As filed with the Securities and Exchange Commission on July 9, 1998
REGISTRATION NO.________________
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
-------------------------
FORM S-6
-------------------------
FOR REGISTRATION UNDER THE SECURITIES ACT
OF 1933 OF SECURITIES OF UNIT INVESTMENT TRUSTS
REGISTERED ON FORM N-8B-2
-------------------------
PHOENIX HOME LIFE VARIABLE UNIVERSAL LIFE ACCOUNT
(EXACT NAME OF TRUST)
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
(NAME OF DEPOSITOR)
-------------------------
ONE AMERICAN ROW
HARTFORD, CONNECTICUT 06115
(COMPLETE ADDRESS OF DEPOSITOR'S PRINCIPAL EXECUTIVE OFFICES)
DONA D. YOUNG, ESQUIRE
EXECUTIVE VICE PRESIDENT AND GENERAL COUNSEL
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
ONE AMERICAN ROW
HARTFORD, CONNECTICUT 06115
(NAME AND COMPLETE ADDRESS OF AGENT FOR SERVICE)
-------------------------
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<S> <C>
COPIES TO:
MICHAEL BERENSON, ESQ. EDWIN L. KERR, ESQ.
JORDEN BURT BOROS CICCHETTI BERENSON & JOHNSON LLP COUNSEL
1025 THOMAS JEFFERSON ST. NW PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
SUITE 400 EAST ONE AMERICAN ROW
WASHINGTON, DC 20007-0805 HARTFORD, CONNECTICUT 06115
</TABLE>
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Approximate date of proposed public offering:
As soon as practicable after the effective date of this Registration Statement.
-------------------------
The Registrant hereby amends this Registration Statement on such date or dates
as may be necessary to delay its effective date until the Registrant shall file
a further amendment which specifically states that this Registration Statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
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<PAGE>
CROSS REFERENCE TO ITEMS REQUIRED
BY FORM N-8B-2
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N-8B-2 ITEM CAPTION IN PROSPECTUS
- ----------- ---------------------
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1 Phoenix and the VUL Account
2 Phoenix and the VUL Account
3 Not Applicable
4 Sales of Policies
5 Phoenix and the VUL Account
6 Phoenix and the VUL Account
7 Not Applicable
8 Not Applicable
9 Legal Proceedings
10 The Rider
11 Investments of the VUL Account
12 Investments of the VUL Account
13 Charges and Deductions; Investments of the VUL Account
14 The Rider
15 The Rider
16 Investments of the VUL Account
17 The Rider
18 The Rider; Investments of the VUL Account
19 Voting Rights; Reports
20 Not Applicable
21 The Rider
22 Not Applicable
23 Safekeeping of the VUL Account's Assets
24 Not Applicable
25 Phoenix and the VUL Account
26 Charges and Other Deductions; Investments of the VUL Account
27 Phoenix and the VUL Account
28 Phoenix and the VUL Account; The Directors and Executive Officers of Phoenix
29 Not Applicable
30 Not Applicable
31 Not Applicable
32 Not Applicable
33 Not Applicable
34 Not Applicable
35 Phoenix and the VUL Account
36 Not Applicable
37 Not Applicable
38 Sales of Policies
39 Sales of Policies
40 Not Applicable
41 Sales of Policies
42 Not Applicable
43 Not Applicable
44 The Rider
45 Not Applicable
</TABLE>
<PAGE>
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<CAPTION>
N-8B-2 ITEM CAPTION IN PROSPECTUS
- ----------- ---------------------
<S> <C>
46 The Rider
47 The Rider
48 Not Applicable
49 Not Applicable
50 Not Applicable
51 Phoenix and the VUL Account; The Rider; Charges and Deductions
52 Investments of the VUL Account
53 Federal Tax Considerations
54 Not Applicable
55 Not Applicable
56 Not Applicable
57 Not Applicable
58 Not Applicable
59 Not Applicable
</TABLE>
<PAGE>
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these securities
in any State in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities laws of any such State.
SUBJECT TO COMPLETION, DATED JULY 9, 1998
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
HOME OFFICE: PHOENIX VARIABLE PRODUCTS
One American Row MAIL OPERATIONS (VPMO):
Hartford, CT 06115 PO Box 8027
Boston, MA 02266-8027
VARIABLE INSURANCE ADDITIONS RIDER
PROSPECTUS
This Prospectus describes a Variable Insurance Additions Rider (the
"Rider"), offered by Phoenix Home Life Mutual Insurance Company ("Phoenix"). The
Rider provides Variable Insurance Additions ("VIAs") that are in addition to the
base insurance coverage under the single life policy whose death benefit and
cash value do not vary according to the performance of the Subaccounts (the
"Policy"). The death benefit and cash value of the Rider varies according to the
performance of the Subaccounts to which the Rider Cash Value is allocated.
You may allocate Rider Cash Value to one or more of the Subaccounts of the
Phoenix Home Life Variable Universal Life Account (the "VUL Account"). The
assets of the Subaccounts are used to purchase, at Net Asset Value, shares of a
designated underlying mutual fund (collectively, the "Funds") in the following
series of underlying VUL Account Fund options:
<TABLE>
<CAPTION>
FUND ADVISER
======================================================================================================================
THE PHOENIX EDGE SERIES FUND
<S> <C>
[bullet] Money Market Series [square] Phoenix Investment Counsel, Inc.
[bullet] Multi-Sector Fixed Income Series [square] Phoenix Investment Counsel, Inc.
[bullet] International Series [square] Phoenix Investment Counsel, Inc.
[bullet] Strategic Theme Series [square] Phoenix Investment Counsel, Inc.
[bullet] Engemann Nifty Fifty Series [square] Phoenix Investment Counsel, Inc.
[bullet] Phoenix Value Equity Series [square] Phoenix Investment Counsel, Inc.
[bullet] Seneca Mid-Cap Growth Series [square] Phoenix Investment Counsel, Inc.
[bullet] Growth Series [square] Phoenix Investment Counsel, Inc.
[bullet] Strategic Allocation Series [square] Phoenix Investment Counsel, Inc.
[bullet] Balanced Series [square] Phoenix Investment Counsel, Inc.
[bullet] Research Enhanced Index Series [square] Phoenix Investment Counsel, Inc.
[bullet] Phoenix Growth & Income Series [square] Phoenix Investment Counsel, Inc.
[bullet] Schafer Mid-Cap Value Series [square] Phoenix Investment Counsel, Inc.
[bullet] Real Estate Securities Series [square] Duff & Phelps Investment Management Co.
[bullet] Aberdeen New Asia Series [square] Phoenix-Aberdeen International Advisors, LLC
WANGER ADVISORS TRUST
[bullet] U.S. Small Cap Series [square] Wanger Asset Management, L.P.
[bullet] International Small Cap Series [square] Wanger Asset Management, L.P.
======================================================================================================================
</TABLE>
The Rider Cash Value allocated to the VUL Account is not guaranteed and will
vary with the investment performance of the underlying Fund. The Rider and any
VIAs will remain in effect while the Policy Value or Cash Surrender Value is
sufficient to pay certain monthly charges imposed in connection with the Policy.
This Prospectus is valid only if accompanied by or preceded by current
prospectuses for the Funds. This Prospectus and the prospectuses for the Funds
should be read and retained for future reference.
The Riders are not deposits or obligations of, or guaranteed or endorsed by,
any financial institution or credit union and are not federally insured by the
Federal Deposit Insurance Corporation ("FDIC") or any other agency. Investments
in the Riders are subject to investment risk including the fluctuation of Cash
Values and the possible loss of principal.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION ("SEC") NOR HAS THE SEC PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
1
<PAGE>
TABLE OF CONTENTS
Heading Page
- -------------------------------------------------------------
VARIABLE INSURANCE ADDITIONS RIDER........................ 1
TABLE OF CONTENTS......................................... 2
SPECIAL TERMS............................................. 3
SUMMARY................................................... 3
PERFORMANCE HISTORY....................................... 4
PHOENIX AND THE VUL ACCOUNT............................... 5
Phoenix.................................................. 5
The VUL Account ......................................... 5
THE RIDER ................................................ 6
Introduction ............................................ 6
Eligible Purchasers ..................................... 6
Purchase of VIAs ........................................ 6
Subaccount Allocation.................................... 6
Transfer of Rider Cash Value............................. 6
Determination of Subaccount Values....................... 6
Death Benefit............................................ 7
Surrenders............................................... 7
Rider Loans.............................................. 7
Termination of the Rider................................. 7
INVESTMENTS OF THE VUL ACCOUNT............................ 7
Participating Mutual Funds............................... 7
The Phoenix Edge Series Fund............................ 7
Investment Advisers.................................... 8
Wanger Advisors Trust................................... 9
Services of the Advisers................................. 9
Reinvestment and Redemption.............................. 9
Substitution of Investments.............................. 9
CHARGES AND DEDUCTIONS.................................... 9
Monthly Deduction........................................ 9
Cost of Insurance....................................... 9
Mortality and Expense Risk Charge........................ 10
Investment Management Charge............................. 10
Other Charges--Taxes..................................... 10
GENERAL PROVISIONS........................................ 10
Postponement of Payments................................. 10
Change of Owner or Beneficiary........................... 10
PAYMENT OF PROCEEDS....................................... 10
Surrender and Death Benefit Proceeds..................... 10
FEDERAL TAX CONSIDERATIONS................................ 10
Introduction............................................. 10
Phoenix's Tax Status..................................... 11
Rider Benefits........................................... 11
Diversification Standards................................ 11
Other Taxes.............................................. 11
VOTING RIGHTS............................................. 11
The Funds................................................ 11
Phoenix.................................................. 12
THE DIRECTORS AND EXECUTIVE OFFICERS OF PHOENIX........... 12
SAFEKEEPING OF THE VUL ACCOUNT'S ASSETS................... 13
SALES OF POLICIES ........................................ 13
STATE REGULATION ......................................... 13
REPORTS .................................................. 13
LEGAL PROCEEDINGS ........................................ 13
LEGAL MATTERS ............................................ 13
REGISTRATION STATEMENT ................................... 13
YEAR 2000 ISSUE........................................... 14
FINANCIAL STATEMENTS ..................................... 14
_______________
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFERING IN ANY JURISDICTION IN WHICH
SUCH OFFERING MAY NOT BE LAWFULLY MADE. NO DEALER, SALESPERSON OR OTHER PERSON
IS AUTHORIZED TO GIVE ANY INFORMATION OR MAKE ANY REPRESENTATIONS IN CONNECTION
WITH THIS OFFERING OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, AND IF GIVEN
OR MADE, SUCH OTHER INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON.
_______________
The Rider is not available in all States.
2
<PAGE>
SPECIAL TERMS
- --------------------------------------------------------------------------------
As used in this Prospectus, the following terms have the indicated meanings:
BENEFICIARY: The person or persons specified by the Owner as entitled to receive
the death benefits under a Policy.
CONVERSION DATE: The Valuation Date on or next following the Rider Date.
FUND(S): The Phoenix Edge Series Fund and Wanger Advisors Trust.
GENERAL ACCOUNT: The general asset account of Phoenix.
IN FORCE: Condition under which the coverage under a Rider is in effect and the
Insured's life remains insured.
INSURED: The person upon whose life the Policy is issued.
IN WRITING (WRITTEN REQUEST): In a written form satisfactory to Phoenix and
delivered to VPMO.
MONTHLY CALCULATION DAY: The first Monthly Calculation Day is the Conversion
Date. Subsequent Monthly Calculation Days are the Valuation Dates on or next
following the same day of each month as the Policy Date of Issue. If a month
ends before reaching that day, the Monthly Calculation Day will be the Valuation
Date on or next following the last day of the month.
NET ASSET VALUE: The worth of one share of a Series of a Fund at the end of a
Valuation Period. Net Asset Value is computed by adding the value of all a
Series' holding plus other assets, minus liabilities and then dividing the
result by the number of shares outstanding.
PAID-UP ADDITIONS: Nonvariable paid-up additions as described in the Policy.
PAYMENT DATE: The Valuation Date on which a premium payment or loan repayment is
received at VPMO unless it is received after the close of the New York Stock
Exchange ("NYSE"), in which case it will be the next Valuation Date.
POLICYOWNER (OWNER, YOU, YOUR): The Owner of a single life traditional insurance
policy.
PROPORTIONATE (PRO RATA): Amounts allocated to Subaccounts on a proportionate
basis are allocated by increasing (or decreasing) a Rider's share in the value
of the affected Subaccounts so that such shares maintain the same ratio to each
other before and after the allocation.
