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Phoenix Companies posts $22.6 million loss in Q2

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In a near-repeat of its performance at this time last year, The Phoenix Companies posted a second quarter loss, the company discloses in its financial results for the first half of 2015.

For the quarter that ended June 30, the insurer had a net loss of $22.6 million ($3.93 million per share). The red ink exceeds the $22.4 million the company suffered in the year-ago period.

The Q2 negative net income is, however, an improvement over that of the first quarter: $74 million or $12.87 million per share.

In the wake of the hemorrhaging, The Phoenix Companies’ president and CEO, James Wehr, characterized the company’s performance as “mixed.” That’s because the financial services provider also enjoyed a marked improvement in its statutory capital reserves and business metrics.

“The net loss was driven primarily by unfavorable mortality and financial reporting expenses that remain elevated but are beginning to decline,” said Wehr. “These factors were partially offset by the positive impact of higher interest rates.

“While it is unusual for Phoenix to have consecutive quarters with unfavorable mortality, the recent experience does not impact our expectations regarding future mortality,” he added. “Cumulative mortality experience remains favorable to expectations over the last five years.”

Contributing to the second quarter 2015 results were:

  • Unfavorable mortality in the open block, primarily in the universal life (“UL”) product line, that contributed approximately $35 million to the loss.

  • External financial reporting expenses of $13.4 million, including $4.1 million relating to remediation, $5.0 million in audit expenses, and $4.3 million in other external financial reporting support.

  • Positive impact of higher interest rates of approximately $18 million.

Additional highlights from the second quarter include:

  • Annuity deposits totaled $221.4 million, primarily in fixed indexed annuities.

  • Life insurance annualized premium was $4.8 million, driven primarily by term insurance sales.

  • Total annualized life insurance surrender rate was 3.8 percent, consistent with the second quarter of 2014 and first quarter of 2015.

  • Annualized annuity surrender rate was 11.1 percent, improved from the second quarter of 2014 and consistent with the first quarter of 2015.

  • Phoenix’s distribution company, Saybrus Partners’, revenue grew 16 percent and EBITDA grew 35 percent from the second quarter of 2014.

  • Mortality was unfavorable compared with expectations, with unfavorable open block experience driven by the UL product line. Closed block experience was favorable compared with expectations.

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