UNITED STATES
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: February 6, 2003
--------------------------------
(Date of earliest event reported)
THE PHOENIX COMPANIES, INC.
---------------------------
(Exact name of registrant as specified in its charter)
Delaware 1-16517 06-0493340
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(State or other jurisdiction of (Commission File Number) (IRS Employer Identification No.)
incorporation)
One American Row, Hartford, Connecticut 06102-5056
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(Address of principal executive offices) (Zip Code)
860-403-5000
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(Registrant's telephone number, including area code)
Item 9. Other Information.
On February 6, 2003, The Phoenix Companies, Inc., a Delaware corporation, reported its fourth quarter and full-year 2002
results; announces additional actions in support of key priorities and strategic plan; revises ROE target, a copy of which is
attached hereto as Exhibit 99.1 and is incorporated herein by reference.
Item 7. Exhibits.
99.1 News release of The Phoenix Companies Inc., dated February 6, 2003, regarding fourth quarter and full-year 2002 results;
announces additional actions in support of key priorities and strategic plan; revises ROE target.
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.
By: /s/ Carole A. Masters
-------------------------------------------
Name: Carole A. Masters
Title: Vice President and Counsel
Date: February 6, 2003
EXHIBIT INDEX
Exhibit Number Exhibit
- -------------- -------
99.1 News release of The Phoenix Companies Inc., dated February 6, 2003,
regarding fourth quarter and full-year 2002 results; announces
additional actions in support of key priorities and strategic plan;
revises ROE target.
Exhibit 99.1
[GRAPHIC OMITTED][GRAPHIC OMITTED]
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
For Immediate Release
Contacts: Media Relations Investor Relations
--------------- ------------------
Alice S. Ericson Peter A. Hofmann
860-403-5946 860-403-7100
PHOENIX REPORTS FOURTH QUARTER AND FULL-YEAR 2002 RESULTS; ANNOUNCES ADDITIONAL ACTIONS IN SUPPORT OF KEY PRIORITIES AND
STRATEGIC PLAN; REVISES ROE TARGET
HARTFORD, Conn., February 6, 2003 - The Phoenix Companies, Inc. (NYSE:
PNX) today reported fourth quarter and full-year 2002 results and announced
additional actions in support of its key priorities and strategic plan, as
well as a revised return on equity target.
FOURTH QUARTER AND FULL-YEAR 2002 RESULTS
The company reported fourth quarter 2002 cash operating income,
excluding venture capital, of $21.0 million, or $0.22 per share, compared
with $28.2 million, or $0.27 per share, in the fourth quarter of 2001. The
company also reported operating income of $11.4 million, or $0.12 per
share, for the quarter, compared with operating income of $22.7 million, or
$0.22 per share, in the fourth quarter of 2001. The company reported a GAAP
net loss of $14.5 million, or a $0.15 loss per share, in the fourth quarter
of 2002, compared with a $7.5 million net loss, or a $0.07 loss per share,
in the fourth quarter of 2001. (See reconciliation of financial measures
below.)
The fourth quarter 2002 GAAP result includes net realized investment
losses of $22.7 million, after income taxes, primarily related to credit
losses in the bond portfolio. It also includes a previously announced
charge of $3.1 million, after income taxes, related to staff reductions in
investment management and annuity distribution, information technology,
international operations, and other areas of the company.
For full-year 2002, the company reported cash operating income,
excluding venture capital, of $78.1 million, or $0.80 per share, compared
with $86.6 million, or $0.83 per share, in 2001. The company also reported
an operating loss of $61.7 million, or a $0.63 loss per share, for the
year, principally related to losses in its Venture Capital segment and a
third quarter non-cash goodwill charge. This compares with an operating
loss of $74.1 million, or a $0.71 loss per share, in 2001. The company
reported a full-year 2002 GAAP net loss of $246.0 million, or a $2.51 loss
per share, compared with a $202.7 million net loss, or a $1.94 loss per
share, in the prior year.
