EXHIBIT 99.1
THE PHOENIX COMPANIES, INC.
NEWS RELEASE
EXHIBIT 99.1
[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
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FOR IMMEDIATE RELEASE
CONTACTS: MEDIA RELATIONS INVESTOR RELATIONS
--------------- ------------------
ALICE S. ERICSON PETER A. HOFMANN
860-403-5946 860-403-7100
PHOENIX REPORTS FIRST QUARTER 2003 RESULTS
HARTFORD, CONN., MAY 8, 2003 -The Phoenix Companies, Inc. (NYSE: PNX)
today reported first quarter 2003 net income of $3.2 million or $0.03 per
share, compared with a net loss of $101.4 million, or a $1.00 loss per
share, in the first quarter of 2002.
The company also reported total segment income in the first quarter of
$16.8 million, or $0.18 per share, compared with total segment income of
$12.8 million, or $0.13 per share, in the first quarter of 2002.
EARNINGS SUMMARY FIRST QUARTER FIRST QUARTER
2003 2002
-------------------------- --------------------------
IN PER IN PER
MILLIONS SHARE MILLIONS SHARE
----------- ---------- ------------ ----------
Total Segment Income $ 16.8 $0.18 $ 12.8 $ 0.13
Net Realized Investment Gains (Losses) (12.4) (0.13) 1.6 0.02
Management Restructuring Charge (2.5) (0.03) - -
Deferred Policy Acquisition Cost Adjustment - - 15.1 0.15
Demutualization Expense - - (0.6) (0.01)
Other Income 1.3 0.01 - -
Cumulative Effect of Accounting Change - - (130.3) (1.29)
----------- ---------- ------------ ----------
Net Income (Loss) $ 3.2 $0.03 $(101.4) $(1.00)
=========== ========== ============ ==========
An explanation of financial measures is provided at the end of this
release.
"We are encouraged by the progress we have made and the emerging
results, particularly given the continued market weakness in the first
quarter. We also are pleased to see an upturn in the equity markets since
the end of the quarter. With a lower expense base, sharper business focus
and a committed senior management team in place, Phoenix is in an
excellent position to benefit from improved market conditions and more
positive investor sentiment," said Dona D. Young, chairman, president and
chief executive officer.
Mrs. Young added, "We are on schedule to deliver on each of the four
key priorities announced in the fourth quarter to enhance Phoenix's
financial performance and position the company for consistent earnings
growth. With the addition of Sue Collins to lead the life and annuity
business and Dan Geraci to lead the asset management business, we now
have the management team in place to further accelerate our progress in
the months ahead."
Since the start of the year, the company:
o Completed the foundation to build a performance culture to drive
shareholder value by:
- aligning company, department and individual goals and
establishing metrics to gauge progress; and
- redesigning and rolling out new short- and long-term incentive
compensation plans directly linked to achieving those goals;
o Continued its effort to lower expenses permanently by:
- remaining on track to realize $34 million in annualized savings
by the end of 2003; and
- identifying further reductions of $5 million in annualized
expenses to be achieved by the end of 2004 through more
effective vendor management. The company now expects to achieve
annualized reductions of $45 million by year-end 2006, including
$6 million from a comprehensive facilities plan;
o Intensified its focus on core wealth management products and
services by:
- exiting its operations in Japan and certain of its operations in
the U.K.;
- announcing the combination of two of its investment affiliates,
Capital West Asset Management, LLC, and Duff & Phelps Investment
Management Co. under common leadership; and
- buying the remaining shares of PFG Holdings, Inc., which
specializes in private placement insurance for the high end of
the affluent and high-net-worth market, on May 1. Phoenix had
been the majority owner of PFG since 1999;
o Enhanced capital and resource allocation strategies by:
- mitigating potential earnings volatility through the sale of a
portion of its venture capital portfolio to third parties and
Phoenix Life Insurance Company's closed block; and
- completing a review of securitization of the residual assets
associated with the company's closed block. The company decided
not to proceed with the securitization at this time, but it
completed the groundwork and developed a flexible structure that
will allow it to use securitization to raise capital if there is
a compelling use of proceeds that significantly enhances the
position of the life company or produces higher earnings.
