|[March 15, 2013]
The Phoenix Companies, Inc. (PNX) Provides Update on Restatement and Filing of GAAP Financial Results
HARTFORD, Conn. --(Business Wire)--
The Phoenix Companies, Inc. (NYSE:PNX) today updated the status of its
restatement of prior periods and filing of its third quarter 2012 Form
10-Q and its 2012 Form 10-K with the Securities and Exchange Commission
(SEC (News - Alert)).
On Nov. 8, 2012, Phoenix announced that it would restate previously
issued GAAP financial statements for the years ended December 31, 2011,
2010 and 2009, the interim periods for 2011, and the first and second
quarters of 2012. In its announcement, the company said it was delaying
filing its third quarter 2012 Form 10-Q pending the filing of restated
financial results, which it expected to be prior to the timely filing of
its 2012 Form 10-K.
Phoenix reported today that it will not meet the previously announced
timetable for filing its restated financial information and third
quarter 2012 Form 10-Q and will not timely file its 2012 Form 10-K. The
company will provide an update on or before April 30, 2013.
"We are making substantial progress in completing the restatement and
closing the third and fourth quarters of 2012, but even with a
significant level of dedicated resources, the scope and breadth of the
work involved is much more time consuming than we originally
anticipated. Resuming timely and accurate GAAP reporting is a top
priority, and we are focused intently on completing this process," said
James D. Wehr, president and chief executive officer.
Phoenix initiated the restatement to correct certain errors relating
to the classification of items on the consolidated statement of cash
flows in the prior periods. The company currently estimates
consolidated cash and cash equivalents as of June 30, 2012 will be
approximately $210 million, which is approximately $39 million less
than previously reported in its second quarter 2012 Form 10-Q. The
change is driven by balance sheet reclassifications of assets between
cash and other assets or other liabilities. These reclassifications
were in the operating subsidiaries, and there was no impact on holding
company cash. In addition, there was no impact on consolidated
Phoenix is adjusting the financial statements for errors previously
identified and recording the adjustments in the appropriate historical
period. It also has identified additional errors affecting prior
periods including actuarial valuation of certain insurance liabilities
and deferred policy acquisition cost assets, accounting for complex
reinsurance transactions, and valuation of certain private debt
securities and derivative instruments. The current estimated impact of
quantified corrections on reported consolidated stockholders' equity
as of June 30, 2012 is a reduction of less than 1% of the amount
previously reported in Phoenix's second quarter 2012 Form 10-Q. The
impact of these corrections on any individual period could be
material. Since the restatement work is not complete, the estimated
impact on consolidated stockholders' equity and consolidated cash and
cash equivalents is subject to additional adjustments that could be
material and adverse.
Phoenix continues to assess its disclosure controls and procedures and
internal control over financial reporting, and believes it has
identified multiple material weaknesses that will be reported in its
2012 Form 10-K.
The company filed a Current Report on Form 8-K/A today that details
the current status of the restatement.
FULL YEAR 2012 STATUTORY RESULTS FOR PHOENIX LIFE INSURANCE COMPANY
Phoenix Life Insurance Company (PLIC), the principal operating
subsidiary of The Phoenix Companies, Inc., filed its unaudited statutory
financial results for the year ended Dec. 31, 2012 with the New York
Department of Financial Services on March 1, 2013. These statutory
results are not indicative of the consolidated GAAP results of the
parent company. The following are highlights from that filing:
Statutory surplus and asset valuation reserve was $922.5 million at
Dec. 31, 2012, net of the $71.8 million in dividends paid to the
holding company during the year and the repurchase of $48. million
par amount of PLIC's outstanding 7.15% surplus notes due 2034.
Statutory surplus and asset valuation reserve was $845.7 million at
Dec. 31, 2011.
Risk-based capital ratio was 379% at Dec. 31, 2012.
Statutory net gain from operations was $160.5 million, and statutory
net income was $156.2 million for the year ended Dec. 31, 2012.
FOURTH QUARTER AND FULL YEAR 2012 ESTIMATED OPERATING METRICS FOR THE
PHOENIX COMPANIES, INC.
The following are currently estimated operating metrics for the fourth
quarter and full year 2012:
Annuity deposits of $193.2 million for the fourth quarter of 2012 and
$830.0 million for full year 2012.
Net annuity flows (deposits less surrenders) of $62.0 million for the
fourth quarter of 2012 and $294.6 million for full year 2012.
Annuity funds under management of $5.0 billion at Dec. 31, 2012.
Life insurance annualized premium of $0.8 million for the fourth
quarter of 2012 and $2.7 million for the full year 2012. Gross life
insurance in-force at Dec. 31, 2012 of $113.3 billion.
Fourth quarter 2012 mortality that was $8 million unfavorable to
expectations. Full year 2012 mortality that was modestly unfavorable
to expectations, and two-year results that were modestly favorable.
Fourth quarter 2012 total individual life surrenders at an annualized
rate of 6.2%, and closed block life policies at an annualized rate of
5.8%. Full year 2012 total individual life surrenders at 5.8%, and
closed block life policies at 5.4%.
