Business Wire, Inc. |
For the fourth quarter of 2011, the company reported a net loss of
Excluding unusual items totaling
“We delivered another solid quarter in a solid year, sustaining favorable trends in our fundamentals including mortality, persistency, investment performance, core operating earnings and sales,” said
“In fact, 2011 was our strongest year since 2007 as we built on the progress made in the previous two years and established a sustainable path for profitable growth. At the same time, we continue to strengthen the balance sheet, effectively manage our large inforce block, and further reduce expenses. We were pleased to see these improvements recently acknowledged by two of the rating agencies with outlook changes to ?positive,’”
“We ended 2011 with a stabilized and enhanced financial profile, improved capital adequacy and positive earnings momentum, as well as confidence in our prospects for 2012 and beyond,” he said.
FOURTH QUARTER AND FULL YEAR EARNINGS SUMMARY |
||||||||||||||||||||||||||
($ in millions) |
Fourth |
Third
Quarter 2011 |
Fourth |
Full Year 2011 |
Full Year 2010 |
|||||||||||||||||||||
Net Income (Loss) | $ | (22.0 | ) | $ | 31.8 | $ | (11.6 | ) | $ | 8.1 | $ | (12.6 | ) | |||||||||||||
Realized Gains (Losses) | (9.4 | ) | 6.1 | (29.3 | ) | (16.4 | ) | (9.9 | ) | |||||||||||||||||
Net DAC, PDO, Tax and Other Offsets | 1.4 | 1.4 | 12.8 | 4.5 | (5.1 | ) | ||||||||||||||||||||
Discontinued Operations1 |
(15.1 | ) | (4.7 | ) | (2.9 | ) | (22.0 | ) | 12.0 | |||||||||||||||||
Operating Income (Loss)2 |
$ | 1.1 | $ | 29.0 | $ | 7.8 | $ | 42.0 | $ | (9.6 | ) | |||||||||||||||
Applicable Income Tax Expense (Benefit) | 1.5 | (9.0 | ) | 10.0 | 6.2 | (4.6 | ) | |||||||||||||||||||
Operating Income (Loss) Before Taxes2 | $ | 2.6 | $ | 20.0 | $ | 17.8 | $ | 48.2 | $ | (14.2 | ) | |||||||||||||||
Earnings Per Share Summary | ||||||||||||||||||||||||||
Net Income (Loss) Per Share | ||||||||||||||||||||||||||
Basic | $ | (0.19 | ) | $ | 0.27 | $ | (0.10 | ) | $ | 0.07 | $ | (0.11 | ) | |||||||||||||
Diluted | $ | (0.19 | ) | $ | 0.27 | $ | (0.10 | ) | $ | 0.07 | $ | (0.11 | ) | |||||||||||||
Operating Income (Loss) Per Share | ||||||||||||||||||||||||||
Basic | $ | 0.01 | $ | 0.25 | $ | 0.07 | $ | 0.36 | $ | (0.08 | ) | |||||||||||||||
Diluted | $ | 0.01 | $ | 0.25 | $ | 0.07 | $ | 0.36 | $ | (0.08 | ) | |||||||||||||||
Weighted Average Shares Outstanding
(in millions) |
||||||||||||||||||||||||||
Basic | 116.5 | 116.9 | 116.3 | 116.5 | 116.3 | |||||||||||||||||||||
Diluted | 116.5 | 117.1 | 116.3 | 118.0 | 116.3 |
1 Net of taxes.
2 Net realized investment gains (losses) and the related offsets, are excluded from operating income because their size and timing are frequently subject to management’s discretion. Operating income, as well as components of and financial measures derived from operating income, are non-GAAP financial measures. Management believes that these measures provide investors with additional insight into the underlying trends in our operations. In addition, these are internal performance measures we use in the management of our operations, including our compensation plans and planning processes. Net income and net income per share are the most directly comparable GAAP measures. Our non-GAAP financial measures should not be considered as substitutes for net income and net income per share. Therefore, investors should evaluate both GAAP and non-GAAP financial measures when reviewing our performance.
UNUSUAL ITEMS
To help investors understand the company’s results, unusual items included in operating income are detailed in the following table.
