Delaware | 001-16517 | 06-1599088 |
(State or other jurisdiction | (Commission File Number) | (IRS Employer |
of incorporation) | Identification No.) |
One American Row, Hartford, CT | 06102-5056 |
(Address of Principal Executive Offices) | (Zip Code) |
Registrant’s telephone number, including area code: | (860) 403-5000 |
NOT APPLICABLE |
(Former name or former address, if changed since last report) |
¨ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
þ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
¨ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
¨ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
THE PHOENIX COMPANIES, INC. | ||
Date: November 9, 2015 | By: | /s/ Bonnie J. Malley |
Name: Bonnie J. Malley | ||
Title: Executive Vice President and Chief Financial Officer |
Contacts: | |
Media Relations Alice S. Ericson, 860-403-5946 alice.ericson@phoenixwm.com | Investor Relations Naomi Baline Kleinman, 860-403-7100 pnx.ir@phoenixwm.com |
• | Net Loss Attributable to The Phoenix Companies, Inc. of $15.7 million |
• | Holding Company Cash and Non-affiliated Securities at $83.6 million |
• | Annuity deposits of $185.2 million; Saybrus Partners EBITDA of $2.0 million |
• | Preliminary Phoenix Life Insurance Company (“PLIC”) Statutory Surplus and AVR at $513.9 million, estimated RBC at 393% |
• | Preliminary PHL Variable Insurance Company (“PHL Variable”) Statutory Surplus and AVR at $214.0 million, estimated RBC at 209% |
• | Negative impact of the decline in equity markets of approximately $21 million, primarily the impact of equity markets on derivative valuations. |
• | External financial reporting expenses of $10.4 million, which have declined but remain elevated. |
• | Open block mortality was approximately $10 million unfavorable to expectations. Favorable experience in the universal life (“UL”) product line was more than offset by unfavorable experience in the variable universal life (“VUL”) product line. |
• | Higher net investment income and a tax benefit partially offset the negative drivers. |
($ in millions, except per share data) | For the Qtr Ended Sept. 30, 2015 | For the Qtr Ended June 30, 2015 | For the Qtr Ended Sept. 30, 2014 | ||||||||
Net loss | $ | (10.2 | ) | $ | (22.4 | ) | $ | (22.5 | ) | ||
Less: Net income (loss) attributable to noncontrolling interests | 5.5 | 0.2 | (0.1 | ) | |||||||
Net loss attributable to The Phoenix Companies, Inc. | $ | (15.7 | ) | $ | (22.6 | ) | $ | (22.4 | ) | ||
EARNINGS PER SHARE SUMMARY: | |||||||||||
Net loss attributable to The Phoenix Companies, Inc. | |||||||||||
Basic | $ | (2.73 | ) | $ | (3.93 | ) | $ | (3.90 | ) | ||
Diluted | $ | (2.73 | ) | $ | (3.93 | ) | $ | (3.90 | ) | ||
Weighted average shares outstanding (in thousands) | |||||||||||
Basic | 5,751 | 5,751 | 5,750 | ||||||||
Diluted | 5,751 | 5,751 | 5,750 |
• | Net other-than-temporary fixed income impairment losses for the third quarter 2015 remained well below long-term averages. |
($ in millions) | For the Qtr Ended Sept. 30, 2015 | For the Qtr Ended June 30, 2015 | For the Qtr Ended Sept. 30, 2014 | ||||||||
Total net realized gain (losses) | $ | (11.6 | ) | $ | (2.1 | ) | $ | (3.8 | ) | ||
Net other-than-temporary impairment losses recognized in earnings | $ | (4.0 | ) | $ | (1.1 | ) | $ | (3.9 | ) | ||
Derivative losses | $ | (11.4 | ) | $ | (7.5 | ) | $ | (5.4 | ) |
