Phoenix Cos. CEO Says Company Doesn't Need a Bailout

Despite financial problems, Phoenix Cos. Inc. doesn't need a federal bailout because the company has enough money and maintains a healthy balance sheet, said the new president and chief executive officer of the U.S. life insurer.

Dona D. Young, chairman, president and CEO of Phoenix Cos., retired April 15 from the Hartford, Conn.-based company after 29 years. Succeeding her as president and CEO is James D. Wehr, formerly chief investment officer and senior executive vice president. Recently, Phoenix (NYSE: PNX | Quote | Chart | News | PowerRating) withdrew its application to participate in the U.S. Treasury's Capital Purchase Program, which has allocated the lion's share of the $700 billion Troubled Asset Relief Program, after federal regulators took control of the savings and loan the life insurer planned to acquire.

"Our view is that we are adequately capitalized," Wehr said. "If we were desperately in need of a bailout, I think you could infer that we would have stayed or done everything we could to stay involved in the process...Phoenix elected to step away from the process."

The company never actually acquired American Sterling Bank, Wehr said of the Sugar Creek, Mo.-based bank. Phoenix had a purchase agreement to acquire it but it was contingent on Phoenix receiving a TARP allocation that was acceptable to it, he said.

The Federal Deposit Insurance Corp. took over American Sterling because it had financial problems and was concerned about protecting the bank depositers' interests, he said. When that happened, Phoenix evaluated whether it wanted to stay involved in the application process and identify a new target. It decided, for several reasons, "not the least of which that we felt that we were adequately capitalized, that we would step out of the process," Wehr said. "We have withdrawn our application."

Wehr joined Phoenix in 1981 and held a series of senior investment-related positions, including credit research, rating and portfolio management. As chief investment officer, he oversaw the life insurance company's general account and affiliated investment portfolios and directed the public fixed income group.

The life insurer reported fourth-quarter and year-end 2008 net losses of $378.3 million and $726 million, respectively, in part, on losses related to the spin-off of its asset-management subsidiary and on charges for deferred acquisition costs.

Wehr has several goals to navigate the company through the financial crisis, and maintaining a healthy balance sheet is among them, he said. Phoenix has just north of 20% of debt to capitalization and has no debt maturities until 2032. It also has "meaningfully increased" its liquidity over the past year, he noted.

The company also is committed to lowering its expenses, he said. "We are reducing our expenses through a combination of factors, including general expenses, compensation, head count, compensation plans for senior management."

Phoenix is evolving in its growth strategy, which includes new products and distribution channels "in light of the fact that we are going to be a smaller company," he said.

Will Phoenix still target the affluent market? "High net worth has always been an area of focus for us and will continue to be an area of focus for us," he said. "We will continue to operate in that segment, but we're going to be open-minded and considerate of other segments of the market.

"We're not going to be high net worth solely focused and we really never were, although that was clearly an important of our distribution focus," he said.

Phoenix had a succession plan in place, Wehr said. Both Young and the board "felt that based on my background and the current environment and challenges that Phoenix was facing, that I was the right guy to lead the organization at this point in time," he said.

However, "when you are the person that's selected, it's always a bit of a surprise," Wehr said. "I mean, you don't want to be sitting there expecting something to happen; at least that's not the way I like to make my way through the world."

Phoenix Life Insurance Co. and Phoenix Life and Annuity Co. currently have Best's Financial Strength Ratings of B++ (Good).

(To listen to the entire interview with Wehr in the near future, go to www.bestdayaudio.com)

(By Fran Matso Lysiak, senior associate editor, BestWeek: fran.lysiak@ambest.com)