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Important disclosures
This presentation may contain “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995 which,
by their nature, are subject to risks and uncertainties. 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,” “may,” “should” and other similar words or expressions.
Forward-looking statements are made based upon our current expectations and beliefs concerning trends and future developments and their
potential
effects on the company. They are not guarantees of future performance. Our actual business, financial condition and 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 effect of continuing adverse capital and credit market conditions on our ability
to meet our liquidity needs, our access to capital and our cost of capital; (iii) the possibility of losses due to defaults by others including, but not
limited
to, issuers of fixed income securities; (iv) changes in our investment valuations based on changes in our valuation methodologies,
estimations and assumptions; (v) the effect of guaranteed benefits within our products; (vi) the consequences related to variations
in the amount
of our statutory capital due to factors beyond our control; (vii) further downgrades in our debt or financial strength ratings; (viii) the possibility
that mortality rates, persistency rates, funding levels or other factors may differ
significantly from our pricing expectations; (ix) the availability,
pricing and terms of reinsurance coverage generally and the inability or unwillingness of our reinsurers to meet their obligations to us
specifically; (x) our dependence on
non-affiliated distributors for our product sales; (xi) our dependence on third parties to maintain critical
business and administrative functions; (xii) our ability to attract and retain key personnel in a competitive environment; (xiii) the
strong
competition we face in our business from banks, insurance companies and other financial services firms; (xiv) 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; (xv) the potential need to fund deficiencies in our Closed
Block; (xvi) tax developments that may affect
us directly, or indirectly through the cost of, the demand for or profitability of our products or
services; (xvii) the possibility that the actions and initiatives of the U.S. Government, including those that we elect to participate in, may not
improve
adverse economic and market conditions generally or our business, financial condition and results of operations specifically (xviii) other
legislative or regulatory developments; (xix) legal or regulatory actions; (xx) changes in accounting standards;
(xxi) the potential effects of the
spin-off of our former asset management subsidiary; (xxii) the potential effect of a material weakness in our internal control over financial
reporting on the accuracy of our reported financial results; (xxiii)
the risks related to a man-made or natural disaster; and (xxiv) other risks and
uncertainties described herein or in any of our filings with the SEC.
This information is provided as of September 30, 2009. We undertake no obligation to update or revise publicly any forward-looking statement,
whether as a result of new information, future events
or otherwise.
Table of contents
Summary
Invested Assets
Historical Portfolio Ratings
Bond Portfolio
Financial Sector Holdings
Structured Securities Portfolio
Realized Credit Impairment Losses
Unrealized Losses
Commercial Mortgage-Backed Securities (CMBS)
Residential Mortgage-Backed Securities (RMBS)
Collateralized Debt Obligations (CDO) Holdings
Appendix:
Phoenix Life Insurance Company (PLIC) Closed Block
Page(s)
4
5
6 - 7
8
9
10
11
12 - 13
14 - 15
16 - 23
24
25 - 28
Summary
Well diversified and liquid general account investment portfolio, managed by a team with a successful
track record of investing over a variety of market cycles, following a disciplined monitoring process
Approximately 89% of bond investments are investment grade. Emphasis is on liquidity with 71% of
bonds invested in public securities
Strict limits on individual financial exposures that mitigate our loss potential to any one particular
entity; as a result, we have limited exposure to the financial institutions that have been in the news
Net unrealized losses improved by $669 million during the third quarter. Approximately 56% of
unrealized losses are rated investment grade
Residential mortgage-backed securities exposure is high quality and diversified. Exposure is
concentrated in agency and prime-rated securities with only 2.3% of invested assets in Alt-A and
subprime investments
