Attached files
| file | filename |
|---|---|
| 8-K - CURRENT REPORT - PHOENIX COMPANIES INC/DE | pnx_8k.htm |
Exhibit 99.1
1
As of March 31, 2011
The Phoenix Companies, Inc.
Investment Portfolio Supplement
Investment Portfolio Supplement
2
Important disclosures
This presentation may contain “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. We intend 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 management’s current expectations and beliefs concerning trends and future developments
and their potential effects on us. They are not guarantees of future performance. Our actual business, financial condition or 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 potential adverse affect of interest rate fluctuations on our business and results of operations; (iii) the effect of adverse capital and credit market
conditions on our ability to meet our liquidity needs, our access to capital and our cost of capital; (iv) the effect of guaranteed benefits within our products; (v)
potential exposure to unidentified or unanticipated risk that could adversely affect our businesses or result in losses; (vi) the consequences related to variations
in the amount of our statutory capital due to factors beyond our control; (vii) the possibility that we not be successful in our efforts to implement a new business
plan; (viii) the impact on our results of operations and financial condition of any required increase in our reserves for future policyholder benefits and claims if
such reserves prove to be inadequate; (ix) changes in our investment valuations based on changes in our valuation methodologies, estimations and
assumptions; (x) further downgrades in our debt or financial strength ratings; (xi) the possibility that mortality rates, persistency rates, funding levels or other
factors may differ significantly from our assumptions used in pricing products; (xii) the availability, pricing and terms of reinsurance coverage generally and the
inability or unwillingness of our reinsurers to meet their obligations to us specifically; (xiii) our ability to attract and retain key personnel in a competitive
environment; (xiv) our dependence on third parties to maintain critical business and administrative functions; (xv) the strong competition we face in our
business from banks, insurance companies and other financial services firms; (xvi) 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; (xvii) the potential need to fund deficiencies in our closed block; (xviii) tax developments that may affect us directly, or indirectly through
the cost of, the demand for or profitability of our products or services; (xix) 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; (xx) legislative or regulatory developments; (xxi) regulatory or legal actions; (xxii) potential future material losses from our discontinued
reinsurance business; (xxiii) changes in accounting standards; (xxiv) the potential effect of a material weakness in our internal control over financial reporting
on the accuracy of our reported financial results; and (xxv) other risks and uncertainties described herein or in any of our filings with the SEC.
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 management’s current expectations and beliefs concerning trends and future developments
and their potential effects on us. They are not guarantees of future performance. Our actual business, financial condition or 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 potential adverse affect of interest rate fluctuations on our business and results of operations; (iii) the effect of adverse capital and credit market
conditions on our ability to meet our liquidity needs, our access to capital and our cost of capital; (iv) the effect of guaranteed benefits within our products; (v)
potential exposure to unidentified or unanticipated risk that could adversely affect our businesses or result in losses; (vi) the consequences related to variations
in the amount of our statutory capital due to factors beyond our control; (vii) the possibility that we not be successful in our efforts to implement a new business
plan; (viii) the impact on our results of operations and financial condition of any required increase in our reserves for future policyholder benefits and claims if
such reserves prove to be inadequate; (ix) changes in our investment valuations based on changes in our valuation methodologies, estimations and
assumptions; (x) further downgrades in our debt or financial strength ratings; (xi) the possibility that mortality rates, persistency rates, funding levels or other
factors may differ significantly from our assumptions used in pricing products; (xii) the availability, pricing and terms of reinsurance coverage generally and the
inability or unwillingness of our reinsurers to meet their obligations to us specifically; (xiii) our ability to attract and retain key personnel in a competitive
environment; (xiv) our dependence on third parties to maintain critical business and administrative functions; (xv) the strong competition we face in our
business from banks, insurance companies and other financial services firms; (xvi) 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; (xvii) the potential need to fund deficiencies in our closed block; (xviii) tax developments that may affect us directly, or indirectly through
the cost of, the demand for or profitability of our products or services; (xix) 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; (xx) legislative or regulatory developments; (xxi) regulatory or legal actions; (xxii) potential future material losses from our discontinued
reinsurance business; (xxiii) changes in accounting standards; (xxiv) the potential effect of a material weakness in our internal control over financial reporting
on the accuracy of our reported financial results; and (xxv) other risks and uncertainties described herein or in any of our filings with the SEC.
