FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________ to __________
Commission file number 333-20277
PHL VARIABLE INSURANCE COMPANY
Incorporated in the State of Connecticut 06-1045829
-------------------
(I.R.S. Employer
Identification No.)
One American Row, Hartford, Connecticut 06102-5056
(Address of principal executive offices)
Telephone Number (800) 447-4312
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes__X__ No_____
As of October 31, 1997, there were outstanding 500 shares of common stock, $1.00
par value per share, of the registrant, all of which were directly owned by PM
Holdings, Inc.
<PAGE>
PHL Variable Insurance Company
<TABLE>
<CAPTION>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements Page
<S> <C>
Balance Sheets at September 30, 1997 (unaudited) and December 31, 1996 2
Statements of Income for the Three Months and Nine Months Ended
September 30, 1997 and 1996 (unaudited) 3
Statement of Cash Flows for the Nine Months Ended
September 30, 1997 and 1996 (unaudited) 4
Notes to Condensed Financial Statements 5
Item 2. Management's Discussion and Analysis of Financial Condition 6
and Results of Operations
PART II. OTHER INFORMATION
Item 4. Action Taken by Shareholder 7
Item 6. Exhibits and Reports on Form 8-K 7
Signature 8
Exhibit Index 9
</TABLE>
1
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
PHL Variable Insurance Company
BALANCE SHEETS
<TABLE>
<CAPTION>
(UNAUDITED)
SEPTEMBER 30, DECEMBER 31,
1997 1996
(IN THOUSANDS)
ASSETS
Investments:
Fixed maturities:
<S> <C> <C>
Held-to-maturity, at amortized cost $ 3,128 $ 1,827
Available-for-sale, at fair value 17,206 15,279
Short-term investments 6,243 155
------------------------ ------------------------
Total investments 26,577 17,261
Cash and cash equivalents 1,680 1,667
Accrued investment income 318 208
Deferred policy acquisition costs 17,197 9,557
Current income taxes 14
Deferred income taxes 929 363
Other assets 853 225
Goodwill 687 756
Separate account assets 324,708 159,418
------------------------
------------------------
Total assets $ 372,949 $ 189,469
======================== ========================
LIABILITIES
Contractholders' funds at interest $ 20,761 $ 11,569
Current income taxes 150
Other liabilities 6,087 1,678
Separate account liabilities 323,697 159,418
------------------------
------------------------
Total liabilities 350,695 172,665
------------------------ ------------------------
EQUITY
Common stock, $1 par value, 2,500,000
shares authorized, issued and outstanding 2,500 2,500
Additional paid-in-capital 18,864 13,864
Unrealized investment gains, net 70 44
Retained earnings 820 396
------------------------
------------------------
Total equity 22,254 16,804
------------------------ ------------------------
Total liabilities and equity $ 372,949 $ 189,469
======================== ========================
</TABLE>
The accompanying notes are an integral part of these statements.
2
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PHL Variable Insurance Company
STATEMENTS OF INCOME (UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------------------- --------------------------------
1997 1996 1997 1996
(IN THOUSANDS)
REVENUES
<S> <C> <C> <C> <C>
Investment product fees $ 1,162 $ 426 $ 3,331 $ 887
Net investment income 403 258 1,127 801
Net realized investment losses (18)
-------------- -------------- --------------- --------------
Total revenues 1,670
1,565 684 4,458
-------------- -------------- --------------- --------------
BENEFITS, LOSSES AND EXPENSES
Policy benefits and payments 320 121 634 231
Policy acquisition expenses 375 122 861 310
Other operating expenses 789 260 2,313 792
-------------- -------------- --------------- --------------
Total benefits, losses and expenses 1,333
1,484 503 3,808
-------------- -------------- --------------- --------------
INCOME BEFORE INCOME TAXES 337
81 181 650
Income tax expense 28 63 226 118
-------------- -------------- --------------- --------------
NET INCOME $ $ 219
53 $ 118 424 $
============== ============== =============== ==============
</TABLE>
The accompanying notes are an integral part of these statements.