RIDER: Variable Insurance Additions Rider.
RIDER CASH VALUE: The cash value of the VIAs. It is the sum of a Rider's share
in the value of each Subaccount.
RIDER DATE: The effective date of the Rider as shown on the first page of the
Rider.
SERIES: A separate investment portfolio of the Fund.
SUBACCOUNTS: Accounts within Phoenix's VUL Account to which assets under the
Rider are allocated.
UNIT: A standard of measurement used in determining the value of a Rider. The
value of a Unit for each Subaccount will reflect the investment performance of
that Subaccount and will vary in dollar amount.
VALUATION DATE: For any Subaccount, each date on which the Net Asset Value of
the Fund is determined.
VALUATION PERIOD: For any Subaccount, the period in days from the end of one
Valuation Date through the next.
VIAS (VARIABLE INSURANCE ADDITIONS): Units of variable insurance that are in
addition to the insurance under the Policy.
VPMO: The Variable Products Mail Operation Division of Phoenix that receives and
processes incoming mail for Variable Products Operations.
VUL ACCOUNT (ACCOUNT): Phoenix Home Life Variable Universal Life Account.
VULA: Variable and Universal Life Administration Division of Phoenix.
WE (OUR, US, COMPANY, PHOENIX): Phoenix Home Life Mutual Insurance Company,
Hartford, Connecticut.
SUMMARY
- --------------------------------------------------------------------------------
The following summary of Prospectus information of the Rider should be read
with the detailed information appearing elsewhere in this Prospectus. See "Table
of Contents" and "Special Terms."
INVESTMENT FEATURES
PURCHASE OF VIAS
On the Conversion Date, the Policy Paid-up Additions will be canceled, and
the Cash Value will be used to purchase VIAs. After the Conversion Date, the
Policy annual dividends will be used to purchase additional VIAs. These annual
dividends do not include Paid-up Additions dividends.
SUBACCOUNT ALLOCATION
Amounts purchasing VIAs will be allocated to the VUL Account Subaccounts
according to the Rider election form allocation schedule, or as last changed by
you. You may change the allocation schedule by telephone or by Written Request.
REDEMPTIONS
[bullet] Generally, the Rider may not be used as collateral for policy
loans. However, when a Policy loan is processed, some VIAs may be
surrendered to increase the Policy's maximum loan value.
Surrenders of some VIAs will not apply to automatic premium loans
under the Policy.
[bullet] Partial or full surrenders may be taken anytime provided that you
submit a Written Request to VPMO. The full surrender amount is the
Rider Cash Value at the end of the Valuation Period in which the
request is received.
3
<PAGE>
INSURANCE PROTECTION FEATURE
DEATH BENEFIT
The death benefit amount is provided by the Rider Cash Value when applied as
a net single premium. The net single premium is based on the attained age and
sex of the insured, and on the interest rate and mortality table stated in the
Policy's Basis of Calculations section.
DEDUCTIONS AND CHARGES
FROM RIDER CASH VALUE
A monthly cost of insurance charge will be assessed from the Rider Cash
Value to compensate us for the cost of insurance.
FROM THE VUL ACCOUNT
A charge for certain mortality and expense risks of .50% annually will be
assessed from the VUL Account to compensate for certain risks assumed in
connection with the Rider.
FROM THE FUND
The assets of the VUL Account are used to purchase, at Net Asset Value,
shares of a designated underlying Fund. This Net Asset Value reflects investment
management fees and other direct expenses. See "Investment Management Charge."
ADDITIONAL INFORMATION
TERMINATION OF THE RIDER
The Rider will cancel upon Policy surrender, Policy lapse or full surrender
of the VIAs.
TAX EFFECTS
Generally, under current federal income tax law, death benefits are not
subject to income tax and Rider Cash Value earnings are not subject to income
tax unless there is a distribution from the Policy. Loans, partial surrenders or
Policy cancellation may result in recognition of income for tax purposes.
PERFORMANCE HISTORY
- --------------------------------------------------------------------------------
From time to time, the VUL Account may include the performance history of
any or all Subaccounts in advertisements, sales literature or reports.
Performance information about each Subaccount is based on past performance only
and is not an indication of future performance. THESE RATES OF RETURN ARE NOT AN
ESTIMATE OR GUARANTEE OF FUTURE PERFORMANCE. THEY DO NOT ILLUSTRATE HOW ACTUAL
PERFORMANCE WILL AFFECT THE BENEFITS UNDER A POLICY BECAUSE THEY DO NOT REFLECT
COST OF INSURANCE. FOR THIS INFORMATION SEE APPENDIX B "ILLUSTRATIONS OF DEATH
BENEFITS, POLICY VALUES AND CASH SURRENDER VALUES." Performance information may
be expressed as yield and effective yield of the Money Market Subaccount, as
yield of the Multi-Sector Subaccount and as total return of any Subaccount.
Current yield for the Money Market Subaccount will be based on the income earned
by the Subaccount over a given seven-day period (less mortality and expense risk
charges taken during the period) and then annualized, i.e., the income earned in
the period is assumed to be earned every seven days over a 52-week period and is
stated in terms of an annual percentage return on the investment. Effective
yield is calculated similarly but reflects the compounding effect of earnings on
reinvested dividends. Yield and effective yield reflect the Mortality and
Expense Risk charge on the VUL Account level.
Yield calculations of the Money Market Subaccount used for illustration
purposes are based on the consideration of a hypothetical participant's account
having a balance of exactly one Unit at the beginning of a seven-day period,
which period will end on the date of the most recent financial statements. The
yield for the Subaccount during this seven-day period will be the change in the
value of the hypothetical participant's account's original Unit. The following
is an example of this yield calculation for the Money Market Subaccount based on
a seven-day period ending December 31, 1997.
Example:
Assumptions:
Value of hypothetical pre-existing account with exactly one unit
at the beginning of the period:............................. 1.741679
Value of the same account (excluding capital changes) at the
end of the seven-day period:................................. 1.742998
Calculation:
Ending account value ........................................ 1.742998
Less beginning account value ................................ 1.741679
Net change in account value ................................. 0.001320
Base period return:
(adjusted change/beginning account value) ................... 0.000758
Current yield = return x (365/7) = ........................... 3.95%
Effective yield = [(1 + return)(365/7)] - 1 = ................ 4.03%
The current yield and effective yield information will fluctuate, and
publication of yield information may not provide a basis for comparison with
bank deposits, other investments which are insured and/or pay a fixed yield for
a stated period of time, or other investment companies, due to cost of insurance
charges which will be deducted on the VUL Account level.
For the Multi-Sector Subaccount, quotations of yield will be based on all
investment income per unit earned during a given 30-day period (including
dividends and interest), less expenses accrued during the period ("net
investment income"), and are computed by dividing net investment income by the
maximum offering price per unit on the last day of the period.
When a Subaccount advertises its average annual total return, it will be
calculated for one year, five years, and ten years or since inception if the
Subaccount has not been in existence for at least ten years. Total return is
measured by comparing the value of a hypothetical $10,000 investment in the
Subaccount at the beginning of the relevant period to the value of the
investment at the end of the period, assuming the reinvestment of all
distributions at net asset value and the deduction of the mortality and expense.
The Rider has been offered to the public only since _____ __, 1998. However,
performance date for a Subaccount will be presented in sales materials for as
long a period of time as the Series underlying that Subaccount has operated. For
periods preceding the offering of the Rider, the performance data will reflect
actual Series performance, as adjusted by the assumed deduction of the mortality
and expense risk charge.
4
<PAGE>
Below are quotations of average annual total return of Series of the Funds.
RIDER CHARGES (INCLUDING COST OF INSURANCE) ARE NOT REFLECTED.
AVERAGE ANNUAL TOTAL RETURN FOR THE PERIOD ENDED 12/31/97
---------------------------------------------------------
COMMENCEMENT SINCE
SERIES DATE 1 YEAR 5 YEARS 10 YEARS INCEPTION
- ------ ---- ------ ------- -------- ---------
Multi-Sector... 1/1/83 10.53% 10.52% 10.28% 10.46%
Balanced....... 5/1/92 17.35% 10.60% N/A 11.01%
Allocation..... 9/17/84 20.13% 10.69% 11.64% 12.63%
Growth......... 1/1/83 20.48% 16.14% 16.92% 17.93%
International.. 5/1/90 11.49% 14.50% N/A 8.42%
Money Market... 10/10/82 4.66% 3.99% 5.15% 5.88%
Real Estate.... 5/1/95 21.45% N/A N/A 26.95%
Theme.......... 1/29/96 16.59% N/A N/A 13.75%
Asia........... 9/17/96 (32.73%) N/A N/A (26.51%)
Enhanced Index. 7/15/97 N/A N/A N/A 5.61%
U.S. Small Cap. 5/1/95 28.78% N/A N/A 34.06%
Int'l. Small 5/1/95 (1.95%) N/A N/A 22.81%
Cap............
ANNUAL TOTAL RETURN
-------------------
MULTI- ALLO- INTER- MONEY
YEAR SECTOR BALANCED CATION GROWTH NATIONAL MARKET
---- ------ -------- ------ ------ -------- ------
1983.... 5.47% N/A N/A 32.22% N/A 7.79%
1984.... 10.78% N/A (1.21%) 10.11% N/A 9.67%
1985.... 20.00% N/A 26.69% 34.24% N/A 7.49%
1986.... 18.69% N/A 15.10% 19.86% N/A 5.98%
1987.... 0.60% N/A 12.16% 6.48% N/A 5.97%
1988.... 9.89% N/A 1.83% 3.39% N/A 6.90%
1989.... 7.70% N/A 19.27% 35.39% N/A 8.65%
1990.... 4.67% N/A 5.22% 3.55% (8.74%) 7.67%
1991.... 18.97% N/A 28.64% 42.00% 19.07% 5.45%
1992.... 9.52% 8.44% 10.10% 9.75% (13.26%) 3.06%
1993.... 15.33% 8.06% 10.46% 19.09% 37.72% 2.35%
1994.... (5.93%) (3.32%) (1.89%) 0.96% (0.44%) 3.31%
1995.... 22.91% 22.72% 17.61% 30.23% 9.04% 5.16%
1996.... 11.86% 10.01% 8.50% 12.02% 18.06% 4.50%
1997.... 10.53% 17.35% 20.13% 20.48% 11.49% 4.66%
REAL ENHANCED U.S. INT'L
YEAR ESTATE THEME ASIA INDEX SMALL CAP SMALL CAP
- ---- ------ ----- ---- ----- --------- ---------
1995.... 17.42% N/A N/A N/A 16.24% 34.23%
1996.... 32.60% 9.89% 0.01% N/A 46.08% 31.54%
1997.... 21.45% 16.59% (32.73%) 5.61%* 28.78% (1.95%)
*Since inception.
Advertisements, sales literature and other communications may contain
information about any Series' or Adviser's current investment strategies and
management style. Current strategies and style may change to respond to changing
market and economic conditions. From time to time, the Series may discuss
specific portfolio holdings or industries in such communications. To illustrate
components of overall performance, the Series may separate their cumulative and
average annual returns into income results and capital gains or losses; or cite
separately, as a return figure, the equity or bond portion of a Series'
portfolio; or compare a Series' equity or bond return figure to well-known
indices of market performance including, but not limited to, the Standard &
Poor's 500 Composite Stock Price Index (the "S&P 500"), Dow Jones Industrial
Average, First Boston High Yield Index and Salomon Brothers Corporate and
Government Bond Indices.
The VUL Account may, from time to time, include in advertisements containing
total return the ranking of those performance figures relative to such figures
for groups of Subaccounts having similar investment objectives as categorized by
ranking services such as Lipper Analytical Services, Inc., CDA Investment
Technologies, Inc., Weisenberger Financial Services, Inc. and Morningstar, Inc.
Additionally, the Funds may compare a Series' performance results to other
investment or savings vehicles (such as certificates of deposit) and may refer
to results published in various publications such as Changing Times, Forbes,
Fortune, Money, Barrons, Business Week, Investor's Business Daily, The Stanger
Register, Stanger's Investment Adviser, The Wall Street Journal, The New York
Times, Consumer Reports, Registered Representative, Financial Planning,
Financial Services Weekly, Financial World, U.S. News and World Report, Standard
& Poor's, The Outlook and Personal Investor. The Funds may, from time to time,
illustrate the benefits of tax deferral by comparing taxable investments to
investments made through tax-deferred retirement plans. The total return also
may be used to compare the performance of a Series against certain widely
acknowledged outside standards or indices for stock and bond market performance,
such as the S&P 500, Dow Jones Industrial Average, Europe Australia Far East
Index (EAFE), Consumer Price Index, Lehman Brothers Corporate Index and Lehman
Brothers T-Bond Index. The S&P 500 is a commonly quoted measure of stock market
performance and represents common stocks of companies of varying sizes segmented
across 90 different industries which are listed on the NYSE, the American Stock
Exchange and traded over the NASDAQ National Market System.
