Securities and Exchange Commission
Washington, D.C. 20549
-----------------------------------------------
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): July 28, 2005
The Phoenix Companies, Inc.
- -----------------------------------------------------------------------------------------------------------------
(Exact Name of Registrant as Specified in Its Charter)
Delaware 1-16517 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)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing
obligation of the registrant under any of the following provisions:
[ ] Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
[ ] 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))
Item 2.02. Results of Operations and Financial Condition
On July 28, 2005, The Phoenix Companies, Inc. issued a press release announcing its financial results for the
quarter ended June 30, 2005. This is furnished as Exhibit 99.1 hereto.
Item 9.01 Financial Statements and Exhibits
(a) Not applicable
(b) Not applicable
(c) Exhibits
The following exhibit is furnished herewith:
99.1 News release of The Phoenix Companies, Inc. dated July 28, 2005, regarding the matters described
in Item 2.02.
SIGNATURES
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 hereunto duly authorized.
THE PHOENIX COMPANIES, INC.
Date: July 28, 2005 By: /s/ Scott R. Lindquist
---------------------------------------
Name: Scott R. Lindquist
Title: Senior Vice President and Chief
Accounting Officer
[LOGO]PHOENIX
The Phoenix Companies, Inc. N E W S R E L E A S E
One American Row
PO Box 5056
Hartford CT 06102-5056
PhoenixWealthManagement.com
Contacts:
Media Relations Investor Relations
Alice S. Ericson Peter A. Hofmann
860-403-5946 860-403-7100
For Immediate Release
The Phoenix Companies, Inc. Reports Second Quarter 2005 Earnings; Net Income Rises 56
Percent Year-Over-Year
HARTFORD, Conn., July 28, 2005 - The Phoenix Companies, Inc. (NYSE: PNX) today reported second quarter
2005 earnings.
• Net income was $22.4 million, or $0.22 per diluted share, a 56 percent rise from $14.4 million, or
$0.14 per share, in the 2004 second quarter.
• Total segment income was $30.9 million, or $0.31 per diluted share, an 86 percent rise from $16.6
million, or $0.16 per share, in the 2004 second quarter.
• Life and Annuity pre-tax segment income was $58.7 million, compared with $33.8 million in the 2004
second quarter. The current quarter result includes a $23.6 million pre-tax deferred acquisition cost
(DAC) benefit related primarily to favorable mortality experience.
• Asset Management pre-tax segment income was $0.1 million, consistent with income in the 2004 second
quarter.
Dona D. Young, chairman, president and chief executive officer, said, "The quarter reflects solid
progress in our two core businesses despite a lackluster equity market and low interest rates. It also
demonstrates focused execution on our core business plans for the year."
She continued, "Life sales improved from the first quarter, and mutual fund flows were up
sequentially and year-over-year. Next week we will complete a three-month period of concentrated product
introductions that includes 16 new products - 11 mutual funds, three life products and two annuity
products - which position us well for the balance of the year and into 2006.
"Life and Annuity earnings included a benefit due to changes in deferred acquisition cost
assumptions. The primary driver of these changes was the strength of the company's mortality experience.
Asset Management margins improved sequentially despite lower revenues and the impact
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The Phoenix Companies Inc....2
of the equity market. At the same time, the restructuring of our Asset Management business continues to
progress, and we are highly focused on resolving the remaining outstanding issues," she said.