Unusual Items
($ in millions) |
Fourth |
Third
Quarter 2011 |
Fourth |
Full Year |
Full Year |
||||||||||||||||
Pre-demutualization Retirement Benefits | $ | 11.5 | — | — | $ | 11.5 | — | ||||||||||||||
Unclaimed Death Benefits (NY Section 308) | $ | 3.6 | — | — | $ | 3.6 | — | ||||||||||||||
DAC Unlocking | — | $ | 1.4 | — | $ | 1.4 | $ | 36.3 | |||||||||||||
Reinsurance Transaction Impact | — | — | — | — | $ | 10.5 | |||||||||||||||
Unusual Expenses1 | — | — | — | — | $ | 5.9 | |||||||||||||||
Total Impact to Pre-Tax Operating Income | $ | 15.1 | $ | 1.4 |
|
— | $ | 16.5 | $ | 52.7 | |||||||||||
Earnings Per Share Impact | | ||||||||||||||||||||
Basic | $ | 0.13 | $ | 0.01 | $ | 0.00 | $ | 0.14 | $ | 0.45 | |||||||||||
Diluted | $ | 0.13 | $ | 0.01 | $ | 0.00 | $ | 0.14 | $ | 0.45 | |||||||||||
Weighted Average Shares Outstanding
(in millions) |
|||||||||||||||||||||
Basic | 116.5 | 116.9 | 116.3 | 116.5 | 116.3 | ||||||||||||||||
Diluted | 116.5 | 117.1 | 116.3 | 118.0 | 116.3 |
1 Includes severance costs and tax adjustments.
SELECTED COMPONENTS OF EARNINGS |
|||||||||||||||||||||
($ in millions) |
Fourth |
Third
Quarter 2011 |
Fourth |
Full Year 2011 |
Full Year 2010 |
||||||||||||||||
Net Investment Income | $ | 197.3 | $ | 201.0 | $ | 228.9 | $ | 809.9 | $ | 844.6 | |||||||||||
Total Revenue1 | $ | 450.4 | $ | 472.1 | $ | 487.7 | $ | 1,849.7 | $ | 1,986.3 | |||||||||||
Other Operating Expenses | $ | 69.7 | $ | 57.2 | $ | 72.2 | $ | 245.2 | $ | 291.3 |
1 Prior period amounts have been revised to reflect the correction of a classification error related to the historical presentation of ceded premiums related to certain reinsurance contracts within the closed block. Refer to the consolidated statement of income for additional information.
FOURTH QUARTER AND FULL YEAR OPERATING RESULTS
- Fourth-quarter 2011 pre-tax operating income of
$2.6 million , compared with pre-tax operating income of$17.8 million for the fourth quarter of 2010, was driven by higher earnings from Phoenix’s distribution company,Saybrus Partners, Inc. , and lower expenses, offset by reduced investment income and lower mortality margins. Full-year 2011 pre-tax operating income of$48.2 million , compared with a full-year 2010 pre-tax operating loss of$14.2 million , was primarily attributable to lower expenses and DAC amortization as well as strong mortality. - Fourth-quarter 2011 revenues of
$450.4 million decreased 8 percent from the fourth quarter of 2010, due primarily to lower net investment income. Full-year 2011 revenues of$1.8 billion declined 7 percent from full-year 2010, driven primarily by lower premiums. The premium revenue decline relates almost exclusively to closed block policies (sold before the 2001 demutualization) and is consistent with expectations for this block. - Net investment income was
$197.3 million for the fourth quarter of 2011, compared with$201.0 million for the third quarter of 2011 and$228.9 million for the fourth quarter of 2010. The decrease from the third quarter was driven primarily by fair value option investments while the year-over-year decrease was driven primarily by lower alternative asset returns. Full-year 2011 net investment income was$809.9 million , compared with$844.6 million for full-year 2010. The full-year decrease was driven primarily by lower alternative asset returns. - Total individual life surrenders were at an annualized rate of 6.0 percent for the fourth quarter of 2011, compared with 7.0 percent for the third quarter of 2011 and 7.7 percent for the fourth quarter of 2010. The closed block’s annualized surrender rate was 5.5 percent for the fourth quarter of 2011, compared with 7.0 percent for the third quarter of 2011 and 7.2 percent for the fourth quarter of 2010. Total individual life surrenders for full-year 2011 were 6.5 percent, improved from 8.1 percent for full-year 2010.