The Funds' Annual Reports, available upon request and without charge,
contain a discussion of the performance of the Funds and a comparison of that
performance to a securities market index.
PHOENIX AND THE VUL ACCOUNT
- --------------------------------------------------------------------------------
PHOENIX
Phoenix is a mutual life insurance company originally chartered in
Connecticut in 1851 and redomiciled to New York in 1992. Its executive office is
at One American Row, Hartford, Connecticut 06115 and its main administrative
office is at 100 Bright Meadow Boulevard, Enfield, Connecticut 06083-1900. Its
New York principal office is at 10 Krey Boulevard, East Greenbush, New York
12144. Phoenix is the nation's 9th largest mutual life insurance company and has
consolidated assets of $18.5 billion. We sell insurance policies and annuity
contracts through our own field force of full-time agents and through brokers.
Our operations are conducted in all 50 states, the District of Columbia, Canada
and Puerto Rico.
THE VUL ACCOUNT
The VUL Account is a separate account of Phoenix formed on June 17, 1985 and
governed under the laws of New York. It is registered as a unit investment trust
under the Investment Company Act of 1940 ("1940 Act"), as amended, and it meets
the definition of a "separate account" under that Act. Such registration does
not involve supervision of the management of the VUL Account or Phoenix by the
SEC.
5
<PAGE>
The VUL Account currently has seventeen Subaccounts available for allocation
of Rider Cash Value. If in the future we determine that marketing needs and
investment conditions warrant, we may establish additional Subaccounts, which
will be made available to existing Policy or Rider owners to the extent and on a
basis determined by Phoenix. Each Subaccount will invest solely in shares of the
Funds allocable to one of the available portfolios, each having the specified
investment objective set forth under "Investments of the VUL Account--
Participating Mutual Funds."
Phoenix does not guarantee the investment performance of the VUL Account or
any of its Subaccounts. The Rider Cash Value depends on the investment
performance of the Fund. Therefore, you bear the full investment risk for all
monies invested in the VUL Account.
The VUL Account is administered and accounted for as part of the general
business of Phoenix. However, the income, gains or losses of the VUL Account are
credited to or charged against the assets held in the VUL Account, without
regard to other income, gains or losses of any other business Phoenix may
conduct. Under New York law, the assets of the VUL Account are not chargeable
with liabilities arising out of any other business Phoenix may conduct.
Nevertheless all obligations arising under the Rider are general corporate
obligations of Phoenix.
THE RIDER
- --------------------------------------------------------------------------------
INTRODUCTION
The Rider is a Variable Insurance Additions Rider. VIAs have a death benefit
and cash value as is associated with traditional Paid-Up Additions. VIAs differ
from traditional Paid-Up Additions, however, because you specify in which of
several Subaccounts of the VUL Account the VIA's Cash Value is to be allocated.
Each Subaccount of the VUL Account, in turn, invests its assets exclusively in a
series of the Fund. The Rider's death benefit and Cash Value vary reflecting the
investment performance of the Series to which the Rider Cash Value has been
allocated.
ELIGIBLE PURCHASERS
You may elect to add VIAs if the Policy has been In Force for at least two
years, the dividend option is Paid-Up Additions, the nonloaned Paid-Up Additions
cash value are at least $1,000, and you have not previously elected and canceled
the Rider.
PURCHASE OF VIAS
On the Conversion Date, any Paid-up Additions under the Policy will be
canceled, and their cash value applied to purchase VIAs. After the Conversion
Date any annual dividends apportioned to the Policy will be applied to purchase
additional VIAs. Such annual dividends do not include dividends on any Paid-up
Additions.
SUBACCOUNT ALLOCATION
Any amount applied to purchase VIAs will be allocated to the Subaccounts of
the VUL Account according to the asset allocation schedule in the Rider election
form, or as last changed by you. You may change the allocation schedule by
telephone or by Written Request.
TRANSFER OF RIDER CASH VALUE
You may transfer all or some of the Rider Cash Value among the Subaccounts by
telephone or by Written Request.
You may request transfers among available Subaccounts in writing or by calling
(800) 892-4885, between the hours of 8:30 a.m. and 4:00 p.m. Eastern Time.
Unless you elect in writing not to authorize telephone transfers, telephone
transfer orders also will be accepted from your registered representative.
Phoenix and Phoenix Equity Planning Corporation ("PEPCO") will employ reasonable
procedures to confirm those telephone instructions are genuine. They will
require address verification, identical account registrations and will record
telephone instructions on tape. All telephone exchanges will be confirmed in
writing to you. To the extent that procedures reasonably designed to prevent
unauthorized transfers are not followed, Phoenix and PEPCO may be liable for
following telephone instructions for transfers that are fraudulent. However, you
would bear the risk of loss resulting from instructions entered by an
unauthorized third party that Phoenix and PEPCO reasonably believe to be
genuine. The telephone transfer privilege may be modified or canceled at
anytime, and during times of extreme market volatility, it may be difficult to
exercise. In such cases, you should submit a Written Request.
We reserve the right to limit the number of transfers made each year while the
Rider is In Force. However, you will be permitted at least six transfers each
year while the Rider is In Force. In addition, we reserve the right to set a
minimum transfer amount not to exceed $500. A transfer will take effect on the
date the request is received at VPMO.
We reserve the right to limit the number of Subaccounts you may elect to a
total of 18 at any one time and/or over the life of the Rider unless required to
be less to comply with changes in federal and/or state regulation, including
tax, securities and insurance law.
DETERMINATION OF SUBACCOUNT VALUES
On each Valuation Date, the Rider's share in the value of each Subaccount is
determined separately, but the valuation method used is the same for each
Subaccount. A Rider's share in the value of a Subaccount on any Valuation Date
equals:
(a) The Rider's share in the value of that Subaccount as of the immediately
preceding Valuation Date multiplied by the "Net Investment Factor" of
that Subaccount for the current Valuation Period; plus
(b) All amounts transferred to the Rider's share in the value of that
Subaccount from another Subaccount; plus
(c) All amounts applied to purchase VIAs allocated to that Subaccount during
the current Valuation Period; minus
(d) All amounts transferred from the Rider's share in the value of that
Subaccount to another Subaccount during the current Valuation Period;
minus
(e) Any portion of the monthly deduction allocated to the Rider's share in
the value of that Subaccount during the current Valuation Period; minus
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(f) All reductions in the Rider Cash Value allocated to the Rider's share in
the value of that Subaccount due to any partial surrenders made during
the current Valuation Period.
The Net Investment Factor for each Subaccount for any Valuation Period is
determined by dividing (a) by (b), and subtracting (c) from the result where:
(a) is the result of:
(i) the Net Asset Value of the Fund shares held by that Subaccount
determined as of the end of the current Valuation Period
(exclusive of the net value of any transactions during the
current Valuation Period); plus
(ii) the amount of any dividend (or, if applicable, any capital gain
distribution) made by the Fund on shares held by that Subaccount
if the "ex-dividend" date occurs during the current Valuation
Period; plus/minus
(iii) the charge or credit for any taxes incurred by or provided for in
that Subaccount for the current Valuation Period.
(b) the Net Asset Value of the Fund shares held by that Subaccount
determined as of the end of the immediately preceding Valuation Period.
(c) is a factor, equal to the sum of .50% annually held by that Subaccount,
representing the Mortality and Expense Risk Charge deducted from that
Subaccount during the Valuation Period.
The Net Investment Factor may be greater than, less than or equal to one.
Therefore, the Rider Cash Value may increase, decrease or remain unchanged.
DEATH BENEFIT
The VIA death benefit at anytime is the amount of death benefit provided by
the Rider Cash Value when applied as a net single premium. The net single
premium is based on the attained age and sex of the insured and on the interest
rate and mortality table stated in the Policy's Basis of Calculations section.
Upon receipt of due proof of death of the Insured while this Rider is In
Force, we will pay the VIA death benefit according to the terms of the Policy.
SURRENDERS
Anytime during the lifetime of the Insured and while the Rider is In Force,
you may partially or fully surrender the Rider by sending a written release and
surrender in a form satisfactory to us to VPMO. The amount available for
surrender is the Rider Cash Value at the end of the Valuation Period during
which the surrender request is received at VPMO.
Upon partial or full surrender, we generally will pay the amount surrendered
to you within seven days after we receive the Written Request for the surrender.
Under certain circumstances, the surrender payment may be postponed. See
"General Provisions--Postponement of Payments." For the federal tax effects of
partial and full surrenders, see "Federal Tax Considerations."
RIDER LOANS
VIAs may not be assigned as collateral for policy loans. The Rider Cash
Value is not directly included in the loan value of the Policy. However, when an
increase in the maximum loan value of the Policy is needed to process the full
amount of a policy loan request or to secure indebtedness under the Policy,
Paid-Up Additions, having cash value included in the Policy's loan value, will
be purchased through the automatic release and surrender of some VIAs to the
extent needed for the resultant cash value of the Paid-Up Additions to
sufficiently increase the Policy's maximum loan value. This automatic release
and surrender of a portion of the VIAs to increase the Policy's maximum loan
value will not apply to automatic premium loans under the Policy.
VIAs canceled due to a release and surrender to increase the Policy's
maximum loan value through the purchase of Paid-Up Additions may not later be
restored either directly or through loan repayment.
TERMINATION OF THE RIDER
The Rider, and any VIAs provided will terminate upon the earliest of any of
the events listed below:
(a) Policy surrender;
(b) Policy lapse;
(c) full surrender of existing VIAs;
(d) our receipt of a Written Request from you to cancel the Rider.
INVESTMENTS OF THE VUL ACCOUNT
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PARTICIPATING MUTUAL FUNDS
THE PHOENIX EDGE SERIES FUND
Certain Subaccounts of the VUL Account invest in corresponding Series of The
Phoenix Edge Series Fund. The Fund currently has the following Series available:
MONEY MARKET SERIES: The investment objective of the Money Market Series
is to provide maximum current income consistent with capital preservation
and liquidity.
GROWTH SERIES: The investment objective of the Growth Series is to
achieve intermediate and long-term growth of capital, with income as a
secondary consideration.
MULTI-SECTOR FIXED INCOME ("MULTI-SECTOR") SERIES: The investment
objective of the Multi-Sector Series is to seek long-term total return by
investing in a diversified portfolio of high yield (high risk) and high
quality fixed income securities. For a discussion of the risks associated
with investing in high yield bonds, please see the accompanying Fund
prospectus.
STRATEGIC ALLOCATION ("ALLOCATION") SERIES: The investment objective of
the Allocation Series is to realize as high a level of total rate of return
over an extended time as is considered consistent with prudent investment
risk (total rate of return consists of capital appreciation, current income,
including dividends and interest, possible premiums and short-term gains
from purchasing and selling options and financial futures).
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BALANCED SERIES: The investment objective of the Balanced Series is to
seek reasonable income, long-term capital growth and conservation of
capital. The Balanced Series' investments are made based on combined
considerations of risk, income, capital enhancement and protection of
capital value.
INTERNATIONAL SERIES: The investment objective of the International
Series is to seek a high total return consistent with reasonable risk. The
International Series intends to invest primarily in an internationally
diversified portfolio of equity securities. It intends to reduce its risk by
engaging in hedging transactions involving options, futures contracts and
foreign currency transactions. The International Series provides a means for
investors to invest a portion of their assets outside the United States.
REAL ESTATE SECURITIES ("REAL ESTATE") SERIES: The investment objective
of the Real Estate Series is to seek capital appreciation and income with
approximately equal emphasis. It intends under normal circumstances to
invest in marketable securities of publicly traded real estate investment
trusts (REITs) and companies that operate, develop, manage and/or invest in
real estate located primarily in the United States.
STRATEGIC THEME ("THEME") SERIES: The investment objective of the
Strategic Theme Series is to seek long-term appreciation of capital through
investing in securities of companies that the adviser believes are
particularly well positioned to benefit from cultural, demographic,
regulatory, social or technological changes worldwide.
ABERDEEN NEW ASIA ("ASIA") SERIES: The investment objective of the Asia
Series is to seek long-term capital appreciation. The Asia Series will
invest primarily in a diversified portfolio of equity securities of issuers
organized and principally operating in Asia, excluding Japan.
