revenues
Premiums	$	97.2	$	103.8	$	188.9	$	207.0
Net investment income		121.0		118.0		234.8		235.6
Net realized investment gains (losses)		2.9		3.2		2.0		1.6
Total revenues		221.1		225.0		425.7		444.2
Policy benefits, excluding dividends		124.8		137.5		251.9		279.1
Other operating expenses		1.1		1.5		2.7		3.0
Total benefits and expenses, excluding policyholder dividends		125.9		139.0		254.6		282.1
Closed block contribution to income   before dividends and income taxes		95.2		86.0		171.1		162.1
Policyholder dividends		84.2		73.5		149.2		137.1
Closed block contribution to income before income taxes		11.0		12.5		21.9		25.0
Applicable income tax expense		3.8		4.4		7.6		8.7
Closed block contribution to income	$	7.2	$	8.1	$	14.3	$	16.3
Policyholder dividend obligation
Policyholder dividends provided through earnings	$	84.2	$	73.5	$	149.2	$	137.1
Policyholder dividends provided through OCI		64.5		64.0		93.5		78.7
Additions to policyholder dividend liabilities		148.7		137.5		242.7		215.8
Policyholder dividends paid		(54.1)		(62.3)		(106.5)		(122.8)
Increase in policyholder dividend liabilities		94.6		75.2		136.2		93.0
Policyholder dividend liabilities, beginning of period		801.4		620.1		759.8		602.3
Policyholder dividend liabilities, end of period		896.0		695.3		896.0		695.3
Policyholder dividends payable, end of period		(235.8)		(261.8)		(235.8)		(261.8)
Policyholder dividend obligation, end of period	$	660.2	$	433.5	$	660.2	$	433.5

As of June 30, 2012, the policyholder dividend obligation includes approximately $120.7 million for cumulative closed block earnings in excess of expected amounts calculated at the date of demutualization. These closed block earnings will not inure to stockholders, but will result in additional future dividends to closed block policyholders unless otherwise offset by future performance of the closed block that is less favorable than expected. If actual cumulative performance is less favorable than expected, only actual earnings will be recognized in net income. As of June 30, 2012, the policyholder dividend obligation also includes $539.5 million of net unrealized gains on investments supporting the closed block liabilities.

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8. Changes in Guaranteed Liability Balances (Details) (USD $) In Millions, unless otherwise specified	6 Months Ended	12 Months Ended
	Jun. 30, 2012	Dec. 31, 2011
Variable Annuity GMDB
Liability balance, beginning of the period	$ 4.9	$ 4.6
Incurred	(0.6)	(1.8)
Paid	0.7	2.1
Liability balance, end of the period	5.0	4.9
Variable Annuity GMIB
Liability balance, beginning of the period	17.8	18.1
Incurred	3.7	(0.3)
Paid	0	0
Liability balance, end of the period	21.5	17.8
Fixed Indexed Annuity GMWB & GMDB
Liability balance, beginning of the period	5.6	0.2
Incurred	6.2	5.4
Paid	0	0
Liability balance, end of the period	$ 11.8	$ 5.6

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11. Income Taxes (Details Narrative) (USD $) In Millions, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2012	Jun. 30, 2011	Jun. 30, 2012	Jun. 30, 2011
Income Taxes Details Narrative
Current tax expense	$ 4.6	$ 7.6	$ 13.5	$ 9.0
Deferred tax asset, net of deferred tax liabilities and valuation allowances	91.7		91.7
Increase exluded in the deferred tax asset valuation allowance related to the adoption of a new accounting standard	31.2		58.8
Net increase in the deferred tax asset valuation allowance recognized	5.4
Net increase (decrease) in the valuation allowance impacting income statement related deferred tax balances	8.4		17.6
Net increase (decrease) in the valuation allowance impacting OCI related deferred tax balances	$ (3.0)		$ 13.6

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13. Components of Pension Benefit Costs (Details) (USD $) In Millions, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2012	Jun. 30, 2011	Jun. 30, 2012	Jun. 30, 2011
Components of Pension Benefit Expense:
Service cost	$ 0.2	$ 0.2	$ 0.4	$ 0.5
Interest cost	8.7	8.9	17.3	17.9
Expected return on plan assets	(8.7)	(9.1)	(17.3)	(18.2)
Net loss amortization	2.6	1.6	5.2	3.3
Pension benefit expense	$ 2.8	$ 1.6	$ 5.6	$ 3.5