- Annuity surrenders for the fourth quarter of 2011 were at an annualized rate of 9.7 percent, improved from 11.3 percent for the third quarter of 2011 and 11.9 percent for the fourth quarter of 2010. The full-year 2011 annuity surrender rate was 11.4 percent, improved from 12.4 percent for full-year 2010.
- Overall mortality experience for the fourth quarter of 2011 was in line with expectations. Full-year 2011 mortality experience was favorable compared with expectations, with very favorable experience in the open block that was a meaningful contributor to 2011 earnings.
- Total other operating expenses improved for the fourth quarter of 2011 to
$69.7 million from$72.2 million for the fourth quarter of 2010. Core operating expenses before deferrals were$48.8 million for the fourth quarter of 2011, compared with$61.8 million for the fourth quarter of 2010. The improvement primarily reflects lower professional fees and other outside services, which more than offset additional expenses associated with a previously announced policy administration system conversion. Full-year 2011 total other operating expenses improved 16 percent to$245.2 million from$291.3 million for full-year 2010, while full-year 2011 core operating expenses improved 14 percent to$197.1 million from$230.5 million for full-year 2010. Core operating expenses before deferrals represent total other operating expenses excluding premium taxes, reinsurance allowances, commissions, sales incentives and unusual expenses. - The company recorded a
$1.5 million tax expense for the fourth quarter of 2011 and a$6.2 million tax expense for full-year 2011. - Annuity deposits were
$275.9 million for the fourth quarter of 2011, compared with$279.0 million for the third quarter of 2011 and$135.9 million for the fourth quarter of 2010. Full-year 2011 annuity deposits were$951.5 million compared with$220.8 million for full-year 2010. New sales were comprised primarily of fixed indexed annuities. - Fourth-quarter 2011 net annuity flows remained positive for the fifth consecutive quarter at
$171.1 million , compared with net flows of$17.5 million for the fourth quarter of 2010. Full-year 2011 net annuity flows were$466.4 million , compared with negative net flows of$261.7 million for full-year 2010, contributing to a 10 percent year-over-year increase in annuity funds under management to$4.5 billion atDecember 31, 2011 . - Life insurance annualized premium was
$0.6 million for the fourth quarter of 2011, compared with$0.4 million for the third quarter of 2011 and$0.8 million for the fourth quarter of 2010. Gross life insurance in-force atDecember 31, 2011 was$124.6 billion , a 9 percent decrease fromDecember 31, 2010 . - Saybrus showed continued earnings momentum for the fourth quarter of 2011 with
$0.4 million of EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization, including inter-company revenues) compared with$0.2 million of EBITDA for the third quarter of 2011 and an EBITDA loss of$3.0 million for the fourth quarter of 2010. For full-year 2011, Saybrus recorded a$0.5 million EBITDA loss compared with an EBITDA loss of$19.1 million for full-year 2010. Saybrus more than tripled revenues in 2011 to$18.2 million from$5.9 million in 2010 through deeper penetration within its third-party distribution relationships and strong sales ofPhoenix products.