RESEARCH ENHANCED INDEX ("ENHANCED INDEX") SERIES: The investment
objective of the Enhanced Index Series is to seek high total return by
investing in a broadly diversified portfolio of equity securities of large
and medium capitalization companies within market sectors reflected in the
S&P 500. It is intended that this Series will invest in a portfolio of
undervalued common stocks and other equity securities which appear to offer
growth potential and an overall volatility of return similar to that of the
S&P 500.
ENGEMANN NIFTY FIFTY ("NIFTY FIFTY") SERIES: The investment objective of
the Nifty Fifty Series is to seek long-term capital appreciation by
investing in approximately 50 different securities which offer, in the
adviser's opinion, the best potential for long term growth of capital. At
least 75% of the Series' assets will be invested in common stocks of high
quality growth companies. The remaining portion will be invested in common
stocks of small corporations with rapidly growing earnings per share or
common stocks believed to be undervalued.
SENECA MID-CAP GROWTH ("SENECA MID-CAP") SERIES: The investment
objective of the Seneca Mid-Cap Series is to seek capital appreciation
primarily through investments in equity securities of companies that have
the potential for above average market appreciation. The Series seeks to
outperform the Standard & Poor's Mid-Cap 400 Index.
PHOENIX GROWTH AND INCOME ("GROWTH & INCOME") SERIES: The investment
objective of the Growth & Income Series is to seek dividend growth, current
income and capital appreciation by investing in common stocks. The Series
seeks to achieve its objective by selecting securities primarily from equity
securities of the 1,000 largest companies traded in the United States,
ranked by market capitalization.
PHOENIX VALUE EQUITY ("VALUE") SERIES: The primary investment objective
of the Value Series is long-term capital appreciation, with a secondary
investment objective of current income. The Series seeks to achieve its
objective by investing in a diversified portfolio of common stocks that meet
certain quantitative standards that indicate above average financial
soundness and intrinsic value relative to price.
SCHAFER MID-CAP VALUE ("SCHAFER MID-CAP") SERIES: The primary investment
objective of the Schafer Mid-Cap Series is to seek long-term capital
appreciation, with current income as the secondary investment objective. The
Series will invest in common stocks of established companies having a strong
financial position and a low stock market valuation at the time of purchase
which are believed to offer the possibility of an increase in value.
INVESTMENT ADVISERS
The investment adviser to all series except the Real Estate and Asia Series
is Phoenix Investment Counsel, Inc. ("PIC"). Pursuant to subadvisory agreements
with the Fund, PIC delegates certain investment decisions and research functions
with respect to the following series to the subadviser indicated:
Enhanced Index Series J. P. Morgan Investment
Management, Inc.
Nifty Fifty Series Roger Engemann & Associates,
Inc. ("Engemann")
Seneca Mid-Cap Series Seneca Capital Management, LLC
("Seneca")
Schafer Mid-Cap Series Schafer Capital Management, Inc.
The investment adviser to the Real Estate Series is Duff & Phelps Investment
Management Co. ("DPIM").
The investment adviser to the Asia Series is Phoenix-Aberdeen International
Advisors LLC ("PAIA"). Pursuant to subadvisory agreements with the Fund, PAIA
delegates certain investment decisions and research functions with respect to
the Asia Series to PIC and Aberdeen Fund Managers, Inc.
PIC, DPIM, Engemann and Seneca are indirect, less than wholly-owned
subsidiaries of Phoenix. PAIA is jointly owned and managed by PM Holdings, Inc.,
a subsidiary of Phoenix, and Aberdeen Fund Managers, Inc.
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WANGER ADVISORS TRUST
Certain Subaccounts of the VUL Account invest in corresponding Series of the
Wanger Advisors Trust. The investment adviser is Wanger Asset Management, L.P.
The available Series and their fundamental objectives are as follows:
WANGER U.S. SMALL CAP ("U.S. SMALL CAP") SERIES: The investment
objective of the U.S. Small Cap Series is to provide long-term growth. The
U.S. Small Cap Series will invest primarily in securities of U.S. companies
with total common stock market capitalization of less than $1 billion.
WANGER INTERNATIONAL SMALL CAP ("INTERNATIONAL SMALL CAP") SERIES: The
investment objective of the International Small Cap Series is to provide
long-term growth. The International Small Cap Series will invest primarily
in securities of non-U.S. companies with total common stock market
capitalization of less than $1 billion.
Each Series is subject to market fluctuations and risks inherent in the
ownership of any security and there is no assurance that any Series' stated
investment objective will be realized.
Besides being sold to the VUL Account, shares are also sold to other
separate accounts of Phoenix or its affiliates or of other insurance companies
funding variable annuity or variable life insurance contracts.
It is conceivable that in the future it may be disadvantageous for variable
life insurance separate accounts and variable annuity separate accounts to
invest in the Funds simultaneously. Although neither Phoenix nor the Funds
currently foresee any such disadvantages to Rider owners, variable life
insurance policyowners or to variable annuity contract owners, the Funds'
Trustees intend to monitor events to identify any material conflicts between
Rider owners, variable life insurance policyowners and variable annuity contract
owners and to determine what action, if any, should be taken in response
thereto. Material conflicts could result from, for example, (1) changes in state
insurance laws, (2) changes in federal income tax laws, (3) changes in the
investment management of any portfolio of the Funds or (4) differences in voting
instructions between those given Rider owners and those given by variable
annuity contract owners. Phoenix will, at its own expense, remedy such material
conflict including, if necessary, segregating the assets underlying the Rider,
variable life insurance policies and the variable annuity contracts and
establishing a new registered investment company.
SERVICES OF THE ADVISERS
The advisers continuously furnish an investment program for each Series and
manage the investment and reinvestment of the assets of each Series subject at
all times to the authority and supervision of the Trustees. A detailed
discussion of the investment advisers and subadvisers, and the investment
advisory and subadvisory agreements, is contained in the accompanying prospectus
for the Funds.
REINVESTMENT AND REDEMPTION
All dividend distributions of the Funds are automatically reinvested in
shares of the Funds at their Net Asset Value on the date of distribution; all
capital gains distributions of the Funds, if any, are likewise reinvested at the
Net Asset Value on the record date. Phoenix redeems Fund shares at their Net
Asset Value to the extent necessary to make payments under the Rider.
SUBSTITUTION OF INVESTMENTS
Phoenix reserves the right, subject to compliance with the law as currently
applicable or subsequently changed, to make additions to, deletions from, or
substitutions for the investments held by the VUL Account. In the future,
Phoenix may establish additional Subaccounts within the VUL Account, each of
which will invest in shares of a designated series of the Funds with a specified
investment objective. These series will be established if, and when, in the sole
discretion of Phoenix, marketing needs and investment conditions warrant, and
will be made available under existing Policies to the extent and on a basis to
be determined by us.
Should shares of any series of the Funds no longer be available for
investment, or if in Phoenix's judgment, further investment in shares of any of
the series should become inappropriate in view of the objectives of the Rider,
then Phoenix may substitute shares of another mutual fund for shares already
purchased, or to be purchased in the future, under the Rider. No substitution of
mutual fund shares held by the VUL Account may take place without prior approval
of the SEC and prior notice to you. In case of a substitution, you will be given
the option of transferring the Rider Cash Value of the Subaccount in which the
substitution is to occur to another Subaccount.
CHARGES AND DEDUCTIONS
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Charges are deducted in connection with the Rider to compensate us for: (1)
providing the insurance benefits set forth in the Rider; and (2) assuming
certain risks in connection with the Rider. The nature and amount of these
charges are described more fully below.
MONTHLY DEDUCTION
COST OF INSURANCE
A charge is deducted monthly from the Rider Cash Value under a Rider
("monthly deduction") to compensate us for the cost of insurance. The monthly
deduction is deducted on each Monthly Calculation Day. It is allocated among the
Subaccounts of the VUL Account based on the allocation schedule for monthly
deductions that you specified in the Rider election form or as later changed by
you. Because portions of the monthly deduction can vary from month to month, the
monthly deduction itself may vary in amounts from month to month.
Because the cost of insurance depends upon many variables, this charge can
vary from month to month. Each monthly deduction will pay for the cost of
insurance from that Monthly Calculation Day up to, but not including, the next
Monthly Calculation Day. The cost of insurance is equal to the cost of insurance
rate for that policy month multiplied by the result of:
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(a) the VIA's Death Benefit on the Monthly Calculation Day; minus,
(b) the Rider Cash Value on the Monthly Calculation Day.
Cost of insurance rates are based on the sex (in most states), attained age
and risk class of the Insured. The actual monthly cost of insurance rates are
based on Phoenix's expectations of future experience. They will not, however, be
greater than the guaranteed cost of insurance rates set forth in the Rider.
These guaranteed rates are based on the 1980 Commissioners Standard Ordinary
Mortality Table with appropriate adjustment for the Insured's risk
classification. Any change in the cost of insurance rates will apply to all
persons of the same insurance age, sex and risk class whose Policies have been
In Force for the same length of time.
The risk class of an Insured for the Rider will be identical to that of the
base Policy.
MORTALITY AND EXPENSE RISK CHARGE
We will deduct a daily charge of 0.0000137% from the VUL Account at an
annual rate of 0.50% of the average daily net assets of the VUL Account to
compensate for certain risks assumed in connection with the Rider.
The mortality risk assumed by us is that Insureds may live for a shorter
time than projected because of inaccuracies in that projecting process and,
accordingly, that an aggregate amount of death benefits greater than that
projected will be payable. The expense risk assumed is that the expense incurred
in issuing and administering the Riders will exceed the level assumed by Phoenix
in pricing the Rider.
To the extent Phoenix profits from this charge, it may use those profits for
any proper purpose, such as the payment of expenses that may exceed income in a
given year.
INVESTMENT MANAGEMENT CHARGE
As compensation for investment management services to the Funds, the
Advisers are entitled to fees, payable monthly and based on an annual percentage
of the average aggregate daily net asset values of each Series.
These Fund charges and other expenses are described more fully in the
accompanying Fund Prospectuses.
OTHER CHARGES--TAXES
Currently no charge is made to the VUL Account for federal income taxes that
may be attributable to the VUL Account. We may, however, make such a charge in
the future. Charges for other taxes, if any, attributable to the VUL Account
also may be made.
GENERAL PROVISIONS
- --------------------------------------------------------------------------------
POSTPONEMENT OF PAYMENTS
Payment of any amount upon complete or partial surrender, or benefits
payable at death may be postponed: (i) whenever the NYSE is closed other than
for customary weekend and holiday closings, or trading on the NYSE is restricted
as determined by the SEC; or (ii) whenever an emergency exists, as determined by
the SEC, as a result of which disposal of securities is not reasonably
practicable or it is not reasonably practicable to determine the value of the
VUL Account's net assets. Transfers also may be postponed under these
circumstances.
CHANGE OF OWNER OR BENEFICIARY
The Beneficiary, as named in the Policy application or subsequently changed,
will receive the Rider benefits at the Insured's death. If the named Beneficiary
dies before the Insured, the contingent Beneficiary, if named, becomes the
Beneficiary. If no Beneficiary survives you, the benefits payable at the
Insured's death will be paid to your estate.
As long as the Policy is In Force, you may change the Beneficiary by written
notice. A change in Beneficiary will take effect as of the date the notice is
signed, whether or not the Insured is living when the notice is received by us.
We will not, however, be liable for any payment made or action taken before
receipt of the notice.
PAYMENT OF PROCEEDS
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SURRENDER AND DEATH BENEFIT PROCEEDS
Proceeds of full or partial surrenders and the death benefit proceeds
usually will be paid according to the terms of the Policy and Rider. Payment of
the death benefit proceeds, however, may be delayed if the claim for payment of
the death benefit proceeds needs to be investigated; e.g., to ensure payment of
the proper amount to the proper payee. Any such delay will not be beyond that
reasonably necessary to investigate such claims consistent with insurance
practices customary in the life insurance industry.
While the Insured is living, you may elect a payment option for payment of
the death benefit proceeds to the Beneficiary. You may revoke or change a prior
election, unless such right has been waived. The Beneficiary may make or change
an election before payment of the death benefit proceeds, unless you have made
an election which does not permit such further election or changes by the
Beneficiary.
A written form satisfactory to us is required to elect, change or revoke a
payment option.
The minimum amount of surrender or death benefit proceeds that may be
applied under any option is $1,000.
If the Rider is assigned as collateral security, we will pay any amount due
the assignee in one lump sum. Any remaining proceeds will remain under the
option elected.
