As filed with the Securities and Exchange Commission on April 27, 2000
Registration No. 333-20277
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.
FORM S-1
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
POST-EFFECTIVE AMENDMENT NO. 4
PHL VARIABLE INSURANCE COMPANY
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(Exact name of registrant as specified in its charter)
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<CAPTION>
Connecticut 06-1045829
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(State or other jurisdiction of (Primary Standard Industrial (IRS Employer
incorporation or organization) Classification Code Number) Identification Number)
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ONE AMERICAN ROW
HARTFORD, CT 06115
(800) 447-4312
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(Address, including zip code, and telephone number,
including area code, of registrant's principal executive offices)
DONA D. YOUNG
PHL VARIABLE INSURANCE COMPANY
ONE AMERICAN ROW
HARTFORD, CT 06102-5056
(860) 403-5967
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(Name, address, including zip code, and telephone number,
including area code, of agent for service)
Approximate date of commencement of proposed sale
to the public: May 1, 1998.
If any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [ X ]
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MARKET VALUE ADJUSTED
GUARANTEED INTEREST ACCOUNT
Issued by
PHL VARIABLE INSURANCE COMPANY
IF YOU HAVE ANY QUESTIONS, PLEASE CONTACT:
[envelope] PHOENIX VARIABLE PRODUCTS MAIL OPERATIONS
PO Box 8027
Boston, MA 02266-8027
[telephone] Tel. 800/541-0171
PROSPECTUS MAY 1, 2000
This Prospectus describes a Market Value Adjusted Guaranteed Interest Account
("MVA"). The MVA is only available for use under PHL Variable Insurance
Company's variable accumulation deferred annuity contract ("Contract").
The fund prospectuses and the contract prospectus must accompany this
prospectus. The fund prospectuses should include The Phoenix Edge Series Fund,
Deutsche Asset Management VIT Funds, Federated Insurance Series, The Universal
Institutional Funds, Inc., Wanger Advisors Trust and the Franklin Templeton
Variable Insurance Products Trust. You should read these prospectuses and keep
them for future reference.
The Securities and Exchange Commission has not approved or disapproved these
securities, nor has the Commission determined if this prospectus is accurate or
complete. Any representation to the contrary is a criminal offense.
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TABLE OF CONTENTS
Heading Page
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SPECIAL TERMS................................................3
PRODUCT DESCRIPTION..........................................3
The Nature of the Contract and the MVA....................3
Availability of the MVA...................................3
The MVA...................................................4
Market Value Adjustment...................................4
Setting the Guaranteed Rate...............................5
Deduction of Surrender Charges on Withdrawals.............5
INVESTMENTS BY PHL VARIABLE..................................5
DISTRIBUTION OF CONTRACTS....................................6
FEDERAL INCOME TAXATION DISCUSSION...........................6
ACCOUNTING PRACTICES.........................................6
DESCRIPTION OF PHL VARIABLE .................................6
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATION........................7
Executive Compensation....................................8
DIRECTORS AND OFFICERS OF PHL VARIABLE.......................9
EXPERTS......................................................9
LEGAL PROCEEDINGS............................................9
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
Any document that is incorporated by reference is subject to change from
time to time. When referring to such document you should be sure it is the
latest version. Documents that have been incorporated by reference are part of
the Prospectus.
We will furnish a copy of this Prospectus free of charge. Also, we will
furnish free of charge any statements or documents incorporated by reference
when requested. Requests should be made by calling 800/541-0171.
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SPECIAL TERMS
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As used in this Prospectus, the following terms mean:
ACCOUNT: PHL Variable Accumulation Account, a separate account of PHL Variable
Insurance Company (see "The Nature of the Contract and the MVA" for a
description of this Account).
CONTRACT VALUE: Prior to maturity, the sum of the values under a Contract of all
accumulation units held in the Subaccounts of the Account plus the values held
in the Guaranteed Interest Account and in the MVA.
CURRENT RATE: The Guaranteed Rate currently in effect for amounts allocated to
the MVA, established from time to time for various Guarantee Periods.
DEATH BENEFIT: An amount payable upon the death of the Annuitant or Owner, as
applicable, to the named beneficiary.
EXPIRATION DATE: The date on which the Guarantee Period ends.
GUARANTEE PERIOD: The duration for which interest accrues at the Guaranteed Rate
on amounts allocated to the MVA.
GIA (GUARANTEED INTEREST ACCOUNT): An allocation option under which premium
amounts are guaranteed to earn a fixed rate of interest. Excess interest also
may be credited, in the sole discretion of PHL Variable.
GUARANTEED RATE: The effective annual interest rate we use to accrue interest on
amounts allocated to the MVA for a Guarantee Period. Guaranteed Rates are fixed
at the time an amount is credited to the MVA and remain constant throughout the
Guarantee Period.
MVA (MARKET VALUE ADJUSTED GUARANTEED INTEREST ACCOUNT): This is an account that
pays interest at a Guaranteed Rate if held to maturity. If such amounts are
withdrawn, transferred or applied to an annuity option before the end of the
Guarantee Period, a Market Value Adjustment will be made. Assets allocated to
the MVA are not part of the assets allocated to the Account or our general
account.
MARKET VALUE ADJUSTMENT: An adjustment is made to the amount that a Contract
Owner receives if money is withdrawn, transferred or applied to an annuity
option from the MVA before the Expiration Date of the Guarantee Period.
PHL VARIABLE (WE, US, OUR): PHL Variable Insurance Company.
PRODUCT DESCRIPTION
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THE NATURE OF THE CONTRACT AND THE MVA
The investment option described in this Prospectus is an MVA available only
under the variable accumulation deferred annuity contracts offered by PHL
Variable. The Contract is described in detail in its own prospectus. You should
review the Contract prospectus along with this Prospectus before deciding to
allocate purchase payments to the MVA.
[diamond] The MVA currently provides four choices of interest rate Guarantee
Periods:
o 3 years o 5 years
o 7 years o 10 years
[diamond] Purchase payments can be allocated to one or more of the available MVA
Guarantee Period options. Allocations may be made at the time you make
a payment or you may transfer amounts held in the Subaccounts of the
PHL Variable Accumulation Account (the "Account"), the GIA or other
available MVA Guarantee Periods. Generally, amounts allocated to MVA
options must be for at least $1,000. We reserve the right to limit
cumulative amounts allocated to the MVA during any one-week period to
not more than $250,000.
[diamond] Amounts may be transferred to or from the MVA according to the
transfer rules under the Contract. You may make up to six transfers
per year from the MVA. (See "The Accumulation Period -- Transfers" of
the Contract prospectus.)
[diamond] Allocations that remain in the MVA until the applicable Expiration
Date will be equal to the amount originally allocated, multiplied by
its Guaranteed Rate which is compounded on an annual basis.
[diamond] A Market Value Adjustment will be made if amounts are withdrawn,
transferred or applied to an annuity option from the MVA before the
Expiration Date. (See "The MVA.")
[diamond] The Contract provides for the accumulation of values before maturity
and for the payment of annuity benefits thereafter. Since MVA values
are part of the Contract Value, your earnings on allocations to the
MVA will impact the values available at surrender or maturity. No
Market Value Adjustment will be applied to withdrawals to pay Death
Benefit proceeds.
AVAILABILITY OF THE MVA
The MVA is not available in all states. For information, call Variable
Annuity Operations ("VAO") at 800/541-0171.
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THE MVA
The MVA is available only during the accumulation phase of your Contract.
The MVA option currently offers different Guarantee Periods, which provides you
with the ability to earn interest at different Guaranteed Rates on all or part
of your Contract Value. Each allocation has its own Guaranteed Rate and
Expiration Date. Because we change Guaranteed Rates periodically, amounts
allocated to a Guarantee Period at different times will have different
Guaranteed Rates and Expiration Dates. The applicable Guaranteed Rate, however,
does not change during the Guarantee Period.
We will notify you of the expiration of the Guarantee Period and of your
available options within 30 days of the Expiration Date. You will have 15 days
before and 15 days following the Expiration Date ("Window Period") to notify us
of your election. During this Window Period, any withdrawals or transfers from
the MVA will not be subject to a market value adjustment. Unless you elect to
transfer funds to a different Guarantee Period, to the Subaccounts of the
Account, to the GIA or elect to withdraw funds, we will begin another Guarantee
Period of the same duration as the one just ended and credit interest at the
current rate for that new Guarantee Period. If you chose a Guarantee Period that
is no longer available or if your original Guarantee Period is no longer
available, we will use the Guarantee Period with the next longest duration.
We reserve the right, at anytime, to discontinue Guarantee Periods or to
offer Guarantee Periods that differ from those available at the time your
Contract was issued. Since Guarantee Periods may change, please contact VAO to
determine the current Guarantee Periods being offered.
MARKET VALUE ADJUSTMENT
Any withdrawal from the MVA will be subject to a Market Value Adjustment
unless the effective date of the withdrawal is within the Window Period. For
this purpose, redemptions, transfers and maturity amounts are treated as
withdrawals. The Market Value Adjustment will be applied to the amount being
withdrawn after the deduction of any applicable Administrative Charge and before
the deduction of any applicable Contingent Deferred Sales Charges (surrender
charges). The Market Value Adjustment can be positive or negative. The amount
being withdrawn after application of the Market Value Adjustment can be greater
than or less than the amount withdrawn before the application of the Market
Value Adjustment.