REALIZED AND UNREALIZED INVESTMENT GAINS AND LOSSES
Net unrealized gains on fixed income securities increased to
Net realized investment losses for full-year 2011 were
The company reported
Realized Investment Gains and Losses
($ in millions) |
Fourth |
Third
Quarter 2011 |
Fourth |
Full Year |
Full Year |
|||||||||||||||||||||
Net Other-than-temporary Impairment Losses |
$ |
(8.6 |
) |
$ |
(8.4 |
) |
$ |
(10.8 |
) |
$ |
(25.7 |
) |
$ |
(49.6 |
) |
|||||||||||
Transaction Gains (Losses) | 8.3 | 2.7 | 0.8 | 15.8 | 44.1 | |||||||||||||||||||||
Results of Variable Annuity Hedge Program | ||||||||||||||||||||||||||
|
(1.5 | ) | (9.4 | ) | (1.8 | ) | (10.3 | ) | 1.7 | |||||||||||||||||
|
(5.6 | ) | 26.9 | (16.1 | ) | 15.9 | 1.4 | |||||||||||||||||||
Other Embedded Derivative Liabilities, Net | 4.6 | (11.8 | ) | 8.7 | (9.1 | ) | 7.5 | |||||||||||||||||||
Surplus Hedge | (7.7 | ) | 8.8 | (12.5 | ) | (2.4 | ) | (19.6 | ) | |||||||||||||||||
Cross Currency | — | — | — | — | 1.1 | |||||||||||||||||||||
|
1.1 | (2.7 | ) | 2.4 | (0.6 | ) | 3.5 | |||||||||||||||||||
Total Net Realized Investment Gains (Losses) | $ | (9.4 | ) | $ | 6.1 | $ | (29.3 | ) | $ | (16.4 | ) | $ | (9.9 | ) | ||||||||||||
Credit-related impairments net of offsets for |
$ |
(6.6 |
) |
$ |
(6.2 |
) |
$ |
(8.0 |
) |
$ |
(19.8 |
) |
$ |
(37.6 |
) |
|||||||||||
Non-credit portion of impairment loss |
$(11.0 |
) |
$ |
(22.6 |
) |
$ |
(14.2 |
) |
$ |
(38.9 |
) |
$ |
(55.6 |
) |
1Fair value adjustment to reflect the risk that the GMWB/GMAB obligation will not be fulfilled based on the company’s own credit risk.
BALANCE SHEET AND LIQUIDITY
At
The quality of the portfolio remained strong in the fourth quarter of 2011 with the proportion of below investment grade bonds at 8.1 percent at
Debt-to-total-capital at
Balance Sheet ($ in millions) |
December 31,
2011 |
December 31, |
Change |
||||||||||||
Total Assets | $ | 21,439.9 | $ | 21,082.3 | $ | 357.6 | |||||||||
Total Liabilities | $ | 20,313.7 | $ | 19,926.8 | $ | 386.9 | |||||||||
Indebtedness | $ | $ | 427.7 | $ | (0.8 | ) | |||||||||
Total Stockholders’ Equity | $ | 1,126.2 | $ | 1,155.5 | $ | (29.3 | ) | ||||||||
Total Stockholders’ Equity excluding Accumulated OCI | $ | 1,296.9 | $ | 1,289.3 | $ | 7.6 | |||||||||
| |||||||||||||||
Debt to Total Capital 1 | 24.8 | % | 24.9 | % | (0.1 | )% |
1 Based on Total Stockholders’ Equity, excluding Accumulated OCI.
FOURTH QUARTER AND FULL YEAR PRELIMINARY STATUTORY RESULTS FOR
- Statutory net gain from operations for
Phoenix Life Insurance Company was$27.0 million for the fourth quarter of 2011 compared with$101.7 million for the fourth quarter of 2010, and statutory net income was$18.6 million for the fourth quarter of 2011, compared with$94.2 million for the fourth quarter of 2010. For full-year 2011, the statutory net gain from operations was$130.5 million , compared with a net gain of$147.8 million for full-year 2010. - Statutory surplus and asset valuation reserve increased 11 percent to
$845.7 million atDecember 31, 2011 from$763.2 million atDecember 31, 2010 . - At
December 31, 2011 , Phoenix Life’s estimated risk-based capital ratio was 363 percent, rising from 282 percent atDecember 31, 2010 . The improvement came from growth in surplus and reduced balanced sheet risk, as well as a 53 percentage point benefit from a reinsurance transaction.
OTHER ITEMS
- <li class=”bwlistitemmargb”> The company recorded an out-of-period adjustment of
- The company completed a review of unclaimed death benefits for all of its insurance companies following an industry-wide regulatory request (New York Section 308) that resulted in expected claims and interest totaling
$11.4 million . After policyholder dividend obligation and other offsets, these prior period claims had a$3.6 million impact on fourth-quarter 2011 operating results. - The company strengthened reserves in its discontinued group accident and health reinsurance business by
$14.9 million during the fourth quarter of 2011 reflecting recent developments in the contracts underlying the block.
