(Source: Business Wire)
The Phoenix Companies, Inc. (NYSE: PNX) today reported a net loss of
$26.6 million, or $0.23 per share, and an operating loss of $2.8
million, or $0.02 per share, for the third quarter of 2009. Excluding
unusual items, operating income was $33.3 million, or $0.29 per share.
The unusual items were:
$45.7 million, or $0.39 per share, in non-cash charges comprising a
$27.0 million goodwill impairment and $18.7 million in write-downs of
capitalized expenses;
$12.7 million, or $0.11 per share, in severance costs and non-deferred
sales-related costs; and
a $22.3 million, or $0.19 per share, tax benefit related to
intra-period tax allocations.
In a separate news release, Phoenix announced that it has formed a
distribution company, Saybrus PartnersSM, Inc., and that
Saybrus has secured its first consulting agreement with financial
services firm Edward Jones.
"We believe this quarter's results indicate we've turned the corner on
many key metrics," said James D. Wehr, president and chief executive
officer.
"Core operating fundamentals were stronger this quarter, with improved
investment performance and mortality. Expense reductions began to have
an impact, and surrenders remained at manageable levels," he explained.
"Our investment portfolio continues to be a strong contributor to
improving Phoenix's balance sheet and stabilizing statutory surplus. It
clearly weathered the past year's storm and is showing a positive
trajectory in 2009, with lower impairments, substantially decreased
unrealized losses, and a turnaround in alternative asset classes," Mr.
Wehr said.
"Saybrus is an important element in our growth strategy, which includes
leveraging our existing capabilities in innovative ways. We are pleased
that Saybrus' first agreement is with one of the most widely respected
firms in the industry," Mr. Wehr said.
THIRD QUARTER 2009 FINANCIAL HIGHLIGHTS
Earnings Summary ($ in millions) ThirdQuarter2009 Second Quarter 2009 Third Quarter 2008
Revenues $ 543.4 $ 525.7 $ 569.5
Benefits & Reserves (308.4 ) (346.6 ) (336.6 )
Policyholder Dividends (73.4 ) (61.8 ) (68.9 )
Operating Expenses (69.5 ) (73.0 ) (64.9 )
Goodwill Impairment (27.0 ) -- --
Capitalized Expense Write-down (18.7 ) -- --
Policy Acquisition Cost Amortization (63.2 ) (33.1 ) (72.1 )
Interest Expense (8.3 ) (8.3 ) (8.8 )
Operating Income (Loss) Before Taxes $ (25.1 ) $ 2.9 $ 18.2
Income Tax Benefit (Expense) 22.3 (19.0 ) (10.8 )
Operating Income (Loss)1 $ (2.8 ) $ (16.1 ) $ 7.4
Realized Gains (Losses), Net of Taxes (22.5 ) (68.8 ) (17.0 )
Consolidated CDOs, Net of Taxes -- -- (4.4 )
Discontinued Operations, Net of Taxes (1.3 ) (26.3 ) (325.5 )
Net Loss $ (26.6 ) $ (111.2 ) $ (339.5 )
Earnings Per Share Summary
Net Loss Per Share
Basic $ (0.23 ) $ (0.96 ) $ (2.97 )
Diluted $ (0.23 ) $ (0.96 ) $ (2.97 )
Operating Income (Loss) Per Share
Basic $ (0.02 ) $ (0.14 ) $ 0.06
Diluted $ (0.02 ) $ (0.14 ) $ 0.06
Weighted Average Shares Outstanding (in millions)
Basic 115.9 116.0 114.4
Diluted 115.9 116.0 114.4
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1 Operating income, as well as components of and financial
measures derived from operating income, are non-GAAP financial measures.
Please see "Income Statement Summary" below for more information.
THIRD QUARTER 2009 OPERATING HIGHLIGHTS
Revenues declined from the third quarter of 2008 largely due to lower
premiums and net investment income but improved from the second
quarter of 2009, reflecting higher net investment income and fees.
Operating expenses for the quarter included $12.7 million of severance
costs and non-deferred sales-related costs. During the quarter, the
company completed its previously announced reduction of more than 35
percent of its workforce, which was a large part of its targeted
elimination of $110 million in annualized expenses.
Policy acquisition cost amortization was higher than for the second
quarter of 2009 because of improved mortality. The company deferred
only $1.4 million of sales-related expenses (excluding commissions) in
the third quarter of 2009 in light of reduced business volume.