"Our results very clearly show our areas of strength and the areas in
which we must improve," said Dona D. Young, president and chief executive
officer. "Our core life operation performed well, once again demonstrating
the strength of our franchise. However, results from our annuity and
investment management operations were significantly affected by the
prolonged difficult markets and point to the need for continued action to
improve margins."
ACTIONS IN SUPPORT OF STRATEGIC PLAN
"Following the strategic review I initiated late last year, we are
strongly reaffirming our commitment to our wealth management strategy and
our core businesses and intensifying our focus on execution," said Mrs.
Young. "All our efforts are now directed toward four key priorities:
manufacturing profitable wealth management products and services, lowering
expenses, enhancing capital and resource allocation strategies, and
redesigning our compensation and benefits in support of our goals.
"Within this framework, we have already begun taking aggressive
actions to achieve consistent, quality earnings and profitable growth," she
added. "We are concentrating first on those areas where we can achieve
immediate results, and shareholders can expect continued action throughout
2003. Everything we do is guided by our stated priorities and a commitment
to building the value of our business over time. We expect the successful
execution of our strategy to drive ratings improvement over the next 12 to
18 months."
The company announced several actions today in support of its key
priorities and strategic plan. They are:
o The agreement to sell, subject to receipt of general partner consents, a
$53.5 million portfolio of its venture capital limited partnership
interests, along with unfunded commitments of $28.1 million, half to third
parties and the other half to Phoenix Life Insurance Company's closed
block. The sale is intended to reduce the company's exposure to the equity
markets and mitigate earnings volatility, while also improving Phoenix
Life's capital ratios and enhancing the closed block's potential long-term
returns. Net proceeds from the sale to third parties will be $26.8 million;
the transfer to the closed block will be in exchange for assets of equal
value as determined by the terms of the third-party sale. Phoenix
recognized an after-tax realized loss of $3.3 million in the fourth quarter
related to the partnership interests included in this transaction.
o Additional annualized expense savings of $4 million by year-end 2003
through general operational expense reductions, primarily in Investment
Management, and $6 million more by year-end 2006 from the implementation of
a comprehensive facilities plan. The plan includes the sale of the
company's Enfield, Conn., offices, which will be placed on the market
within 30 days. Business functions from Enfield will be relocated to the
company's existing Hartford offices and a yet-to-be identified smaller
facility in Hartford or north of Hartford. The company will continue to
identify ways to reduce overhead and administrative and back-office costs
in an effort led by the company's Chief Accounting Officer.
In December, Phoenix announced a series of actions to lower annualized
expenses by approximately $30 million by year-end 2003. These actions will
result in a 5 percent reduction of the company's employee base. They
include closing certain of its international operations and adjusting the
size of its distribution force in annuities and investment management to
reflect the current market environment. With the actions announced today,
the company expects to reduce annualized expenses by approximately $34
million in 2003 and by $40 million by the end of 2006. These reductions are
in addition to the efforts that produced annualized expense savings of
approximately $29 million at the end of 2002.
Phoenix also took significant steps in the fourth quarter to enhance
its capital position and return Phoenix Life's risk-based capital back
above the company's target level. Phoenix monetized a significant portion
of its holdings in Hilb, Rogal and Hamilton Company (HRH) in November and
completed an offering of equity units in December. The HRH transactions
produced net proceeds of approximately $157 million and a total net gain,
after tax, of $38.8 million, with $6.4 million realized in the fourth
quarter of 2002, and an additional $32.4 million deferred to the fourth
quarter of 2005. The issuance of the equity units produced net proceeds of
approximately $149 million, which were used primarily to pay down bank
debt.
By the end of this quarter, the company expects to reach a decision on
the securitization of the residual assets associated with its closed block.
Proceeds from such a transaction would be used to further strengthen the
life insurance company.
The company also has redesigned its annual incentive compensation
plans for all employees to further align incentive pay with the drivers of
shareholder value. These plans set company-wide performance goals and
related departmental metrics. Management will present the plans to the
Board of Directors for approval later in February.