A Market Value Adjustment will not be applied upon the payment of the Death
Benefit.
The Market Value Adjustment will reflect the relationship between the
Current Rate (defined below) for the amount being withdrawn and the Guaranteed
Rate. It is also reflective of the time remaining in the applicable Guarantee
Period. Generally, if the Guaranteed Rate is lower than the applicable Current
Rate, the Market Value Adjustment will result in a lower payment upon
withdrawal. Conversely, if the Guaranteed Rate is higher than the applicable
Current Rate, the Market Value Adjustment will produce a higher payment upon
withdrawal.
The Market Value Adjustment which is applied to the amount being withdrawn
is determined by using the following formula:
Market Value Adjustment
1 + i n/12
= Amount x [[---------------] -1]
1 + j + 0.0025
where,
Amount, is the amount being withdrawn less any applicable administrative
charges.
i, is the Guaranteed Rate being credited to the amount being withdrawn; and
j, is the Current Rate, which is the current interest rate for new deposits
with a Guarantee Period equal to the number of years remaining in the current
Guarantee Period, rounded up to the next higher number of complete years; and
n, is the number of months rounded up to the next whole number from the date
of the withdrawal or transfer to the end of the current Guarantee Period.
If the Company does not offer a Guarantee Period equal to the number of
years remaining in the Guarantee Period, "j" will be determined by interpolation
of the Guaranteed Rate for the Guarantee Periods then available.
EXAMPLES
The following examples illustrate how the Market Value Adjustment operates:
EXAMPLE 1
$10,000 is deposited on January 1, 1997, into an MVA with a 5-year Guarantee
Period. The Guaranteed Rate for this deposit amount is 5.50%.
If, on January 1, 1999 (2 years after deposit), the full amount is taken
from this MVA segment, the following amount is available:
1. The accumulated amount prior to application of Market Value Adjustment
is:
$10,000 x (1.055)(2) = $11,130.25
2. The Current Rate that would be applied on January 1, 1999 to amounts
credited to a 3-year MVA segment is 6.50%.
3. The number of months remaining in the Guarantee Period (rounded up to
next whole number) is 36.
4. The Market Value Adjustment equals $-386.43, and is calculated as
follows:
1 + 0.055 36/12
$-386.43 = $11,130.25 x [[------------------] -1]
1 + 0.065 + 0.0025
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The market value for the purposes of surrender on January 1, 1999 is
therefore equal to $10,743.82 ($11,130.25 - $386.43).
EXAMPLE 2
$10,000 is deposited on January 1, 1997, into an MVA with a 5-year Guarantee
Period. The Guaranteed Rate for this amount is 5.50%.
If, on January 1, 1999 (2 years from deposit), the full amount is taken from
this MVA segment, the following amount is available:
1. The accumulated amount prior to application of Market Value Adjustment
is:
$10,000 x (1.055)(2) = $11,130.25
2. The Current Rate being applied on January 1, 1999 to amounts credited to
a 3-year MVA segment is 4.50%.
3. The number of months remaining in the Guarantee Period (rounded up to
next whole number) is 36.
4. The Market Value Adjustment equals $240.79, and is calculated as
follows:
1 + 0.055 36/12
$+240.79 = $11,130.25 x [[------------------] -1]
1 + 0.045 + 0.0025
The market value for the purposes of surrender on January 1, 1999 is
therefore equal to $11,371.04 ($11,130.25 + $240.79).
THE ABOVE EXAMPLES ARE HYPOTHETICAL AND ARE NOT INDICATIVE OF FUTURE OR PAST
PERFORMANCE.
SETTING THE GUARANTEED RATE
We determine Guaranteed Rates for current and future purchase payments,
transfers or renewals. Although future Guaranteed Rates cannot be predicted, we
guarantee that the Guaranteed Rate will never be less than 3% per annum.
DEDUCTION OF SURRENDER CHARGES ON WITHDRAWALS
A Market Value Adjustment will apply if a withdrawal is made before the
Expiration Date and outside the Window Period as described above.
As described in the Contract prospectus, you may withdraw up to 10% of the
Contract Value without a surrender charge being applied. Surrender charges
(expressed as a percentage) on the amount to be withdrawn in excess of the 10%
allowable amount, are as follows:
AGE OF PAYMENT IN COMPLETE YEARS
FROM PAYMENT DATE UNTIL SURRENDER CHARGE AS A
WITHDRAWAL WAS CREDITED PERCENTAGE OF AMOUNT WITHDRAWN
----------------------- ------------------------------
0 7%
1 6%
2 5%
3 4%
4 3%
5 2%
6 1%
7 and over 0%
We make this adjustment since we do not take any sales charge deductions
when a purchase payment is made. The surrender charge is computed based on the
date that the particular payment is received into the Contract.
Purchase payments that remain on deposit for 7 complete years are not
subject to surrender charges. However, all amounts allocated to the MVA continue
to be subject to a Market Value Adjustment and the Market Value Adjustment
remains applicable to amounts withdrawn free of surrender charges. For more
information regarding the application of sales charges, please consult the
Contract prospectus.
Please note that other charges also are imposed against the Contract,
including mortality and expense risk and administrative charges. For a more
detailed explanation of applicable charges, please see the "Deductions and
Charges" section of the Contract prospectus.
INVESTMENTS BY PHL VARIABLE
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Proceeds from purchases of the MVA option will be deposited into the PHL
Variable Separate Account MVA1 ("Separate Account MVA1"), which is a
non-unitized separate account established under Connecticut law. Contract Values
attributable to such proceeds are based on the interest rate we credit to MVA
allocations and terms of the Contract, and do not depend on the investment
performance of the assets in Separate Account MVA1.
Under Connecticut law, all income, gains or losses of Separate Account MVA1
whether realized or not, must be credited to or charged against the amounts
placed in Separate Account MVA1 without regard to our other income, gains and
losses. The assets of the Separate Account may not be charged with liabilities
arising out of any other business that we may conduct. Obligations under the
Contracts are obligations of PHL Variable.
There are no discreet units in Separate Account MVA1. No party with rights
under any Contract participates in the investment gain or loss from assets
belonging to Separate Account MVA1. Such gain or loss accrues solely to us. We
retain the risk that the value of the assets in Separate Account MVA1 may drop
below the reserves and other liabilities it must maintain. If the Separate
Account MVA1 asset value drops below the reserve and other liabilities we must
maintain in relation to the Contracts supported by such assets, we will transfer
assets from our general account to Separate Account MVA1. Conversely, if the
amount we
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maintain is too much, we may transfer the excess to our general account.
In establishing Guaranteed Rates, we intend to take into account the yields
available on the instruments in which we intend to invest the proceeds from the
Contracts. The Company's investment strategy with respect to the proceeds
attributable to the Contracts generally will be to invest in investment-grade
debt instruments having durations tending to match the applicable Guarantee
Periods.
Investment-grade debt instruments in which the Company intends to invest the
proceeds from the Contracts include:
[diamond] Securities issued by the United States government or its agencies or
instrumentalities.
[diamond] Debt securities which have a rating, at the time of purchase, within
the four highest grades assigned by Moody's Investors Services, Inc.
(Aaa, Aa, A or Bb), Standard & Poor's Corporation (AAA, AA, A or BBB)
or any other nationally recognized rating service.
[diamond] Other debt instruments, although not rated by Moody's or Standard &
Poor's, are deemed by the Company's management to have an investment
quality comparable to securities described above.
While the above generally describes our investment strategy with respect to
the proceeds attributable to the Contracts, we are not obligated to invest the
proceeds according to any particular strategy, except as may be required by
Connecticut and other state insurance law.
DISTRIBUTION OF CONTRACTS
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Phoenix Equity Planning Corporation ("PEPCO") acts as the principal
underwriter of the Contracts. Contracts may be purchased through representatives
of W.S. Griffith & Company ("W.S.G.") licensed to sell PHL Variable Annuity
Contracts. PEPCO and W.S.G. are registered as broker-dealers under the
Securities Exchange Act of 1934 and are members of the National Association of
Securities Dealers, Inc. (the "NASD"). PHL Variable, PEPCO and W.S.G. are
indirect subsidiaries of Phoenix Home Life Mutual Insurance Company.
PEPCO enters into selling agreements with other broker-dealers or entities
registered under or exempt under the Securities Act of 1934 ("selling brokers").
The Contracts are sold through agents who are licensed by state insurance
officials to sell the Contracts. These agents also are registered
representatives of selling brokers or W.S.G. Contracts with the MVA option are
offered in states where we have received authority and the MVA and the Contracts
have been approved. The maximum dealer concession that a selling broker will
receive for selling a Contract is 7.25%.
Although the Glass-Steagall Act prohibits banks and bank affiliates from
engaging in the business of underwriting securities, banking regulators have not
indicated that such institutions are prohibited from purchasing variable annuity
contracts upon the order and for the account of their customers.
FEDERAL INCOME TAXATION DISCUSSION
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Please refer to "Federal Income Taxes" in the Contract prospectus for a
discussion of the income tax status of the Contract.