FEDERAL TAX CONSIDERATIONS
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INTRODUCTION
The ultimate effect of federal income taxes on values under the VUL Account
and on the economic benefit to you or Beneficiary depends on our tax status and
upon the tax status of the individual concerned. The discussion contained herein
is general in nature and is not intended as tax advice. For complete information
on federal and state tax considerations, a qualified tax adviser should be
consulted. No attempt is made to consider any estate and inheritance taxes, or
any state, local or other tax laws. Because the discussion
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herein is based upon our understanding of federal income tax laws as they are
currently interpreted, we cannot guarantee the tax status of any Rider. No
representation is made regarding the likelihood of continuation of current
federal income tax laws, Treasury regulations, or of the current interpretations
by the Internal Revenue Service (the "Service"). We reserve the right to make
changes to the Rider in order to assure that it will continue to qualify as life
insurance for federal income tax purposes.
PHOENIX'S TAX STATUS
Phoenix is taxed as a life insurance company under the Internal Revenue Code
of 1986 (the "Code"), as amended. For federal income tax purposes, the VUL
Account is not a separate entity from Phoenix and its operation forms a part of
Phoenix.
Investment income and realized capital gains on the assets of the VUL
Account are reinvested and taken into account in determining the value of the
VUL Account. Investment income of the VUL Account, including realized net
capital gains, is not taxed to us. Due to our tax status under current
provisions of the Code, no charge currently will be made to the VUL Account for
our federal income taxes which may be attributable to the VUL Account. We
reserve the right to make a deduction for taxes if our federal tax treatment is
determined to be other than what we currently believe it to be, if changes are
made affecting the tax treatment to our variable life insurance contracts, or if
changes occur in our tax status. If imposed, such charge would be equal to the
federal income taxes attributable to the investment results of the VUL Account.
RIDER BENEFITS
FULL AND PARTIAL SURRENDERS
Upon surrender of the Rider for any part of its cash value, a portion of the
cash value released may be treated as ordinary income for federal income tax
purposes. Such taxable amount will generally not exceed the excess, if any, of
the total cash value of the Policy and Rider over the total premiums paid.
DIVERSIFICATION STANDARDS
To comply with the Diversification Regulations under Code Section 817(h)
("Diversification Regulations"), each Series of the Funds is required to
diversify its investments. The Diversification Regulations generally require
that on the last day of each quarter of a calendar year no more than 55% of the
value of the Funds' assets is represented by any one investment, no more than
70% is represented by any two investments, no more than 80% is represented by
any three investments, and no more than 90% is represented by any four
investments. A "look through" rule applies to treat a pro rata portion of each
asset of the Funds as an asset of the VUL Account; therefore, each Series of the
Funds will be tested for compliance with the percentage limitations. For
purposes of these diversification rules, all securities of the same issuer are
treated as a single investment, but each United States Government agency or
instrumentality is treated as a separate issuer.
The general diversification requirements are modified if any of the assets
of the VUL Account are direct obligations of the Treasury. In this case, there
is no limit on the investment that may be made in Treasury securities, and for
purposes of determining whether assets other than Treasury securities are
adequately diversified, the generally applicable percentage limitations are
increased based on the value of the VUL Account's investment in Treasury
securities. Notwithstanding this modification of the general diversification
requirements, the portfolios of the Funds will be structured to comply with the
general diversification standards because they serve as an investment vehicle
for certain variable annuity contracts which must comply with these standards.
In connection with the issuance of the Diversification Regulations, the
Treasury announced that such regulations do not provide guidance concerning the
extent to which Rider owners may direct their investments to particular
divisions of a separate account. It is possible that a revenue ruling or other
form of an administrative pronouncement in this regard may be issued in the near
future. It is not clear, at this time, what such a revenue ruling or other
pronouncement will provide. It is possible that the Rider may need to be
modified to comply with such future Treasury pronouncements. For these reasons,
we reserve the right to modify the Rider, as necessary, to prevent you from
being considered the Owner of the assets of the VUL Account.
We intend to comply with the Diversification Regulations to assure that the
Riders continue to qualify as life insurance policies for federal income tax
purposes.
OTHER TAXES
Federal estate tax, state and local estate, inheritance and other tax
consequences of ownership, or receipt of Rider proceeds depend on the
circumstances of each Owner or Beneficiary. We do not make any representations
or guarantees regarding the tax consequences of any Rider with respect to these
types of taxes.
VOTING RIGHTS
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THE FUNDS
We will vote the Fund shares held by the Subaccounts of the VUL Account at
any regular and special meetings of shareholders of the Funds. To the extent
required by law, such voting will be according to instructions received from
you. However, if the 1940 Act or any regulation thereunder should be amended or
if the present interpretation thereof should change, and as a result we
determine that it is permitted to vote the Fund shares at its own discretion, we
may elect to do so.
The number of votes that you have the right to cast will be determined by
applying your percentage interest in a Subaccount to the total number of votes
attributable to the Subaccount. In determining the number of votes, fractional
shares will be recognized.
Fund shares held in a Subaccount for which no timely instructions are
received, and Fund shares which are not otherwise attributable to Owners, will
be voted by us in proportion to the voting instructions that are received with
respect to all variable life insurance policies and Riders participating in that
Subaccount. Voting instructions to abstain on any item to be voted upon will be
applied to reduce the votes eligible to be cast by us.
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You will receive proxy materials, reports, and other materials relating to
the Funds.
We may, when required by state insurance regulatory authorities, disregard
voting instructions if the instructions require that the shares be voted so as
to cause a change in the subclassification or investment objective of one or
more of the Series of the Funds or to approve or disapprove an investment
advisory contract for the Funds. In addition, we may disregard voting
instructions in favor of changes initiated by an Owner in the investment
policies or the investment adviser of a Fund if we reasonably disapprove such
changes. A change would be disapproved only if the proposed change is contrary
to state law or prohibited by state regulatory authorities or we determine that
the change would adversely effect the General Account because the proposed
investment policy for a series may result in overly speculative or unsound
investments. In the event we do disregard voting instructions, a summary of that
action and the reasons for such action will be included in the next periodic
report to Rider Owners.
PHOENIX
You (or the payee entitled to payment under a payment option if a different
person) will have the right to vote at annual meetings of all Phoenix
Policyholders for the election of members of the Board of Directors of Phoenix
and on other corporate matters, if any, where a Policyholder's vote is taken. At
meetings of all of the Phoenix Policyholders, a Policyholder (or payee) may cast
only one vote as the holder of a Policy or Rider, irrespective of Policy or
Rider Value or the number of the Policies or Riders held.
THE DIRECTORS AND EXECUTIVE OFFICERS OF PHOENIX
- --------------------------------------------------------------------------------
Phoenix is managed by its Board of Directors, the members of which are
elected by its Policyholders, including Owners of the Policies and Riders. See
"Voting Rights."
The following are the Directors and Executive Officers of Phoenix:
DIRECTORS PRINCIPAL OCCUPATION
Sal H. Alfiero Chairman and Chief Executive
Officer, Mark IV Industries, Inc.
Amherst, New York
J. Carter Bacot Chairman and Chief Executive
Officer, The Bank of New York
New York, New York
Carol H. Baldi President, Carol H. Baldi, Inc.
New York, New York
Richard H. Booth Executive Vice President, Strategic
Development, Phoenix Home Life
Mutual Insurance Company,
Hartford, Connecticut; formerly
President, Traveler's Insurance
Company
Peter C. Browning President and Chief Operating
Officer, Sunoco Products Company
Hartsville, South Carolina
Arthur P. Byrne Chairman, President and Chief
Executive Officer, The Wiremold
Company
West Hartford, Connecticut
Richard N. Cooper Professor of International
Economics, Harvard University;
formerly Chairman, National
Intelligence Council, Central
Intelligence Agency
McLean, Virginia
Gordon J. Davis, Esq. Partner, LeBoeuf, Lamb, Greene &
MacRae; formerly Partner, Lord, Day
& Lord, Barret Smith
New York, New York
Robert W. Fiondella Chairman of the Board, President
and Chief Executive Officer, Phoenix
Home Life Mutual Insurance
Company
Hartford, Connecticut
Jerry J. Jasinowski President, National Association of
Manufacturers
Washington, DC
John W. Johnstone Chairman, President and Chief
Executive Officer, Olin Corporation
Norwalk, Connecticut
Marilyn E. LaMarche Limited Managing Director, Lazard
Freres & Company
New York, New York
Philip R. McLoughlin Executive Vice President and Chief
Investment Officer, Phoenix Home
Life Mutual Insurance Company
Hartford, Connecticut
Indra K. Nooyi Senior Vice President,
PepsiCo, Inc.
Purchase, New York
Robert F. Vizza President and Chief Executive
Officer, St. Francis Hospital
Roslyn, New York
Robert G. Wilson Chief Executive Officer, CreditSource
USA, Inc., Charlotte, North Carolina;
formerly Chairman and President,
Ziani International Capital, Inc.,
Miami, Florida; Vice Chairman,
Carter Kaplan & Company,
Richmond, Virginia and Chairman
and Chief Executive Officer, Ecologic
Waste Services, Inc., Miami, Florida
Dona D. Young Executive Vice President, Individual
Insurance and General Counsel,
Phoenix Home Life Mutual Insurance
Company, Hartford, Connecticut
12
<PAGE>
EXECUTIVE OFFICERS PRINCIPAL OCCUPATION
Robert W. Fiondella Chairman of the Board, President
and Chief Executive Officer
Richard H. Booth Executive Vice President, Strategic
Development; formerly President,
Traveler's Insurance Company
Carl T. Chadburn Executive Vice President
Philip R. McLoughlin Executive Vice President and Chief
Investment Officer
David W. Searfoss Executive Vice President and Chief
Financial Officer
Dona D. Young Executive Vice President, Individual
Insurance and General Counsel
Kelly J. Carlson Senior Vice President, Distribution
Planning
Robert G. Chipkin Senior Vice President and Corporate
Actuary
Martin J. Gavin Senior Vice President, Trust
Operations
Randall C. Giangiulio Senior Vice President, Group Life
and Health
Edward P. Hourihan Senior Vice President, Information
Systems
Joseph E. Kelleher Senior Vice President, Underwriting
and Operations
Robert G. Lautensack, Jr. Senior Vice President, Individual
Financial
Maura L. Melley Senior Vice President, Public Affairs
Scott C. Noble Senior Vice President
David R. Pepin Senior Vice President
Robert E. Primmer Senior Vice President, Individual Line
Distribution
Frederick W. Sawyer, III Senior Vice President
Richard C. Shaw Senior Vice President
Simon Y. Tan Senior Vice President, Market and
Product Development
Anthony J. Zeppetella Senior Vice President, Corporate
Portfolio Management
Walter H. Zultowski Senior Vice President, Marketing and
Market Research; formerly Senior
Vice President, LIMRA International,
Hartford, Connecticut
The above positions reflect the last held position in the organization.
SAFEKEEPING OF THE VUL ACCOUNT'S ASSETS
- --------------------------------------------------------------------------------
The assets of the VUL Account are held by us. The assets of the VUL Account
are kept physically segregated and held separate and apart from the General
Account of Phoenix. We maintain records of all purchases and redemptions of
shares of the Funds.
SALES OF POLICIES
- --------------------------------------------------------------------------------
The Rider will be sold as a dividend option to the underlying Policy by
individuals who are licensed life insurance agents of Phoenix and registered
representatives of W.S. Griffith & Co., Inc. ("W. S. Griffith") a corporation
formed under the laws of the state of New York on August 7, 1970, licensed to
sell Phoenix insurance policies, annuity contracts and funds of companies
affiliated with Phoenix. W. S. Griffith, an indirect subsidiary of Phoenix, is
registered as a broker-dealer with the SEC under the Securities Exchange Act of
1934 ("1934 Act") and is a member of the National Association of Securities
Dealers, Inc. ("NASD"). PEPCO serves as national distributor of the Riders.
PEPCO is an indirect subsidiary of Phoenix Investment Partners, Ltd., in which
Phoenix owns a majority interest. Riders may in the future be sold through other
broker-dealers registered under the 1934 Act. No commissions are payable for the
sale of a VIA.
STATE REGULATION
- --------------------------------------------------------------------------------
We are subject to the provisions of the New York insurance laws applicable
to mutual life insurance companies and to regulation and supervision by the New
York Superintendent of Insurance. We also are subject to the applicable
insurance laws of all other states and jurisdictions in which we do insurance
business.
State regulation of Phoenix includes certain limitations on the investments
which it may make, including investments for the Account. It does not include,
however, any supervision over the investment policies of the Account.