These actions will support the specific 2003 priorities Phoenix has
set for its life insurance, annuity and investment management businesses.
o Life Insurance - Target 12 to 15 percent annual sales growth through
accelerated product introductions and expansion of its distribution
relationships with key firms.
o Annuities - Eliminate products with lower profit potential and launch new
products that capitalize on emerging needs, such as income protection and
asset allocation strategies, and selectively expand distribution channels,
including regional and community banks.
o Investment Management - Focus on achieving strong relative investment
performance and improving cash margins while seeking to identify a new head
of the operation by the end of this quarter.
ROE
"Today's actions, in combination with prior steps and anticipated 2003
performance, should enable Phoenix to generate, on an annualized run rate
by the fourth quarter 2003, a 6 to 8 percent cash return on equity,
excluding venture capital," Mrs. Young said. "This target assumes an equity
market return of 7 percent or better for the year."
FOURTH QUARTER AND FULL-YEAR 2002 SEGMENT RESULTS
Phoenix has two operating segments, "Life and Annuity" and "Investment
Management", and two reporting segments, "Venture Capital" and "Corporate
and Other". The Corporate and Other segment includes unallocated capital,
interest expense and other expenses, as well as certain businesses not of
sufficient scale to report independently. The company looks at its segment
results on the basis of operating income (loss) before amortization and
taxes to better focus on the operating performance of each segment.
Fourth Fourth For the Year Ended
Quarter Quarter December 31,
2002 2001 2002 2001
-------------- ------------- ------------ -----------
(in millions)
Life and Annuity $24.2 $24.7 $78.4 $83.5
Investment Management 10.3 14.1 40.3 54.1
Venture Capital (2.3) 15.6 (59.3) (159.6)
Corporate and Other (16.4) (1.0) (48.9) (39.6)
Life and Annuity - This segment reported operating income
before income taxes of $24.2 million in the fourth quarter of 2002,
compared with $24.7 million in the fourth quarter of 2001. Solid momentum
in life insurance earnings was tempered by losses in annuities and
increases in pension costs that were allocated across segments. Continued
favorable mortality and persistency enabled the company to maintain strong
insurance and investment margins on its life products. In addition, the
closed block continued to perform well, as evidenced by the growth in the
policyholder dividend obligation. Operating income for full-year 2002 was
$78.4 million, compared with $83.5 million for full-year 2001, reflecting
the impact of the adverse stock market and lower interest rates on annuity
margins. For each of the life product lines, operating income increased
quarter over quarter and year over year.
Total life insurance sales (annualized premium and single premium)
were a record $141.8 million in the fourth quarter of 2002, compared with
$58.3 million in the prior year's quarter. Sales of private placement
insurance drove the increase, which also reflects a 15 percent growth in
wholesaled production.
Annualized premium was $53.4 million in the fourth quarter of 2002,
compared with $37.0 million in the prior year's quarter, driven by growth
in private placements and universal life product sales. Sales from State
Farm agents accounted for 18 percent of wholesaled annualized premium in
the quarter. Average face amounts for new sales, including private
placements, surpassed the $1 million mark for the first time, and increased
to $954,000 for wholesaled production.
Full-year 2002 total life insurance sales were $356.0 million, up 60
percent from 2001's $222.4 million in sales. While the majority of the
growth was in private placements , wholesaled products also grew 12
percent, driven largely by sales from State Farm, which ended the year as
the company's third largest life distribution relationship. Total variable
universal life sales grew 58 percent in 2002 to $268.5 million from $169.9
million in 2001, and universal life sales in 2002 more than doubled to
$66.8 million from $29.0 million in 2001. Full-year 2002 annualized premium
was $170.3 million compared with $118.9 million in 2001.
Annuity deposits in the fourth quarter of 2002 were $217.8 million,
compared with $593.4 million in the prior year's quarter, primarily
reflecting the company's decision to discontinue its Retirement Planner's
Edge (RPE) variable annuity during the third quarter. Deposits for
full-year 2002 were $2.3 billion compared with full-year 2001 deposits of
$1.5 billion, reflecting strong sales of both RPE and fixed annuities
during the first three quarters.
