CHICAGO, May 30 /PRNewswire/ -- Duff & Phelps Credit Rating Co. (DCR) has
reaffirmed the 'AA' (Double-A) claims paying ability rating of Phoenix Home
Life Mutual Insurance Company (Phoenix). This very high rating is based on
the company's strong and stable individual life insurance business, high
quality liquid investment portfolio, good capital base and excellent
asset/liability management program. Weighed against these positives is the
increasingly competitive environment for financial services products, higher
financial leverage than similarly rated peer companies and low historic
profitability. The Rating Outlook is Stable.
In 1999 and 2000, the company executed a number of transactions that
resulted in a tightened focus on the core upper income individual market.
Phoenix divested its group life and health insurance, life reinsurance,
property and casualty brokerage, real estate and third party administration
operations. These transactions generated substantial gains upon disposition
and will reduce earnings variability going forward. In addition to the upper
income market, the company will also focus on the variable annuity business,
as well as its asset management business. These business lines are subject to
intense competition.
Asset quality and liquidity is strong. Of the bond portfolio, publicly
traded bonds accounted for approximately three-fourths and below
investment-grade securities made up 8 percent. In 1998, the company announced
that it would no longer originate mortgage loans and would operate its
mortgage and real estate portfolio in a run-off mode. These investments made
up just 7 percent of total invested assets at yearend 1999.
DCR believes that Phoenix has adequate capital relative to its business
risks. NAIC risk-based capital (RBC) for the company was 229 percent at
yearend 1999. This ratio declined from the yearend 1998 level of 244 percent
as a result of higher capital charges related to appreciation of venture
capital, unaffiliated equity and affiliated equity investments. DCR expects
this ratio to improve substantially in 2000. Phoenix's financial leverage
ratio of 24 percent is higher than similarly-rated mutual insurance company
peers when surplus notes and guaranteed subsidiary debt are included.
In 1999, Phoenix took provisions related to Unicover. While the total
potential losses are still evolving, DCR does not expect them to adversely
impact Phoenix's future results. The company will continue its efforts to
reduce exposure through settlements.
Historically, Phoenix's statutory and GAAP profitability levels have been
modest due primarily to high dividend payments to policyholders. Going
forward, DCR expects profitability to improve as the company shifts its sales
mix away from dividend paying life insurance products and increases focus on
expense initiatives.
Phoenix is one of the largest life insurance companies in the United
States. Consolidated assets under management totaled $71.9 billion at yearend
1999, nearly three-quarters of which was in mutual fund or advisory accounts.
The company reported statutory admitted assets and adjusted surplus of $17.7
billion and $1.4 billion, respectively, at December 31, 1999.
DCR has also reaffirmed the 'AA' (Double-A) claims paying ability rating
of Phoenix's subsidiary, AGL Life Assurance Company (AGL Life). This company
designs and markets private placement variable annuity products to high net
worth individuals. The rating is based on strength and explicit support of
Phoenix.
For additional information, visit http://www.dcrco.com (Quick Search:
Phoenix Home). DCR's research is also available on Bloomberg at DCR,
FirstCall's BondCall Direct/Research Direct at http://www.firstcall.com and
Multex at http://www.multex.com, as well as through other third-party
providers.
SOURCE Duff & Phelps Credit Rating Co.
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Related links:
http://www.dcrco.com
http://www.multex.com http://www.firstcall.com
CONTACT:
Julie A. Burke, CPA, CFA, 312-368-3158,
burke@dcrco.com, or Douglas M. Pawlowski, CFA, 312-368-2054,
pawlowski@dcrco.com, both of Duff & Phelps Credit Rating Co.
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