ACCOUNTING PRACTICES
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The information presented below should be read with the audited financial
statements of PHL Variable and other information included elsewhere in this
Prospectus.
The financial statements and other financial information included in this
Prospectus have been prepared in conformity with accounting principles generally
accepted in the United States.
DESCRIPTION OF PHL VARIABLE
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THE COMPANY
We are a life insurance company and a wholly-owned subsidiary of Phoenix
Home Life Mutual Insurance Company ("Phoenix"). Phoenix purchased the Company
(formerly known as Dreyfuss Consumers Life) and its name was changed accordingly
in 1994. We are domiciled in the state of Connecticut. Phoenix and its
subsidiaries (the "Phoenix Group") offer a wide range of insurance and
investment products and services including:
[diamond] individual participating life insurance
[diamond] variable life insurance
[diamond] investment advisory services
[diamond] mutual fund distribution services
We serve as the variable annuity operation for the Phoenix Group and as of
the date of this prospectus, we offer individual deferred variable annuities
that are registered with the SEC, single life flexible premium and survivorship
universal life insurance and 10-year and 20-year guaranteed level term life
insurance.
Our home office is located at One American Row, Hartford, Connecticut. Our
principal administrative office is located at 101 Munson Street, Greenfield,
Massachusetts. Phoenix provides all administrative and operational services for
the Phoenix Group.
SELECTED FINANCIAL DATA
The following selected financial data was taken from the financial
statements which can be found at the end of this prospectus. You should read the
financial statements including the notes.
The following table reflects the results of our operations for the years
ended December 31, 1999, 1998, and 1997:
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FOR THE YEARS ENDED DECEMBER 31,
1999 1998 1997
---- ---- ----
(in thousands)
Revenues:
Premiums $ 9,838 $ 6,280 $ 230
Insurance and investment
product fees 20,948 10,998 5,050
Net investment income 3,891 2,458 1,543
Net realized investment
gains 7 40
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Total revenues 34,684 19,776 6,823
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Benefits, losses and
expenses:
Policy benefits and payments 9,248 3,964 1,092
Policy acquisition expenses 5,126 4,006 1,310
Other operating expenses 11,081 5,359 2,915
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Total benefits, losses and
expenses 25,455 13,329 5,317
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Income before income taxes 9,229 6,447 1,506
Income taxes 3,230 2,257 553
---------- --------- ---------
Net income $ 5,999 $ 4,190 $ 953
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATION
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RESULTS OF OPERATION
Deposits from the sale of variable annuity products were $332.1 million,
$367.4 million and $212.6 million for the years ending 1999, 1998 and 1997,
respectively. Variable annuity funds under management include contractholders'
funds at interest and separate account liabilities totalling $1,322.2 million as
of December 31, 1999 and $822.2 million as of December 31, 1998. The growth of
annuity deposits during the last three years occurred primarily in the separate
accounts, with approximately 95% of the end of year variable annuity liabilities
residing in separate accounts and 5% in guaranteed interest accounts. Although
the Company began offering variable annuities with a market value adjustment
option during the third quarter of 1997, the effect on operating results was not
significant in 1999, 1998, or 1997. The liability balance for this product
option was $0.9 million and $0.3 million at December 31, 1999 and 1998.
A universal life insurance product was introduced during 1998 but did not
contribute significantly to revenues or earnings in that year. Revenues or
insurance product fees for universal life products consist of mortality,
administration and surrender charges assessed against the fund values. In 1999
the universal life product revenues grew to $1.7 million from $0.1 million.
The term product introduced during 1997 generated increased sales in 1999,
reaching $9.5 million in premium revenues, up from $6.28 million in 1998 and
$0.23 million in 1997.
Investment product fees represent contract charges assessed against variable
annuity fund values. For the year ended December 31, 1999, these fees totaled
$19.6 million, an $8.6 million increase from the $11.0 million reported in 1998
and $14.4 million increase from the $5.1 million reported in 1997. The higher
fees were attributed to a greater level of fund balances that generated
additional revenues. Fees were earned on average funds under management of
approximately $1,020.2 million, $613 million and $287 million in 1999, 1998 and
1997, respectively.
Other revenues including net investment income and realized investment gains
rose to $3.9 million in 1999, an improvement over $2.5 million in 1998 and $1.5
million in 1997.
Policy benefits and payments include interest credited on guaranteed
interest accounts and the cost of reinsuring the minimum death benefit on
variable annuity contracts and the current and future policy benefit costs for
the traditional term and universal life insurance policies. Guaranteed interest
account balances rose to $64.2 million at December 31, 1999, up from $39.7
million at December 31, 1998. Interest credited increased during these periods
contributing to these balances. In addition, the cost of reinsurance on the
growing block of variable annuity business increased to $1.0 million from $0.6
million in 1998 and $0.3 million in 1997.
Policy acquisition expenses consist primarily of commissions and field
distribution expenses. The increase in these expenses to $5.1 million in 1999
from $4.0 million in 1998 and $1.3 million in 1997 is a direct result of the
higher sales volume of the individual term and universal life insurance products
and the continuing new deposits on the variable annuity products.
Other operating expenses include the cost of facilities and services under
an expense allocation agreement with Phoenix. Operating expenses were $11.1
million for 1999, $5.4 million for 1998, and $2.9 million for 1997. Increasing
sales of the universal life, term life and variable annunities contributed to
expense increases.
Net income was $6.0 million for 1999, compared to $4.2 million in 1998 and
$1.0 million in 1997. The growth in the variable annuity funds under management
and related fee income associated with that business had the greatest effect on
the improvement in operating results.
Gross revenues of $34.7 million in 1999 increased $14.9 million over 1998
revenues of $19.8 million which in turn increased $13.0 million over 1997
revenues of $6.8 million. Benefits and expenses, totaling $25.5 million in 1999
increased by $12.2 million over 1998 expenses of $13.3 million in 1998 which in
turn increased $8.0 million from $5.3 million in 1997. Pretax income of $9.2
million in 1999 increased by $3.2 million from $6.4 million in 1998 which
represented an increase of $4.9 million from $1.5 million in 1997. Income taxes
of $3.2 million for 1999, $2.2 million for 1998, and $.6 million for 1997
averaged 35.0%, 34.3% and 36.7% of pretax earnings for the respective years.
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LIQUIDITY AND CAPITAL RESOURCES
The Company's liquidity requirements are met by anticipating and managing
the timing of cash uses and sources provided from insurance operations,
investing activities and capital contributions from the parent.
The growth in sales has created a need for additional cash in order to cover
the acquisition costs incurred in operating activities. These liquidity
requirements are currently being met through investing activities and by capital
contributed by its parent. P.M. Holdings has made capital contributions of $29
million in 1999, $17 million in 1998 and $5 million in 1997.
SEGMENT INFORMATION
As of the date of this Prospectus, the Company offers deferred variable and
fixed interest rate annuities as well as two life insurance products. The life
products include 10-year and 20-year guaranteed level term products and a single
life flexible premium product is being added.
REINSURANCE
The Company has entered into a reinsurance agreement related to the death
benefit on its variable deferred annuities. This agreement transfers the payment
obligation for the death benefit on variable deferred annuities to the reinsurer
in exchange for a reinsurance premium.
In addition, other reinsurance agreements are in place for the term and
universal life insurance products. These agreements transfer 90% of the life
insurance benefit payment obligation to various reinsurers in exchange for a
reinsurance premium.
The ceding of death benefit payments does not discharge the original insurer
from its primary liability to the policyholder. The original insurer would
remain liable in those situations where the reinsurer is unable to meet the
obligations assumed under the reinsurance agreements. The Phoenix Group has
established strict standards that govern the placement of reinsurance and
monitors ceded insurance security.
COMPETITION
The Company is engaged in a business that is highly competitive due to the
large number of insurance companies and other entities competing in the
marketing and sale of insurance and annuity products. There are approximately
2,300 stock, mutual and other types of insurers in the life insurance business
in the United States.
EMPLOYEES
Phoenix employees perform all management and administrative functions. PHL
Variable is charged for such services on a time allocation basis.
REGULATION
PHL Variable is organized as a Connecticut stock life insurance company, and
is subject to Connecticut law governing insurance companies. The Company is
regulated and supervised by the Connecticut Commissioner of Insurance. By March
1st of every year, an annual statement must be prepared and filed in a form
prescribed by the Connecticut Insurance Department. This annual statement
reports on the Company's operating results for the preceding calendar year. A
statement of financial condition as of December 31st of the preceding calendar
year must also be prepared and filed. The Commissioner and his or her agents
have the right at all times to review or examine the Company's books and assets.
A full examination of the Company's operations will be conducted periodically
according to the rules and practices of the National Association of Insurance
Commissioners ("NAIC"). PHL Variable is subject to the insurance laws and
various federal and state securities laws and regulations and to regulatory
agencies, such as the SEC and the Connecticut Banking Department, which
administer those laws and regulations.
PHL Variable can be assessed, up to prescribed limits, policyholder losses
incurred by insolvent insurers under the insurance guaranty fund laws of most
states. The amount of any such future assessments cannot be predicted or
estimated. However, the insurance guaranty laws of most states provide for
deferring payment or exempting a company from paying such an assessment if it
would threaten such insurer's financial strength.