REGULATION G
As a consequence of the SEC's Regulation G, which became effective on
March 29, and to provide greater clarity in its financial reporting,
Phoenix is no longer reporting non-GAAP financial measures that exclude
results of its Venture Capital segment and amortization of identified
intangible assets. The company is now presenting operating results on a
segment basis, with total segment income representing net income adjusted
for realized gains and losses and for certain other items that are not
indicative of the ongoing operations of the business segments. In
addition, the company is suspending discussion of its return on equity
target. The target continues in effect for internal management purposes.
SEGMENT RESULTS
Phoenix has two operating segments, "Life and Annuity" and "Asset
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.
SEGMENT INCOME FIRST FIRST
(in millions) QUARTER QUARTER
2003 2002 CHANGE
-------------- --------------- --------------
Life Insurance $ 22.7 $ 25.6 $ (2.9)
Annuities (5.3) 2.6 (7.9)
-------------- --------------- --------------
Life and Annuity Segment 17.4 28.2 (10.8)
Asset Management Segment (4.6) 1.9 (6.5)
Venture Capital Segment 23.9 (5.0) 28.9
Corporate and Other Segment (12.6) (8.7) (3.9)
-------------- --------------- --------------
Total Segment Income, before Income Taxes 24.1 16.4 7.7
Applicable Income Taxes 7.3 3.6 3.7
-------------- --------------- --------------
Total Segment Income $16.8 $12.8 $4.0
============== =============== ==============
LIFE AND ANNUITY
Operations and Earnings - This segment reported income before income
taxes of $17.4 million in the first quarter of 2003, compared with $28.2
million in the prior year's first quarter. The decrease is primarily
attributable to a $7.9 million decline in the annuity product line.
The segment result includes income of $22.7 million from the life
insurance business, compared with life insurance income of $25.6 million
in the first quarter of 2002. The prior year's results included the
release of a $2.9 million reserve relating to a policyholder tax
contingency. While overall mortality and persistency in life insurance
remained strong, universal life experienced negative mortality compared
to prior quarters. Higher net reinsurance costs and higher amortization
of deferred acquisition costs also affected the result.
Total life insurance sales (annualized premium and single premium)
were $49.8 million in the first quarter of 2003, compared with $56.5
million in the first quarter of 2002, which included a single, $10.4
million annualized premium, multi-life case. Sales of universal life
insurance and private placement insurance rose over the year-ago quarter,
while sales of variable life products declined.
Annualized premium was $27.7 million in the first quarter of 2003,
compared with $37.6 million in the first quarter of 2002. Average face
amounts for wholesaled new business passed the $1 million mark for the
first time and continued to exceed $1 million for combined wholesaled and
private placement policies. New business activity remains strong, with
total applications submitted to underwriting during the quarter up 41
percent compared with the year-ago quarter.
The segment result includes a loss of $5.3 million from the annuity
business, compared with income of $2.6 million in the first quarter of
2002. The decrease is primarily attributable to lower fees and higher
amortization of deferred acquisition costs resulting from spread
compression and higher surrenders. The company has amended its variable
annuity contracts to limit deposits in guaranteed interest accounts for
new variable annuity sales effective April 1, 2003. In addition, the
company plans to introduce additional product features this summer to
mitigate the financial impact of its discontinued Retirement Planner's
Edge (RPE) variable annuity.
Annuity deposits in the first quarter of 2003 were $432.1 million,
compared with $575.4 million in the first quarter of 2002. The company
has made significant progress in replacing sales of RPE with other
products. Sales of variable annuities, excluding RPE, more than doubled
from a year ago, and fixed annuity sales were also strong this quarter,
due primarily to increased sales at community and regional banks.
Closed Block - Phoenix Life's closed block had continued strong
performance in the quarter. Excluding unrealized gains, the policyholder
dividend obligation (PDO), which represents accumulated earnings in the
closed block, grew by $11.5 million in the current quarter to $80.6
million at March 31, 2003; the PDO was $32.2 million at March 31, 2002.