• | Net unrealized gains on available-for-sale debt securities decreased by $266.5 million to $434.8 million at Sept. 30, 2015 from $701.3 million at Dec. 31, 2014, due primarily to higher interest rates. After actuarial offsets and taxes, accumulated other comprehensive income (“AOCI”) declined by $1.1 million from $234.4 million at Dec. 31, 2014. |
• | At Sept. 30, 2015, holding company cash and non-affiliated securities were $83.6 million, compared with $78.3 million at Dec. 31, 2014. PLIC paid a $30 million dividend to Phoenix in the third quarter, bringing its year-to-date total to $59.9 million, its capacity for 2015. Phoenix expects holding company liquidity to remain above its $50.0 million internal threshold. |
• | Total stockholders’ equity attributable to The Phoenix Companies, Inc. was $213.2 million at Sept. 30, 2015, compared with $326.6 million at Dec. 31, 2014. |
• | Liquidity in the life companies remained strong with cash and cash equivalents, short-term investments, treasuries and agency mortgage-backed securities totaling $1.5 billion, or 11.2% of the fixed income portfolio, at Sept. 30, 2015, compared with $1.7 billion, or 12.7% of the fixed income portfolio, at Dec. 31, 2014. |
• | The quality of the investment portfolio remained strong during the third quarter of 2015 with the proportion of below-investment-grade bonds as a percentage of total available-for-sale debt securities at 6.6% at Sept. 30, 2015, within Phoenix’s target range of 6% – 10%, compared with 6.7% at Dec. 31, 2014. |
• | Phoenix has no debt maturities until 2032. |
($ in millions) | Sept. 30, 2015 | Dec. 31, 2014 | Change | ||||||||
Total Assets | $ | 21,288.4 | $ | 21,745.9 | $ | (457.5 | ) | ||||
Total Liabilities | $ | 21,053.4 | $ | 21,399.3 | $ | (345.9 | ) | ||||
Indebtedness | $ | 378.9 | $ | 378.9 | $ | — | |||||
Accumulated Other Comprehensive Income (Loss) | $ | (235.5 | ) | $ | (234.4 | ) | $ | (1.1 | ) | ||
Total Stockholders’ Equity Attributable to The Phoenix Companies, Inc. | $ | 213.2 | $ | 326.6 | $ | (113.4 | ) |
• | Annuity deposits were $185.2 million, primarily in fixed indexed annuities, down from both the third quarter of 2014 and second quarter of 2015. |
• | Life insurance annualized premium was $4.8 million, driven primarily by term insurance sales, improved from the third quarter of 2014 and consistent with the second quarter of 2015. |
• | Total annualized life insurance surrender rate was 3.7%, modestly lower than the third quarter of 2014 and second quarter of 2015. |
• | Annualized annuity surrender rate was 10.9%, modestly lower than the third quarter of 2014 and second quarter of 2015. |
• | Phoenix’s distribution company, Saybrus Partners’, revenue of $10.2 million was down modestly from the third quarter of 2014 primarily reflecting lower sales of Phoenix products. EBITDA of $2.0 million was down modestly from the third quarter of 2014. |
• | Overall mortality was unfavorable compared with expectations. In the open block, favorable UL mortality was more than offset by unfavorable VUL mortality. Closed block experience was unfavorable compared with expectations. |
• | External financial reporting expenses of $10.4 million were down from $13.4 million for the second quarter of 2015 and $19.4 million for the third quarter of 2014. These external financial reporting expenses have included restatement, SEC reporting catch up, remediation and audit expenses. |
($ in millions, unless noted otherwise) | As of or for the Qtr Ended Sept. 30, 2015 | As of or for the Qtr Ended June 30, 2015 | As of or for the Qtr Ended Sept. 30, 2014 | ||||||||
