Phoenix To Sell Broker-Dealer Units,

Focus On Manufacturing

BY

As part of an effort to regain profitability, the Phoenix Companies Inc. has agreed to sell its retail broker-dealer operations to Linsco/Private Ledger Financial Services.

The companies expect to close the deal around June 1. Financial terms were not disclosed.

The deal calls for the reassignment to LPL of 725 advisors affiliated with Phoenix broker-dealer WS Griffith Securities Inc. and 270 professionals with its other retail unit, Main Street Management Company.

Dona D. Young, chairman, president and CEO of Phoenix, in Hartford, calls the move “a significant step to improving our profitability.”

Following a series of losses, Phoenix cut jobs last year, shutting down its Hollister Investment Management division. By year-end, it recovered somewhat, reporting a $3 million net loss on around $699 million in revenue in the fourth quarter, compared to a loss of around $15 million on $611 million in revenue in fourth quarter 2002.

The action essentially completes Youngs conversion of Phoenix into a pure manufacturer of products and services for affluent individuals. Getting out of the distribution end will help Phoenix expand its life, annuity and asset management product offerings, Young says.

“All of our energies must be focused on providing best-of-class product support to our distribution partners,” she says. “We do not need to own or manage the distribution network to do this.”

The transaction will eliminate about 300 positions across the country for Phoenix. Young estimates cost reductions from shedding its branch network and back office operations will add $10 million or more annually to earnings, pre-tax.

However, Young also projects Phoenix will incur restructuring and transaction-related charges over the first 3 quarters of this year of around $8 million after taxes, mostly due to lease terminations and severance packages.

“We recognize that this has the potential to be disruptive to our business,” she says. “But we will work closely with Griffith, Main Street and LPL throughout the transition to minimize the impact.”

Griffith evolved into an independent broker-dealer over the last several years and already is selling many nonproprietary products in addition to those of Phoenix.

Main Street, in Wallingford, Conn., sells mostly variable products and mutual funds.

LPL is an independent broker-dealer with more than 900 employees in Boston and San Diego and more than 5,100 investment professionals in branch offices throughout the United States.


Reproduced from National Underwriter Life & Health/Financial Services Edition, March 25, 2004. Copyright 2004 by The National Underwriter Company in the serial publication. All rights reserved.Copyright in this article as an independent work may be held by the author.