Several states, including Connecticut, regulate insurers and their
affiliates under insurance holding company laws and regulations. Such regulation
is applicable to PHL Variable and its affiliates. Under such laws, intercompany
transactions, such as dividend payments to parent companies and transfers of
assets, may be subject to prior notice and approval, depending on factors such
as the size of the transaction in relation to the financial position of the
companies.
Currently, the federal government does not directly regulate the business of
insurance. However, federal legislative, regulatory and judicial decisions and
initiatives often have significant effects on our business. Types of changes
that are most likely to affect our business include changes to: (a) the taxation
of life insurance companies; (b) the tax treatment of insurance products; (c)
the securities laws, particularly as they relate to insurance and annuity
products; (d) the "business of insurance" exemption from many of the provisions
of the antitrust laws; (e) the barriers preventing most banks from selling or
underwriting insurance; and (f) any initiatives directed toward improving the
solvency of insurance companies. PHL Variable would also be affected by federal
initiatives that have impact on the ownership of, or investment in, United
States companies by foreign companies or investors.
EXECUTIVE COMPENSATION
All of the executive officers of PHL Variable also serve as officers of
Phoenix and receive no direct compensation from PHL Variable. Allocations have
been made as to the officers' time devoted to duties as executive officers of
PHL
8
<PAGE>
Variable. No officer or Director of PHL Variable received allocated
compensation in excess of $100,000.
DIRECTORS AND OFFICERS OF PHL VARIABLE
- --------------------------------------------------------------------------------
NAME POSITION WITH REGISTRANT
Carl T. Chadburn Director
Robert W. Fiondella Director and Chairman
Michael J. Gilotti Executive Vice President
Joseph E. Kelleher Director and Senior
Vice President
Robert G. Lautensack, Jr. Senior Vice President
Philip R. McLoughlin Director, Executive Vice
President and Chief Investment
Officer
David W. Searfoss Director, Executive Vice
President and Chief financial
Officer
Simon Y. Tan Director and President
Dona D. Young Director and Executive
Vice President
EXPERTS
- --------------------------------------------------------------------------------
The financial statements of PHL Variable Insurance Company as of December
31, 1999 and 1998 and for each of the three years in the period ended December
31, 1999, included herein, have been so included in reliance on the report of
PricewaterhouseCoopers LLP, independent accountants, given on the authority of
said firm as experts in accounting and auditing. PricewaterhouseCoopers LLP,
whose address is 100 Pearl Street, Hartford, Connecticut, also provides other
accounting and tax-related services as requested by PHL Variable from time to
time.
Edwin L. Kerr, Counsel, Phoenix Home Life Mutual Insurance Company,
Hartford, Connecticut has passed upon legal matters relating to the validity of
the securities being issued. Mr. Kerr also has provided advice on certain
matters relating to federal securities and income tax laws about the Contracts.
LEGAL PROCEEDINGS
- --------------------------------------------------------------------------------
PHL Variable, the Account and PEPCO are not parties to any litigation that
would have a material adverse effect upon the Account or the Contracts.
9
<PAGE>
PHL VARIABLE
INSURANCE COMPANY
FINANCIAL STATEMENTS
DECEMBER 31, 1999
10
<PAGE>
PHL VARIABLE INSURANCE COMPANY
(A WHOLLY-OWNED SUBSIDIARY OF PM HOLDINGS, INC.)
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
PAGE
Report of Independent Accountants ...........................................12
Balance Sheet at December 31, 1999 and 1998 .................................13
Statement of Income, Comprehensive Income and Equity for the Years Ended
December 31, 1999, 1998 and 1997 ...........................................14
Statement of Cash Flows for the Years Ended
December 31, 1999, 1998 and 1997 ...........................................15
Notes to Financial Statements ...........................................16-27
11
<PAGE>
[logo] PRICEWATERHOUSECOOPERS LLP
PRICEWATERHOUSECOOPERS LLP
100 Pearl Street
Hartford CT 06103-4508
Telephone(860) 241 7000
Facsimile(860) 241 7590
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholder of
PHL Variable Insurance Company
In our opinion, the accompanying balance sheet and the related statements of
income, comprehensive income and equity and cash flows present fairly, in all
material respects, the financial position of PHL Variable Insurance Company at
December 31, 1999 and 1998, and the results of its operations and its cash flows
for each of the three years in the period ended December 31, 1999, in conformity
with accounting principles generally accepted in the United States. These
financial statements are the responsibility of the Company's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these statements in accordance with
auditing standards generally accepted in the United States, which require that
we plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for the opinion expressed above.
/s/ PricewaterhouseCoopers LLP
February 15, 2000
12
<PAGE>
PHL VARIABLE INSURANCE COMPANY
(A WHOLLY-OWNED SUBSIDIARY OF PM HOLDINGS, INC.)
BALANCE SHEET
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
DECEMBER 31,
1999 1998
(IN THOUSANDS)
<S> <C> <C>
ASSETS
Investments:
Held-to-maturity debt securities, at amortized cost $ 10,298 $ 3,840
Available-for-sale debt securities, at fair value 55,840 36,480
Policy loans 522 249
Other invested assets 1,052 1,064
----------- ---------
Total investments 67,712 41,633
Cash and cash equivalents 23,039 7,320
Accrued investment income 786 511
Deferred policy acquisition costs 61,806 36,686
Deferred income taxes 2,178
Deferred and uncollected premiums 6,300 1,872
Other assets 4,394 1,860
Goodwill 451 553
Separate account assets 1,257,947 782,496
----------- ---------
Total assets $ 1,422,435 $ 875,109
=========== =========
LIABILITIES
Contractholders' funds at interest $ 64,230 $ 39,690
Reserves for future policy benefits 13,910 2,736
Deferred income taxes 209
Other liabilities 7,950 6,077
Separate account liabilities 1,257,947 782,496
----------- ---------
Total liabilities 1,344,246 830,999
----------- ---------
EQUITY
Common stock, $5,000 par value (1,000
shares authorized, 500 shares issued and outstanding) 2,500 2,500
Additional paid-in capital 64,864 35,864
Retained earnings 11,538 5,539
Accumulated other comprehensive (loss) income (713) 207
----------- ---------
Total equity 78,189 44,110
----------- ---------
Total liabilities and equity $ 1,422,435 $ 875,109
=========== =========
</TABLE>
The accompanying notes are an integral part of these statements.
13
<PAGE>
PHL VARIABLE INSURANCE COMPANY
(A WHOLLY-OWNED SUBSIDIARY OF PM HOLDINGS, INC.)
STATEMENT OF INCOME, COMPREHENSIVE INCOME AND EQUITY
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
1999 1998 1997
(IN THOUSANDS)
<S> <C> <C> <C>
REVENUES
Premiums $ 9,838 $ 6,280 $ 230
Insurance and investment product fees 20,948 10,998 5,050
Net investment income 3,891 2,458 1,543
Net realized investment gains 7 40
---------- ----------- ---------
Total revenues 34,684 19,776 6,823
---------- ----------- ---------
BENEFITS, LOSSES AND EXPENSES
Policy benefits and payments 9,248 3,964 1,092
Policy acquisition expenses 5,126 4,006 1,310
Other operating expenses 11,081 5,359 2,915
---------- ----------- ---------
Total benefits, losses and expenses 25,455 13,329 5,317
---------- ----------- ---------
INCOME BEFORE INCOME TAXES 9,229 6,447 1,506
Income taxes 3,230 2,257 553
---------- ----------- ---------
NET INCOME 5,999 4,190 953
---------- ----------- ---------
OTHER COMPREHENSIVE (LOSS) INCOME,
NET OF INCOME TAXES
Unrealized (losses) gains on securities
arising during period (913) 166 37
Reclassification adjustment for
losses included in net income (7) (40)
---------- ----------- ---------
Total other comprehensive (loss) income (920) 126 37
---------- ----------- ---------
COMPREHENSIVE INCOME 5,079 4,316 990
Capital contributions 29,000 17,000 5,000
---------- ----------- ---------
NET INCREASE IN EQUITY 34,079 21,316 5,990
EQUITY, BEGINNING OF YEAR 44,110 22,794 16,804
---------- ----------- ---------
EQUITY, END OF YEAR $ 78,189 $ 44,110 $ 22,794
========= =========== =========
</TABLE>
The accompanying notes are an integral part of these statements.
14
<PAGE>
PHL VARIABLE INSURANCE COMPANY
(A WHOLLY-OWNED SUBSIDIARY OF PM HOLDINGS, INC.)