Investment Management - Operating income before amortization
and income taxes for the segment was $10.3 million in the fourth quarter of
2002, compared with $14.1 million in the fourth quarter of 2001. The result
is due primarily to the decline in earnings from Aberdeen Asset Management,
PLC, in which the company has an equity ownership interest. The segment's
revenues were flat, with declines in most areas offset by the acquisition
of a 60 percent interest in Kayne Anderson Rudnick Investment Management
(KAR) in January. Expenses declined 4 percent, despite the KAR acquisition.
Full-year 2002 operating income before amortization and taxes was $40.3
million, compared with $54.1 million in 2001, again, reflecting the effects
of Aberdeen and declines in revenues, as well as additional revenues and
expenses related to KAR.
Assets under management for the segment on December 31, 2002 were
$54.0 billion, compared with $52.1 billion on December 31, 2001. The
year-over-year increase in assets under management is primarily
attributable to the inclusion of KAR in 2002 and the issuance of the
Phoenix-Mistic CBO in the third quarter, offset by negative market
performance.
Net flows were negative $73.6 million in the fourth quarter of 2002,
compared with negative net flows of $593.5 million in the prior year's
quarter, reflecting a significant turnaround in institutional accounts,
offset by declines in mutual funds and variable products. Full-year 2002
net flows were $184.0 million, compared with full-year 2001 net flows of
$459.0 million. For the year, increased sales of managed accounts,
primarily related to the KAR acquisition, were offset by declines in sales
of mutual funds, institutional accounts and variable products.
Inflows totaled $1.8 billion in the fourth quarter of 2002,
approximately the same as inflows in the prior year's quarter. Outflows
were $1.9 billion in the fourth quarter of 2002, improved from the $2.4
billion of outflows in the prior year's quarter. Full-year 2002 inflows
were $10.1 billion, compared with $9.5 billion in 2001. Outflows for the
full-year 2002 were $10.0 billion, compared with $9.1 billion in 2001.
Venture Capital - The Venture Capital segment, which represents
1 percent of the $16.8 billion of invested assets and cash in the general
account portfolio, had a $2.3 million operating loss before income taxes in
the fourth quarter of 2002. The loss was due to market appreciation offset
by expenses, realized losses, and true-ups to partnership valuations for
the third quarter. In the prior year's quarter, the segment had operating
income of $15.6 million. Total distributions in the fourth quarter of 2002
were $7.0 million, compared with $17.3 million in the fourth quarter of
2001. Capital contributions were $11.5 million in the fourth quarter of
2002, compared with $11.7 million in the fourth quarter of 2001.
For full-year 2002, partnership results declined largely in concert
with their sectors in the equity markets. The segment posted a $59.3
million operating loss for the year, compared with an operating loss of
$159.6 million for 2001. Total distributions for full-year 2002 were $41.8
million, compared with $63.0 million in 2001. Capital contributions for the
full year were $42.2 million, compared with $47.0 million in 2001. On
December 31, 2002, Venture Capital segment assets were $227.8 million.
Corporate and Other - In the fourth quarter of 2002, the
Corporate and Other segment had a $16.4 million operating loss before
amortization and income taxes, compared with an operating loss of $1.0
million in the fourth quarter of 2001. For full-year 2002, this segment
experienced an operating loss before amortization and income taxes of $48.9
million, compared with a loss of $39.6 million for full-year 2001.
Increased interest expense, reduced investment earnings and higher losses
from international investments were the key drivers of the losses for the
quarter and the year.
REALIZED GAINS AND LOSSES
The company reported fourth quarter 2002 net realized investment
losses after-tax of $22.7 million versus $22.1 million in the fourth
quarter of 2001. On a pre-tax basis, gross credit losses of $39.4 million
and a $14.9 million loss related to the company's investment in Argentina
were partially offset by realized gains of $15.3 million from the HRH
position and $7.3 million from the conversion of an equity position in
Clark/Bardes, Inc. to debt. For the full-year 2002, net realized capital
losses were $39.3 million versus $46.2 million in 2001.
RECONCILIATION OF FINANCIAL MEASURES
The company considers operating income and cash operating income,
excluding venture capital, in evaluating its financial performance, in
addition to net income presented in accordance with Generally Accepted
Accounting Principles (GAAP). (See attached table reconciling these
measures.) Operating income represents net income adjusted for realized
investment gains and losses and nonrecurring items.
