Phoenix Cos. Posts Another Quarterly Loss on Investments

HARTFORD, Conn., Aug 04, 2009 (A. M. Best via COMTEX) -- Phoenix Cos. Inc. posted a second-quarter net loss of $111.2 million as the U.S. life insurer's bottom line suffered from millions in investment losses.

Hurting its results were $68.8 million in realized investment losses and a $26.3 million loss from discontinued operations. Phoenix (NYSE: PNX | Quote | Chart | News | PowerRating) reported net income of $6.2 million the same period a year ago.

On the afternoon of Aug. 4, Phoenix's stock was down 16.03% from the previous close, trading at $1.99 a share.

It posted an operating loss of $16.1 million, which it blamed on a $19 million increase in the tax valuation allowance, as it said it wasn't able to recognize tax benefits it generated in prior periods, and $11.5 million in severance and other sales-related expenses the company is eliminating as part of a cost-cutting initiative.

"Despite the challenges of the quarter, we made progress in a number of areas significant to our business,? said James D. Wehr, Phoenix's president and chief executive officer, in a statement. "We advanced our strategic commitments to maintain a healthy balance sheet, ensure policyholder security and reduce expenses."

Wehr took over as president and CEO of Phoenix in April, succeeding Dona D. Young, who retired from the Hartford, Conn.-based life insurer after 29 years.

It's been a rough year for Phoenix, as it widened its first-quarter 2009 net loss to $74.8 million (BestWire, May 5, 2009). That followed fourth-quarter and year-end 2008 net losses on costs related to the spin-off of its asset-management subsidiary, Virtus Investment Partners (BestWire, Feb. 27, 2009).

Total second-quarter revenue dropped 10% to $525.7 million, mostly due to lower asset balances and premiums, Phoenix said.

In March, State Farm Mutual Automobile Insurance Co. told Phoenix it would suspend sales of its life insurance and variable annuities because of downgrades by rating agencies to its life insurance subsidiaries. A.M. Best Co. downgraded the financial strength rating of Phoenix Life to it's current B++ (Good) from A (Excellent) of Phoenix's core life insurance entities.

Phoenix said it recently restructured its agreement with State Farm, amending the existing agreement to clarify the service and support Phoenix will provide to customers who bought their policies and contracts through a State Farm agent. The deal, however, doesn't provide for any new sales of Phoenix products through the State Farm distribution system.

There are about 90,000 Phoenix in-force policies and contracts sold through State Farm agents, the company said.