STATEMENT OF CASH FLOWS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
1999 1998 1997
(IN THOUSANDS)
<S> <C> <C> <C>
CASH FLOW FROM OPERATING ACTIVITIES
Net income $ 5,999 $ 4,190 $ 953
ADJUSTMENTS TO RECONCILE NET INCOME
TO NET CASH USED FOR OPERATING ACTIVITIES
Net realized investment gains (7) (40)
Amortization 102 107 96
Deferred income taxes 2,883 (987) (916)
Increase in accrued investment income (275) (254) (49)
Increase in deferred policy acquisition costs (24,137) (15,815) (11,453)
Increase (decrease) in other assets/liabilities 6,085 1,881 (973)
Other, net (209)
---------- --------- ---------
Net cash used for operating activities (9,350) (10,918) (12,551)
---------- --------- ---------
CASH FLOW FROM INVESTING ACTIVITIES
Proceeds from sales, maturities or repayments of
available-for-sale debt securities 11,664 14,133 4,665
Proceeds from maturities or repayments of
held-to-maturity debt securities 623 634 212
Purchase of available-for-sale debt securities (33,397) (28,360) (11,003)
Purchase of held-to-maturity debt securities (7,000) (1,216) (1,529)
Increase in policy loans (273) (249)
Investment in separate accounts (1,000)
Other, net (88) (177)
---------- --------- ---------
Net cash used for investing activities (28,471) (15,235) (8,655)
---------- --------- ---------
CASH FLOW FROM FINANCING ACTIVITIES
Capital contributions from parent 29,000 17,000 5,000
Increase in contractholder funds 24,540 14,759 16,098
---------- --------- ---------
Net cash provided by financing activities 53,540 31,759 21,098
---------- --------- ---------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 15,719 5,606 (108)
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR 7,320 1,714 1,822
---------- --------- ---------
CASH AND CASH EQUIVALENTS, END OF YEAR $ 23,039 $ 7,320 $ 1,714
========= ========= =========
SUPPLEMENTAL CASH FLOW INFORMATION
Income taxes paid, net $ 3,338 $ 1,711 $ 2,044
</TABLE>
The accompanying notes are an integral part of these statements.
15
<PAGE>
PHL VARIABLE INSURANCE COMPANY
(A WHOLLY-OWNED SUBSIDIARY OF PM HOLDINGS, INC.)
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
1. DESCRIPTION OF BUSINESS
PHL Variable Insurance Company (PHL Variable) offers variable annuity and
non-participating life insurance products in the United States. PHL
Variable is a wholly-owned subsidiary of PM Holdings, Inc. PM Holdings is a
wholly-owned subsidiary of Phoenix Home Life Mutual Insurance Company
(Phoenix).
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
These financial statements have been prepared in accordance with accounting
principles generally accepted in the United States (GAAP). The preparation
of financial statements in conformity with GAAP requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities at the date of the financial statements and the reported
amounts of revenues and expenses during the reporting period. Actual
results could differ from those estimates. Significant estimates used in
determining insurance and contractholder liabilities, related reinsurance
recoverables, income taxes and valuation allowances for investment assets
are discussed throughout the Notes to Financial Statements. Certain
reclassifications have been made to the 1998 and 1997 amounts to conform
with the 1999 presentation.
VALUATION OF INVESTMENTS
Investments in debt securities include bonds, mortgage-backed and
asset-backed securities. PHL Variable classifies its debt securities as
either held-to-maturity or available-for-sale investments. Debt securities
held-to-maturity consist of private placement bonds reported at amortized
cost, net of impairments, that management intends and has the ability to
hold until maturity. Debt securities available-for-sale are reported at
fair value with unrealized gains or losses included in equity and consist
of public bonds that management may not hold until maturity. Debt
securities are considered impaired when a decline in value is considered to
be other than temporary.
Short-term investments are carried at amortized cost, which approximates
fair value.
Realized investment gains and losses, other than those related to separate
accounts for which PHL Variable does not bear the investment risk, are
determined by the specific identification method and reported as a
component of revenue. A realized investment loss is recorded when an
investment valuation reserve is determined. Valuation reserves are netted
against the asset categories to which they apply and changes in the
valuation reserves are included in realized investment gains and losses.
Unrealized investment gains and losses on debt securities
available-for-sale are included as a separate component of equity, net of
deferred income taxes and deferred policy acquisition costs.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents include cash on hand and money market
instruments.
16
<PAGE>
PHL VARIABLE INSURANCE COMPANY
(A WHOLLY-OWNED SUBSIDIARY OF PM HOLDINGS, INC.)
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
DEFERRED POLICY ACQUISITION COSTS
The costs of acquiring new business, principally commissions, underwriting,
distribution and policy issue expenses, all of which vary with and are
primarily related to the production of new business, are deferred. Deferred
policy acquisition costs are subject to recoverability testing at the time
of policy issue and loss recognition at the end of each accounting period.
For universal life insurance policies, limited pay and investment type
contracts, deferred policy acquisition costs are amortized in proportion to
total estimated gross profits over the expected average life of the
contracts using estimated gross margins arising principally from
investment, mortality and expense margins and surrender charges based on
historical and anticipated experience, updated at the end of each
accounting period.
GOODWILL
Goodwill represents the excess of the cost of businesses acquired over the
fair value of their net assets. The costs are amortized on the
straight-line method over a period of 10 years, the expected period of
benefit from the acquisition. Management periodically reevaluates the
propriety of the carrying value of goodwill by comparing estimates of
future undiscounted cash flows to the assets. Assets are considered
impaired if the carrying value exceeds the expected future undiscounted
cash flows.
SEPARATE ACCOUNTS
Separate account assets and liabilities are funds maintained in accounts to
meet specific investment objectives of contractholders who can either
choose to bear the full investment risk or can choose guaranteed investment
earnings subject to certain conditions.
For contractholders who bear the investment risk, investment income and
investment gains and losses accrue directly to such contractholders. The
assets of each account are legally segregated and are not subject to claims
that arise out of any other business of PHL Variable. The assets and
liabilities are carried at market value. Net investment income and realized
investment gains and losses for these accounts are excluded from revenues,
and the related liability increases are excluded from benefits and
expenses. Amounts assessed to the contractholders for management services
are included in PHL Variable's revenues.
For Market Value Adjusted separate accounts, contractholders receive
interest at a guaranteed rate if the account is held until maturity. In
these separate accounts, appreciation or depreciation of assets,
undistributed net investment income and investment or other sundry expenses
is reflected as net income or loss in PHL Variable's interest in the
separate accounts. Contractholders receive a distribution of interest at a
guaranteed interest rate on this annuity option provided funds are not
withdrawn from the separate account before the end of their elected
guarantee period.
CONTRACTHOLDERS' FUNDS AT INTEREST
Contractholder deposit funds consist of deposits received from customers
and investment earnings on their fund balances, less administrative
charges.
17
<PAGE>
PHL VARIABLE INSURANCE COMPANY
(A WHOLLY-OWNED SUBSIDIARY OF PM HOLDINGS, INC.)
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
INVESTMENT PRODUCT FEES
Revenues for investment-type products consist of net investment income and
contract charges assessed against the fund values (fees). Related benefit
expenses primarily consist of net investment income credited to the fund
values after deduction for investment and risk charges.
POLICY LIABILITIES AND ACCRUALS
Reserves for future policy benefits are liabilities for life insurance
products. Such liabilities are established in amounts adequate to meet the
estimated future obligations of policies in force. Policy liabilities for
traditional life insurance are computed using the net level premium method
on the basis of actuarial assumptions as to assumed rates of interest,
mortality, morbidity and withdrawals. Liabilities for universal life
policies include deposits received from customers and investment earnings
on their fund balances, less administrative charges. Universal life fund
balances are also assessed mortality charges.
PREMIUM AND FEE REVENUE AND RELATED EXPENSES
Term life insurance premiums are recorded as premium revenue on a pro-rata
basis over each policy year. Benefits, losses and related expenses are
matched with premiums over the related contract periods. Revenues for
variable annuity products consist of net investment income and contract
charges assessed against the fund values. Related benefit expenses
primarily consist of net investment income credited to the fund values
after deduction for investment and risk charges. Revenues for universal
life products consist of net investment income and mortality,
administration and surrender charges assessed against the fund values
during the period. Related benefit expenses include universal life benefit
claims in excess of fund values and net investment income credited to
universal life fund values.
INCOME TAXES
For the tax year ended December 31, 1999, PHL Variable will file a separate
federal income tax return as required under Internal Revenue Code Section
1504(c). PHL Variable has been filing on a separate company basis since
December 31, 1996.
Deferred income taxes result from temporary differences between the tax
basis of assets and liabilities and their recorded amounts for financial
reporting purposes. These differences result primarily from policy
liabilities, accruals and surrenders, policy acquisition expenses and
unrealized gains or losses on investments.
EMPLOYEE BENEFIT PLANS
Phoenix sponsors pension and savings plans for its employees and agents,
and those of its subsidiaries. The multi-employer qualified plans comply
with requirements established by the Employee Retirement Income Security
Act of 1974 (ERISA) and excess benefit plans provide for that portion of
pension obligations which is in excess of amounts permitted by ERISA.
Phoenix also provides certain health care and life insurance benefits for
active and retired employees. PHL Variable incurs applicable employee
benefit expenses through the process of cost allocation by Phoenix.
Applicable information regarding the actuarial present value of vested and
non-vested accumulated plan benefits, and the net assets of the plans
available for benefits is omitted,
18
<PAGE>
PHL VARIABLE INSURANCE COMPANY
(A WHOLLY-OWNED SUBSIDIARY OF PM HOLDINGS, INC.)
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
as the information is not separately calculated for PHL Variable's
participation in the plans. The amount of such allocated benefits is not
significant to the financial statements. However, with respect to the
Phoenix Home Life Mutual Insurance Company employee pension plan, the total
assets of the plan exceeded the actuarial present value of vested benefits
at January 1, 1999, the date of the most recent actuarial valuation.