Nonrecurring items include expenses related to Phoenix's
demutualization and its acquisition of the PXP minority interest, an early
retirement program, a first quarter 2002 adjustment to the amortization of
deferred acquisition costs related to the closed block, management
restructuring charges, surplus tax, and the cumulative effect of accounting
changes. For cash operating income, the company adds back amortization of
intangible assets to operating income to measure the ability of the
business to generate cash earnings. When evaluating operating performance,
the company also excludes the Venture Capital segment, a separate reporting
segment, in order to focus on the performance of its core operating
businesses.
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 fourth
quarter, as well as its 2003 priorities. The conference call will be
broadcast live over the Internet at WWW.PHOENIXWEALTHMANAGEMENT.COM
in the Investor Relations section. To listen to the live call, please go to
the Web site at least fifteen minutes prior to register, download and
install any necessary audio software. The call can also be accessed by
telephone at 973-321-1020. A replay of the call will be available by
telephone at 973-341-3080 (passcode 3677372) and on Phoenix's Web site,
WWW.PHOENIXWEALTHMANAGEMENT.COM in the Investor Relations section
through February 20, 2003. Additional financial information can be accessed
on Phoenix's Web site, WWW.PHOENIXWEALTHMANAGEMENT.COM, in the
Investor Relations section.
The Phoenix Companies, Inc. is a leading provider of wealth management
products and services to individuals and institutions. Through a variety of
advisors and financial services firms, Phoenix helps the affluent and high
net worth accumulate, preserve and transfer their wealth with an innovative
portfolio of life insurance, annuity and investment management products and
services. Phoenix has corporate offices in Hartford, Conn.
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 insurance subsidiaries'
ability to pay dividends is subject to regulatory restrictions; (iv)
regulatory, accounting or tax changes that may affect the cost of, or
demand for, the products or services of the company's subsidiaries; (v)
downgrades in the claims paying ability or financial strength ratings of
the company's subsidiaries or in its 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 success in achieving planned expense reductions; and (ix) 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.
Financial Highlights (Unaudited)
Income Statement Summary ($ in millions) Fourth Fourth
Quarter Quarter Year-to-Date Year-to-Date
2002 2001 2002 2001
-------------- -------------- --------------- ---------------
Revenues $ 611.8 $ 628.2 $ 2,452.9 $2,429.9
Operating Income (Loss) (1) 11.4 22.7 (61.7) (74.1)
Add: Amortization of Goodwill and Intangibles 8.1 15.6 101.3 57.0
-------------- -------------- --------------- ---------------
Cash Operating Income (Loss) 19.5 38.3 39.6 (17.1)
Cash Operating Income, excluding Venture Capital 21.0 28.2 78.1 86.6
GAAP Reported: Net Loss (14.5) (7.5) (246.0) (202.7)
- ----------------------------------------------------------- -------------- -- -------------- -- --------------- --- ---------------
Earnings Per Share (2) Fourth Fourth
Quarter Quarter Year-to-Date Year-to-Date
2002 2001 2002 2001
-------------- -------------- --------------- ---------------
Operating EPS $ 0.12 $ 0.22 $ (0.63) $ (0.71)
Cash Operating EPS $ 0.21 $ 0.37 $ 0.40 $ (0.16)
Cash Operating EPS, excluding Venture Capital $ 0.22 $ 0.27 $ 0.80 $ 0.83
Net Loss Per Share $ (0.15) $ (0.07) $ (2.51) $ (1.94)
- ----------------------------------------------------------- -------------- -- -------------- -- --------------- --- ---------------
Balance Sheet Summary Fourth Fourth
($ in billions, except per share data) Quarter Quarter
2002 2001
-------------- --------------
Invested Assets $ 16.8 $ 14.4
Separate Account and Investment Trust Assets 5.7 5.6
Total Assets 25.1 22.5
Total Equity 2.0 2.4
Book Value Per Share (3) $ 21.61 $ 23.51
Assets Under Management $ 63.7 $ 61.2
(1) Operating income represents net income adjusted for realized gains and for some non-recurring items that are not indicative
of the ongoing operations of the business segments. The size and timing of realized investment gains are often subject to
management's discretion. Certain non-recurring items are removed from net income if, in management's opinion, they are not
indicative of overall operating trends. While some of these items may be significant components of our net income, we
believe operating income is an appropriate measure that represents the net income attributable to the ongoing operations of
the business. However, operating income is not a substitute for net income determined in accordance with generally accepted
accounting principles, and may be different from similarly titled measures of other companies.