3
<PAGE>
PHL Variable Insurance Company
STATEMENTS OF CASH FLOWS (UNAUDITED)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
--------------------------------------------
1997 1996
(IN THOUSANDS)
CASH FLOW FROM OPERATING ACTIVITIES
<S> <C> <C> <C> <C>
Net income $ 424 $ 219
ADJUSTMENTS TO RECONCILE NET INCOME
TO NET CASH PROVIDED BY (USED FOR) OPERATIONS
Amortization and depreciation 69 70
Deferred income taxes and other assets (1,193) (295)
Increase in accrued investment income (110) (30)
Increase in deferred policy acquisition costs (7,630) (5,714)
Increase in contractholder funds 9,192 4,978
Increase (decrease) in other liabilities
1,022 (195)
Increase (decrease) in payable to affiliates
3,387 730
-------------------- --------------------
Net cash provided by (used for) operating activities
5,161 (237)
-------------------- --------------------
CASH FLOW FROM INVESTING ACTIVITIES
Proceeds from disposals of fixed maturities:
Available-for-sale
4,877 3,099
Purchase of fixed maturities:
Available-for-sale (6,636) (5,171)
Held-to-maturity (1,301) (1,810)
Change in short-term investments, net (6,088)
4,425
Other investing activities (separate account seed money) (1,000)
-------------------- --------------------
Net cash (used for) provided by investing activities (10,148)
543
-------------------- --------------------
CASH FLOW FROM FINANCING ACTIVITIES
Capital contribution from parent 5,000
-------------------- --------------------
Net cash provided by financing activities 5,000 -
-------------------- --------------------
NET INCREASE IN CASH AND CASH EQUIVALENTS 13 306
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 1,667 1,117
-------------------- --------------------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 1,680 $ 1,423
-------------------- --------------------
SUPPLEMENTAL CASH FLOW INFORMATION
Income taxes paid $ 654 $ 987
==================== ====================
</TABLE>
The accompanying notes are an integral part of these statements.
4
<PAGE>
NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED)
1. BASIS OF PRESENTATION
The condensed unaudited financial statements include the accounts of PHL
Variable Insurance Company (PHLV or the Company). These condensed financial
statements have been prepared in accordance with generally accepted
accounting principles (GAAP). The information furnished includes all
adjustments and accruals consisting only of normal, recurring accrual
adjustments which are, in the opinion of management, necessary for a fair
statement of results for the interim period.
The results of operations for any interim period are not necessarily
indicative of results for the full year. Certain information and footnote
disclosures normally included in financial statements prepared in
accordance with GAAP have been condensed or omitted. Certain
reclassifications have been made to prior year amounts to conform with
current year presentations. The September 30, 1997 Condensed Financial
Statements should be read in conjunction with the December 31, 1996
Financial Statements contained in the Form S-1 registration statement
dated July 15, 1997.
2. ORGANIZATION
As described more fully in Note 1 of the December 31, 1996 Financial
Statements, PM Holdings, Inc. (PM Holdings) acquired Dreyfus Consumer Life
Insurance Company from The Dreyfus Corporation on May 31, 1994 and renamed
the company PHL Variable Insurance Company. PM Holdings accounted for the
acquisition of the Company under the purchase method of accounting. The
assets and liabilities of the Company were recorded at their fair value as
of the date of acquisition and goodwill was pushed-down to the Company from
PM Holdings. PM Holdings is a wholly-owned subsidiary of Phoenix Home Life
Mutual Insurance Company (Phoenix).
5
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
FINANCIAL CONDITION
As of September 30, 1997, assets increased 97% from December 31, 1996.
Contributing to this change was the $165 million increase in separate account
assets.
On June 23, 1997, PM Holdings made a capital contribution of $5 million in cash
to the Company. This contribution, held in short-term investments, increased
PHLV's equity as additional paid-in capital. Deposits from the sale of variable
annuity products increased separate account assets by $69.7 million during the
third quarter of 1997, and by $165.3 million for nine months, bringing separate
account assets to $324.7 million as of September 30, 1997. Separate account
assets also include a $1.0 million investment made by the Company on July 15,
1997 to provide seed money for the new Market Value Adjustment (MVA) option.
RESULTS OF OPERATIONS
Investment product fees for the nine months ended September 30, 1997, were $3.3
million, a $2.4 million (276%) increase from $0.9 million for the corresponding
period in 1996. This increase reflected the higher fees earned on a $223.2
million increase in assets under management from September 30, 1996 to September
30, 1997, reaching $344.4 million. For the three months ended September 30,
1997, fees increased to $1.2 million compared to $0.4 million during the same
period last year. Investment income rose to $0.4 million during the third
quarter of 1997, a $0.1 million (56%) improvement over the third quarter of
1996.