This information is provided as of March 31, 2011. Certain other factors which may impact our business, financial condition or results of operations or which
may cause actual results to differ from such forward-looking statements are discussed or included in our periodic reports filed with the SEC and are available
on our Web site, www.phoenixwm.com in the Investor Relations section. You are urged to carefully consider all such factors. We do not undertake or plan to
update or revise forward-looking statements to reflect actual results, changes in plans, assumptions, estimates or projections, or other circumstances occurring
after the date of this presentation, even if such results, changes or circumstances make it clear that any forward-looking information will not be realized. If we
make any future public statements or disclosures which modify or impact any of the forward-looking statements contained in or accompanying this
presentation, such statements or disclosures will be deemed to modify or supersede such statements in this presentation.
may cause actual results to differ from such forward-looking statements are discussed or included in our periodic reports filed with the SEC and are available
on our Web site, www.phoenixwm.com in the Investor Relations section. You are urged to carefully consider all such factors. We do not undertake or plan to
update or revise forward-looking statements to reflect actual results, changes in plans, assumptions, estimates or projections, or other circumstances occurring
after the date of this presentation, even if such results, changes or circumstances make it clear that any forward-looking information will not be realized. If we
make any future public statements or disclosures which modify or impact any of the forward-looking statements contained in or accompanying this
presentation, such statements or disclosures will be deemed to modify or supersede such statements in this presentation.
3
Table of contents
Page(s)
Summary 4
Total Invested Assets 5
Historical Portfolio Ratings 6
Bond Portfolio Detail 7 - 8
Alternative Asset Detail 9
Structured Securities Portfolio 10
Realized Credit Impairment Losses 11
Unrealized Gains/Losses 12
Commercial Mortgage-Backed Securities (CMBS) 13 - 14
Residential Mortgage-Backed Securities (RMBS) 15 - 18
Collateralized Debt Obligations (CDO) Holdings 19
Appendix: 20 - 23
Phoenix Life Insurance Company (PLIC) Closed Block
4
Summary
> General account investment portfolio is well diversified and liquid; managed by a team with a
successful track record of investing over a variety of market cycles, following a disciplined monitoring
process
successful track record of investing over a variety of market cycles, following a disciplined monitoring
process
> Approximately 92% of bond investments are investment grade. Emphasis is on liquidity with 72% of
bonds invested in public securities
bonds invested in public securities
> Strict limits on individual financial exposures that mitigate loss potential to any one particular entity; as
a result, there is limited exposure to the financial institutions that have been in the news
a result, there is limited exposure to the financial institutions that have been in the news
> Net unrealized gains of $314 million versus $266 million at year-end 2010
> Residential mortgage-backed securities (RMBS) exposure is high quality and diversified. Exposure is
concentrated in agency and non agency prime-rated securities