Annuity deposits | $ | 185.2 | $ | 221.4 | $ | 221.7 | |||||
Net annuity flows (deposits less surrenders) | $ | 29.3 | $ | 61.2 | $ | 64.6 | |||||
Annuity funds under management ($ in billions) | $ | 5.6 | $ | 5.8 | $ | 5.6 | |||||
Life insurance annualized premium | $ | 4.8 | $ | 4.8 | $ | 1.1 | |||||
Total individual life surrenders (annualized) | 3.7 | % | 3.8 | % | 3.8 | % | |||||
Total closed block life surrenders (annualized) | 3.6 | % | 3.7 | % | 3.7 | % | |||||
Total annuity surrenders (annualized) | 10.9 | % | 11.1 | % | 11.2 | % | |||||
Holding company cash and non-affiliated securities | $ | 83.6 | $ | 64.5 | $ | 152.0 | |||||
Saybrus Partners EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization) | $ | 2.0 | $ | 2.7 | $ | 2.4 | |||||
Saybrus Partners revenue | $ | 10.2 | $ | 11.1 | $ | 10.3 | |||||
External financial reporting expenses1 | $ | 10.4 | $ | 13.4 | $ | 19.4 |
• | PLIC reported a statutory net loss from operations of $3.7 million and a statutory net loss (excluding the impact of the de-stacking on realized capital losses) of $3.4 million for the quarter ended Sept. 30, 2015, compared with a statutory net gain from operations of $36.1 million and statutory net income of $41.5 million for the quarter ended Sept. 30, 2014. |
• | PLIC’s statutory surplus and asset valuation reserve was $513.9 million at Sept. 30, 2015, compared with $752.2 million at Dec. 31, 2014. The decrease was driven by a $262.2 million impact from the de-stacking that includes the carrying value of the de-stacked subsidiaries and related reduction of admitted deferred tax assets, as well as $59.9 million in dividends PLIC paid to the parent holding company. These negative drivers were partially offset by the favorable impact of the intercompany reinsurance treaty between PLIC and PHL Variable executed in the second quarter. |
• | PLIC’s estimated risk-based capital (“RBC”) ratio was 393% at Sept. 30, 2015, compared with 334% at Dec. 31, 2014, primarily driven by the impact of the de-stacking. |
• | PHL Variable reported a statutory net loss from operations of $7.4 million and statutory net loss of $7.1 million for the quarter ended Sept. 30, 2015, compared with a statutory net loss from operations of $10.3 million and a statutory net loss of $14.2 million for the quarter ended Sept. 30, 2014. |
• | PHL Variable’s statutory surplus and asset valuation reserve was $214.0 million at Sept. 30, 2015, compared with $213.7 million at Dec. 31, 2014. |
• | PHL Variable had an estimated RBC ratio of 209% at Sept. 30, 2015, compared with 218% at Dec. 31, 2014. |
• | Phoenix filed a preliminary proxy statement on Oct. 30, 2015 and will file with the SEC and mail to stockholders a definitive proxy statement in connection with the transaction. Phoenix expects to hold a special meeting of stockholders in the fourth quarter of 2015. |
• | Nassau made the required filings requesting approval from the New York Department of Financial Services and from the Connecticut Insurance Department on Nov. 6, 2015. |
• | Phoenix is preparing to file its applications for change of control of equity ownership with FINRA with respect to its two broker dealers. |
• | Both companies have filed the required notifications under the Hart-Scott-Rodino Act, and the Federal Trade Commission granted early termination of the waiting period on Oct. 26, 2015. |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
($ in millions, except per share data) | 2015 | 2014 | 2015 | 2014 | |||||||||||