SECOND QUARTER 2005 RESULTS
Earnings Summary Second Second
(Millions except per share data) Quarter Quarter
2005 2004 Change
------------- ------------ -----------
Life and Annuity Segment $58.7 $33.8 $24.9
Asset Management Segment 0.1 0.1 --
------------- ------------ -----------
Operating Segment Income 58.8 33.9 24.9
Venture Capital Segment 2.7 4.4 (1.7)
Corporate and Other Segment (16.4) (16.0) (0.4)
------------- ------------ -----------
Total Segment Income, Before Income Taxes 45.1 22.3 22.8
Applicable Income Taxes 14.2 5.7 8.5
------------- ------------ -----------
Total Segment Income (1) 30.9 16.6 14.3
Realized Gains (Losses), Net (0.6) 8.6 (9.2)
Restructuring Costs and Other Nonrecurring Items, Net (7.9) (10.8) 2.9
------------- ------------ -----------
Net Income $22.4 $14.4 $8.0
============= ============ ===========
Earnings Per Share Summary
Total Segment Income Per Share (1)
Basic $.32 $.18 $.14
Diluted $.31 $.16 $.15
Net Income Per Share
Basic $.24 $.15 $.09
Diluted $.22 $.14 $.08
Weighted Average Shares Outstanding
Basic 95.0 94.6 .4
Diluted 101.1 101.3 (.2)
(1) Total segment income is a non-GAAP financial measure that is presented in a manner consistent
with the way management evaluates operating results. A reconciliation of non-GAAP financial measures to
GAAP is provided in the tables at the end of this release.
SUMMARY OF SEGMENT RESULTS
Life and Annuity
Summary Second Second
(millions) Quarter Quarter
2005 2004 Change
------------- ------------ -----------
Life Insurance Income (pre-tax) $68.3 $29.2 $39.1
Annuity Income (Loss) (pre-tax) (9.6) 4.6 (14.2)
------------- ------------ -----------
Life and Annuity Segment Income (pre-tax) $58.7 $33.8 $24.9
============= ============ ============
Life Insurance Sales (Annualized + Single Premium) $34.4 $36.5 $(2.1)
Annuity Deposits 80.4 137.9 (57.5)
Annuity Net Deposits $(155.1) $(30.0) $(125.1)
• Life and Annuity segment income reflects year-over-year improvements in investment and mortality
margins, continued strong persistency and the benefit of expense reductions, particularly those
related to the second quarter 2004 sale of Phoenix's affiliated retail distribution to Linsco/Private
Ledger (LPL).
• Life Insurance income included a $34.3 million pre-tax DAC benefit related primarily to the
recognition of favorable mortality experience.
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The Phoenix Companies Inc....3
• Annuity income included a $10.7 million pre-tax DAC writedown related primarily to revised assumptions
on interest rates and spreads.
• While total life sales declined year-over-year, primarily due to the sale of affiliated retail
distribution, annualized life premium rose 10 percent. Excluding formerly affiliated distribution and
LPL for both periods, total life sales rose 2 percent and annualized life premium rose 15 percent.
• The year-over-year decrease in annuity deposits reflects the sale of affiliated retail distribution
and the absence of new product introductions in the first half of the year.
• Life sales and annuity deposits exclude private placement deposits. Total private placement life and
annuity deposits were $23.2 million in the second quarter of 2005, compared with $85.6 million in the
prior year's second quarter. Year-to-date private placement deposits totaled $525.1 million, well
over double full-year 2004 results.
Asset Management
Summary Second Second
(Millions) Quarter Quarter
2005 2004 Change
------------ ------------ ------------
Asset Management Segment Income (pre-tax) $0.1 $0.1 $ --
Asset Management Inflows $1,451.8 $1,758.0 $(306.2)
Asset Management Net Flows $(1,795.7) $(2,791.2) $995.5
Assets Under Management (end of period) $42,309.2 $43,642.5 $(1,333.3)
• Segment income reflects lower revenues, resulting from net outflows and uneven markets. At the same
time, it benefited from continued expense reductions even as the company invested in product
development and institutional distribution.
• Mutual fund sales continued to grow, rising 50 percent from the 2004 second quarter to $535.2 million,
with net inflows of $7.5 million, compared with net outflows of $235.4 million in the prior year's
quarter. Overall outflows were driven by continued redemptions in under-performing equity
institutional products.
