A rating agency has cut the grades it has assigned to an insurance holding company and the company’s operating subsidiaries.

Moody’s Investors Service, New York, has lowered the senior unsecured debt rating on Phoenix Companies Inc., Hartford (NYSE:PNX), to B3, from B1, and the insurance financial strength rating of Phoenix Life Insurance Company to Ba2, from Ba1.

The insurance financial strength rating of PHL Variable Insurance Company has been lowered to Ba2, from Ba1.

Moody’s has changed the outlook on the Phoenix ratings to stable, from negative.

The downgrades were due mainly to the company’s “relatively weak capital position,” Moody’s says.

“The stable outlook on the ratings reflects the expectation that investment losses will stabilize or decline going forward, providing some lift to earnings,” Moody’s says.

Phoenix held about $51 million of cash and securities March 31, and that gives the company a cushion to meet holding company interest payment and operating expense requirements, Moody’s says.

Phoenix says a downgrade is never welcome but that it believes the change to a stable outlook is encouraging.

“Phoenix achieved meaningful improvement in the first quarter on many metrics important to Moody’s and the other rating agencies,” the company says.