RECENT ACCOUNTING PRONOUNCEMENTS
In June, 1999, The Financial Accounting Standards Board issued Statement of
Financial Accounting Standards (SFAS) No. 137, "Accounting for Derivative
Instruments and Hedging Activities - Deferral of the Effective Date of SFAS
No. 133." Because of the complexities associated with transactions
involving derivative instruments and their prevalent use as hedging
instruments and, because of the difficulties associated with the
implementation of Statement 133, the effective date of SFAS No. 133
"Accounting for Derivative Instruments and Hedging Activities" was delayed
until fiscal years beginning after June 15, 2000. SFAS No. 133, initially
issued on June 15, 1998, requires that all derivative instruments be
recorded on the balance sheet at their fair value. Changes in the fair
value of derivatives are recorded each period in current earnings or other
comprehensive income, depending on whether a derivative is designated as
part of a hedge transaction and, if it is, the type of hedge transaction.
For fair-value hedge transactions in which PHL Variable is hedging changes
in an asset's, liability's or firm commitment's fair value, changes in the
fair value of the derivative instrument will generally be offset in the
income statement by changes in the hedged item's fair value. For cash-flow
hedge transactions, in which PHL Variable is hedging the variability of
cashflows related to a variable-rate asset, liability, or a forecasted
transaction, changes in the fair value of the derivative instrument will be
reported in other comprehensive income. The gains and losses on the
derivative instrument that are reported in other comprehensive income will
be reclassified as earnings in the period in which earnings are impacted by
the variability of the cash flows of the hedged item. The ineffective
portion of all hedges will be recognized in current period earnings.
PHL Variable has not yet determined the impact that the adoption of SFAS
No. 133 will have on its earnings or statement of financial position.
PHL Variable adopted SFAS No. 130, "Reporting Comprehensive Income," as of
January 1, 1998. This statement establishes standards for the reporting and
display of comprehensive income and its components in a full set of
financial statements. This statement defines the components of
comprehensive income as those items that were previously reported only as
components of equity and were excluded from net income.
On January 1, 1999, PHL Variable adopted Statement of Position (SOP) 97-3,
"Accounting by Insurance and Other Enterprises for Insurance-Related
Assessments." SOP 97-3 provides guidance for assessments related to
insurance activities. The adoption of SOP 97-3 did not have a material
impact on the Company's results from operations or financial position.
In 1998, the NAIC adopted the Codification of Statutory Accounting
Principles guidance, which will replace the current Accounting Practices
and Procedures manual as the NAIC's primary guidance on statutory
accounting. The Codification provides guidance for areas where statutory
accounting has been silent and changes current statutory accounting in some
areas, e.g., deferred income taxes are recorded.
19
<PAGE>
PHL VARIABLE INSURANCE COMPANY
(A WHOLLY-OWNED SUBSIDIARY OF PM HOLDINGS, INC.)
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
The State of Connecticut Insurance Department has adopted the Codification
guidance, effective January 1, 2001. The Company has not estimated the
potential effect of the Codification guidance.
3. INVESTMENTS
Information pertaining to PHL Variable's investments, net investment income
and realized and unrealized investment gains and losses follows:
DEBT SECURITIES
The amortized cost and fair value of investments in debt securities as of
December 31, 1999 were as follows:
<TABLE>
<CAPTION>
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED FAIR
COST GAINS LOSSES VALUE
(IN THOUSANDS)
<S> <C> <C> <C> <C>
HELD-TO-MATURITY:
Corporate securities $ 10,298 $ 136 $ (169) $ 10,265
========= ======= ======== =========
AVAILABLE-FOR-SALE:
U.S. government and agency bonds $ 6,475 $ 3 $ (156) $ 6,322
State and political subdivision bonds 10,366 (343) 10,023
Corporate securities 16,637 (983) 15,654
Mortgage-backed or
asset-backed securities 24,194 (353) 23,841
--------- ------- -------- ---------
Total $ 57,672 $ 3 $ (1,835) $ 55,840
========= ======= ======== =========
</TABLE>
The amortized cost and fair value of investments in debt securities as of
December 31, 1998 were as follows:
<TABLE>
<CAPTION>
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED FAIR
COST GAINS LOSSES VALUE
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
HELD-TO-MATURITY:
Corporate securities $ 3,840 $ 27 $ (126) $ 3,741
-------- ------- -------- --------
AVAILABLE-FOR-SALE:
U.S. government and agency bonds $ 6,515 $ 290 $ (9) $ 6,796
State and political subdivision bonds 9,485 126 (21) 9,590
Corporate securities 13,605 187 (81) 13,711
Mortgage-backed or
asset-backed securities 6,308 80 (5) 6,383
-------- ------- -------- --------
Total $ 35,913 $ 683 $ (116) $ 36,480
======== ======= ======== ========
</TABLE>
20
<PAGE>
PHL VARIABLE INSURANCE COMPANY
(A WHOLLY-OWNED SUBSIDIARY OF PM HOLDINGS, INC.)
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
The amortized cost and fair value of debt securities, by contractual
maturity, as of December 31, 1999 are shown below. Actual maturities may
differ from contractual maturities because borrowers may have the right to
call or prepay obligations with or without call or prepayment penalties, or
PHL Variable may have the right to put or sell the obligations back to the
issuers.
<TABLE>
<CAPTION>
HELD-TO-MATURITY AVAILABLE-FOR-SALE
AMORTIZED FAIR AMORTIZED FAIR
COST VALUE COST VALUE
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Due in one year or less $ 1,732 $ 1,726 $ 500 $ 500
Due after one year through five years 6,676 6,654 14,282 13,737
Due after five years through ten years 1,890 1,884 9,903 9,664
Due after ten years 8,793 8,098
Mortgage-backed or
asset-backed securities 24,194 23,841
--------- --------- --------- ---------
Total $ 10,298 $ 10,264 $ 57,672 $ 55,840
========= ========= ========= =========
</TABLE>
NET INVESTMENT INCOME
The components of net investment income for the year ended December 31,
were as follows:
<TABLE>
<CAPTION>
1999 1998 1997
(IN THOUSANDS)
<S> <C> <C> <C>
Debt securities $ 3,362 $ 2,142 $ 1,301
Policy loans 7 1
Other invested assets 20 9
Short-term investments 561 344 269
-------- -------- --------
3,950 2,496 1,570
Less investment expenses 59 38 27
-------- -------- --------
Net investment income $ 3,891 $ 2,458 $ 1,543
======== ======== ========
</TABLE>
21
<PAGE>
PHL VARIABLE INSURANCE COMPANY
(A WHOLLY-OWNED SUBSIDIARY OF PM HOLDINGS, INC.)
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
INVESTMENT GAINS AND LOSSES
Net unrealized (losses) gains and on securities available-for-sale and
carried at fair value for the year ended December 31, were as follows:
<TABLE>
<CAPTION>
1999 1998 1997
(IN THOUSANDS)
<S> <C> <C> <C>
Debt securities $ (2,399) $ 333 $ 87
Deferred policy acquisition costs 983 (139) (30)
Deferred income taxes (benefits) (496) 68 20
--------- ------- -------
Net unrealized investment (losses) gains
on securities available-for-sale $ (920) $ 126 $ 37
========= ======= =======
</TABLE>
The proceeds from sales of available-for-sale debt securities for the years
ended December 31, 1999, 1998 and 1997 were $6.0 million, $10.0 million and
$0.2 million, respectively. The gross realized gains or losses associated
with these sales were $7.4 thousand, $37.7 thousand and ($0.3) thousand in
1999, 1998 and 1997, respectively.
4. GOODWILL
PHL Variable was acquired by way of a stock purchase agreement on May 31,
1994 and was accounted for under the purchase method of accounting. The
assets and liabilities were recorded at fair value as of the date of
acquisition and the goodwill of $1.02 million was pushed down to PHL
Variable from PM Holdings.
Goodwill was as follows:
DECEMBER 31,
1999 1998
(IN THOUSANDS)
Goodwill $ 1,020 $ 1,020
Accumulated amortization (569) (467)
-------- --------
Total $ 451 $ 553
======== ========
22
<PAGE>
PHL VARIABLE INSURANCE COMPANY
(A WHOLLY-OWNED SUBSIDIARY OF PM HOLDINGS, INC.)
