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FOR IMMEDIATE RELEASE
OLDWICK, N.J. - MARCH 07, 2003 12:00 AM (EST)
A.M. Best Co. has affirmed the financial strength rating of A (Excellent) of Phoenix Life Insurance Company (Phoenix Life) (Greenbush, NY) and its core affiliates and changed the outlook from positive to stable. Concurrent with this rating action, A.M. Best has lowered the long-term debt rating to "a-" from "a" on Phoenix Life's $175 million 6.95% surplus notes issued in 1996. In addition, A.M. Best has lowered to "bbb+" from "a" the rating on the $300 million of 7.45% 30-year senior unsecured bonds of The Phoenix Companies, Inc. (Phoenix) (Hartford, CT) [NYSE: PNX], the holding company for Phoenix Life Insurance Company.
The one notch differential between the senior debt rating at Phoenix and the surplus note rating at Phoenix Life reflects A.M. Best's view on the relative position of the respective securities within the capital structure, given the ability of regulators to restrict the flow of funds from the operating entity. This is a refinement to A.M. Best's debt rating methodology.
The affirmation of the financial strength rating reflects the company's strong position in the upper-income individual market, the enhanced quality and diversity of its distribution sources, strong new business growth and sound operating fundamentals within its life insurance operation. The rating also recognizes that the company has significantly reduced its risk exposure over the past three years as it focused its strategy on serving the wealth management needs of the upper income markets-corporate executives, business owners and other wealthy individuals-while divesting riskier and non-core businesses.
A.M. Best views favorably the numerous management initiatives undertaken to improve the company's profitability, strengthen its capital and surplus position (on an absolute and risk-adjusted basis), reduce its exposure to venture capital and other equity investments and rationalize its expense infrastructure.
The rating actions follow Phoenix's release of full-year 2002 results in which the organization reported GAAP after-tax operating losses of $62 million and cash operating income (excluding the amortization of intangibles) of $40 million. Full-year 2002 results also reflect $130 million of one-time goodwill impairment charges related to the adoption of Statement of Financial Accounting Standards #142, significant investment related losses and credit write-downs in the company's investment portfolio, totaling $39 million, and $25 million of restructuring charges. Current period results reflect Phoenix's exposure to continued volatility in the financial markets, the current low interest rate environment and the overall weakness in the U.S. economy. These factors, combined with the decline in statutory and GAAP capital, are reflected in the lower long-term debt ratings of both Phoenix and Phoenix Life and contributed to the change in outlook.
A.M. Best has also affirmed the financial strength ratings of A (Excellent) of the following Phoenix subsidiaries:
- Phoenix Life Insurance Co.
- AGL Life Assurance Co.
- PHL Variable Insurance Co.
- Phoenix Life and Annuity Co.
- American Phoenix Life & Reassurance Co.
A.M. Best Co., established in 1899, is the world's oldest and most authoritative insurance rating and information source.