Policy benefits and reserves improved by $38.2 million and $28.2
million, respectively, from the second quarter of 2009 and the third
quarter of 2008, reflecting mortality experience that was modestly
better than long-term expectations across all product lines, declining
inforce, as well as stronger markets resulting in lower annuity
reserves.
Life and annuity surrenders remained at manageable levels. Individual
life surrenders were at an annualized rate of 10.0 percent for the
third quarter of 2009 compared with 8.9 percent for the second quarter
of 2009. Annuity surrenders for the third quarter of 2009 were at an
annualized rate of 10.1 percent, compared with 12.6 percent in the
second quarter of 2009.
The company has established a tax valuation allowance against its net
deferred tax assets (DTA). Changes in the DTA and the related
valuation allowance resulted in a tax benefit of $22.3 million after
the application of intra-period allocation rules.
STRATEGIC BUSINESS DEVELOPMENT
In a separate news release today, Phoenix announced that it has formed a
distribution company, Saybrus PartnersSM, Inc., and that
Saybrus has an agreement with financial services firm Edward Jones to
provide life insurance consulting services to the firm's financial
advisors.
Phoenix formed Saybrus as part of a series of actions to strengthen its
market position and strategy. Saybrus provides dedicated consultation
services to partner companies, as well as support for Phoenix's product
line within its own distribution channels.
The initial agreement with Edward Jones is for three years and will
focus Saybrus consultants on two new insurance carriers in the Edward
Jones retail distribution network, John Hancock Life Insurance Company
(U.S.A.) and Pacific Life Insurance Company, both of which have a
distribution agreement with Edward Jones.
REALIZED AND UNREALIZED GAINS AND LOSSES
Net unrealized losses on fixed income securities improved by $669.1
million to $403.6 million at September 30, 2009 from $1,072.7 million at
June 30, 2009. The total value of fixed income securities improved
primarily due to continued spread tightening across all sectors. At
quarter end, 56 percent of the unrealized loss was concentrated in
investment-grade debt, and the company expects securities with
unrealized losses will continue to pay their contractual principal and
interest.
Realized Gains and Losses ($ in millions) ThirdQuarter2009 Second Quarter 2009 Third Quarter 2008
Credit-related Impairments $ (14.9 ) $ (20.9 ) $ (38.1 )
Transaction Gains (Losses) (8.7 ) (33.8 ) (11.1 )
Hedge Gains (Losses) (4.0 ) 11.1 (5.3 )
FAS 157 Non-performance Risk Factor 7.5 (45.5 ) --
Fair Value Option Securities 2.7 2.9 (4.6 )
Debt Securities Pledged as Collateral -- -- (0.6 )
Total Realized Gains (Losses) $ (17.4 ) $ (86.2 ) $ (59.7 )
Offsets (PDO, DAC, Taxes) (3.3 ) 19.2 39.1
Realized Gains (Losses) After Offsets $ (20.7 ) $ (67.0 ) $ (20.6 )
FSP FAS 115-2 Non-credit Portion of Impairment Loss Recognized in OCI $ (22.8 ) $ (18.3 ) --
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Phoenix had net realized losses after offsets of $20.7 million for the
third quarter of 2009, compared with $67.0 million in net realized
losses for the second quarter of 2009 and $20.6 million in net realized
losses for the third quarter of 2008.
Gross credit impairments resulting in realized losses for the third
quarter of 2009 were $14.9 million, compared with $20.9 million for the
second quarter of 2009 and $38.1 million for the third quarter of 2008.
Net of offsets for taxes, deferred acquisition costs and policyholder
dividend obligation, they were $5.5 million for the third quarter of
2009, compared with $12.8 million for the second quarter of 2009 and
$12.6 million for the third quarter of 2008.
BALANCE SHEET STRENGTH AND LIQUIDITY
($ in millions) September 30, 2009 December 31,2008 Change
Total Assets $ 25,411.8 $ 25,768.8 $ (357.0 )
Indebtedness $ 433.6 $ 458.0 $ (24.4 )
Total Stockholders' Equity $ 1,184.9 $ 865.0 $ 319.9
Total Stockholders' Equity excluding FAS 115 other accumulated OCI and FIN 46-R $ 1,408.7 $ 1,665.7 $ (257.0 )
Debt to Total Capital (1) 23.5 % 21.6 %
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1 Based on Total Stockholders' Equity, excluding FAS 115
other accumulated OCI and FIN 46-R
The company retains its focus on maintaining adequate capital and
liquidity. Approximately 12 percent of the fixed income portfolio is
invested in the most highly liquid instruments, such as cash, short-term
investments, Treasuries and agency mortgage-backed securities.