REPORTS
- --------------------------------------------------------------------------------
All Owners will be furnished with those reports required by the 1940 Act and
regulations promulgated thereunder, or under any other applicable law or
regulation.
LEGAL PROCEEDINGS
- --------------------------------------------------------------------------------
The VUL Account is not engaged in any litigation. We are not involved in any
litigation that would have an adverse effect on our ability to meet our
obligations under the Riders.
LEGAL MATTERS
- --------------------------------------------------------------------------------
The organization of Phoenix, its authority to issue variable life insurance
policies, and the validity of the Rider have been passed upon by Edwin L. Kerr,
Counsel, Phoenix. Legal matters relating to the federal securities and income
tax laws have been passed upon for us by Jorden Burt Boros Cicchetti Berenson &
Johnson LLP.
REGISTRATION STATEMENT
- --------------------------------------------------------------------------------
A Registration Statement has been filed with the SEC, under the Securities
Act of 1933 ("1933 Act") as amended, with respect to the securities offered
hereby. This Prospectus does not contain all the information set forth in the
Registration Statement and amendments thereto and exhibits filed as a part
thereof, to all of which reference
13
<PAGE>
is hereby made for further information concerning the VUL Account, Phoenix and
the Rider. Statements contained in this Prospectus as to the content of the
Rider and other legal instruments are summaries. For a complete statement of the
terms thereof, reference is made to such instruments as filed.
YEAR 2000 ISSUE
- --------------------------------------------------------------------------------
Many existing computer programs use only two digits to identify the year in
a date field. Commonly called the "Year 2000 Issue," companies must consider the
impact of the upcoming change in the century on their computer systems. The Year
2000 Issue, if not adequately addressed, could result in computer system
failures or miscalculations causing disruptions of operations and the possible
inability of companies to process transactions. We believe that the Year 2000
Issue is an important business priority requiring careful analysis of every
business system to be assured that all information systems applications are
century compliant.
We have been addressing the Year 2000 Issue in earnest since 1995 when, with
consultants, a comprehensive inventory and assessment of all business systems,
including those of its subsidiaries, were conducted. We have identified and are
now actively pursuing many strategies to address the issue, including:
[bullet] upgrading systems with compliant versions;
[bullet] developing or acquiring new systems to replace those that are
obsolete;
[bullet] and remediating existing systems by converting code or hardware.
Based on current assessments, we expect to have its computer systems
compliant by the end of 1998, with testing to continue through 1999. In
addition, we are examining the status of our third-party vendors, obtaining
assurances that their software and hardware products will be century compliant
by 1999.
FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
The consolidated financial statements of Phoenix as contained herein should
be considered only as bearing upon our ability to meet our obligations under the
Rider, and they should not be considered as bearing on the investment
performance of the VUL Account. The financial statements of the VUL Account are
not yet available.
14
<PAGE>
PHOENIX HOME LIFE MUTUAL
INSURANCE COMPANY
CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1997
15
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
Report of Independent Accountants ...........................................17
Consolidated Balance Sheet at December 31, 1997 and 1996 ....................18
Consolidated Statement of Income and Equity for the Years Ended
December 31, 1997, 1996 and 1995 ..........................................19
Consolidated Statement of Cash Flows for the Years Ended
December 31, 1997, 1996 and 1995 ...........................................20
Notes to Consolidated Financial Statements ...............................21-47
16
<PAGE>
One Financial Plaza Telephone 860 240 2000
Hartford, CT 06103
[LOGO] PRICE WATERHOUSE LLP [LOGO]
REPORT OF INDEPENDENT ACCOUNTANTS
February 11, 1998
To the Board of Directors
and Policyholders of
Phoenix Home Life Mutual Insurance Company
In our opinion, the accompanying consolidated balance sheet and the related
consolidated statements of income and equity and of cash flows present fairly,
in all material respects, the financial position of Phoenix Home Life Mutual
Insurance Company and its subsidiaries at December 31, 1997 and 1996, and the
results of their operations and their cash flows for each of the three years in
the period ended December 31, 1997, in conformity with generally accepted
accounting principles. 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 generally accepted auditing standards 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/Price Waterhouse LLP
17
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
CONSOLIDATED BALANCE SHEET
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
DECEMBER 31,
1997 1996
(IN THOUSANDS)
<S> <C> <C>
ASSETS
Investments:
Held-to-maturity debt securities, at amortized cost $ 1,554,905 $ 1,555,685
Available-for-sale debt securities, at fair value 5,659,061 4,895,393
Equity securities, at fair value 373,388 235,351
Mortgage loans 927,501 947,076
Real estate 321,757 410,945
Policy loans 1,986,728 1,667,784
Other invested assets 262,675 218,119
Short-term investments 1,078,276 164,967
------------------ -----------------
Total investments 12,164,291 10,095,320
Cash and cash equivalents 159,307 172,895
Accrued investment income 149,566 135,475
Deferred policy acquisition costs 1,038,407 926,274
Premiums, accounts and notes receivable 99,468 79,354
Reinsurance recoverables 66,649 46,251
Property and equipment, net 156,190 137,231
Goodwill and other intangible assets, net 541,499 313,507
Other assets 61,087 134,589
Separate account assets 4,082,255 3,412,152
------------------ -----------------
Total assets $ 18,518,719 $ 15,453,048
================== =================
LIABILITIES
Policy liabilities and accruals $ 11,334,014 $ 9,462,039
Securities sold subject to repurchase agreements 137,473
Other indebtedness 471,085 490,430
Deferred income taxes 143,821 61,934
Other liabilities 585,467 499,940
Separate account liabilities 4,082,255 3,412,152
------------------ -----------------
Total liabilities 16,754,115 13,926,495
Contingent liabilities (Note 17)
MINORITY INTEREST IN NET ASSETS OF CONSOLIDATED SUBSIDIARIES 136,514 129,084
POLICYHOLDERS' EQUITY 1,628,090 1,397,469
------------------ -----------------
Total liabilities and policyholders' equity $ 18,518,719 $ 15,453,048
================== =================
</TABLE>
The accompanying notes are an integral part of these statements.
18
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
CONSOLIDATED STATEMENT OF INCOME AND EQUITY
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
1997 1996 1995
(IN THOUSANDS)
<S> <C> <C> <C>
REVENUES
Premiums $ 1,640,606 $ 1,518,822 $ 1,456,875
Insurance and investment product fees 468,030 421,058 324,459
Net investment income 736,874 689,890 662,468
Net realized investment gains 142,770 95,265 74,738
--------------- --------------- --------------
Total revenues 2,988,280 2,725,035 2,518,540
--------------- --------------- --------------
BENEFITS, LOSSES AND EXPENSES
Policy benefits, claims, losses and loss
adjustment expenses 1,633,633 1,529,573 1,471,030
Policyholder dividends 343,725 311,739 289,469
Policy acquisition expenses 248,726 242,363 221,339
Other operating expenses 531,597 452,399 419,231
--------------- --------------- --------------
Total benefits, losses and expenses 2,757,681 2,536,074 2,401,069
--------------- --------------- --------------
OPERATING INCOME 230,599 188,961 117,471
NON-OPERATING INCOME
Gain on merger transactions 40,580
--------------- --------------- --------------
INCOME BEFORE INCOME TAXES AND MINORITY INTEREST 230,599 188,961 158,051
Income taxes 57,069 79,331 43,352
--------------- --------------- --------------
INCOME BEFORE MINORITY INTEREST 173,530 109,630 114,699
Minority interest in net income of consolidated subsidiaries 8,882 8,902 950
--------------- --------------- --------------
NET INCOME 164,648 100,728 113,749
Change in net unrealized investment gains, net of income taxes 65,973 15,154 99,518
--------------- --------------- --------------
INCREASE IN POLICYHOLDERS' EQUITY 230,621 115,882 213,267
POLICYHOLDERS' EQUITY, BEGINNING OF YEAR 1,397,469 1,281,587 1,068,320
--------------- --------------- --------------
POLICYHOLDERS' EQUITY, END OF YEAR $ 1,628,090 $ 1,397,469 $ 1,281,587
=============== =============== ==============
</TABLE>
The accompanying notes are an integral part of these statements.
19
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
CONSOLIDATED STATEMENT OF CASH FLOWS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
1997 1996 1995
(IN THOUSANDS)
<S> <C> <C> <C>
CASH FLOW FROM OPERATING ACTIVITIES
Net income $ 164,648 $ 100,728 $ 113,749
ADJUSTMENTS TO RECONCILE NET INCOME TO NET CASH
PROVIDED BY OPERATIONS
Net realized investment gains (142,770) (95,265) (74,738)
Net gain on mergers (40,580)
Amortization and depreciation 90,565 64,870 58,912
Deferred income taxes (benefit) 2,555 14,774 (16,236)
(Increase) decrease in receivables (49,172) 5,955 (30,130)
Increase in deferred policy acquisition costs (48,860) (61,985) (26,370)
Increase in policy liabilities and accruals 512,476 559,724 537,919
Increase (decrease) in other assets/other liabilities, net 44,269 (66,337) 95,880
Other, net 5,832 (652) 4,203
-------------- ----------------- --------------
Net cash provided by operating activities 579,543 521,812 622,609
-------------- ----------------- --------------
CASH FLOW FROM INVESTING ACTIVITIES
Proceeds from maturities or repayments of
available-for-sale debt securities 1,187,943 1,348,809 1,145,146
Proceeds from maturities or repayments of
held-to-maturity debt securities 217,302 118,596 143,773
Proceeds from disposals of equity securities 51,373 382,359 329,104
Proceeds from mortgage loan maturities or repayments 164,213 151,760 186,172
Proceeds from sale of other invested assets 218,874 127,440 148,546
Purchase of available-for-sale debt securities (1,689,479) (1,909,086) (1,614,387)
Purchase of held-to-maturity debt securities (225,722) (385,321) (247,354)
Purchase of equity securities (88,573) (215,104) (282,488)
Purchase of subsidiaries (246,400)
Purchase of mortgage loans (140,831) (200,683) (93,097)
Purchase of other invested assets (90,593) (157,077) (73,482)
Change in short term investments, net 58,384 110,503 (166,445)
Increase in policy loans (59,699) (49,912) (32,387)
Capital expenditures (41,504) (3,543) (18,449)
Other investing activities, net (1,750) (5,898) (12,704)
-------------- ----------------- --------------
Net cash used for investing activities (686,462) (687,157) (588,052)
-------------- ----------------- --------------
CASH FLOW FROM FINANCING ACTIVITIES
Withdrawals of contractholder deposit funds,
net of deposits and interest credited (17,902) (6,301) (154,100)
Proceeds from securities sold subject to
repurchase agreements 137,472
Proceeds from borrowings 215,359 226,082 177,922
Repayment of borrowings (234,703) (2,400) (12,726)
Dividends paid to minority shareholders (6,895) (6,245) (31,215)
-------------- ----------------- --------------
Net cash provided by (used for) financing activities 93,331 211,136 (20,119)
-------------- ----------------- --------------
NET CHANGE IN CASH AND CASH EQUIVALENTS (13,588) 45,791 14,438
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR 172,895 127,104 112,666
-------------- ----------------- --------------
CASH AND CASH EQUIVALENTS, END OF YEAR $ 159,307 $ 172,895 $ 127,104
============== ================= ==============
SUPPLEMENTAL CASH FLOW INFORMATION
Income taxes paid, net $ 76,167 $ 76,157 $ 33,399
Interest paid on indebtedness $ 32,300 $ 19,214 $ 8,100
</TABLE>
The accompanying notes are an integral part of these statements.
20
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
1. DESCRIPTION OF BUSINESS
Phoenix Home Life Mutual Insurance Company (Phoenix) and its subsidiaries
market a wide range of insurance and investment products and services
including individual participating life insurance, variable life insurance,
group life and health insurance, life and health reinsurance, annuities,
investment advisory and mutual fund distribution services, insurance agency
and brokerage operations, primarily based in the United States. These
products and services are distributed among seven segments: Individual
Insurance, Group Life and Health Insurance, Life Reinsurance, General Lines
Brokerage, Securities Management, Real Estate Management and Other
Operations. See Note 10 for segment information.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION AND BASIS OF PRESENTATION
The consolidated financial statements include the accounts of Phoenix and
significant subsidiaries. Less than majority-owned entities in which
Phoenix has at least a 20% interest or those where Phoenix has significant
influence are reported on the equity basis.