Commercial mortgage exposure is in highly rated commercial mortgage-backed securities with
minimal direct loan or real estate holdings
No subprime collateralized debt obligations (CDO) exposure. CDO holdings are backed by bank
loans, investment grade bonds and commercial mortgage-backed securities
No credit default swap (CDS) exposure
Portfolio comprised primarily of
fixed income securities
Bonds $10,545
77%
Policy Loans $2,422
17%
Invested Assets: $13.9 Billion
$ in millions
Market value as of September 30, 2009
Cash & Cash Equivalents
Venture Capital
Stock
Mortgages & Real Estate
Other Invested Assets
$127
$186
$22
$43
$513
1%
1%
0%
0%
4%
High quality portfolio
Percentages based on GAAP Value
As of September 30, 2009
29.1
29.6
27.5
25.6
Private Bonds
70.4
41.0
59.0
8.2
91.8%
2008
70.9
48.3
51.7
11.4
88.6%
3Q 2009
72.5
74.4
Public Bonds
35.3
27.5
Percentage of BIG in NAIC 4-6
64.7
72.5
Percentage of BIG in NAIC 3
7.7
8.3
Below Investment Grade (BIG) Bonds
92.3%
91.7%
Investment Grade Bonds
2006
2007
Rating downgrades of structured
securities
Rating agency downgrade activity has dominated the market in late 2008 and 2009
90% of the Phoenix ABS, RMBS, and CMBS portfolio are Aaa/AAA and Aa/AA
The Phoenix portfolio held up well despite the challenging markets
2009 Twelve Month Ratings Transition Data - % of ABS, CMBS, RMBS Downgraded
Based on # of issues
Source: Moody’s September 2009 Structured Rating Transitions, S&P Structured Finance Rating Transition as of October 2, 2009
Bond portfolio diversified by sector
U.S. Corporates
49%
Foreign Corporates
9%
ABS
6%
Emerging Markets
5%
$ in millions
Market value as of September 30, 2009
1Includes $191 million of Home Equity Asset Backed Securities also included in the RMBS exhibits
Below Investment Grade Bonds
RMBS
15%
9.5
1,003
Commercial MBS
14.4
1,517
Foreign Corporates
19.1
2,010
Residential MBS1
4.2
449
Utilities
2.3
247
CBO/CDO/CLO
8.4
883
U.S. Treasuries / Agencies
14.1
1,490
Financials
Bond Portfolio
100.0%
$10,545
Total
1.3
133
Emerging Markets
1.7
175
Taxable Municipals
2.4
250
Asset Backed Securities
As of September 30, 2009
$2,388
22.6%
Industrials
Bonds by Rating
NAIC 1
58.0%
NAIC 2
30.6%
NAIC 3 & Lower
11.4%
CDO/CLO
16%
Diverse financial sector holdings
59.8
0.4
54.1
57.9
Consumer Finance
60.4%
10.7%
$1,489.8
$1,656.2
Total
-
-
0.7
0.7
Project Finance
58.6
1.5
204.2
208.6
REITS
56.2
0.7
98.0
93.1
Leasing/Rental
62.3
2.6
360.9
374.9
Insurance
51.6
1.6
222.4
309.5
Diversified Financial
54.9
0.5
69.3
79.4
Commercial Finance
55.5
0.6
87.9
89.7
Broker-Dealer
67.9%
2.8%
$392.3
$442.4
Bank
Book
Value
Market
Value
% General
Account
% in Closed
Block
Sector
As of September 30, 2009
Percentages based on market value
$ in millions
High quality structured
securities portfolio
Structured portfolio is approximately 87% investment grade
RMBS (51.8%) and CMBS (28.6%) dominate the structured portfolio
AAA
74.5%
B or less – 9.4%
BBB – 5.3%
AA – 5.1%
A – 2.3%
BB – 3.4%
1 Includes $29.2 million of CMBS CDOs
Market value as of September 30, 2009
Quality rating breakdown based on NAIC ratings
$ in millions
7.0
246.6
CBO/CDO/CLO1
0.9
29.7
Aircraft Equipment Trust
Structured Securities Portfolio
100.0%
$3,510.2
Total
0.6
22.0
Auto Loans
As of September 30, 2009
1.4
47.2
Manufactured Housing
28.6
1,002.9
Commercial MBS
5.4
191.0
Home Equity
4.3
151.4
Other ABS
$ 1,819.4
51.8%
Residential MBS
Moderation in credit impairments
As of September 30, 2009
$ in millions
3.5
-
-
1.0
Equity
$14.9
1.1
$10.3
-
0.9
-
6.0
-
2.1
$1.3
3Q09
$20.9
1.8
$19.1
-
4.6
-
7.1
5.4
1.6
$0.4
2Q09
$137.7
7.2
$129.5
5.7
75.7
1.7
19.0
17.5
8.2
$1.7
4Q08
$38.3
6.9
$31.4
3.8
19.5
-
2.6
0.7
3.6
$1.2
1Q09
Total Debt
Schedule BA
Total Credit Impairments
Other ABS/MBS
Corporate
CMBS
CLO/CDO
Subprime RMBS
Alt-A RMBS
Prime RMBS
GAAP Credit Impairments
Improved net unrealized loss position
1 All Other – Corporates, Agency RMBS, Other ABS, Foreign
As of September 30, 2009
$ in millions
$(1,072.7)
(122.7)
(116.9)
(290.9)
(131.0)
(146.3)
(165.1)
$(99.8)
6/30/2009
$(403.6)
(191.7)
(61.8)
(166.4)
(50.5)
(114.8)
(129.3)
$(72.4)
9/30/2009
$669.2
314.5
55.1
124.4
80.6
31.5
35.8
$27.3
3Q09
Improvement
$(1,645.2)
(388.9)
(192.3)
(410.6)
(160.9)
(214.4)
(155.4)
$(122.7)
12/31/2008
$(1,574.7)
(294.5)
(185.7)
(469.9)
(160.7)
(154.7)
(199.6)
$(109.6)
3/31/2009
Total
All Other1
All Other High Yield
Financial
CMBS
CDO/CLO
Subprime/Alt-A
RMBS Prime
Gross unrealized losses concentrated
in investment grade issues
Market value as of September 30, 2009
$ in millions
Well constructed CMBS portfolio
Phoenix CMBS Portfolio
High levels of credit enhancement
Excellent credit characteristics vs.