• For the five-year period ended June 30, 2005, 60 percent of assets under management out-performed
their respective benchmarks.
• Pre-tax operating margin, before intangible amortization and minority interest, was 16.6 percent for
the quarter.
VENTURE CAPITAL SEGMENT
The Venture Capital segment had pre-tax earnings of $2.7 million in the 2005 second quarter, compared
with $4.4 million in the prior year's second quarter. The current and prior years' quarter results
reflect modest activity in the portfolio during these periods.
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The Phoenix Companies Inc....4
Corporate and Other Segment
The Corporate and Other segment had a pre-tax loss of $16.4 million in the 2005 second quarter,
compared with a $16.0 million loss in the prior year's second quarter. The result reflects higher
interest expense of $1.5 million as a result of the fourth quarter 2004 surplus notes refinance
transaction.
OTHER ITEMS
• Restructure charges for the 2005 second quarter of $6.7 million after-tax relate principally to
restructuring activity in the Asset Management business.
• Net income reflects the impact of impairments in certain non-recourse CDO investment pools
consolidated on Phoenix's balance sheet under FIN 46-R. These losses, which totaled $1.2 million in
the 2005 second quarter, will reverse as the CDOs mature, are liquidated or are deconsolidated.
• Second quarter 2005 net realized investment losses of $0.6 million included $9.3 million of net
impairments ($0.3 million after offsets) in the corporate investment portfolio, compared with $1.2
million in net impairments ($0.8 million after offsets) in the 2004 second quarter.
• Phoenix Life Insurance Company had a statutory net gain from operations of $16.9 million in the 2005
second quarter, compared with a $0.9 million loss in the 2004 second quarter. Statutory surplus grew
by 11 percent from the prior year to $1.0 billion at June 30, 2005. Year-to-date statutory gain from
operations was $33.2 million, and the estimated risk-based capital ratio remained over 350 percent at
the end of the second quarter.
GUIDANCE
Phoenix today confirmed the following targets for 2005:
• A total segment return on equity of 5.0 percent to 5.5 percent for the year, compared with 4.1 percent
achieved in 2004 and 4.8 percent achieved year-to-date
• Double-digit growth in total life insurance sales
• Positive net flows in Asset Management and variable annuities
• An 18 percent pre-tax operating margin, before intangible amortization and minority interest, in its
Asset Management segment
These targets are based on a number of planning assumptions and other factors, including equity
returns (dividends and market appreciation) of 5 percent, gradually rising interest rates to a year-end
level of 4.75 percent for 5-year Treasury Bonds, and an investment income return of 8 percent on venture
capital investments.
These targets represent forward-looking statements and are subject to the risks and uncertainties
outlined at the end of this news release. Specifically, to the extent that actual interest rates or
equity
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The Phoenix Companies Inc....5
and venture capital returns differ from the assumptions outlined above, the company's performance
could differ materially from the targeted levels. Total segment return on equity and operating margin,
which are non-GAAP financial measures, are further described in the tables above and in the
reconciliation table at the end of this news release.
CONFERENCE CALL
The Phoenix Companies, Inc. will host a conference call today at 11:00 a.m. Eastern time to discuss
with the investment community Phoenix's second quarter financial results. The conference call will be
broadcast live over the Internet at www.PhoenixWealthManagement.com in the Investor Relations section. The
call also can be accessed by telephone at 1-973-321-1020. A replay of the call will be available through
August 11, 2005 by telephone at 1-973-341-3080 (passcode 6176620) and on Phoenix's Web site.
The Phoenix Companies, Inc. is a leading manufacturer of life insurance, annuity and asset management
products for the accumulation, preservation and transfer of wealth. With a history dating to 1851, The
Phoenix Companies, Inc. has two principal operating subsidiaries, Phoenix Life Insurance Company and
Phoenix Investment Partners, Ltd. Through a variety of advisors and financial services firms, the company
provides products and services to affluent and high-net-worth individuals and to institutions. Phoenix
has corporate offices in Hartford, Connecticut.
