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Phoenix To Cut 250 Jobs

DIANE LEVICK

February 27, 2009

The Phoenix Cos. said Friday it will cut more than 250 jobs -- about 25 percent of its 1,100 employees companywide -- and reported a net loss of $424.3 million for the fourth quarter of 2008 and a $772 million loss for the year.

The life insurance and annuity company said its capital remains strong, but it will eliminate its shareholder dividend to preserve $18 million of capital.

Phoenix says it doesn't know yet how many of the 250 layoffs will be in Hartford where it's based, but Friday's announcement raises the specter of scores of job cuts. Phoenix has about 600 employees in Hartford after the Dec. 31 spinoff of its asset management business, Virtus Investment Partners.

"Phoenix is at a pivotal point in our history and management is fully cognizant that times are more difficult than any of us have experienced in our lifetimes," said Dona D. Young, chairman, president and CEO.

Top executives including Young won't get annual bonuses for 2008, and the 2008 bonus pool for other employees is 86 percent lower than for 2007. Also, the company is freezing salaries for its 130 most senior employees for 2009.

"While the Virtus spinoff is now behind us, the economic and market challenges remain," said Young, adding Phoenix is taking "decisive actions to retain financial strength and pursue new market opportunities."

Phoenix will eliminate the 250 jobs over the next two to six months, and some job cuts are likely to result from outsourcing. The company is planning to reduce annualized expenses by about $65 million, including the layoffs.

Phoenix said it eliminated 160 jobs or 13 percent of its companywide work force in 2008, but wouldn't say how many were in Hartford.

The upcoming Phoenix layoffs come as the city and region reel from mounting job cuts at other companies including Aetna, CIGNA, and The Hartford Financial Services Group.

"While these layoffs are disappointing and we feel for the families affected, I am confident that the steps that Phoenix is taking will ensure the long-term viability of the company in Hartford," said Eddie A. Perez, the city's mayor.

Phoenix's fourth quarter net loss of $424.3 million or $3.71 a share compares with $3.1 million or 3 cents a share of net income a year earlier. The 2008 quarter included $95.5 million of realized investment losses compared with $19.8 million of losses a year earlier.

Phoenix said it will re-position its business by expanding alternative retirement product offerings, developing new distribution channels for its main product offerings, and seeking partners for private labeling ventures.

Private labeling means Phoenix would design a product for a partner company, which would sell it under its own name. Phoenix would assume some of the financial risk and share in the profits from such products, and might provide other services such as underwriting or customer service, if the partner wishes.

"With Phoenix shares selling under $1, clearly the company is facing substantial challenges," said Robert Glasspiegel, an analyst and co-manager at Langen McAlenney in Hartford. "While management provides assurances in the press release that solvency is not an issue, generating significant sales in the current environment seems highly unlikely."

Life insurance sales dropped 71 percent in the fourth quarter of 2008 from a year earlier, and annuity deposits fell 37 percent.

Phoenix's stock closed Friday at its lowest price ever -- 48 cents a share, down 22 cents from Thursday's close.

Phoenix's adjusted operating income, which excludes realized investment losses and other items, was $11 million or 10 cents a share. The Thomson Reuters analysts' consensus was 11 cents a share.

Adjusted income excludes $193.2 million in discontinued operations losses, a $142.5 million of charges related to accounting for deferred acquisition costs such as commissions, and $4.1 million of costs such as severance.

Adjusted operating income for the 2007 quarter was $$18.7 million or 16 cents a share.

The full-year 2008 net loss of $772 million or $6.75 a share compares with $117.6 million or $1.01 a share of net income in 2007.