concentrated in agency and non agency prime-rated securities
> Commercial mortgage exposure is in highly rated commercial mortgage-backed securities with
minimal direct loan or real estate holdings
minimal direct loan or real estate holdings
> No credit default swap (CDS) exposure
As of March 31, 2011
5
Portfolio comprised
primarily of fixed income securities
primarily of fixed income securities
Bonds $11,160
77%
Policy Loans $2,374
16%
Cash & Cash Equivalents $107 1%
Private Equity $226 2%
Stock $52 0%
Other Invested Assets $404 3%
Mezzanine Funds $178 1%
Total Invested Assets: $14.5 Billion
$ in millions
Market value as of March 31, 2011
6
Portfolio quality improved
Percentages based on GAAP Value
As of March 31, 2011
|
|
1Q10
|
2Q10
|
3Q10
|
4Q10
|
1Q11
|
|
Investment Grade Bonds
|
89.9%
|
90.9%
|
91.0%
|
91.3%
|
91.8%
|
|
Below Investment Grade (BIG) Bonds
|
10.1
|
9.1
|
9.0
|
8.7
|
8.2
|
|
Percentage of BIG in NAIC 3
|
53.8
|
55.1
|
59.0
|
49.5
|
51.1
|
|
Percentage of BIG in NAIC 4-6
|
46.2
|
44.9
|
41.0
|
50.5
|
48.9
|
|
Corporate
|
|
|
|
|
|
|
Investment Grade
|
90.3
|
91.0
|
91.1
|
91.2
|
91.9
|
|
Below Investment Grade
|
9.7
|
9.0
|
8.9
|
8.8
|
8.1
|
|
Structured
|
|
|
|
|
|
|
Investment Grade
|
89.6
|
90.7
|
91.0
|
91.3
|
91.5
|
|
Below Investment Grade
|
10.4
|
9.3
|
9.0
|
8.7
|
8.5
|
7
RMBS
6%
CMBS 4%
$ in millions
Market value as of March 31, 2011
1 Includes $231.9 million of Home Equity Asset Backed Securities also included in the RMBS exhibits
2 Includes $36.5 million of CMBS CDO’s also included in the CMBS exhibits
Bond portfolio diversified by sector
U.S. Corporates
56%
Foreign Corporates
7%
ABS 4%
Emerging Markets
3%
Below Investment Grade (BIG) Bonds
by Sector
|
As of March 31, 2011
|
Market Value |
% of Total |
|
Industrials
|
$2,463.6
|
22.1
|
|
Residential MBS1
|
2,112.2
|
18.9
|
|
Foreign Corporates
|
1,598.3
|
14.3
|
|
Financials
|
1,500.6
|
13.5
|
|
Commercial MBS
|
1,174.1
|
10.5
|
|
U.S. Treasuries / Agencies
|
719.4
|
6.4
|
|
Asset Backed Securities
|
519.7
|
4.7
|
|
Utilities
|
504.7
|
4.5
|
|
CBO/CDO/CLO2
|
253.8
|
2.3
|
|
Municipals
|
213.0
|
1.9
|
|
Emerging Markets
|
100.1
|
0.9
|
|
Total
|
$11,159.5
|
|
Bonds by Rating
NAIC 1
59.0%
NAIC 2
32.8%
NAIC 3 & Lower
(BIG)
(BIG)
8.2%
CDO/CLO
20%
8
Top 10 fixed income holdings
|
Issuer |
Market
Value
|
% of
Fixed Income
|
Issuer
Rating
|
|
Bank of America Corp
|
$59.4
|
0.5%
|
A2/A
|
|
Wells Fargo
|
47.6
|
0.4
|
Aa2/AA
|
|
General Electric
|
41.6
|
0.4
|
Aa2/AA+
|
|
Citigroup
|
39.2
|
0.4
|
A3/A
|
|
AT&T Corporation
|
36.4
|
0.3
|
A2/A-
|
|
Walgreens
|
34.6
|
0.3
|
A2/A
|
|
Riverside Health System
|
34.5
|
0.3
|
A2/A
|
|
Berkshire Hathaway Inc.
|
34.4
|
0.3
|
Aa2/AA+
|
|
Reed Elsevier Inc.
|
31.5
|
0.3
|
Baa1/BBB+
|
|
Enterprise Products
|
30.4
|
0.3
|
Baa3/BBB-
|
$ in millions
As of March 31, 2011
9
Alternative asset balances
|
|
12/31/2010 |
3/31/2011 |
|
Private Equity
|
$220.0
|
$225.7
|
|
Mezzanine Funds
|
187.5
|
177.8
|
|
Infrastructure Funds
|
33.5
|
34.4
|
|
Hedge Fund of Funds
|
30.3
|
31.3
|
|
Other
|
38.3
|
37.8
|
|
Leveraged Lease
|
28.1
|
28.3
|
|
Mortgage & Real Estate Funds
|
14.8
|
19.0
|
|
Direct Equity
|
15.2
|
15.5
|
|
|
$567.7
|
$569.8
|
$ in millions
As of March 31, 2011
10
High quality
structured securities portfolio
structured securities portfolio
> Structured portfolio is 91.5% investment grade
> RMBS (46.3%) and CMBS (28.9%) dominate the structured portfolio
AAA
67.3%
B or less - 4.8%
BBB - 7.7%