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2. Basis of Presentation and Significant Accounting (Policy)

6 Months Ended

Jun. 30, 2012

Notes to Financial Statements

Use of estimates

Use of estimates

In preparing these financial statements in conformity with GAAP, we are required to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting periods. Significant estimates and assumptions are made in the determination of estimated gross profits (“EGPs”) used in the valuation and amortization of assets and liabilities associated with universal life and annuity contracts; policyholder liabilities and accruals; valuation of investments in debt and equity securities; limited partnerships and other investments; valuation of deferred tax assets; pension and other post-employment benefits liabilities; and accruals for contingent liabilities. Actual results could differ from these estimates.

Adoption of new accounting standards

Adoption of new accounting standards

Amendments to the Presentation of Comprehensive Income

In June 2011, the Financial Accounting Standards Board (the “FASB”) issued amended guidance to ASC 220, Comprehensive Income, with respect to the presentation of comprehensive income as part of the effort to establish common requirements in accordance with GAAP and International Financial Reporting Standards (“IFRS”). This amended guidance requires entities to present all non-owner changes in stockholders’ equity either in a single continuous statement of comprehensive income or in two separate but consecutive statements. The amendments do not affect which components of comprehensive income are recognized in net income or comprehensive income, or when an item of other comprehensive income must be classified to net income. The computation and presentation of earnings per share also does not change. This guidance was adopted in the first quarter of 2012. Disclosures in Note 12 reflect the retrospective adoption of this guidance. Other than additional disclosures, adoption of this guidance did not have a material effect on our consolidated financial statements.

Amendments to Fair Value Measurement and Disclosure Requirements

In May 2011, the FASB issued amended guidance to ASC 820, Fair Value Measurement, with respect to measuring fair value and related disclosures as part of the effort to establish common requirements in accordance with GAAP and IFRS. The amended guidance clarifies that the concept of highest and best use should only be used in the valuation of non-financial assets, specifies how to apply fair value measurements to instruments classified in stockholders’ equity and requires that premiums or discounts be applied consistent with what market participants would use absent Level 1 inputs. The amendment also explicitly requires additional disclosures related to the valuation of assets categorized as Level 3 within the fair value hierarchy. Additional disclosures include quantitative information about unobservable inputs, the sensitivity of fair value measurement to changes in unobservable outputs and information on the valuation process used. This guidance was adopted in the first quarter of 2012. Disclosures in Note 10 reflect the prospective adoption of this guidance. Other than additional disclosures, adoption of this guidance did not have a material effect on our consolidated financial statements.

Accounting for Costs Associated with Acquiring or Renewing Insurance Contracts

In October 2010, the FASB issued amended guidance to ASC 944, Financial Services – Insurance, to address the diversity in practice for accounting for costs associated with acquiring or renewing insurance contracts. The amendment clarifies the definition of acquisition costs (i.e., costs which qualify for deferral) to incremental direct costs that result directly from, and are essential to, a contract and would not have been incurred by the insurance entity had the contract transaction not occurred. Therefore, only costs related to successful efforts of acquiring a new, or renewal, contract should be deferred. This guidance was retrospectively adopted on January 1, 2012. The cumulative effect of retrospective adoption reduced deferred policy acquisition costs and beginning stockholders’ equity as of January 1, 2012 by $168.2 million primarily related to lower deferrals associated with expenses not directly related to new policy sales.

Accounting standards not yet adopted

Accounting standards not yet adopted

Disclosures about Offsetting Assets and Liabilities

In December 2011, the FASB issued amended guidance to ASC 210, Balance Sheet, with respect to disclosure of offsetting assets and liabilities as part of the effort to establish common requirements in accordance with GAAP and IFRS. This amended guidance requires the disclosure of both gross information and net information about both financial instruments and derivative instruments eligible for offset in our consolidated balance sheet and instruments and transactions subject to an agreement similar to a master netting arrangement. This guidance is effective for periods beginning on or after January 1, 2013, with respective disclosures required retrospectively for all comparative periods presented. The adoption of this guidance effective January 1, 2013 is not expected to have a material effect on our consolidated financial statements.