Operating expenses of $2.3 million for the nine months ended September 30, 1997,
increased by $1.5 million from the $0.8 million incurred for nine months in
1996. Expenses increased to $0.8 million during the three months ended September
30, 1997, up $0.5 million over the $0.3 million amount in the comparable 1996
period. Policy acquisition expenses of $0.9 million for the nine months ended
September 30, 1997, increased by $0.6 million from the $0.3 million incurred
during the same period in 1996 with quarterly acquisition expenses showing
similar results. Operating expenses included costs for facilities and services,
under an expense allocation agreement with its ultimate parent Phoenix. The
increases in this year's operating expenses and acquisition expenses were
primarily attributable to the acquisition and administration of a larger
block of business, described previously. Higher policy benefits and payments
also related directly to higher funds being managed, experiencing $0.6 million
and $0.2 million in benefits for the nine months ended September 30, 1997 and
1996, respectively. Benefits of $0.3 million and $0.1 million were recorded for
the three months ended during the respective year-to-year quarters.
Net income of $53 thousand in the third quarter of 1997 is below the $118
thousand of net income reported during the same period in 1996 due to somewhat
higher operating costs. Net income of $424 thousand for the nine months ended
September 30 1997, showed a $205 thousand improvement over the $219 thousand
reported in 1996 due to a larger increase in revenues that offset the increase
in benefits, losses and expenses.
6
<PAGE>
PART II. OTHER INFORMATION
Item 4. Action Taken by Shareholder
By written consent of the sole shareholder, P.M. Holdings, Inc., dated
September 2, 1997, the election of directors was voted upon. All votes were cast
in favor of the nominees; no votes were cast against or withheld, and there were
no abstentions or broker nonvotes.
The following individuals were so elected as directors: Richard H.
Booth, Robert G. Chipkin, Robert W. Fiondella, Joseph E. Kelleher, Philip R.
McLoughlin, Charles J. Paydos, David W. Searfoss, Simon Y. Tan and Dona D.
Young.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits -- see Exhibit Index
(b) PHL Variable Insurance Company did not file any report on Form
8-K during the quarter covered by this report.
7
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
PHL VARIABLE INSURANCE COMPANY
By /s/David W. Searfoss
--------------------------------------------
David W. Searfoss
Executive Vice President and Treasurer
November 13, 1997
8
<PAGE>
EXHIBIT INDEX
Exhibit
Number Description
(27) Financial Data Schedule is filed herewith.
9
<TABLE> <S> <C>
<ARTICLE> 7
<CIK> 1031223
<NAME> PHL Variable Insurance Company
<MULTIPLIER> 1
<CURRENCY> U.S. Dollars
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> dec-31-1997
<PERIOD-START> jan-01-1997
<PERIOD-END> sep-30-1997
<EXCHANGE-RATE> 1
<DEBT-HELD-FOR-SALE> 17,206,000
<DEBT-CARRYING-VALUE> 3,128,000
<DEBT-MARKET-VALUE> 0
<EQUITIES> 0
<MORTGAGE> 0
<REAL-ESTATE> 0
<TOTAL-INVEST> 26,577,000
<CASH> 1,680,000
<RECOVER-REINSURE> 0
<DEFERRED-ACQUISITION> 17,197,000
<TOTAL-ASSETS> 372,949,000
<POLICY-LOSSES> 0
<UNEARNED-PREMIUMS> 0
<POLICY-OTHER> 0
<POLICY-HOLDER-FUNDS> 20,761,000
<NOTES-PAYABLE> 0
0
0
<COMMON> 2,500,000
<OTHER-SE> 19,754,000
<TOTAL-LIABILITY-AND-EQUITY> 372,949,000
0
<INVESTMENT-INCOME> 1,127,000
<INVESTMENT-GAINS> 0
<OTHER-INCOME> 3,331,000
<BENEFITS> 634,000
<UNDERWRITING-AMORTIZATION> 861,000
<UNDERWRITING-OTHER> 2,313,000
<INCOME-PRETAX> 650,000
<INCOME-TAX> 226,000
<INCOME-CONTINUING> 424,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 424,000
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
<RESERVE-OPEN> 0
<PROVISION-CURRENT> 0
<PROVISION-PRIOR> 0
<PAYMENTS-CURRENT> 0
<PAYMENTS-PRIOR> 0
<RESERVE-CLOSE> 0
<CUMULATIVE-DEFICIENCY> 0
</TABLE>