These consolidated financial statements have been prepared in accordance
with generally accepted accounting principles (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 revenue 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, contingencies and valuation allowances for
investment assets are discussed throughout the Notes to Consolidated
Financial Statements. Significant intercompany accounts and transactions
have been eliminated. Certain reclassifications have been made to the 1996
and 1995 amounts to conform with the 1997 presentation.
VALUATION OF INVESTMENTS
Investments in debt securities include bonds, asset-backed securities
including collateralized mortgage obligations and redeemable preferred
stocks. Phoenix 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 policyholders' equity and consist of public
bonds and preferred stocks that management may not hold until maturity.
Debt securities are considered impaired when a decline in value is
considered to be other than temporary.
Equity securities are reported at fair value based principally on their
quoted market prices with unrealized gains or losses included in
policyholders' equity. Equity securities are considered impaired when a
decline in value is considered to be other than temporary.
Mortgage loans on real estate are stated at unpaid principal balances, net
of valuation reserves on impaired mortgages. A mortgage loan is considered
to be impaired if management believes it is probable that Phoenix will be
unable to collect all amounts of contractual interest and principal as
scheduled in the loan agreement. An impaired mortgage loan's fair value is
measured based on the present value of future cash flows discounted at the
loan's observable market price or at the fair value of the collateral. If
the fair value of a mortgage loan is less than the recorded investment in
the loan, the difference is recorded as a valuation reserve.
21
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
Real estate, all of which is held for sale, is carried at the lower of cost
or current fair value less costs to sell. Fair value for real estate is
determined taking into consideration one or more of the following factors:
property valuation techniques utilizing discounted cash flows at the time
of stabilization including capital expenditures and stabilization costs;
sales of comparable properties; geographic location of the property and
related market conditions; and disposition costs.
Policy loans are generally carried at their unpaid principal balances and
are collateralized by the cash values of the related policies.
Short-term investments are carried at amortized cost, which approximates
fair value.
Other invested assets (primarily partnership interests) are carried at cost
adjusted for Phoenix's equity in undistributed earnings or losses since
acquisition, less allowances for other than temporary declines in value.
Realized investment gains and losses, other than those related to separate
accounts for which Phoenix 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 and equity
securities classified as available-for-sale are included as a separate
component of policyholders' equity, net of deferred income taxes and
deferred policy acquisition costs.
FINANCIAL INSTRUMENTS
In the normal course of business, Phoenix enters into transactions
involving various types of financial instruments, including debt,
investments such as debt securities, mortgage loans and equity securities,
and off-balance sheet financial instruments such as investment and loan
commitments, financial guarantees, and interest rate swaps. These
instruments have credit risk and also may be subject to risk of loss due to
interest rate and market fluctuations.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents includes cash on hand and money market
instruments.
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 revenues, 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 individual participating life insurance business, deferred policy
acquisition costs are amortized in proportion to historical and anticipated
gross margins. Deviations from expected experience are reflected in
earnings in the period such deviations occur.
For universal life, 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.
22
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
GOODWILL AND OTHER INTANGIBLE ASSETS
Goodwill represents the excess of the cost of businesses acquired over the
fair value of their net assets. These costs are amortized on a
straight-line basis over periods, not exceeding 40 years, that correspond
with the benefits expected to be derived from the acquisitions. Other
intangible assets are amortized on a straight-line basis over the estimated
lives of such assets. Management periodically reevaluates the propriety of
the carrying value of goodwill and other intangible assets by comparing
estimates of future undiscounted cash flows to the carrying value of
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 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 Phoenix. The assets and liabilities are carried at market
value. Deposits, 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
revenues.
POLICY LIABILITIES AND ACCRUALS
Future policy benefits are liabilities for life, health and annuity
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
include deposits received from customers and investment earnings on their
fund balances, less administrative charges. Universal life fund balances
are also assessed mortality charges.
Liabilities for outstanding claims, losses and loss adjustment expenses are
amounts estimated to cover incurred losses. These liabilities are based on
individual case estimates for reported losses and estimates of unreported
losses based on past experience.
Unearned premiums relate primarily to individual participating life
insurance as well as group life, accident and health insurance premiums.
The premiums are reported as earned on a pro-rata basis over the contract
period. The unexpired portion of these premiums is recorded as unearned
premiums.
PREMIUM AND FEE REVENUE AND RELATED EXPENSES
Life insurance premiums, other than premiums for universal life and certain
annuity contracts, 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 investment-related
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.
23
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
POLICYHOLDERS' DIVIDENDS
Certain life insurance policies contain dividend payment provisions that
enable the policyholder to participate in the earnings of Phoenix. The
amount of policyholders' dividends to be paid is determined annually by
Phoenix's board of directors. The aggregate amount of policyholders'
dividends is related to the actual interest, mortality, morbidity and
expense experience for the year and Phoenix's judgment as to the
appropriate level of statutory surplus to be retained. At the end of the
reporting period, Phoenix establishes a dividend liability for the pro-rata
portion of the dividends payable on the next anniversary of each policy.
Phoenix also establishes a liability for termination dividends.
INCOME TAXES
Phoenix and its eligible affiliated companies have elected to file a
life/nonlife consolidated federal income tax return for the years ended
December 31, 1997, 1996 and 1995. Entities included within the consolidated
group are segregated into either a life insurance or non-life insurance
company subgroup. The consolidation of these subgroups is subject to
certain statutory restrictions in the percentage of eligible non-life tax
losses that can be applied to offset life company taxable income.
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 and accruals, policy acquisition expenses, investment
impairment reserves, reserves for postretirement benefits and unrealized
gains or losses on investments.
As a mutual life insurance company, Phoenix is required to reduce its
income tax deduction for policyholder dividends by the differential
earnings amount, defined as the difference between the earnings rates of
stock and mutual companies applied against an adjusted base of
policyholders' surplus.
3. SIGNIFICANT TRANSACTIONS
CONFEDERATION LIFE
On December 31, 1997, Phoenix acquired the individual life and
single-premium deferred annuity business of the former Confederation Life
Insurance Company. Confederation Life, a Canadian mutual life insurer, was
placed in liquidation during August of 1994. The blocks of business
acquired were part of Confederation Life's U.S. branch operations and were
covered under the rehabilitation plan approved by a Michigan circuit court.
Approximately 40,000 policies with annualized premium of $122.8 million
were included in the acquisition under an assumption reinsurance contract.
Pursuant to initiation of the contract and the closing on December 31,
1997, Phoenix recorded all balances reinsured using the purchase accounting
method. The value of reserves and liabilities acquired totaled $1.4 billion
and exceeded the assets received, principally cash and short-term
investments. The difference of $141.3 million was recorded as deferred
acquisition costs.
PHOENIX DUFF & PHELPS CORPORATION
On September 3, 1997, Phoenix Duff & Phelps acquired Pasadena Capital
Corporation, the parent company of Roger Engemann & Associates, Inc.
Pasadena Capital manages $6.3 billion in assets, primarily individual
accounts.
24
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
On July 17, 1997, Phoenix Duff & Phelps acquired a majority interest in
GMG/Seneca Capital Management LLC, renamed Seneca Capital Management.
Seneca Capital Management manages $4.2 billion in assets.
Effective January 1, 1995, the money management businesses of Phoenix were
completely transferred to Phoenix Securities Group, Inc. an indirect
wholly-owned subsidiary. Phoenix Securities Group entered into contracts to
manage the investments of the general and separate accounts of Phoenix. On
November 1, 1995, Phoenix, through its subsidiary, PM Holdings, Inc.,
merged Phoenix Securities Group into Duff & Phelps Corporation, forming
Phoenix Duff & Phelps Corporation. The transaction was accounted for as a
reverse merger with the purchase accounting method applied to Duff &
Phelps' assets and liabilities. The purchase price was $190.7 million and
Phoenix Duff & Phelps recorded $93.1 million of goodwill, which is being
amortized over forty years using the straight-line method. PM Holdings owns
approximately 60% of the outstanding Phoenix Duff & Phelps common stock. In
addition, PM Holdings owns 45% of Phoenix Duff & Phelps' series A
convertible exchangeable preferred stock. PM Holdings recognized a
non-operating, non-cash, tax free gain on this transaction of $36.9 million
resulting from the realization of the appreciation of the stock exchanged
which is included in the gain on merger transactions in the Consolidated
Statement of Income and Equity.
SURPLUS NOTES
On November 25, 1996, Phoenix issued $175 million of surplus notes with a
6.95% interest rate scheduled to mature on December 1, 2006. There are no
sinking fund provisions in the notes. The notes are classified as debt in
the Consolidated Balance Sheet.
The notes were issued in accordance with Section 1307 of the New York
Insurance Law and, accordingly, interest and principal payments cannot be
made without the approval of the New York Insurance Department.
The notes were issued pursuant to Rule 144A under the Securities Act of
1933 underwritten by Bear, Stearns & Co. Inc., Chase Securities Inc. and
Merrill Lynch & Co. and are administered by Bank of New York as
registrar/paying agent.
ABERDEEN ASSET MANAGEMENT PLC
On March 25, 1996, Phoenix purchased common shares of Aberdeen Asset
Management PLC, a Scottish asset management firm for $26.4 million. Phoenix
transferred these shares to PM Holding in 1996. As of December 31, 1997, PM
Holdings owned 10% of Aberdeen Asset Management's outstanding common stock.
The investment is reported on the equity basis and classified as other
invested assets in the Consolidated Balance Sheet.
In addition, on April 15, 1996, Phoenix purchased a 7% convertible
subordinated note issued by Aberdeen Asset Management for $37.5 million.
The note, which matures on March 29, 2003, may be converted into shares
which would be equivalent to approximately 11% of Aberdeen Asset
Management's then outstanding common stock. The note is classified as
equity securities in the Consolidated Balance Sheet.
In the spring of 1996, Phoenix and Aberdeen Asset Management joined
together to form Phoenix-Aberdeen International Advisors, LLC, an SEC
registered investment advisor that, in conjunction with Phoenix Duff &
Phelps and Aberdeen Asset Management, develops and markets investment
products in the United States and the United Kingdom.
25
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
4. INVESTMENTS
Information pertaining to Phoenix's investments, net investment income and
realized and unrealized investment gains and losses follows:
DEBT AND EQUITY SECURITIES
The amortized cost and fair value of investments in debt and equity
securities as of December 31, 1997 were as follows:
<TABLE>
<CAPTION>
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED FAIR
COST GAINS LOSSES VALUE
(IN THOUSANDS)
<S> <C> <C> <C> <C>
DEBT SECURITIES
HELD-TO-MATURITY:
State and political subdivision bonds $ 11,041 $ 569 $ (8) $ 11,602
Foreign government bonds 3,032 15 (115) 2,932
Corporate securities 1,521,033 103,267 (2,042) 1,622,258
Mortgage-backed securities 19,799 949 20,748
---------------- --------------- --------------- ----------------
Total 1,554,905 104,800 (2,165) 1,657,540
---------------- --------------- --------------- ----------------
AVAILABLE-FOR-SALE:
U.S. government and agency bonds 501,190 25,020 (636) 525,574
State and political subdivision bonds 474,123 32,896 (3,477) 503,542
Foreign government bonds 248,831 26,303 (5,992) 269,142
Corporate securities 1,384,503 97,943 (4,403) 1,478,043
Mortgage-backed securities 2,786,278 99,785 (3,303) 2,882,760
---------------- --------------- --------------- ----------------
Total 5,394,925 281,947 (17,811) 5,659,061
---------------- --------------- --------------- ----------------
TOTAL DEBT SECURITIES $ 6,949,830 $ 386,747 $ (19,976) $ 7,316,601
================ =============== =============== ================
EQUITY SECURITIES $ 195,717 $ 190,669 $ (12,998) $ 373,388
================ =============== =============== ================
</TABLE>
26
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
The amortized cost and fair value of investments in debt and equity
securities as of December 31, 1996 were as follows:
<TABLE>
<CAPTION>
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED FAIR
COST GAINS LOSSES VALUE
(IN THOUSANDS)
<S> <C> <C> <C> <C>
DEBT SECURITIES
HELD-TO-MATURITY:
State and political subdivision bonds $ 11,685 $ 5 $ (375) $ 11,315
Corporate securities 1,525,999 61,692 (13,405) 1,574,286
Mortgage-backed securities 18,001 1,037 (15) 19,023
----------------- ----------------- ----------------- -----------------
Total 1,555,685 62,734 (13,795) 1,604,624
----------------- ----------------- ----------------- -----------------
AVAILABLE-FOR-SALE:
U.S. government and agency bonds 561,017 13,970 (1,610) 573,377
State and political subdivision bonds 406,679 13,831 (1,154) 419,356
Foreign government bonds 174,298 31,441 (1,457) 204,282
Corporate securities 1,092,163 70,432 (7,968) 1,154,627
Mortgage-backed securities 2,509,232 60,321 (25,802) 2,543,751
----------------- ----------------- ----------------- -----------------
Total 4,743,389 189,995 (37,991) 4,895,393
----------------- ----------------- ----------------- -----------------
TOTAL DEBT SECURITIES $ 6,299,074 $ 252,729 $ (51,786) $ 6,500,017
================= ================= ================= =================
EQUITY SECURITIES $ 137,907 $ 100,258 $ (2,814) $ 235,351
================= ================= ================= =================
</TABLE>
27
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
The amortized cost and fair value of debt securities, by contractual
maturity, as of December 31, 1997 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
Phoenix 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 $ 113,850 $ 116,684 $ 78,768 $ 79,054
Due after one year through five years 477,101 499,155 329,529 347,240
Due after five years through ten years 625,518 670,597 651,878 683,747
Due after ten years 318,637 350,357 1,548,472 1,666,260
Mortgage-backed securities 19,799 20,747 2,786,278 2,882,760
---------------- ---------------- ---------------- ----------------
Total $ 1,554,905 $ 1,657,540 $ 5,394,925 $ 5,659,061
================ ================ ================ ================
</TABLE>
Carrying values for investments in mortgage-backed securities, excluding
U.S. government guaranteed investments, were as follows:
DECEMBER 31,
1997 1996
(IN THOUSANDS)
Planned amortization class $ 554,425 $ 618,953
Asset-backed 594,128 490,018
Mezzanine 328,539 322,812
Commercial 556,155 413,571
Sequential pay 680,397 552,512
Pass through 132,522 105,282
Other 56,393 58,604
-------------- --------------
Total mortgage-backed securities $ 2,902,559 $ 2,561,752
============== ==============
Phoenix had 30% and 37% at December 31, 1997 and 1996, respectively, in
planned amortization class and mezzanine mortgage-backed securities which
have reasonably predictable cash flows and a relatively high degree of
prepayment protection.