FORWARD-LOOKING STATEMENT
This release may contain forward-looking statements within the meaning of the Private Securities
Litigation Reform Act of 1995. The company intends these forward-looking statements to be covered by the
safe harbor provisions of the federal securities laws relating to forward-looking statements. These
include statements relating to trends in, or representing management's beliefs about, the company's
future strategies, operations and financial results, as well as other statements including words such as
"anticipate", "believe," "plan," "estimate," "expect," "intend," "may," "should" and other similar
expressions. Forward-looking statements are made based upon management's current expectations and beliefs
concerning trends and future developments and their potential effects on the company. They are not
guarantees of future performance. Actual results may differ materially from those suggested by
forward-looking statements as a result of risks and uncertainties which include, among others: (i)
changes in general economic conditions, including changes in interest and currency exchange rates and the
performance of financial markets; (ii) heightened competition, including with respect to pricing, entry
of new competitors and the development of new products and services by new and existing competitors;
(iii) the company's primary reliance, as a holding company, on dividends and other payments from its
subsidiaries to meet debt payment obligations, particularly since the company's
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The Phoenix Companies....6
insurance subsidiaries' ability to pay dividends is subject to regulatory restrictions; (iv) regulatory,
accounting or tax developments that may affect the company or the cost of, or demand for, its products or
services; (v) downgrades in financial strength ratings of the company's insurance subsidiaries or in the
company's credit ratings; (vi) discrepancies between actual claims experience and assumptions used in
setting prices for the products of insurance subsidiaries and establishing the liabilities of such
subsidiaries for future policy benefits and claims relating to such products; (vii) movements in the
equity markets that affect our investment results, including those from venture capital, the fees we earn
from assets under management and the demand for our variable products; (viii) the company's continued
success in achieving planned expense reductions; (ix) the effects of closing the company's retail
brokerage operations; and (x) other risks and uncertainties described in any of the company's filings
with the Securities and Exchange Commission. The company undertakes no obligation to update or revise
publicly any forward-looking statement, whether as a result of new information, future events or
otherwise.
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The Phoenix Companies Inc....7
Financial Highlights
Three and Six Months Ended June 30, 2005 and 2004
(Unaudited)
Three Months Six Months
----------------------------- ------------------------------
2005 2004 2005 2004
------------- ------------ -------------- -------------
Income Statement Summary ($ in millions)
Revenues $ 623.9 $ 666.1 $ 1,237.3 $ 1,339.4
Total Segment Income(1) 30.9 16.6 47.7 34.1
Net Income $ 22.4 $ 14.4 $ 31.8 $ 31.0
---------------------------------------------
Earnings Per Share
Weighted Average Shares Outstanding
(in thousands)
Basic 95,034 94,644 94,982 94,569
Diluted 101,116 101,294 101,719 101,645
============= ============= ============== ==============
Total Segment Income Per Share (1)
Basic $ 0.32 $ 0.18 $ 0.50 $ 0.36
Diluted $ 0.31 $ 0.16 $ 0.47 $ 0.34
============= ============= ============== ==============
Net Income Per Share
Basic $ 0.24 $ 0.15 $ 0.33 $ 0.33
Diluted $ 0.22 $ 0.14 $ 0.31 $ 0.30
============= ============= ============== ==============
---------------------------------------------
Balance Sheet Summary
($ in millions, except share and per share data) June December
2005 2004
------------- ------------
Invested Assets $ 17,392.9 $ 17,334.6
Separate Account Assets 7,216.9 6,950.3
Total Assets 28,650.7 28,362.6
Indebtedness 689.1 690.8
Total Stockholders' Equity $ 2,038.5 $ 2,022.4
Common Shares outstanding (in thousands) 95,079 94,878
------------- ------------
Book Value Per Share $ 21.44 $ 21.31
Book Value Per Share, excluding Accumulated
OCI and FIN 46-R 21.46 21.27
Third Party Assets Under Management $ 42,309.2 $ 42,908.5
(1) In addition to net income presented in accordance with Generally Accepted
Accounting Principles ("GAAP"), Phoenix considers total segment income in
evaluating its financial performance. A reconciliation of these measures is
provided at the end of this release. Total segment income is an internal
performance measure used by Phoenix in the management of its operations,
including its compensation plans and planning processes. Management believes
that segment income provides additional insight into the underlying trends
in Phoenix's operations.