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
5. INCOME TAXES
A summary of income taxes (benefits) in the Statement of Income,
Comprehensive Income and Equity for the year ended December 31, is as
follows:
1999 1998 1997
Income taxes:
Current $ 347 $ 3,244 $ 1,469
Deferred 2,883 (987) (916)
-------- --------- --------
Total $ 3,230 $ 2,257 $ 553
======== ========= ========
The income taxes attributable to the results of operations are different
than the amounts determined by multiplying income before taxes by the
statutory income tax rate. The sources of the difference and the tax
effects of each for the year ended December 31, were as follows (in
thousands, aside from the percentages):
<TABLE>
<CAPTION>
1999 1998 1997
<S> <C> <C> <C> <C> <C> <C>
Income tax expense at statutory rate $3,230 35% $2,256 35% $ 527 35%
Dividend received deduction and (1) 0% 0% 1 0%
tax-exempt interest
State income tax expense
Other, net 1 0% 1 0% 25 2%
------ ------ -----
Income taxes $3,230 35% $2,257 35% $ 553 37%
====== ====== =====
</TABLE>
The deferred income tax liability (asset) represents the tax effects of
temporary differences. The components as of December 31, were as follows:
<TABLE>
<CAPTION>
1999 1998
(IN THOUSANDS)
<S> <C> <C>
Deferred policy acquisition costs $ 17,775 $ 10,953
Surrender charges (17,597) (11,886)
Investments 104 72
Future policyholder benefits 376 (1,374)
Other (65) (54)
--------- ---------
593 (2,289)
Net unrealized investment (losses) gains (384) 111
--------- ---------
Deferred tax liability (asset), net $ 209 $ (2,178)
========= =========
</TABLE>
23
<PAGE>
PHL VARIABLE INSURANCE COMPANY
(A WHOLLY-OWNED SUBSIDIARY OF PM HOLDINGS, INC.)
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
Gross deferred income tax assets totaled $18.1 million and $13.3 million at
December 31, 1999 and 1998, respectively. Gross deferred income tax
liabilities totaled $18.3 million and $11.1 million at December 31, 1999
and 1998, respectively. It is management's assessment, based on PHL
Variable's earnings and projected future taxable income, that it is more
likely than not that the deferred income tax assets at December 31, 1999
and 1998, will be realized.
PHL Variable's income tax return is not currently being examined; however,
income tax years 1996 through 1998 remain open for examination. Management
does not believe that there will be a material adverse effect on the
financial statements as a result of pending income tax matters.
6. COMPREHENSIVE INCOME
The components of, and related income tax effects for, other comprehensive
(loss) income for the years ended December 31, were as follows:
<TABLE>
<CAPTION>
1999 1998 1997
(IN THOUSANDS)
<S> <C> <C> <C>
UNREALIZED (LOSSES) GAINS ON SECURITIES
AVAILABLE-FOR-SALE ARISING DURING PERIOD:
Before-tax amount $ (1,405) $ 256 $ 57
Income tax (benefit) expense (492) 90 20
--------- ------- -------
Totals (913) 166 37
--------- ------- -------
RECLASSIFICATION ADJUSTMENT FOR (LOSSES)
REALIZED IN NET INCOME:
Before-tax amount (11) (62)
Income tax (benefit) (4) (22)
--------- ------- -------
Totals (7) (40)
--------- ------- -------
NET UNREALIZED (LOSSES) GAINS ON SECURITIES
AVAILABLE-FOR-SALE:
Before-tax amount (1,416) 194 57
Income tax (benefit) expense (496) 68 20
--------- ------- -------
Totals $ (920) $ 126 $ 37
========= ======= =======
</TABLE>
The following table summarizes accumulated other comprehensive (loss)
income balances:
<TABLE>
<CAPTION>
DECEMBER 31,
1999 1998
(IN THOUSANDS)
<S> <C> <C>
ACCUMULATED OTHER COMPREHENSIVE (LOSS) INCOME
Balance, beginning of year $ 207 $ 81
Change during period (920) 126
-------- -------
Balance, end of year $ (713) $ 207
======== =======
</TABLE>
24
<PAGE>
PHL VARIABLE INSURANCE COMPANY
(A WHOLLY-OWNED SUBSIDIARY OF PM HOLDINGS, INC.)
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
7. REINSURANCE
PHL Variable entered into a reinsurance treaty in 1996 that cedes death
benefits to a reinsurer in excess of account balances on variable
contracts. Premiums paid by PHL Variable during 1999, 1998 and 1997 were
$1,114 thousand, $668 thousand and $259 thousand, respectively, less claims
of $22 thousand, $13 thousand and $1 thousand in 1999, 1998 and 1997,
respectively.
In connection with PHL Variable's life insurance products, automatic
treaties have been established with four reinsurers and their subsidiaries,
covering 90% of the net amount at risk, on a first dollar basis. As of
December 31, 1999, PHL Variable had approximately $661.5 million of net
insurance in force, including $6.5 billion of direct in force less $5.8
billion of reinsurance ceded. As of December 31, 1998, PHL Variable had
approximately $271.6 million of net insurance in force, including $2.7
billion of direct in force less $2.4 billion of reinsurance ceded. As of
December 31, 1997, PHL Variable had approximately $9.1 million of net
insurance in force, including $80.7 million of direct in force less $71.6
million of reinsurance ceded. No claims were recovered in 1999, 1998 or
1997.
For PHL Variable's life insurance products, a stop loss treaty between
Phoenix and PHL Variable was introduced in 1998. The reinsurance
recoverables were $0 thousand as of December 31, 1999 and $455 thousand and
as of December 31, 1998. The claims recovered were $455 thousand for 1999
and $0 for 1998 and 1997, respectively.
8. RELATED PARTY TRANSACTIONS
Phoenix provides services and facilities to the Company and is reimbursed
through a cost allocation process. Investment services are provided for a
fee by a Phoenix registered investment advisor.
9. DEFERRED POLICY ACQUISITION COSTS
The following reflects the amount of policy acquisition costs deferred and
amortized for the years ended December 31:
1999 1998
(IN THOUSANDS)
Balance at beginning of year $ 36,686 $ 21,010
Acquisition expense deferred 28,884 19,791
Amortized to expense during the year (4,747) (3,976)
Adjustment to equity during the year 983 (139)
--------- ---------
Balance at end of year $ 61,806 $ 36,686
========= =========
25
<PAGE>
PHL VARIABLE INSURANCE COMPANY
(A WHOLLY-OWNED SUBSIDIARY OF PM HOLDINGS, INC.)
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
10. FAIR VALUE DISCLOSURES OF FINANCIAL INSTRUMENTS
Financial instruments that are subject to fair value disclosure
requirements (insurance contracts are excluded) are carried in the
financial statements at amounts that approximate fair value. The fair
values presented for certain financial instruments are estimates which, in
many cases, may differ significantly from the amounts which could be
realized upon immediate liquidation. In cases where market prices are not
available, estimates of fair value are based on discounted cash flow
analyses that utilize current interest rates for similar financial
instruments which have comparable terms and credit quality.
The following methods and assumptions were used to estimate the fair value
of each class of financial instruments:
CASH AND CASH EQUIVALENTS
For these short-term investments, the carrying amount approximates fair
value.
DEBT SECURITIES
Fair values are based on quoted market prices, where available, or quoted
market prices of comparable instruments. Fair values of private placement
debt securities are estimated using discounted cash flows that apply
interest rates currently being offered with similar terms to borrowers of
similar credit quality.
POLICY LOANS
Fair values are estimated as the present value of loan interest and policy
loan repayments discounted at the ten year Treasury rate. Loan repayments
were assumed only to occur as a result of anticipated policy lapses, and it
was assumed that annual policy loan interest payments were made at the
guaranteed loan rate less 17.5 basis points. Discounting was at the ten
year Treasury rate, except for policy loans with a variable policy loan
rate. Variable policy loans have an interest rate that is reset annually
based upon market rates and therefore, book value is a reasonable
approximation of fair value.
INVESTMENT CONTRACTS
Variable annuity contracts have guarantees of less than one year for which
interest credited is closely tied to rates earned on owned assets. For such
liabilities, fair value is assumed to be equal to the stated liability
balances. The contract liability balances for December 31, 1999 and 1998
were $64.2 million and $39.7 million, respectively.
OTHER INVESTED ASSETS
Other invested assets consist of the Company's interest in the separate
accounts which are carried at fair value.
26
<PAGE>
PHL VARIABLE INSURANCE COMPANY
(A WHOLLY-OWNED SUBSIDIARY OF PM HOLDINGS, INC.)
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
11. STATUTORY FINANCIAL INFORMATION
The life insurance subsidiaries of Phoenix are required to file annual
statements with state regulatory authorities prepared on an accounting
basis prescribed or permitted by such authorities. As of December 31, 1999,
there were no material practices not prescribed by the State of Connecticut
Insurance Department. Statutory equity differs from equity reported in
accordance with GAAP for life insurance companies primarily because policy
acquisition costs are expensed when incurred, investment reserves are based
on different assumptions, postretirement benefit costs are based on
different assumptions and reflect a different method of adoption, life
insurance reserves are based on different assumptions and income tax
expense reflects only taxes paid or currently payable.
The following reconciles the statutory net income of PHL Variable as
reported to regulatory authorities to the net income as reported in these
financial statements for the year ended December 31:
<TABLE>
<CAPTION>
1999 1998 1997
(IN THOUSANDS)
<S> <C> <C> <C>
Statutory net income $ (1,655) $ 1,542 $ 937
Deferred policy aquisition costs 24,136 15,815 11,483
Future policy benefits (13,496) (14,056) (12,271)
Deferred income taxes (2,882) 987 899
Other, net (104) (98) (95)
--------- -------- -------
Net income, as reported $ 5,999 $ 4,190 $ 953
========= ======== =======
</TABLE>
The following reconciles the statutory surplus and asset valuation reserve
(AVR) of PHL Variable as reported to regulatory authorities to equity as
reported in these financial statements:
DECEMBER 31,
1999 1998
(IN THOUSANDS)
Statutory surplus and AVR $ 66,354 $ 41,268
Deferred policy acquisition costs, net 61,072 36,686
Future policy benefits (48,391) (37,155)
Investment valuation allowances (1,089) 568
Deferred income taxes (208) 2,178
Other, net 451 565
--------- ---------
Equity, as reported $ 78,189 $ 44,110
========= =========
The Connecticut Insurance Holding Act limits the maximum amount of annual
dividends or other distributions available to stockholders of Connecticut
domiciled insurance companies without prior approval of the Insurance
Commissioner. Under current law, the maximum dividend distribution that may
be made by PHL Variable during 1999 without prior approval is subject to
restrictions relating to statutory surplus.