Fourth quarter 2012 annuity surrenders at an annualized rate of 10.5%,
and full year 2012 annuity surrenders at 11.1%.
Holding company cash and securities of $144.5 million at Dec. 31, 2012.
Saybrus Partners EBITDA (Earnings Before Interest, Taxes, Depreciation
and Amortization), including inter-company revenues, of $1.8 million
for the fourth quarter of 2012 and $3.3 million of EBITDA for full
7.45% QUARTERLY INTEREST BONDS DUE 2032
On Jan. 16, 2013, Phoenix announced the success of its solicitation of
bondholders holding its outstanding 7.45% Quarterly Interest Bonds due
2032 (CUSIP 71902E 20 8) seeking a one-time consent to amend the
indenture governing the bonds and provide a related waiver. The approval
of the amendments and waiver allowed Phoenix to extend the date for
providing its third quarter 2012 Form 10-Q to the bond trustee to March
Phoenix is required to file its quarterly and annual reports with the
bond trustee within 15 days after the applicable SEC filing deadline.
Once that date passes, the trustee or holders representing 25% or more
in principal amount of the bonds may then initiate a 60-day "cure"
period. If the reports are not delivered to the trustee before the cure
period expires, the trustee or holders representing 25% or more in
principal amount of the bonds can request acceleration of maturity.
With today's announcement, Phoenix has concluded that it will not meet
the respective deadlines for providing the trustee with its third
quarter 2012 Form 10-Q or 2012 Form 10-K. If the company later concludes
that it does not expect to deliver these reports within the cure
periods, it may solicit its bondholders for another consent that would
further extend the deadline for providing the trustee with the third
quarter 2012 Form 10-Q and extend the deadline for providing the 2012
Even without another successful solicitation of bondholders, the company
believes acceleration to be unlikely because of, among other things, the
favorable interest rate paid on the bonds. However, the company believes
it would have adequate liquidity in the holding company to meet those
obligations if an acceleration occurred directly after the cure periods.
ANNUAL MEETING OF SHAREHOLDERS
Phoenix will announce the date for its 2013 Annual Meeting of
Shareholders once a timetable for the filing of its 2012 Form 10-K is
Headquartered in Hartford, Connecticut, The Phoenix Companies, Inc.
(NYSE:PNX) is a boutique life insurance and annuity company serving
customers' retirement and protection needs through select independent
distributors. For more information, visit www.phoenixwm.com.
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
The foregoing may contain "forward-looking statements" within the
meaning of the Private Securities Litigation Reform Act of 1995. We
intend these forward-looking statements to be covered by the safe harbor
provisions of the federal securities laws relating to forward-looking
statements. These forward-looking statements include statements
relating to trends in, or representing management's beliefs about, our
future transactions, strategies, operations and financial results, and
often contain words such as "will," "anticipate," "believe," "plan,"
"estimate," "expect," "intend," "is targeting," "may," "should" and
other similar words or expressions. Forward-looking statements are made
based upon management's current expectations and beliefs concerning
trends and future developments and their potential effects on us. They
are not guarantees of future performance.
Our actual business, financial condition or results of operations may
differ materially from those suggested by forward-looking statements as
a result of risks and uncertainties which include, among others: the
Company's ability to produce restated financial results and provide
final third quarter and year-end 2012 financial information in the
anticipated timeframes; the impact of downgrades in our debt or
financial strength ratings; if we fail to maintain an effective system
of internal control over financial reporting, the accuracy and timing of
our financial reporting may be adversely affected and, as previously
reported, management will likely conclude that there are multiple
material weaknesses in our internal control over financial reporting;
the impact of our anticipated incurrence of significant expenses related
to our financial restatement and our failure to timely file our third
quarter 2012 Form 10-Q and 2012 Form 10-K with the SEC; the impact that
our financial restatement and the delay in filing our third quarter 2012
Form 10-Q and 2012 Form 10-K may have on our ability to access alternate
financing arrangements to fund our ongoing operations; the impact of the
financial restatement process of one of our principal insurance company
subsidiaries and our financial restatement on the level of regulatory
scrutiny on us and our subsidiaries; the impact of our limited ability
to register our securities for offer and sale until we are current with
our relevant SEC filing obligations; and the impact of the outcome of
litigation and other claims not in our favor, which could have a
material adverse effect on our financial condition, liquidity or
consolidated financial statements.
Certain other factors which may impact our business, financial
condition or results of operations or which may cause actual results to
differ from such forward-looking statements are discussed or included in
our reports filed with the SEC and are available on our website at www.phoenixwm.com
under "Investor Relations." You are urged to carefully consider
all such factors. We do not undertake or plan to update or revise
forward-looking statements to reflect actual results, changes in plans,
assumptions, estimates or projections, or other circumstances occurring
after the date of this news release, even if such results, changes or
circumstances make it clear that any forward-looking information will
not be realized.
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