AA - 7.0%
A - 9.5%
BB - 3.7%
$ in millions
Market value as of March 31, 2011, Quality rating breakdown based on NAIC ratings
1 Includes $36.5 million of CMBS CDOs
|
As of March 31, 2011
|
Market Value |
% of Total
|
|
Residential MBS
|
$ 1,880.3
|
46.3
|
|
Commercial MBS
|
1,174.1
|
28.9
|
|
Other ABS
|
264.4
|
6.5
|
|
CBO/CDO/CLO1
|
253.8
|
6.3
|
|
Home Equity
|
231.9
|
5.7
|
|
Auto Loans
|
163.4
|
4.0
|
|
Aircraft Equipment Trust
|
56.1
|
1.4
|
|
Manufactured Housing
|
35.8
|
0.9
|
|
Total
|
$4,059.8
|
|
11
Moderation in credit impairments
GAAP Credit Impairments
|
|
1Q10
|
2Q10
|
3Q10
|
4Q10
|
1Q11
|
|
Prime RMBS
|
$0.7
|
$1.9
|
-
|
$1.6
|
-
|
|
Alt-A RMBS
|
4.6
|
2.4
|
0.5
|
2.5
|
1.0
|
|
Subprime RMBS
|
0.1
|
-
|
-
|
1.5
|
0.3
|
|
CLO/CDO
|
5.5
|
3.4
|
3.6
|
3.5
|
-
|
|
CMBS
|
1.4
|
0.7
|
2.9
|
1.7
|
-
|
|
Corporate
|
1.9
|
1.7
|
1.1
|
-
|
4.4
|
|
Other ABS/MBS
|
-
|
2.1
|
3.7
|
-
|
-
|
|
Total Debt
|
$14.2
|
$12.2
|
$11.8
|
$10.8
|
$5.7
|
|
Schedule BA
|
-
|
-
|
-
|
-
|
-
|
|
Equity
|
0.3
|
0.2
|
0.1
|
-
|
-
|
|
Total Credit Impairments
|
$14.5
|
$12.4
|
$11.9
|
$10.8
|
$5.7
|
$ in millions
As of March 31, 2011
12
Portfolio in a gain position
$ in millions
1 Market value of $1,174.1 million includes $36.5 million of CMBS CDO’s
2 All Other - Corporates, RMBS Agency, Other ABS, Foreign, US Government
|
|
12/31/2010
Unrealized
|
3/31/2011
Unrealized
|
3/31/2011
Invested Assets |
|
RMBS Prime
|
$(21.2)
|
$(10.8)
|
$535.7
|
|
Subprime/Alt-A
|
(58.5)
|
$(51.0)
|
499.4
|
|
CDO/CLO1
|
(47.9)
|
(36.1)
|
253.8
|
|
CMBS
|
24.5
|
31.7
|
1,174.1
|
|
Financial
|
(25.2)
|
(0.2)
|
1,500.5
|
|
All Other High Yield
|
0.9
|
4.9
|
434.4
|
|
All Other2
|
393.5
|
375.4
|
6,761.6
|
|
Total
|
$266.1
|
$313.9
|
$11,159.5
|
13
Highly rated, seasoned
CMBS portfolio
CMBS portfolio
> $1.2 billion in market value
> $140.3 million or 11.6% Government
guaranteed
guaranteed
> 77.3% AAA and 3.2% BB and below
> 71.1% 2005 and prior origination
> Only 3% in CMBS CDO’s
Market value as of March 31, 2011
Percentages based on market value
$ in millions
14
Well constructed CMBS portfolio
Phoenix CMBS Portfolio
> High levels of credit enhancement
> Excellent credit characteristics vs.
market
market
> Avoided 2006 and 2007 aggressive
underwriting
underwriting
|
|
Market1
|
Phoenix
|
|
Weighted average credit
enhancement |
27%
|
29%
|
|
Weighted average credit
enhancement (U.S. Treasury defeasance adjusted) |
28%
|
33%
|
|
Interest Only (I/O) loans
|
67%
|
34%
|
|
Weighted average coupon
|
5.74%
|
6.28%
|
|
Weighted average loan age
|
65 months
|
85 months
|
|
60+ Delinquency Rate
|
8.3%
|
5.6%
|
As of March 31, 2011
1Sources: Barclays CMBS Index, Trepp, Bloomberg
15
High quality, diversified RMBS portfolio
$ in millions
Market value as of March 31, 2011
|
Rating |
Book Value |
Market Value |
% General Account |
AAA |
AA |
A |
BBB |
BB &
Below |
|
Agency
|
$1,047.0
|
$1,077.1
|
7.4%
|
100.0% |
-
|
-
|
-
|
-
|
|
Prime
|
546.5
|
535.7
|
3.7%
|
57.7%
|
11.9%
|
3.6%
|
1.4%
|
25.4%
|
|
Alt-A
|
346.2
|
314.8
|
2.2%
|
43.8%
|
17.8%
|
6.2%
|
4.1%
|
28.1%
|
|
Subprime
|
204.2
|
184.6
|
1.3%
|
55.8%
|
17.9%
|
-
|
7.4%
|
18.9%
|
|
Total
|
$2,143.9
|
$2,112.2
|
14.6%
|
77.0%
|
7.2%
|
1.9%
|
1.6%
|
12.3%
|
16
High quality, seasoned
non-agency prime RMBS holdings
non-agency prime RMBS holdings
> $535.7 million market value
> 70% AAA and AA rated
> 82% 2005 and prior origination
> 93.8% fixed rate vs. 47% for the market
> Phoenix 60+ day delinquent 7.5% vs.