(2) Weighted average shares outstanding for fourth quarter 2002 is 94.2 million shares. Weighted average shares outstanding for
fourth quarter 2001 is 103.3 million shares. Weighted average shares outstanding for year-to-date 2002 and 2001 are 97.9
million shares and 104.6 million pro forma shares, respectively.
(3) Book value per share is based on 94.0 million and 101.9 million shares outstanding at year-end 2002 and 2001, respectively.
Consolidated Balance Sheet
December 31, 2002 and 2001
(in millions, except share data)
2002 2001
------------------ -----------------
ASSETS:
Available-for-sale debt securities, at fair value $ 11,851.2 $ 9,607.7
Equity securities, at fair value 391.2 290.9
Mortgage loans, at unpaid principal balances 468.8 535.8
Real estate, at lower of cost or fair value 69.6 83.1
Venture capital partnerships, at equity in net assets 228.6 291.7
Affiliate equity and debt securities 187.4 330.6
Policy loans, at unpaid principal balances 2,195.9 2,172.2
Other investments 313.8 282.4
------------------ -----------------
Total investments 15,706.5 13,594.4
Cash and cash equivalents 1,058.5 815.5
Accrued investment income 192.3 203.1
Premiums, accounts and notes receivable 194.9 147.8
Reinsurance recoverable balances 22.4 21.3
Deferred policy acquisition costs 1,234.1 1,123.7
Premises and equipment 110.0 117.7
Deferred income taxes 41.4 1.8
Goodwill and other intangible assets 762.0 858.6
Net assets of discontinued operations 20.8 20.8
Other general account assets 88.5 50.7
Separate account and investment trust assets 5,692.4 5,570.0
------------------ -----------------
Total assets $ 25,123.8 $ 22,525.4
================== =================
LIABILITIES:
Policy liabilities and accruals $ 12,826.4 $ 11,993.4
Policyholder deposit funds 3,249.3 1,368.2
Deferred income taxes -- --
Indebtedness 644.3 599.3
Delivery obligations under stock purchase contracts 147.2 --
Other general account liabilities 520.3 595.1
Separate account and investment trust liabilities 5,693.8 5,564.9
------------------ -----------------
Total liabilities 23,081.3 20,120.9
------------------ -----------------
MINORITY INTEREST:
Minority interest in net assets of subsidiaries 10.8 8.8
------------------ -----------------
STOCKHOLDERS' EQUITY:
Common stock, $0.01 par value, 1.0 billion shares authorized;
106.4 million shares issued 1.0 1.0
Additional paid-in capital 2,421.5 2,410.4
Accumulated deficit (292.6) (30.8)
Accumulated other comprehensive income 97.5 81.1
Treasury stock, at cost: 12.3 million and 4.5 million shares (195.7) (66.0)
------------------ -----------------
Total stockholders' equity 2,031.7 2,395.7
------------------ -----------------
Total liabilities, minority interest and stockholders' equity $ 25,123.8 $ 22,525.4
================== =================
Certain reclassifications have been made to the 2001 financial statements to conform with the year-end 2002 presentation.