The increase in the current quarter was driven by significantly improved
persistency and by a $5 million pre-tax venture capital partnership
realized gain.
ASSET MANAGEMENT
Reflecting the weak financial markets in the first quarter, this
segment reported a loss before income taxes of $4.6 million, compared
with income before income taxes of $1.9 million in the prior year's first
quarter. The result includes amortization of identified intangible assets
of $8.4 million in the first quarter of 2003 and $9.6 million in the
first quarter of 2002. Management has responded to the lingering market
pressures by continuing to seek ways to gain efficiencies and improve
margins. Operating expenses declined 12 percent this quarter, but the
reductions were not sufficient to offset the decrease in revenues.
The earnings decline is largely attributable to lower revenues on
assets under management and lower earnings from Aberdeen Asset
Management, PLC, in which the company has an equity ownership interest.
This quarter the company began to record interest income related to the
debt of Aberdeen in the Life and Annuity segment. Assets under management
for the segment on March 31, 2003 were $52.9 billion, compared with $60.7
billion on March 31, 2002.
Net flows for assets under management were negative $152.3 million in
the first quarter of 2003, compared with positive net flows of $399.5
million in the first quarter of 2002, due primarily to lower managed
account inflows. Total inflows were $1.7 billion in the first quarter of
2003, compared with $2.3 billion in the prior year's first quarter,
reflecting uncertain market conditions and decreased demand for equity
products. Total outflows were $1.8 billion in the first quarter of 2003,
about even with the $1.9 billion in first quarter 2002 outflows and a
third consecutive quarterly improvement.
VENTURE CAPITAL
The Venture Capital segment had income before income taxes of $23.9
million in the first quarter of 2003, compared with a $5.0 million loss
before income taxes in the prior year's first quarter. The improvement
was driven by the effect of the reconciliation to the partnerships'
audited fourth quarter financials. The Venture Capital segment excludes
venture capital investments held by Phoenix Life's
closed block and represents approximately 1 percent of the $17.2 billion
of invested assets and cash in the general account portfolio.
Total distributions by partnerships in the first quarter of 2003 were
$3.0 million, compared with $9.4 million in the first quarter of 2002. In
addition, the segment received proceeds of $52.2 million from the sale of
certain partnership interests to third parties and the transfer of an
equal amount to Phoenix Life's closed block. The sale and transfer
resulted in a $13.8 million pre-tax realized loss in the first quarter as
the reconciliations to the partnerships' audited financial statements
were recorded as investment income.
Capital contributions to partnerships, pursuant to existing
commitments, were $11.6 million in the first quarter of 2003, compared
with $13.0 million in the first quarter of 2002. The company made no new
commitments to venture capital during the quarter.
CORPORATE AND OTHER
In the first quarter of 2003, the Corporate and Other segment had a
$12.6 million loss before income taxes, compared with a loss before
income taxes of $8.7 million in the prior year's first quarter. The
higher loss primarily reflects contract adjustment payments on stock
purchase contracts related to the fourth quarter 2002 monetization of a
significant portion of the company's holdings in Hilb, Rogal and Hamilton
Company, as well as increased interest expense related to Phoenix's
fourth quarter 2002 equity units offering.
INVESTMENT PORTFOLIO
The company reported first quarter 2003 net realized investment losses
of $12.4 million, compared with net gains of $1.6 million in the first
quarter of 2002. This includes after-tax realized losses of $8.9 million
($13.8 million pre-tax) related to the venture capital transactions
discussed above. Bond impairments in the first quarter totaled $25.6
million, representing 0.2 percent of the bond portfolio, and included a
write-down related to HealthSouth ($8 million) and a further write-down
related to National Century Financial ($3 million). While default levels
in the credit markets remained high, the company continued to benefit
from a very high level of diversification by sector, industry and issuer.
During the
quarter, the company reduced its exposure to emerging markets debt, a
sector that produced exceptionally strong performance in the past year.