Total segment income represents income from continuing operations (which is
a GAAP measure) before realized investment gains and losses and certain
other items.
* Net realized investment gains and losses are excluded from total segment
income because their size and timing are frequently subject to our
discretion.
* Certain other items are excluded from total segment income because we
believe they are (i) not indicative of overall operating trends; and
(ii) infrequent and material and result from a business restructuring,
a change in regulatory requirements, or other unusual circumstances.
Because certain of these items are excluded based on our discretion and
involve judgments by management, inconsistencies in their determination may
exist and total segment income may differ from similarly titled measures of
other companies.
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The Phoenix Companies Inc....8
Consolidated Balance Sheet
June 30, 2005 (Preliminary) and December 31, 2004
(in millions, except share data)
2005 2004
-------------- --------------
ASSETS:
Available-for-sale debt securities, at fair value $ 13,767.0 $ 13,476.3
Available-for-sale equity securities, at fair value 275.0 304.3
Trading equity securities, at fair value - 87.3
Mortgage loans, at unpaid principal balances 164.9 207.9
Venture capital partnerships, at equity in net assets 254.5 255.3
Policy loans, at unpaid principal balances 2,212.0 2,196.7
Other investments 358.1 371.8
-------------- --------------
17,031.5 16,899.6
Available-for-sale debt and equity securities pledged as
collateral, at fair value 1,222.4 1,278.8
-------------- --------------
Total investments 18,253.9 18,178.4
Cash and cash equivalents 361.4 435.0
Accrued investment income 217.9 222.3
Receivables 152.0 135.8
Deferred policy acquisition costs 1,460.7 1,429.9
Deferred income taxes 5.0 30.7
Intangible assets 291.2 308.4
Goodwill 429.0 427.2
Other assets 262.7 244.6
Separate account assets 7,216.9 6,950.3
-------------- --------------
Total assets $ 28,650.7 $ 28,362.6
============== ==============
LIABILITIES:
Policy liabilities and accruals $ 13,328.7 $ 13,132.3
Policyholder deposit funds 3,321.8 3,492.4
Stock purchase contracts 124.6 131.9
Indebtedness 689.1 690.8
Other liabilities 568.9 546.3
Non-recourse collateralized obligations 1,323.0 1,355.2
Separate account liabilities 7,216.9 6,950.3
-------------- --------------
Total liabilities 26,573.0 26,299.2
-------------- --------------
MINORITY INTEREST:
Minority interest in net assets of subsidiaries 39.2 41.0
-------------- --------------
STOCKHOLDERS' EQUITY:
Common stock, $0.01 par value, 106,407,418 and
106,394,959 shares issued 1.0 1.0
Additional paid-in capital 2,438.1 2,435.2
Deferred compensation on restricted stock units (4.2) (3.6)
Accumulated deficit (269.8) (285.6)
Accumulated other comprehensive income 52.9 58.0
Treasury stock, at cost: 11,328,018 and 11,517,387 shares (179.5) (182.6)
-------------- --------------
Total stockholders' equity 2,038.5 2,022.4
-------------- --------------
Total liabilities, minority interest and stockholders' equity $ 28,650.7 $ 28,362.6
============== ==============
Certain reclassifications have been made to the 2004 financial statements to conform with the 2005
presentation.