REVENUES: | |||||||||||||||
Premiums | $ | 86.1 | $ | 78.1 | $ | 251.1 | $ | 240.9 | |||||||
Fee income | 135.1 | 135.2 | 404.1 | 404.2 | |||||||||||
Net investment income | 227.5 | 204.9 | 639.1 | 607.9 | |||||||||||
Net realized gains (losses): | |||||||||||||||
Total other-than-temporary impairment (“OTTI”) losses | (4.4 | ) | (3.7 | ) | (12.3 | ) | (4.7 | ) | |||||||
Portion of OTTI losses recognized in other comprehensive income (“OCI”) | 0.4 | (0.2 | ) | (1.2 | ) | (0.4 | ) | ||||||||
Net OTTI losses recognized in earnings | (4.0 | ) | (3.9 | ) | (13.5 | ) | (5.1 | ) | |||||||
Net realized gains (losses), excluding OTTI losses | (7.6 | ) | 0.1 | (16.3 | ) | (21.4 | ) | ||||||||
Net realized gains (losses) | (11.6 | ) | (3.8 | ) | (29.8 | ) | (26.5 | ) | |||||||
Total revenues | 437.1 | 414.4 | 1,264.5 | 1,226.5 | |||||||||||
BENEFITS AND EXPENSES: | |||||||||||||||
Policy benefits | 296.4 | 263.6 | 875.7 | 795.2 | |||||||||||
Policyholder dividends | 60.6 | 57.0 | 155.7 | 171.8 | |||||||||||
Policy acquisition cost amortization | 30.1 | 29.4 | 71.8 | 73.1 | |||||||||||
Interest expense on indebtedness | 7.0 | 7.0 | 21.2 | 21.2 | |||||||||||
Other operating expenses | 70.1 | 77.0 | 276.7 | 258.6 | |||||||||||
Total benefits and expenses | 464.2 | 434.0 | 1,401.1 | 1,319.9 | |||||||||||
Income (loss) from continuing operations before income taxes | (27.1 | ) | (19.6 | ) | (136.6 | ) | (93.4 | ) | |||||||
Income tax expense (benefit) | (17.0 | ) | 2.6 | (32.2 | ) | (21.8 | ) | ||||||||
Income (loss) from continuing operations | (10.1 | ) | (22.2 | ) | (104.4 | ) | (71.6 | ) | |||||||
Income (loss) from discontinued operations, net of income taxes | (0.1 | ) | (0.3 | ) | (1.2 | ) | (1.5 | ) | |||||||
Net income (loss) | (10.2 | ) | (22.5 | ) | (105.6 | ) | (73.1 | ) | |||||||
Less: Net income (loss) attributable to noncontrolling interests | 5.5 | (0.1 | ) | 6.7 | (0.2 | ) | |||||||||
Net income (loss) attributable to The Phoenix Companies, Inc. | $ | (15.7 | ) | $ | (22.4 | ) | $ | (112.3 | ) | $ | (72.9 | ) |
(Continued from previous page) | Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||
($ in millions, except per share data) | 2015 | 2014 | 2015 | 2014 | |||||||||||
COMPREHENSIVE INCOME (LOSS): | |||||||||||||||
Net income (loss) attributable to The Phoenix Companies, Inc. | $ | (15.7 | ) | $ | (22.4 | ) | $ | (112.3 | ) | $ | (72.9 | ) | |||
Net income (loss) attributable to noncontrolling interests | 5.5 | (0.1 | ) | 6.7 | (0.2 | ) | |||||||||
Net income (loss) | (10.2 | ) | (22.5 | ) | (105.6 | ) | (73.1 | ) | |||||||
Other comprehensive income (loss) before income taxes: | |||||||||||||||
Unrealized investment gains (losses), net of related offsets | 3.9 | (14.4 | ) | (47.4 | ) | 61.2 | |||||||||
Net pension liability adjustment | 4.0 | 1.7 | 7.1 | 5.1 | |||||||||||
Other comprehensive income (loss) before income taxes | 7.9 | (12.7 | ) | (40.3 | ) | 66.3 | |||||||||
Less: Income tax expense (benefit) related to: | |||||||||||||||
Unrealized investment gains (losses), net of related offsets | (21.8 | ) | (5.5 | ) | (39.2 | ) | 60.6 | ||||||||
Net pension liability adjustment | — | — | — | — | |||||||||||
Total income tax expense (benefit) | (21.8 | ) | (5.5 | ) | (39.2 | ) | 60.6 | ||||||||
Other comprehensive income (loss), net of income taxes | 29.7 | (7.2 | ) | (1.1 | ) | 5.7 | |||||||||
Comprehensive income (loss) | 19.5 | (29.7 | ) | (106.7 | ) | (67.4 | ) | ||||||||