CONFERENCE CALL
ABOUT
FORWARD-LOOKING STATEMENTS
This press release may contain "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. We intend for 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: (i) unfavorable general economic developments including, but not limited to, specific related factors such as the performance of the debt and equity markets and changes in interest rates; (ii) the potential adverse affect of interest rate fluctuations on our business and results of operations; (iii) the effect of adverse capital and credit market conditions on our ability to meet our liquidity needs, our access to capital and our cost of capital; (iv) the effect of guaranteed benefits within our products; (v) potential exposure to unidentified or unanticipated risk that could adversely affect our businesses or result in losses; (vi) the consequences related to variations in the amount of our statutory capital due to factors beyond our control; (vii) the possibility that we not be successful in our efforts to implement a new business plan; (viii) the impact on our results of operations and financial condition of any required increase in our reserves for future policyholder benefits and claims if such reserves prove to be inadequate; (ix) changes in our investment valuations based on changes in our valuation methodologies, estimations and assumptions; (x) further downgrades in our debt or financial strength ratings; (xi) the possibility that mortality rates, persistency rates, funding levels or other factors may differ significantly from our assumptions used in pricing products; (xii) the availability, pricing and terms of reinsurance coverage generally and the inability or unwillingness of our reinsurers to meet their obligations to us specifically; (xiii) our ability to attract and retain key personnel in a competitive environment; (xiv) our dependence on third parties to maintain critical business and administrative functions; (xv) the strong competition we face in our business from banks, insurance companies and other financial services firms; (xvi) our reliance, as a holding company, on dividends and other payments from our subsidiaries to meet our financial obligations and pay future dividends, particularly since our insurance subsidiaries' ability to pay dividends is subject to regulatory restrictions; (xvii) the potential need to fund deficiencies in our closed block; (xviii) tax developments that may affect us directly, or indirectly through the cost of, the demand for or profitability of our products or services; (xix) the possibility that the actions and initiatives of the
Consolidated Balance Sheet |
||||||||||
December 31, 2011 |
December 31, 2010 |
|||||||||
ASSETS: | ||||||||||
Available-for-sale debt securities, at fair value (amortized cost of |
$ | 11,890.0 | $ | 10,893.8 | ||||||
Available-for-sale equity securities, at fair value (cost of |
35.7 | 47.5 | ||||||||
Limited partnerships and other investments | 601.3 | 600.0 | ||||||||
Policy loans, at unpaid principal balances | 2,379.3 | 2,386.5 | ||||||||
Derivative instruments | 174.8 | 136.9 | ||||||||
Fair value option investments | 86.6 | 102.1 | ||||||||
Total investments | 15,167.7 | 14,166.8 | ||||||||
Cash and cash equivalents | 194.3 | 121.9 | ||||||||
Accrued investment income | 175.6 | 169.5 | ||||||||
Receivables | 415.1 | 405.7 | ||||||||
Deferred policy acquisition costs | 1,317.6 | 1,444.3 | ||||||||
Deferred income taxes | 118.3 | 116.4 | ||||||||
Other assets | 164.5 | 180.5 | ||||||||
Discontinued operations assets | 69.2 | 60.4 | ||||||||