27
<PAGE>
PART II
INFORMATION NOT REQUIRED IN A PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
Not applicable.
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 5.9 of the Connecticut Corporation Law & Practice, provides that a
corporation may indemnify any director or officer of the corporation made, or
threatened to be made, a party to an action or proceeding other than one by or
in the right of the corporation to procure a judgment in its favor, whether
civil or criminal, including an action by or in the right of any other
corporation of any type or kind, by reason of the fact that he, his testator or
intestate, served such other corporation in any capacity at the request of the
indemnifying corporation.
Article III Section 14 of the By-laws of the Company provides: "Each
Director, officer or employee of the Company, and his heirs, executors or
administrators, shall be indemnified or reimbursed by the Company for all
expenses necessarily incurred by him in connection with the defense or
reasonable settlement of any action, suit or proceeding in which he is made a
party by reason of his being or having been a Director, officer or employee of
the Company, or of any other company which he was serving as a Director or
officer at the request of the Company, except in relation to matters as to which
such Director, officer or employee is finally adjudged in such action, suit or
proceeding to be liable for negligence or misconduct in the performance of his
duties as such Director, officer or employee. The foregoing right of
indemnification or reimbursement shall not be exclusive of any other rights to
which he may be entitled under any statute, by-law, agreement, vote of
shareholders or otherwise."
Insofar as indemnification for liability arising under the Securities Act of
1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the registrant of expenses incurred
or paid by a director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
Not applicable.
ITEM 16. EXHIBITS
1 Underwriting Agreement. Incorporated by reference to Exhibit 3 of
File No. 33-87376 Pre-Effective Amendment No. 1 to Form N-4 filed
on July 20, 1995.
2 Plan of acquisition, reorganization, arrangement, liquidation or
succession. Not applicable.
3 (i) Articles of Incorporation. Incorporated by reference to
Exhibit 6(a) of File No. 33-87376 Registration Statement on
Form N-4 filed on December 14, 1994.
(ii) By-laws. Incorporated by reference to Exhibit 6(b) of File
No. 33-87376 Registration Statement on Form N-4 filed on
December 14, 1994.
4 Form of Variable Annuity Contract with MVA Rider. Filed via Edgar
with Registration Statement on Form S-1 on January 23, 1997 and
incorporated herein by reference.
5 Opinion re legality. Refer to Exhibit 23.2.
8 Opinion re tax matters. Not applicable.
9 Voting trust agreement. Not applicable.
10 Material contracts. Not applicable.
11 Statement re computation of per share earnings. Not applicable.
12 Statements re computation of ratios. Not applicable.
II-1
<PAGE>
15 Letter re unaudited interim financial information. Not
applicable.
16 Letter re change in certifying accountant. Not applicable.
21 Subsidiaries of the registrant. Not applicable.
23.1 Consent of PricewaterhouseCoopers LLP.*
23.2 Opinion and Consent of Counsel Edwin L. Kerr, Esq.*
24 Powers of attorney are incorporated herein by reference to
registrant's Post-Effective Amendment No. 2 on April 28, 1998.
25 Statement of eligibility of trustee. Not applicable.
26 Invitation for competitive bids. Not applicable.
27 Financial Data Schedule.*
ITEM 17. UNDERTAKINGS
The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers of sales are being
made, a post-effective amendment to this registration statement:
(i) To include any prospectus required by section 10(a)(3) of
the Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising
after the effective date of the registration statement (or
the most recent post-effective amendment thereof) which,
individually or in the aggregate, represent a fundamental
change in the information set forth in the registration
statement. Notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that
which was registered) and any deviation from the low or
high end of the estimated maximum offering range may be
reflected in the form of prospectus filed with the
Commission pursuant to Rule 424(b) if, in the aggregate,
the changes in volume and price represent no more than a
20% change in the maximum aggregate offering price set
forth in the "Calculation of Registration Fee" table in the
effective registration statement.
(iii) To include any material information with respect to the
plan of distribution not previously disclosed in the
registration statement or any material change to such
information in the registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall
be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering
thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain
unsold at the termination of the offering.
(4) Not applicable.
ITEM 18. FINANCIAL STATEMENTS AND SCHEDULES
Financial Statements and Schedules conforming to the requirement of
Regulation S-X are filed herewith.
____________________
*Filed herewith.
II-2
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Hartford, State of
Connecticut, on this 27th day of April, 2000.
PHL VARIABLE INSURANCE COMPANY
By____________________________________
*Simon Y. Tan
President
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the persons in the capacities
indicated with PHL Variable Insurance Company on this 27th day of April, 2000.
SIGNATURE TITLE
--------- -----
- ------------------------ Director
Carl T. Chadburn
- ------------------------ Chairman of the Board
*Robert W. Fiondella (Principal Executive Officer)
- ------------------------ Director
*Joseph E. Kelleher
- ------------------------ Director
*Philip R. McLoughlin
- ------------------------ Director, Executive Vice President,
*David W. Searfoss Chief Financial Officer and Treasurer
(Principal Financial and Accounting Officer)
- ------------------------ Director, President
*Simon Y. Tan
/s/ Dona D. Young
- ------------------------ Director
Dona D. Young
By: /s/ DONA D. YOUNG
-------------------
Dona D. Young
*DONA D. YOUNG, as Attorney-in-Fact pursuant to Powers of Attorney filed
previously.
S-1
EXHIBIT 23.1
CONSENT OF PRICEWATERHOUSECOOPERS LLP
<PAGE>
CONSENT OF INDEPENDENT ACCOUNTANTS
----------------------------------
We hereby consent to the use in this Post-Effective Amendment No. 4 to the
registration statement on Form S-1 ("Registration Statement") of our report
dated February 15, 2000, relating to the financial statements of PHL Variable
Insurance Company, which appears in such Registration Statement. We also consent
to the reference to us under the heading "Experts" in such Registration
Statement.
/s/PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
Hartford, Connecticut
April 21, 2000
EXHIBIT 23.2
OPINION AND CONSENT OF COUNSEL EDWIN L. KERR, ESQ.
<PAGE>
To Whom It May Concern:
I hereby consent to the reference to my name under the caption "Legal
Matters" in the Prospectus contained in Post-Effective Amendment No. 4 to the
Registration Statement on Form S-1 (File No. 333-20277) filed by Separate
Account MVA1 with the Securities and Exchange Commission under the Securities
Act of 1933.
Very truly yours,
Dated: April 27, 2000 /s/ Edwin L. Kerr
----------------------------
Edwin L. Kerr, Counsel
PHL Variable Insurance Company
<TABLE> <S> <C>
<ARTICLE> 7
<CIK> 0001031223
<NAME> PHL Variable Ins Co
<MULTIPLIER> 1
<CURRENCY> U.S. Dollars
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> Dec-31-1999
<PERIOD-START> Jan-01-1999
<PERIOD-END> Dec-31-1999
<EXCHANGE-RATE> 1
<DEBT-HELD-FOR-SALE> 55,840,000
<DEBT-CARRYING-VALUE> 10,298,000
<DEBT-MARKET-VALUE> 0
<EQUITIES> 0
<MORTGAGE> 0
<REAL-ESTATE> 0
<TOTAL-INVEST> 67,712,000
<CASH> 23,039,000
<RECOVER-REINSURE> 0
<DEFERRED-ACQUISITION> 61,806,000
<TOTAL-ASSETS> 1,422,435,000 <F1>
<POLICY-LOSSES> 0
<UNEARNED-PREMIUMS> 0
<POLICY-OTHER> 0
<POLICY-HOLDER-FUNDS> 64,230,000
<NOTES-PAYABLE> 0
0
0
<COMMON> 2,500,000
<OTHER-SE> 75,689,000
<TOTAL-LIABILITY-AND-EQUITY> 1,422,435,000 <F2>
9,838,000
<INVESTMENT-INCOME> 3,891,000
<INVESTMENT-GAINS> 7,000
<OTHER-INCOME> 20948000
<BENEFITS> 9248000
<UNDERWRITING-AMORTIZATION> 5126000
<UNDERWRITING-OTHER> 11081000
<INCOME-PRETAX> 9229000
<INCOME-TAX> 3230000
<INCOME-CONTINUING> 5999000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5999000
<EPS-BASIC> 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
<FN>
<F1> Included in Total Assets are Assets Held in Separate Accounts of
1257947000.
<F2> Included in Total Liabilities and Equity are Liabilities Related to
Separate Accounts of $1257947000.
</FN>
</TABLE>