13.4% for the prime RMBS market
13.4% for the prime RMBS market
$ in millions
As of March 31, 2011
Source: JPM MBS Research
17
Well constructed
non-agency prime RMBS portfolio
non-agency prime RMBS portfolio
As of March 31, 2011
Source: JP Morgan MBS Research - March 2011, Bloomberg
Market Phoenix
Weighted average credit enhancement 4.0% 10.3%
Weighted average 60+ day delinquent loan 13.4% 7.5%
Phoenix prime portfolio loss coverage: using 40% loss severity 0.75x 3.4x
18
Seasoned
non-agency Alt-A RMBS holdings
non-agency Alt-A RMBS holdings
> $314.8 million market value
> 62% AAA or AA rated
> 82% 2005 and prior originations
> 100% fixed rate collateral vs. 34% for market
> Phoenix 60+ day delinquent 15.2% vs.
28.4% for Alt-A market
28.4% for Alt-A market
$ in millions
Market value as of March 31, 2011
Source: JPM MBS Research
19
Diversified CDO holdings
$ in millions
No affiliated CDO holdings as of March 31, 2011
Percentages based on market value
|
Collateral |
Book
Value |
Market
Value |
% General
Account |
AAA |
AA |
A |
BBB |
BB &
Below |
|
Bank Loans
|
$231.1
|
$213.3
|
1.5%
|
3.2%
|
4.9%
|
14.5%
|
23.6%
|
53.8%
|
|
Inv Grade Debt
|
4.5
|
4.0
|
-
|
-
|
12.4%
|
-
|
87.6%
|
-
|
|
CMBS
|
54.3
|
36.5
|
0.3%
|
9.8%
|
56.4%
|
5.9%
|
20.0%
|
7.9%
|
|
Total
|
$289.9
|
$253.8
|
1.8%
|
4.1%
|
12.4%
|
13.0%
|
24.1%
|
46.4%
|
Appendix
21
PLIC Closed Block investments
primarily fixed income
primarily fixed income
Bonds $6,385
79%
Policy Loans $1,315
16%
Cash & Cash Equivalents $11 0%
Private Equity $215 3%
Stock $22 0%
Mezzanine Funds $80 1%
Other Invested Assets $58 1%
Invested Assets: $8.1 Billion
$ in millions
Market value as of March 31, 2011
22
PLIC Closed Block
portfolio high quality
portfolio high quality
Percentages based on GAAP Value
As of March 31, 2011
|
|
1Q10
|
2Q10
|
3Q10
|
4Q10
|
1Q11
|
|
Investment Grade Bonds
|
92.0%
|
92.5%
|
92.6%
|
92.9%
|
93.1%
|
|
Below Investment Grade (BIG) Bonds
|
8.0
|
7.5
|
7.4
|
7.1
|
6.9
|
|
Percentage of BIG in NAIC 3
|
62.1
|
62.6
|
67.3
|
59.4
|
59.8
|
|
Percentage of BIG in NAIC 4-6
|
37.9
|
37.4
|
32.7
|
40.6
|
40.2
|
|
Public Bonds
|
68.2
|
67.5
|
66.5
|
67.0
|
67.3
|
|
Private Bonds
|
31.8
|
32.5
|
33.5
|
33.0
|
32.7
|
23
PLIC Closed Block
portfolio diversified
portfolio diversified
U.S. Corporates
60%
Foreign Corporates
8%
ABS - 3%
Emerging Markets -5%
$ in millions
Market value as of March 31, 2011
1 Includes $35.7 million of Home Equity Asset Backed Securities
2 Includes $21.4 million of CMBS CDO’s
Below Investment Grade (BIG) Bonds
by Sector
|
Bond Portfolio
Phoenix Closed Block
|
|
|
|
As of March 31, 2011
|
|
|
|
Industrials
|
$1,631.6
|
25.6%
|
|
Foreign Corporates
|
989.9
|
15.5
|
|
Residential MBS1
|
978.5
|
15.3
|
|
Financials
|
912.9
|
14.3
|
|
Commercial MBS
|
678.5
|
10.6
|
|
U.S. Treasuries / Agencies
|
432.6
|
6.8
|
|
Utilities
|
325.7
|
5.1
|
|
Asset Backed Securities
|
130.9
|
2.1
|
|
Municipals
|
130.5
|
2.0
|
|
CBO/CDO/CLO’s2
|
98.0
|
1.5
|
|
Emerging Markets
|
75.5
|
1.2
|
|
Total
|
$6,384.6
|
|
Bonds by Rating
NAIC 1
58.1%
NAIC 2
35.0%
NAIC 3 & Lower
6.9%
RMBS - 7%
CLO/CDO
14%
CMBS - 3%