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The Phoenix Companies Inc....9
Consolidated Statement of Income (Unaudited)
Three and Six Months Ended June 30, 2005 and 2004
(in millions)
Three Months Six Months
----------------------------- ------------------------------
2005 2004 2005 2004
------------- ------------ ------------- -------------
REVENUES:
Premiums $ 229.1 $ 238.2 $ 455.9 $ 470.9
Insurance and investment product fees 127.4 134.0 256.4 270.1
Broker-dealer commission and distribution
fees 7.1 20.2 13.9 44.5
Investment income, net of expenses 268.1 259.3 536.8 537.0
Net realized investment gains (losses) (7.8) 14.4 (25.7) 16.9
------------- ------------ ------------- -------------
Total revenues 623.9 666.1 1,237.3 1,339.4
------------- ------------ ------------- -------------
BENEFITS AND EXPENSES:
Policy benefits, excluding policyholder
dividends 340.0 341.3 683.3 686.9
Policyholder dividends 83.4 105.3 167.2 211.2
Policy acquisition cost amortization 9.9 23.1 38.1 45.7
Intangible asset amortization 8.8 8.3 17.2 16.6
Interest expense on indebtedness 11.4 9.9 22.5 19.7
Interest expense on non-recourse
collateralized obligations 10.3 7.5 19.2 16.4
Other operating expenses 127.3 150.2 244.5 299.3
------------- ------------ ------------- -------------
Total benefits and expenses 591.1 645.6 1,192.0 1,295.8
------------- ------------ ------------- -------------
Income from continuing operations before
income taxes, minority interest and equity
in earnings of affiliates 32.8 20.5 45.3 43.6
Applicable income taxes 10.2 6.2 13.0 13.3
------------- ------------ ------------- -------------
Income from continuing operations before
income taxes, minority interest and equity
in earnings of affiliates 22.6 14.3 32.3 30.3
Minority interest in net income of subsidiaries (0.2) - (0.5) -
Equity in undistributed earnings of affiliates - 0.3 - 0.6
------------- ------------ ------------- -------------
Income from continuing operations 22.4 14.6 31.8 30.9
Income (loss) from discontinued operations - (0.2) - 0.1
------------- ------------ ------------- -------------
Net income $ 22.4 $ 14.4 $ 31.8 $ 31.0
============= ============= ============= =============
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The Phoenix Companies Inc....10
Reconciliation of Income Measures (Unaudited)
for the Three and Six Months Ended June 30, 2005 and 2004
(in millions)
Three Months Six Months
----------------------------- ------------------------------
2005 2004 2005 2004
------------- ------------ ------------- -------------
Segment Income (loss)
Life insurance $ 68.3 $ 29.2 $ 106.3 $ 52.0
Annuities (9.6) 4.6 (3.6) 7.6
------------- ------------ -------------- --------------
Life and annuity segment 58.7 33.8 102.7 59.6
Asset management segment 0.1 0.1 (1.6) 0.2
Venture capital segment 2.7 4.4 0.5 16.0
Corporate and other segment (16.4) (16.0) (32.7) (28.7)
------------- ------------ -------------- --------------
Total segment income, before income taxes 45.1 22.3 68.9 47.1
Applicable income taxes 14.2 5.7 21.2 13.0
------------- ------------ -------------- --------------
Total segment income 30.9 16.6 47.7 34.1
Realized investment gains (losses), after
income taxes and other offsets (0.6) 8.6 (6.5) 10.3
Realized gain (losses) from collateralized
debt obligations (1.2) (3.6) (0.8) (4.6)
Income from discontinued operations, net
of income taxes - (0.2) - 0.1
Restructuring charges and other non-recurring
items, net of income taxes (6.7) (7.0) (8.6) (8.9)
------------- ------------ -------------- --------------
Net income $ 22.4 $ 14.4 $ 31.8 $ 31.0
============= ============ ============== ==============
Note: For additional information, see our financial supplement at
PhoenixWealthManagement.com.
###