market
Avoided 2006 and 2007 aggressive
underwriting
50 months
71.3%
5.89%
66%
28%
26%
Market1
6.82%
Weighted average coupon
71.6%
Weighted average LTV
29%
Weighted average credit
enhancement
89 months
Weighted average loan age
27%
Interest Only (I/O) loans
36%
Weighted average credit
enhancement (U.S. Treasury
defeasance adjusted)
Phoenix
1Sources: Barclays CMBS Index, Trepp
As of September 30, 2009
Highly rated, seasoned CMBS portfolio
$1.0 billion in market value
$169 million or 16% Government
guaranteed
83% AAA and less than 2% BBB or
below
87% 2005 and prior origination
Only 3% in CMBS CDO’s
Market value as of September 30, 2009
Percentages based on market value
$ in millions
$66.6
$71.9
$61.1
$832.5
AAA
AA
A
BBB
Below BBB
Total
% Yr of Issue
Year of Issue
2007
$46.6
6.5
12.4
-
1.1
$66.6
6.4%
2006
$60.5
6.5
3.1
1.8
-
$71.9
7.0%
2005
$34.7
12.2
11.1
2.7
0.4
$61.1
5.9%
2004 and Prior
$714.7
55.5
48.5
13.8
-
$832.5
80.7%
Total
$856.5
80.7
75.1
18.3
1.5
$1,032.1
% by Rating
83.0%
7.8
7.3
1.8
0.1
High quality,diversified RMBS portfolio
As of September 30, 2009
Percentages based on market value
$ in millions
6.3%
5.7%
35.2%
12.3%
-
BB &
Below
2.9%
1.0%
4.0%
85.8%
14.4%
$2,010.4
$2,169.7
Total
10.1%
7.9%
10.1%
66.2%
1.0%
138.3
190.2
Subprime
8.1%
1.6%
9.6%
45.5%
1.3%
179.8
257.2
Alt-A
6.4%
1.6%
10.9%
68.8%
3.2%
450.3
522.7
Prime
-
-
-
100.0%
8.9%
$1,242.0
$1,199.6
Agency
BBB
A
AA
AAA
% General
Account
Market
Value
Book
Value
Rating
Well constructed RMBS portfolio
29.0
88
67
76
1.0
Subprime
34.0
100
67
55
1.3
Alt-A
3.2%
% of General
Account
Non-Agency
Prime
82%
% of Portfolio
Originated in 2005
& Prior
80%
% Rated AAA
& AA
92%
% of Portfolio
Backed by
Fixed Rate
Collateral
47.0%
% of Market
Backed by
Fixed Rate
Collateral
Market value as of September 30, 2009
Source: JP Morgan MBS Research, Bank of America/Merrill Lynch Credit Round-up
RMBS delinquencies
better than market
As of September 30, 2009
Source: JP Morgan MBS Research 60+ day
High quality, seasoned non-agency
prime RMBS holdings
$450 million market value
80% AAA and AA rated
82% 2005 and prior origination
92% fixed rate
100% of 2007 originations are
super senior classes
As of September 30, 2009
Percentages based on market value
$ in millions
$15.2
$64.7
$82.9
$287.4
AAA
AA
A
BBB
Below BBB
Total
% Yr of Issue
Year of Issue
2007
-
2.4
-
-
12.8
$15.2
3.4%
2006
$13.6
7.6
-
10.9
32.6
$64.7
14.4%
2005
$46.5
8.0
6.8
12.4
9.2
$82.9
18.4%
2004 and Prior
$249.7
30.9
0.3
5.7
0.8
$287.4
63.8%
Total
$309.8
48.9
7.1
29.0
55.4
$450.2
% by Rating
68.8%
10.9
1.6
6.4
12.3
Well constructed non-agency prime
RMBS portfolio
As of September 30, 2009
Source: JP Morgan MBS Research – September 2009, Bloomberg
Weighted average credit enhancement
Weighted average 60+ day delinquent loan
Phoenix prime portfolio loss coverage: using 30% loss severity
Market
5.0%
8.9%
1.9x
Phoenix
10.1%
4.6%
7.3x
Seasoned non-agency Alt-A RMBS
holdings
$180 million market value
55% AAA or AA rated
67% 2005 and prior originations
Market value as of September 30, 2009
Percentages based on market value
$ in millions
$2.9
$56.9
$48.1
$71.9
AAA