Less: Comprehensive income (loss) attributable to noncontrolling interests | 5.5 | (0.1 | ) | 6.7 | (0.2 | ) | |||||||||
Comprehensive income (loss) attributable to The Phoenix Companies, Inc. | $ | 14.0 | $ | (29.6 | ) | $ | (113.4 | ) | $ | (67.2 | ) | ||||
EARNINGS (LOSS) PER SHARE: | |||||||||||||||
Income (loss) from continuing operations – basic | (2.71 | ) | (3.85 | ) | (19.32 | ) | (12.42 | ) | |||||||
Income (loss) from continuing operations – diluted | (2.71 | ) | (3.85 | ) | (19.32 | ) | (12.42 | ) | |||||||
Income (loss) from discontinued operations – basic | (0.02 | ) | (0.05 | ) | (0.21 | ) | (0.26 | ) | |||||||
Income (loss) from discontinued operations – diluted | (0.02 | ) | (0.05 | ) | (0.21 | ) | (0.26 | ) | |||||||
Net income (loss) attributable to The Phoenix Companies, Inc. – basic | (2.73 | ) | (3.90 | ) | (19.53 | ) | (12.68 | ) | |||||||
Net income (loss) attributable to The Phoenix Companies, Inc. – diluted | (2.73 | ) | (3.90 | ) | (19.53 | ) | (12.68 | ) | |||||||
Basic weighted-average common shares outstanding (in thousands) | 5,751 | 5,750 | 5,751 | 5,747 | |||||||||||
Diluted weighted-average common shares outstanding (in thousands) | 5,751 | 5,750 | 5,751 | 5,747 |
($ in millions, except share data) | September 30, 2015 | December 31, 2014 | |||||
ASSETS: | |||||||
Available-for-sale debt securities, at fair value (cost of $12,155.9 and $11,978.0) | $ | 12,590.7 | $ | 12,679.3 | |||
Available-for-sale equity securities, at fair value (cost of $151.2 and $156.0) | 170.9 | 179.5 | |||||
Short-term investments | 229.5 | 149.7 | |||||
Limited partnerships and other investments | 544.5 | 542.8 | |||||
Policy loans, at unpaid principal balances | 2,350.5 | 2,352.1 | |||||
Derivative instruments | 67.1 | 161.3 | |||||
Fair value investments | 185.6 | 235.4 | |||||
Total investments | 16,138.8 | 16,300.1 | |||||
Cash and cash equivalents | 465.2 | 450.0 | |||||
Accrued investment income | 219.3 | 176.7 | |||||
Reinsurance recoverable | 575.9 | 559.1 | |||||
Deferred policy acquisition costs | 895.3 | 848.6 | |||||
Deferred income taxes, net | 73.5 | 34.2 | |||||
Other assets | 342.4 | 311.3 | |||||
Discontinued operations assets | 44.8 | 45.2 | |||||
Separate account assets | 2,533.2 | 3,020.7 | |||||
Total assets | $ | 21,288.4 | $ | 21,745.9 | |||
LIABILITIES: | |||||||
Policy liabilities and accruals | $ | 12,350.4 | $ | 12,417.6 | |||
Policyholder deposit funds | 4,319.5 | 3,955.0 | |||||
Dividend obligations | 813.0 | 916.8 | |||||
Indebtedness | 378.9 | 378.9 | |||||
Pension and post-employment liabilities | 369.3 | 380.0 | |||||
Other liabilities | 249.3 | 289.8 | |||||
Discontinued operations liabilities | 39.8 | 40.5 | |||||
Separate account liabilities | 2,533.2 | 3,020.7 | |||||
Total liabilities | 21,053.4 | 21,399.3 | |||||
CONTINGENCIES AND COMMITMENTS | |||||||
STOCKHOLDERS’ EQUITY: | |||||||
Common stock, $.01 par value: 5.8 million and 5.8 million shares outstanding | 0.1 | 0.1 | |||||
Additional paid-in capital | 2,632.8 | 2,632.8 | |||||
Accumulated other comprehensive income (loss) | (235.5 | ) | (234.4 | ) | |||
Retained earnings (accumulated deficit) | (2,001.3 | ) | (1,889.0 | ) | |||
Treasury stock, at cost: 0.7 million and 0.7 million shares | (182.9 | ) | (182.9 | ) | |||
Total The Phoenix Companies, Inc. stockholders’ equity | 213.2 | 326.6 | |||||
Noncontrolling interests | 21.8 | 20.0 | |||||
Total stockholders’ equity | 235.0 | 346.6 | |||||
Total liabilities and stockholders’ equity | $ | 21,288.4 | $ | 21,745.9 |