The Phoenix Companies, Inc. (NYSE:PNX) today reported a first-quarter 2012 net loss of $8.1 million, or $0.07 per share, compared with first-quarter 2011 net income of $3.6 million, or $0.03 per diluted share.
First-quarter 2012 operating income was $6.5 million, or $0.06 per diluted share, compared with first-quarter 2011 operating income of $24.5 million, or $0.21 per diluted share.
Pre-tax operating income for the first quarter of 2012 was $21.6 million, or $0.19 per diluted share, compared with $21.9 million, or $0.19 per diluted share for the first quarter of 2011. Given the significant volatility in the company’s GAAP tax provision, operating comparisons are provided on both a pre-tax and after-tax basis.
The first-quarter 2012 net loss was driven by two factors: an unusually high GAAP tax rate due to strong statutory earnings, and a $15.1 million ($9.8 million after tax) change in the non-performance risk factor, which is a fair value adjustment that does not have an economic impact on the company. Additionally, prior period amounts have been revised to reflect the adoption of new accounting guidance for deferred acquisition costs.“Phoenix had another very solid quarter,” said James D. Wehr, president and chief executive officer. “We sustained favorable trends in the fundamentals of the business including balance sheet strength, expense management, inforce persistency and profitable business growth. At the same time, strong capital generation and statutory earnings led to an unusually high tax provision in the quarter, which affected our results.” Mr. Wehr said, “I am pleased with the continuing progress in our fixed indexed annuity business. Our pricing strategy for new business focuses on generating solid margins, even if it affects sales. We demonstrated that discipline by adjusting price to align with lower interest rates and consequently saw a modest decline in sales from the fourth quarter.” FIRST QUARTER EARNINGS SUMMARY
|($ in millions)||First Quarter 2012||Fourth Quarter 2011||First Quarter 2011|
|Net Income (Loss)||$||(8.1||)||$||(14.0||)||$||3.6|
|Net DAC, PDO, Tax and Other Offsets||1.5||1.4||(3.2||)|
|Discontinued Operations 1||(0.5||)||(15.1||)||(1.5||)|
|Operating Income 2||$||6.5||$||9.1||$||24.5|
|Applicable Income Tax Expense (Benefit)||15.1||1.5||(2.6||)|
|Operating Income Before Taxes 2||$||21.6||$||10.6||$||21.9|
|Earnings Per Share Summary|
|Net Income (Loss) Per Share|
|Operating Income Per Share|
|Operating Income Before Taxes Per Share|
|Weighted Average Shares Outstanding (in millions)|
|($ in millions)||First Quarter 2012||Fourth Quarter 2011||First Quarter 2011|
|Net Investment Income||$||207.9||$||197.3||$||200.8|
|Total Revenue 1||$||439.1||$||450.4||$||449.4|
|Other Operating Expenses||$||60.5||$||70.1||$||59.7|
- First-quarter 2012 pre-tax operating income of $21.6 million, compared with pre-tax operating income of $21.9 million for the first quarter of 2011, was driven primarily by strong net investment income, offset by lower fee income.
- First-quarter 2012 revenues were $439.1 million, compared with $449.4 million for the first quarter of 2011. The change was due primarily to lower premium revenue from closed block policies (sold before the 2001 demutualization) and is consistent with expectations for this block.
- Net investment income was $207.9 million for the first quarter of 2012, compared with $197.3 million for the fourth quarter of 2011 and $200.8 million for the first quarter of 2011. Both increases were driven primarily by higher alternative asset returns, while the year-over-year improvement was also driven by higher asset balances.
- Total individual life surrenders were at an annualized rate of 6.4% for the first quarter of 2012, compared with 6.0% for the fourth quarter of 2011 and 7.2% for the first quarter of 2011. The closed block’s annualized surrender rate was 5.6% for the first quarter of 2012, compared with 5.5% for the fourth quarter of 2011 and 6.6% for the first quarter of 2011.
- Annuity surrenders for the first quarter of 2012 were at an annualized rate of 12.1%, compared with 9.7% for the fourth quarter of 2011 and 13.0% for the first quarter of 2011.
- Overall mortality experience for the first quarter of 2012 was in line with expectations, with modestly favorable experience in the closed block.
- First-quarter 2012 total other operating expenses were $60.5 million, compared with $70.1 million for the fourth quarter of 2011, which included an $11.5 million out-of-period adjustment for certain pre-2001 retirement benefits. First-quarter 2011 total other operating expenses were $59.7 million. Core operating expenses before deferrals were $50.0 million for the first quarter of 2012, compared with $48.8 million for the fourth quarter of 2011 and $50.6 million for the first quarter of 2011. Core operating expenses before deferrals represent total other operating expenses excluding premium taxes, reinsurance allowances, commissions, sales incentives and unusual expenses.
- The company recorded a $15.1 million tax expense in operating income for the first quarter of 2012, including $8.9 million of alternative minimum tax driven by strong statutory earnings.
- Annuity deposits were $227.3 million for the first quarter of 2012, compared with $275.9 million for the fourth quarter of 2011 and $205.3 million for the first quarter of 2011. The decline from the fourth quarter was driven by price adjustments in certain product lines. The company expects to finish the year with about $1 billion in annuity deposits, which is the lower end of its target range.
- First-quarter 2012 net annuity flows were $86.3 million, compared with net annuity flows of $70.4 million for the first quarter of 2011. Annuity funds under management increased 12% year-over-year to $4.8 billion at March 31, 2012.
- Life insurance annualized premium was $0.3 million for the first quarter of 2012, compared with $0.6 million for the fourth quarter of 2011 and $0.6 million for the first quarter of 2011. Gross life insurance in-force at March 31, 2012 was $121.5 billion, a 9% decrease from March 31, 2011.
- Saybrus showed continued earnings momentum with $0.7 million of EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization, including inter-company revenues) for the first quarter of 2012, compared with $0.4 million of EBITDA for the fourth quarter of 2011 and an EBITDA loss of $0.8 million for the first quarter of 2011. Saybrus revenues were $5.1 million for the first quarter of 2012, up from $4.9 million for the fourth quarter of 2011 and $3.8 million for the first quarter of 2011.
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