Consolidated Statement of Income (in millions)
Period ended December 31
Fourth Fourth
Quarter Quarter Year-to-Date Year-to-Date
2002 2001 2002 2001
---------------- --------------- --------------- ----------------
REVENUES:
Premiums $ 268.1 $ 276.7 $1,082.0 $ 1,112.7
Insurance and investment product fees 137.7 132.1 563.3 546.4
Net investment income 239.5 254.6 915.2 843.2
Net realized investment losses (33.5) (35.2) (107.6) (72.4)
---------------- --------------- --------------- ----------------
Total revenues 611.8 628.2 2,452.9 2,429.9
---------------- --------------- --------------- ----------------
BENEFITS AND EXPENSES:
Policy benefits 365.4 350.0 1,436.1 1,406.7
Policyholder dividends 107.4 98.4 401.8 400.1
Policy acquisition cost amortization 17.6 37.7 59.2 133.0
Intangible asset amortization 7.7 12.2 98.8 49.4
Interest expense 8.3 6.1 31.4 27.3
Demutualization expenses 0.1 1.1 1.8 25.9
Other operating expenses 133.8 131.7 584.7 628.1
---------------- --------------- --------------- ----------------
Total benefits and expenses 640.3 637.2 2,613.8 2,670.5
---------------- --------------- --------------- ----------------
Income (loss) before income taxes and minority
interest (28.5) (9.0) (160.9) (240.6)
Applicable income tax (benefit) expense (16.7) (3.6) (57.1) (110.5)
---------------- --------------- --------------- ----------------
Income (loss) before minority interest (11.8) (5.4) (103.8) (130.1)
Minority interest in net income of subsidiaries 2.7 2.1 11.9 7.2
---------------- --------------- --------------- ----------------
Income (loss) before cumulative effect of
accounting changes (14.5) (7.5) (115.7) (137.3)
Cumulative effect of accounting changes:
Goodwill impairment -- -- (130.3) --
Securitized financial instruments, Venture capital
partnerships and derivative financial instruments -- -- -- (65.4)
---------------- --------------- --------------- ----------------
Net loss $ (14.5) $ (7.5) $(246.0) $ (202.7)
================ =============== =============== ================
Certain reclassifications have been made to the 2001 financial statements to conform with the 2002 presentation.
Reconciliation of Income Measures (in millions)
Fourth Fourth
Quarter Quarter Year-to-Date Year-to-Date
2002 2001 2002 2001
------------- ----------- --------------- ----------------
GAAP Reported: Net Loss $(14.5) $ (7.5) $ (246.0) $ (202.7)
------------- ----------- --------------- ----------------
Less: Cumulative Effect of Accounting Changes -- -- (130.3) (16.6)(A)
Net Realized Investment Gains (Losses),
after tax (22.7)(B) (22.1) (39.4)(B) (46.2)
Non-Recurring Items, after tax:
Deferred Policy Acquisition Costs
Adjustment -- -- 15.1 --
Expenses of Purchase of PXP Minority
Interest -- (2.9) -- (52.8)
Early Retirement Pension Adjustment -- (4.2) -- (15.5)
Management Restructuring Reserve -- -- (25.4) --
Staff Reductions Expense (3.1) -- (3.1) --
Demutualization Expense (0.1) (1.0) (1.3) (23.9)
Surplus tax -- -- -- 21.0
Other -- -- 0.1 5.4
------------- ----------- --------------- ----------------
(25.9) (30.2) (184.3) (128.6)
------------- ----------- --------------- ----------------
Operating Income (Loss) 11.4 22.7 (61.7) (74.1)(C)
Less: Venture Capital, after tax (1.5) 10.1 (38.5) (103.7)
Add: Goodwill and Intangibles Amortization 8.1 15.6 101.3 57.0
------------- ----------- --------------- ----------------
Cash Operating Income, Excluding Venture
Capital $ 21.0 $ 28.2 $ 78.1 $ 86.6
============= =========== =============== ================
(A) Cumulative effect of accounting changes excludes the cumulative effect of accounting change for venture capital
partnerships. See (C) below.
(B) Net realized investment gains and losses for 2002 are presented net of the related impact on the policyholder dividend
obligation and deferred acquisition cost amortization for 2002.
(C) Venture capital, after tax includes the cumulative effect of accounting change for venture capital partnerships of $75
million (pre tax) as management considers this when evaluating the financial performance of the venture capital
reporting segment.
Note: For additional information see our financial supplement.