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16. Results of Operations by Segment as Reconciled (Details) (USD $) In Millions, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2012	Jun. 30, 2011	Jun. 30, 2012	Jun. 30, 2011
Results Of Operations By Segment As Reconciled Details
Life and Annuity operating income	$ 8.0	$ 24.5	$ 28.4	$ 47.4
Saybrus Partners operating income (loss)	(0.1)	(0.4)	0.4	(1.5)
Less: Applicable income tax expense	4.6	7.6	13.5	9.0
Income from discontinued operations, net of income taxes	(6.3)	(0.7)	(6.8)	(2.2)
Net realized investment gains (losses)	(8.2)	3.1	(23.8)	(13.1)
Fixed indexed annuity derivatives	(4.8)	0	(3.5)	0
Deferred policy acquisition cost and policy dividend obligation impacts, net of taxes	2.8	(3.7)	(2.5)	(2.8)
Net income (loss)	$ (13.2)	$ 15.2	$ (21.3)	$ 18.8

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14. Share-Based Payment (Tables)

6 Months Ended

Jun. 30, 2012

Notes to Financial Statements

Share-based Compensation Plans:

Share-Based Compensation Plans:	Three Months Ended				Six Months Ended
($ in millions)	June 30,				June 30,
	2012		2011		2012		2011
Compensation cost charged to income from continuing operations	$	0.5	$	0.9	$	2.0	$	2.1
Income tax expense (benefit) before valuation allowance	$	(0.2)	$	(0.3)	$	(0.7)	$	(0.1)

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14. Share-Based Payment

6 Months Ended

Jun. 30, 2012

Notes to Financial Statements

Note 14 - Share-Based Payment

14. Share-Based Payment

We provide share-based compensation to certain of our employees and non-employee directors, as further described below. The compensation cost that has been charged against income for these plans is summarized in the following table:

Share-Based Compensation Plans:	Three Months Ended				Six Months Ended
($ in millions)	June 30,				June 30,
	2012		2011		2012		2011
Compensation cost charged to income from continuing operations	$	0.5	$	0.9	$	2.0	$	2.1
Income tax expense (benefit) before valuation allowance	$	(0.2)	$	(0.3)	$	(0.7)	$	(0.1)

We did not capitalize any of the cost of stock-based compensation during the three and six month periods ended June 30, 2012 and 2011. In satisfaction of stock-based compensation, shares issued may be made available from authorized but unissued shares or shares may be purchased on the open market.

Stock options

We have stock option plans under which we grant options for a fixed number of common shares to employees and non-employee directors. Our options have an exercise price equal to the market value of the shares at the date of grant. Each option, once vested, entitles the holder to purchase one share of our common stock. The employees’ options generally vest over a three-year period while the directors’ options vest immediately. Certain options involve both service and market criteria and vest at the later of a stated number of years from the grant date or when the market criterion has been met. If the market criterion has not been met within five years from the grant date, options are forfeited. The fair values of options granted are measured as of the grant date and expensed ratably over the vesting period.

As of June 30, 2012, 1,921,337 of outstanding stock options were exercisable, with a weighted-average exercise price of $9.93 per share. There were no options granted during the three and six months ended June 30, 2012.

Restricted stock units

We have restricted stock unit (“RSU”) plans under which we grant RSUs to employees and non-employee directors. RSUs granted to employees are performance-vested, time-vested or a combination thereof. Each RSU, once vested, entitles the holder to one share of our common stock when the restriction expires. We recognize compensation expense over the vesting period of the RSUs, which is generally three years for each employee award. Director RSU awards vest immediately.

During the six months ended June 30, 2012, 144,978 director RSUs were awarded. As of June 30, 2012, there were 2,576,756 time-vested RSUs outstanding with a weighted-average grant price of $2.79 and 340,476 performance-vested RSUs outstanding with a weighted-average grant price of $2.75.

Liability awards

During the six months ended June 30, 2012 and 2011, the Company issued awards that are intended to be settled in cash. As a result, these awards are remeasured at the end of each reporting period until settlement. As of June 30, 2012, $2.4 million was accrued for these awards.