This reduction contributed to an overall decline in its below investment
grade exposure to 8.4 percent of debt securities at March 31, 2003 from
9.0 percent at December 31, 2002.
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
first quarter financial results. 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
1-973-321-1020. A replay of the call will be available through May 22,
2003 by telephone at 1-973-341-3080 (passcode 3862727) and 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)
FIRST FOURTH FIRST
QUARTER QUARTER QUARTER
2003 2002 2002
------------- ------------- -------------
INCOME STATEMENT SUMMARY ($ IN MILLIONS)
Revenues $ 643.4 $ 611.8 $ 593.9
Total Segment Income (1) 16.8 11.3 12.8
Net Income (Loss) 3.2 (14.5) (101.4)
- -----------------------------------------------------------------------------
EARNINGS PER SHARE
Weighted average shares outstanding (in thousands) (2) 94,046 94,152 101,195
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Basic and Diluted
-----------------
Total Segment Income Per Share $ 0.18 $ 0.12 $ 0.13
Net Income (Loss) Per Share $ 0.03 $ (0.15) $ (1.00)
- -----------------------------------------------------------------------------
BALANCE SHEET SUMMARY
($ IN BILLIONS, EXCEPT PER SHARE DATA)
Invested Assets $ 17.2 $ 16.8 $ 14.5
Separate Account and Investment Trust Assets 6.0 5.8 5.7
Total Assets 25.9 25.2 22.9
Total Stockholders' Equity 2.0 2.0 2.2
Common and Equivalent Shares outstanding (in thousands) 95,056 94,617 100,054
------------- ------------- -------------
Book Value Per Share $ 21.20 $ 21.47 $ 22.17
Assets Under Management $ 63.1 $ 63.8 $ 69.8
(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. See the reconciliation of these
measures below. Total segment income is an internal performance measure used
by Phoenix in the management of its operations, including it compensation
plans and budgeting and planning processes. In addition, management believes
that total 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 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 which result from a business restructuring, a change
in regulatory requirements, or other unusual circumstances are excluded
from total segment income because we believe they are not indicative of
overall operating trends and are items that management believes are
infrequent and material.
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.
(2) For diluted total segment income and net income per share amounts, weighted
average common and equivalent shares outstanding were 95,014, 94,725 and
101,195 for the first quarter 2003, fourth quarter 2002 and first quarter
2002, respectively. Diluted total segment and net income per share amounts
are unchanged from the basic total segment and net income per share amounts
from the addition of the restricted stock units outstanding to weighted
average shares outstanding.
CONSOLIDATED BALANCE SHEET
March 31, 2003 and December 31, 2002
(in millions, except share data)
2003 2002
------------- -------------
ASSETS:
Available-for-sale debt securities, at fair value $ 12,818.4 $ 11,894.1
Equity securities, at fair value 361.1 391.2
Mortgage loans, at unpaid principal balances 407.3 468.8
Venture capital partnerships, at equity in net assets 227.4 228.6
Affiliate equity securities, at cost plus equity in earnings 131.3 134.7
Policy loans, at unpaid principal balances 2,202.9 2,195.9
Other investments 421.5 398.9
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Total investments 16,569.9 15,712.2
Cash and cash equivalents 613.0 1,058.5
Accrued investment income 212.1 192.3
Receivables 276.3 217.3
Deferred policy acquisition costs 1,270.0 1,234.1
Deferred income taxes 66.0 41.4
Goodwill and other intangible assets 748.3 762.0
Other general account assets 186.2 225.2
Separate account and investment trust assets 5,990.7 5,793.1
------------- -------------
Total assets $ 25,932.5 $ 25,236.1
============= =============
LIABILITIES:
Policy liabilities and accruals $ 12,798.4 $ 12,680.0
Policyholder deposit funds 3,679.0 3,395.7
Stock purchase contracts 118.5 137.6
Indebtedness 644.0 644.3
Other general account liabilities 680.0 542.9
Separate account and investment trust liabilities 5,990.7 5,793.1
------------- -------------
Total liabilities 23,910.6 23,193.6
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MINORITY INTEREST:
Minority interest in net assets of subsidiaries 6.4 10.8
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STOCKHOLDERS' EQUITY:
Common stock, $0.01 par value, 106,375,583 and
106,374,510 shares issued 1.0 1.0
Additional paid-in capital 2,427.1 2,424.4
Deferred compensation on restricted stock units (2.8) -
Accumulated deficit (289.4) (292.6)
Accumulated other comprehensive income 74.6 94.6
Treasury stock, at cost: 12,287,667 and 12,330,000 shares (195.0) (195.7)
------------- -------------
Total stockholders' equity 2,015.5 2,031.7
------------- -------------
Total liabilities, minority interest and stockholders' equity $ 25,932.5 $ 25,236.1
============= =============
Certain reclassifications have been made to the 2002 financial statements to
conform with the March 31, 2003 presentation.