AA
A
BBB
BB & Below
Total
% Yr of Issue
Year of Issue
2007
-
-
-
-
2.9
$2.9
1.6%
2006
$35.4
-
-
-
21.5
$56.9
31.6%
2005
$9.1
-
0.4
-
38.6
$48.1
26.8%
2004 and Prior
$37.3
17.3
2.5
14.6
0.2
$71.9
40.0%
Total
$81.8
17.3
2.9
14.6
63.2
$179.8
% by Rating
45.5%
9.6
1.6
8.1
35.2
Well constructed non-agency Alt-A
RMBS portfolio
As of September 30, 2009
Sources: JP Morgan MBS Research – September 2009
Bank of America/Merrill Lynch – September 2009
Option ARM
Alt-A ARM
Alt-A Fixed
60+ Delinquent
Alt-A Market
32%
35%
34%
26.5%
Phoenix
0.2%
-
99.7%
15.9%
High quality non-agency subprime
RMBS portfolio
$138 million market value
76.0% rated AAA or AA
Phoenix 60+ day delinquent
19.8% vs. 43.7% for the subprime
market
Phoenix weighted average credit
support is 39.0%
$ in millions
As of September 30, 2009
Percentages based on market value
Source: JP Morgan MBS Research September 2009
$30.3
$15.2
$45.4
$47.4
AAA
AA
A
BBB
Below BBB
Total
% Yr of Issue
Year of Issue
2007
$19.4
2.1
-
6.2
2.6
$30.3
21.9%
2006
$3.4
-
8.4
2.1
1.3
$15.2
11.0%
2005
$31.2
8.0
2.5
-
3.7
$45.4
32.8%
2004 and Prior
$37.6
3.9
-
5.6
0.3
$47.4
34.3%
Total
$91.6
14.0
10.9
13.9
7.9
$138.3
% by Rating
66.2%
10.1
7.9
10.1
5.7
Diversified CDO holdings
As of September 30, 2009
Percentages based on market value
No affiliated CDO holdings as of September 30, 2009
$ in millions
29.6%
-
1.3%
-
60.8%
30.5%
BB &
Below
18.8%
3.1%
46.6%
30.2%
0.2%
29.2
59.1
CMBS
28.6%
23.1%
13.7%
5.0%
1.8%
$246.6
$349.6
Total
-
-
-
-
-
-
-
RMBS
100.0%
-
-
-
-
3.9
3.9
High-Yield Debt
10.1%
-
29.1%
-
0.2%
25.3
33.7
Inv Grade Debt
31.1%
29.8%
6.8%
1.8%
1.4%
$188.2
$252.9
Bank Loans
BBB
A
AA
AAA
% General
Account
Market
Value
Book
Value
Collateral
PLIC Closed Block investments
primarily fixed income
Bonds $6,389
79%
Policy Loans $1,403
17%
Invested Assets: $8.1 Billion
$ in millions
Market value as of September 30, 2009
Cash & Cash Equivalents
Venture Capital
Stock
Mortgages & Real Estate
Other Invested Assets
$21
$175
$8
$7
$136
0%
2%
0%
0%
2%
PLIC Closed Block portfolio
high quality
Percentages based on GAAP Value
As of September 30, 2009
32.1
67.9
36.1
63.9
6.4
93.6%
2008
32.3
67.7
39.3
60.7
9.1
90.9%
3Q 2009
30.7
28.7
Private Bonds
69.3
71.3
Public Bonds
32.4
23.4
Percentage of BIG in NAIC 4-6
67.6
76.6
Percentage of BIG in NAIC 3
6.8
7.4
Below Investment Grade (BIG) Bonds
93.2%
92.6%
Investment Grade Bonds
2006
2007
PLIC Closed Block portfolio
diversified
U.S. Corporates
54%
Foreign Corporates
12%
ABS
5%
Emerging Markets
8%
1 Includes $19.6 million of Home Equity Asset Baked Securities
Market value as of September 30, 2009
$ in millions
Below Investment Grade Bonds
14.1
899.9
Financials
1.7
111.3
Asset Backed Securities
1.6
101.1
CBO/CDO/CLO’s
5.0
320.0
Utilities
11.7
745.5
Commercial MBS
14.7
940.6
Foreign Corporates
Bond Portfolio
Phoenix Closed Block
100.0%
$6,388.6
Total
1.6
99.6
Emerging Markets
2.0
127.9
Taxable Municipals
As of September 30, 2009
5.4
341.9
U.S. Treasuries / Agencies
17.0
1,088.4
Residential MBS1
$1,612.4
25.2%
Industrials
Bonds by Rating
NAIC 1
62.9%
NAIC 2
30.2%
NAIC 3 & Lower
6.9%
RMBS
9%
CLO/CDO
12%