Separate account assets | 3,817.6 | 4,416.8 | ||||||||
Total assets | $ | 21,439.9 | $ | 21,082.3 | ||||||
LIABILITIES: | ||||||||||
Policy liabilities and accruals | $ | 12,967.8 | $ | 12,992.5 | ||||||
Policyholder deposit funds | 2,429.4 | 1,494.1 | ||||||||
Indebtedness | 426.9 | 427.7 | ||||||||
Other liabilities | 613.7 | 546.3 | ||||||||
Discontinued operations liabilities | 58.3 | 49.4 | ||||||||
Separate account liabilities | 3,817.6 | 4,416.8 | ||||||||
Total liabilities | 20,313.7 | 19,926.8 | ||||||||
STOCKHOLDERS’ EQUITY: | ||||||||||
Common stock, |
| 1.3 | 1.3 | |||||||
Additional paid-in capital | 2,630.5 | 2,631.0 | ||||||||
Accumulated deficit | (1,155.4 | ) | (1,163.5 | ) | ||||||
Accumulated other comprehensive loss | (170.7 | ) | (133.8 | ) | ||||||
Treasury stock, at cost: 11.3 million and 11.3 million shares | (179.5 | ) | (179.5 | ) | ||||||
Total stockholders’ equity | 1,126.2 | 1,155.5 | ||||||||
Total liabilities and stockholders’ equity | $ | 21,439.9 | $ | 21,082.3 |
Consolidated Statement of Income (Unaudited and Preliminary) Three and Twelve Months Ended ($ in millions) |
||||||||||||||||||||
Three Months | Twelve Months | |||||||||||||||||||
2011 | 2010 | 2011 | 2010 | |||||||||||||||||
REVENUES: | ||||||||||||||||||||
Premiums (1) | $ | 121.4 | $ | 134.0 | $ | 459.1 | $ | 521.4 | ||||||||||||
Fee income | 141.1 | 154.1 | 597.1 | 630.2 | ||||||||||||||||
Net investment income | 197.3 | 228.9 | 809.9 | 844.6 | ||||||||||||||||
Net realized investment gains (losses): | ||||||||||||||||||||
Total OTTI losses | (19.6 | ) | (25.0 | ) | (64.6 | ) | (105.2 | ) | ||||||||||||
Portion of OTTI losses recognized in |
11.0 | 14.2 | 38.9 | 55.6 | ||||||||||||||||
Net OTTI losses recognized in earnings | (8.6 | ) | (10.8 | ) | (25.7 | ) | (49.6 | ) | ||||||||||||
Net realized investment gains (losses), |
(0.8 | ) | (18.5 | ) | 9.3 | 39.7 | ||||||||||||||
Net realized investment losses | (9.4 | ) | (29.3 | ) | (16.4 | ) | (9.9 | ) | ||||||||||||
Total revenues | 450.4 | 487.7 | 1,849.7 | 1,986.3 | ||||||||||||||||
BENEFITS AND EXPENSES: | ||||||||||||||||||||
Policy benefits, excluding policyholder dividends (1) | 283.2 | 269.3 | 1,083.2 | 1,090.0 | ||||||||||||||||
Policyholder dividends | 58.3 | 84.9 | 246.9 | 309.8 | ||||||||||||||||
Policy acquisition cost amortization | 38.7 | 64.4 | 210.6 | 298.2 | ||||||||||||||||
Interest expense on indebtedness | 7.9 | 7.9 | 31.8 | 31.7 | ||||||||||||||||
Other operating expenses | 69.7 | 72.2 | 245.2 | | 291.3 | |||||||||||||||
Total benefits and expenses | 457.8 | 498.7 | 1,817.7 | 2,021.0 | ||||||||||||||||
Income (loss) from continuing operations |
(7.4 | ) | (11.0 | ) | 32.0 | (34.7 | ) | |||||||||||||
Income tax expense (benefit) | (0.5 | ) | (2.3 | ) | 1.9 | (10.1 | ) | |||||||||||||
Income (loss) from continuing operations | (6.9 | ) | (8.7 | ) | 30.1 | (24.6 | ) | |||||||||||||
Income (loss) from discontinued operations, |
(15.1 | ) | (2.9 | ) | (22.0 | ) | 12.0 | |||||||||||||
Net income (loss) | $ | (22.0 | ) | $ | (11.6 | ) | $ | 8.1 | $ | (12.6 | ) |
1 Prior period amounts have been revised to reflect the correction of a classification error related to the historical presentation of ceded premiums related to certain reinsurance contracts within the closed block. The adjustments reflect the reclassification of ceded premiums from benefits and reserves to revenue. The adjustment reduced revenues and benefits and reserves by
Media Relations:
alice.ericson@phoenixwm.com
or
Investor Relations:
pnx.ir@phoenixwm.com
Source:
Copyright: | Copyright Business Wire 2012 |
Wordcount: | 4477 |
More Articles