CONSOLIDATED STATEMENT OF INCOME (IN MILLIONS)
FIRST FOURTH FIRST
QUARTER QUARTER QUARTER
2003 2002 2002
------------- ------------- -------------
REVENUES:
Premiums $ 246.1 $ 268.1 $ 257.4
Insurance and investment product fees 132.9 137.7 140.3
Net investment income 276.7 239.5 231.2
Net realized investment losses (12.3) (33.5) (35.0)
------------- ------------- -------------
Total revenues 643.4 611.8 593.9
------------- ------------- -------------
BENEFITS AND EXPENSES:
Policy benefits 350.8 365.4 333.9
Policyholder dividends 116.5 107.4 74.2
Policy acquisition cost amortization 28.0 17.6 (10.9)
Intangible asset amortization 8.4 7.7 8.1
Interest expense 9.8 8.3 7.7
Demutualization expenses - .1 .9
Other operating expenses 126.5 133.8 136.0
------------- ------------- -------------
Total benefits and expenses 640.0 640.3 549.9
------------- ------------- -------------
Income (loss) before income taxes and minority interest 3.4 (28.5) 44.0
Applicable income taxes (benefit) (2.6) (16.7) 12.3
------------- ------------- -------------
Income (loss) before minority interest 6.0 (11.8) 31.7
Minority interest in net income of subsidiaries 2.8 2.7 2.8
------------- ------------- -------------
INCOME (LOSS) BEFORE CUMULATIVE EFFECT OF
ACCOUNTING CHANGES 3.2 (14.5) 28.9
Cumulative effect of accounting change for goodwill
and other intangible assets - - (130.3)
------------- ------------- -------------
NET INCOME (LOSS) $ 3.2 $ (14.5) $ (101.4)
============= ============= =============
Certain reclassifications have been made to the 2002 financial statements to
conform with the 2003 presentation.
RECONCILIATION OF INCOME MEASURES (IN MILLIONS)
FIRST FOURTH FIRST
QUARTER QUARTER QUARTER
2003 2002 2002
----------- ----------- -----------
SEGMENT INCOME
Life insurance $ 22.7 $ 29.5 $ 25.6
Annuities (5.3) (5.0) 2.6
----------- ----------- -----------
Life and annuity segment 17.4 24.5 28.2
Asset management segment (4.6) 2.5 1.9
Venture capital segment 23.9 (2.4) (5.0)
Corporate and other segment (12.6) (16.6) (8.7)
----------- ----------- -----------
Segment income, before income taxes 24.1 8.0 16.4
Applicable income taxes (benefit) 7.3 (3.3) 3.6
----------- ----------- -----------
TOTAL SEGMENT INCOME 16.8 11.3 12.8
Realized gains (losses), after income taxes (12.4) (22.6) 1.6
Management restructuring costs (2.5) (3.1) -
Deferred policy acquisition cost adjustment - - 15.1
Demutualization related items, net - (0.1) (0.6)
Other income 1.3 - -
Cumulative effect of accounting change - - (130.3)
----------- ----------- -----------
NET INCOME (LOSS) $ 3.2 $ (14.5) $ (101.4)
=========== =========== ===========