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Phoenix Sheds 133 Jobs; Net Income Fell 80% For Quarter

By DIANE LEVICK | Courant Staff Writer

August 01, 2008

Net income at The Phoenix Cos. plunged 80 percent in the second quarter, and the company said Thursday that it has eliminated 133 jobs as it prepares to spin off its asset management business.

Net profit fell on investment losses and millions of dollars of expenses related to a contested election of directors and the spinoff of Phoenix Investment Partners to Phoenix Cos. shareholders. The spinoff is scheduled for completion by the end of September but is subject to final board approval.

Hartford-based Phoenix Cos. wouldn't say how many of the job cuts were layoffs. But company spokeswoman Alice Ericson said that well over half were accomplished through attrition and that 56 of the 133 jobs were Hartford positions.

Ninety of the cuts were in the life insurance and annuity business that will make up the ongoing Phoenix Cos. The other 43 job cuts were in Phoenix Investment Partners, which will be renamed Virtus Investment Partners.

The Phoenix Cos. had 1,568 employees companywide as of June 30, including 809 in Hartford. Phoenix Investment Partners has 340 employees around the nation, including about 140 in Hartford.

Net profit at The Phoenix Cos. was $6.2 million, or 5 cents a share, for the quarter ended June 30, compared with $30.9 million, or 27 cents a share, a year ago.

This year's quarter included $9.2 million of net realized investment losses, mainly due to investment writedowns, compared with $1 million a year ago.

Operating profit, which excludes net realized investment gains or losses, was $14.8 million, or 13 cents a share, falling short of the Thomson Reuters analysts' consensus of 18 cents a share. The operating income was down 53 percent compared with $31.6 million, or 27 cents a share, in the 2007 quarter.

Phoenix blamed market performance, which lowered investment income and hurt fees it earns. In addition, the company's net income included $4.8 million of pre-tax expenses from a battle with Oliver Press Partners LLC over board seats earlier this year, and $3.9 million of expenses related to the upcoming spinoff.

Phoenix shares fell 20 cents, or 2 percent, Thursday to close at $9.73 a share after financial results were released.

"Our ongoing life and annuity business continued to produce solid results despite one of the worst market environments in recent memory," said Dona D. Young, chairman, president and chief executive.

The life insurance and annuity business posted $45.5 million of operating income, down 3.6 percent from $47.2 million a year ago.

The asset management business reported a $4 million pre-tax operating loss compared with a $2.3 million operating profit in the 2007 second quarter.

Customers drew $2.2 billion more out of asset management business than they put in during this year's second quarter. In the second quarter of 2007, customers deposited $384.2 million more than they withdrew.

Assets under management dropped to $33.4 billion as of June 30 from $46.4 billion at the end of June 2007.

The Phoenix Cos. has reduced $3.8 million of expenses so far this year, excluding the asset management business, and expects $13.5 million of savings for the full year. The savings include job eliminations and renegotiation of several significant vendor contracts.

Young was asked during a conference call with analysts Thursday whether the company might call off the spinoff because of market conditions and Phoenix Investment Partners' poor financial results. She would only say the board will consider all factors before taking final action. She also declined to comment on whether any potential suitors had come to Phoenix in the last 1½ years.

UBS analyst Andrew Kligerman asked Young what the board has concluded about Phoenix's poor stock performance over the years and the performance of the company's management. She declined to comment, other than to say the board is well aware of the stock performance and has been "active" and "engaged."

Third Point LLC, a New York hedge fund that has bought a chunk of Phoenix stock, has called for the firing of Young and sale of Phoenix. Many analysts had predicted in recent years the company would be sold.