Moody's Downgrades Phoenix Cos. Ratings

NEW YORK (AP) — Moody's Investors Service on Tuesday downgraded the senior debt rating of insurer Phoenix Cos. due to its declining capital.

Last month, the company posted a wide second-quarter loss, driven by severance costs and tax issues, as revenue fell 11 percent to $525.7 million.

Moody's downgraded the company's senior debt rating to "B1" from "Ba2," a junk-bond status that indicates the future of the bonds can't be well assured.

Moody's said in a statement the outlook is negative, reflecting "the challenges that management faces in maintaining the company's liquidity position without overly compromising investment earnings, the pace of negative cash flows from the company's in-force block, as well as concerns about the ability of the company to stabilize and improve its capital position given its weak earnings capacity."

Moody's also cut the insurance financial strength rating of the company's life insurance subsidiaries, led by Phoenix Life Insurance Company, has been lowered to "Ba1" from "Baa2." ''Ba1" is also a junk-bond rating.

The Hartford, Conn.-based company said it was disappointed by the downgrades, but believes it is "making progress" at cutting costs and pursuing a better business strategy.

Shares fell 16 cents, or 5.9 percent, to close at $2.57 for the day.