28
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
MORTGAGE LOANS AND REAL ESTATE
Phoenix's mortgage loans and real estate are diversified by property type
and location and, for mortgage loans, by borrower. Mortgage loans are
collateralized by the related properties and are generally 75% of the
properties' value at the time the original loan is made.
Mortgage loans and real estate investments comprise the following property
types and geographic regions:
<TABLE>
<CAPTION>
MORTGAGE LOANS REAL ESTATE
DECEMBER 31, DECEMBER 31,
1997 1996 1997 1996
(IN THOUSANDS) (IN THOUSANDS)
<S> <C> <C> <C> <C>
PROPERTY TYPE:
Office buildings $ 246,500 $ 251,526 $ 180,743 $ 246,644
Retail 231,886 257,721 108,907 121,813
Apartment buildings 303,990 241,286 20,560 26,286
Industrial buildings 162,008 197,013 39,810 56,134
Other 18,917 47,929 238 7,577
Valuation allowances (35,800) (48,399) (28,501) (47,509)
--------------- -------------- ---------------- -------------
Total $ 927,501 $ 947,076 $ 321,757 $ 410,945
=============== ============== ================ =============
GEOGRAPHIC REGION:
Northeast $ 222,975 $ 260,146 $ 92,513 $ 103,761
Southeast 257,376 261,957 85,781 110,746
North central 189,163 158,902 63,751 86,070
South central 79,092 57,507 58,954 85,532
West 214,695 256,963 49,259 72,345
Valuation allowances (35,800) (48,399) (28,501) (47,509)
--------------- -------------- ---------------- -------------
Total $ 927,501 $ 947,076 $ 321,757 $ 410,945
=============== ============== ================ =============
</TABLE>
At December 31, 1997, scheduled mortgage loan maturities were as follows:
1998 - $151 million; 1999 - $88 million; 2000 - $97 million; 2001 - $92
million; 2002 - $41 million; and $494 million thereafter. Actual maturities
will differ from contractual maturities because borrowers may have the
right to prepay obligations with or without prepayment penalties and loans
may be refinanced. Phoenix refinanced $8.6 million and $28.9 million of its
mortgage loans during 1997 and 1996, respectively, based on terms which
differed from those granted to new borrowers.
29
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
INVESTMENT VALUATION ALLOWANCES
Investment valuation allowances which have been deducted in arriving at
investment carrying values as presented in the Consolidated Balance Sheet
and changes thereto were as follows:
<TABLE>
<CAPTION>
BALANCE AT BALANCE AT
JANUARY 1, ADDITIONS DEDUCTIONS DECEMBER 31,
(IN THOUSANDS)
<S> <C> <C> <C> <C>
1997
Mortgage loans $ 48,399 $ 6,731 $ (19,330) $ 35,800
Real estate 47,509 4,201 (23,209) 28,501
-------------- -------------------- --------------- --------------------
Total $ 95,908 $ 10,932 $ (42,539) $ 64,301
============== ==================== =============== ====================
1996
Mortgage loans $ 65,807 $ 7,640 $ (25,048) $ 48,399
Real estate 83,755 2,526 (38,772) 47,509
-------------- -------------------- --------------- --------------------
Total $ 149,562 $ 10,166 $ (63,820) $ 95,908
============== ==================== =============== ====================
</TABLE>
NON-INCOME PRODUCING MORTGAGE LOANS AND BONDS
The net carrying values of non-income producing mortgage loans were $7.0
million and $4.5 million at December 31, 1997 and 1996, respectively. There
were no non-income producing bonds at December 31, 1997 or 1996.
INTEREST RATE SWAPS
Phoenix enters into interest rate swap agreements, generally having
maturities of seven years or less, to hedge certain variable rate
investment income streams matched against fixed rate liability streams. The
notional amounts of these investments were $272.9 million and $73.1 million
at December 31, 1997 and 1996, respectively. Average received and average
paid rates were 7.00% and 6.63% for 1997.
These agreements do not require the exchange of underlying principal
amounts, and accordingly Phoenix's maximum exposure to credit risk is the
difference in interest payments exchanged. Management of Phoenix considers
the likelihood of any material loss on interest rate swaps to be remote.
30
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
OTHER INVESTED ASSETS
Other invested assets, consisting primarily of partnership interests and
equity in unconsolidated affiliates, were as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
1997 1996
(IN THOUSANDS)
<S> <C> <C>
Venture capital equity partnerships $ 88,228 $ 66,284
Transportation and equipment leases 59,111 46,950
Investment in Aberdeen Asset Management 32,817 29,980
Investment in Beutel, Goodman & Co. Ltd. 31,214 34,541
Seed money in separate accounts 41,297 35,747
Other 10,008 4,617
------------- ------------
Total other invested assets $ 262,675 $ 218,119
============= ============
</TABLE>
NET INVESTMENT INCOME
The components of net investment income for the year ended December 31,
were as follows:
<TABLE>
<CAPTION>
1997 1996 1995
(in thousands)
<S> <C> <C> <C>
Debt securities $ 509,702 $ 469,713 $ 437,521
Equity securities 4,277 4,689 1,787
Mortgage loans 85,662 84,318 92,283
Policy loans 122,562 117,742 115,055
Real estate 18,939 21,799 20,910
Other invested assets (415) 332 871
Short-term investments 18,768 18,688 21,974
------------ ------------ -------------
Sub-total 759,495 717,281 690,401
Less investment expenses 22,621 27,391 27,933
------------ ------------ -------------
Net investment income $ 736,874 $ 689,890 $ 662,468
============ ============ =============
</TABLE>
Investment income of $.7 million was not accrued on certain delinquent
mortgage loans and defaulted bonds at December 31, 1997. Phoenix does not
accrue interest income on impaired mortgage loans and impaired bonds when
the likelihood of collection is doubtful.
The payment terms of mortgage loans may from time to time be restructured
or modified. The investment in restructured mortgage loans, based on
amortized cost, amounted to $51.3 million and $61.5 million at December 31,
1997 and 1996, respectively. Interest income on restructured mortgage loans
that would have been recorded in accordance with the original terms of such
loans amounted to $5.3 million, $3.1 million and $6.6 million in 1997, 1996
and 1995, respectively. Actual interest income on these loans included in
net investment income was $3.8 million, $5.2 million and $6.4 million in
1997, 1996 and 1995, respectively.
31
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
INVESTMENT GAINS AND LOSSES
Unrealized gains and losses on investments carried at fair value for the
year ended December 31, were as follows:
<TABLE>
<CAPTION>
1997 1996 1995
(IN THOUSANDS)
<S> <C> <C> <C>
Debt securities $ 112,194 $ (70,986) $ 476,352
Equity securities 74,547 40,803 24,527
Deferred policy acquisition costs (77,985) 51,528 (341,836)
Deferred income taxes 38,064 7,432 55,692
Other (Note 9) (4,719) 1,241 (3,833)
-------------- ------------------ ---------------
Net unrealized investment gains $ 65,973 $ 15,154 $ 99,518
============== ================== ===============
</TABLE>
Realized investment gains and losses for the year ended December 31, were
as follows:
<TABLE>
<CAPTION>
1997 1996 1995
(IN THOUSANDS)
<S> <C> <C> <C>
Debt securities $ 19,315 $ (10,476) $ 8,080
Equity securities 26,290 59,794 29,276
Mortgage loans 3,805 2,628 (262)
Real estate 44,668 24,711 20,535
Other invested assets 48,692 18,608 17,109
-------------- ------------------ ---------------
142,770 95,265 74,738
Income taxes 49,970 33,343 26,158
-------------- ------------------ ---------------
Net realized investment gains after taxes $ 92,800 $ 61,922 $ 48,580
============== ================== ===============
</TABLE>
The proceeds from sales of available-for-sale debt securities and the gross
realized gains and gross realized losses on those sales for the year ended
December 31, were as follows:
<TABLE>
<CAPTION>
1997 1996 1995
(IN THOUSANDS)
<S> <C> <C> <C>
Proceeds from disposals $ 1,206,744 $ 1,348,809 $ 1,145,146
Gross gains on sales $ 48,100 $ 17,429 $ 27,980
Gross losses on sales $ 28,785 $ 27,905 $ 19,900
</TABLE>
32
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
5. GOODWILL AND OTHER INTANGIBLE ASSETS
Goodwill and other intangible assets were as follows:
DECEMBER 31,
1997 1996
(IN THOUSANDS)
Goodwill $ 387,517 $ 231,135
Investment management contracts 167,788 56,700
Client listings 45,441 41,410
Non-compete covenants 5,000 5,000
Intangible asset related to
pension plan benefits 18,032 19,835
Other 1,499 1,220
------------ ------------
625,277 355,300
Accumulated amortization (83,778) (41,793)
------------ ------------
Total $ 541,499 $ 313,507
============ ============
Phoenix Duff & Phelps' amounts included above were as follows:
DECEMBER 31,
1997 1996
(IN THOUSANDS)
Goodwill $ 321,932 $ 179,406
Investment management contracts 167,788 56,700
Non-compete covenants 5,000 5,000
Other 1,220 1,220
------------ ------------
495,940 242,326
Accumulated amortization (27,579) (13,198)
------------ ------------
Total $ 468,361 $ 229,128
============ ============
In 1997, American Phoenix Corporation wrote down the carrying value of its
goodwill and other intangible assets by $18.8 million. This impairment loss
is included in other operating expenses in the Consolidated Statement of
Income and Equity.
33
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
6. FAIR VALUE DISCLOSURES OF FINANCIAL INSTRUMENTS
Other than debt securities being held-to-maturity, 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 which 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.
EQUITY SECURITIES
Fair values are based on quoted market prices, where available. If a quoted
market price is not available, fair values are estimated using independent
pricing sources or internally developed pricing models.
MORTGAGE LOANS
Fair values are calculated as the present value of scheduled payments, with
the discount based upon the Treasury rate comparable for the remaining loan
duration, plus a spread of between 175 and 450 basis points, depending on
the internal quality rating of the loan. For loans in foreclosure or
default, values were determined assuming principal recovery was the lower
of the loan balance or the estimated value of the underlying property.
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.
34
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
INVESTMENT CONTRACTS
In determining the fair value of guaranteed interest contracts, a discount
rate equal to the appropriate Treasury rate, plus 150 basis points, was
assumed to determine the present value of projected contractual liability
payments through final maturity.
The fair value of deferred annuities and supplementary contracts without
life contingencies with an interest guarantee of one year or less is valued
at the amount of the policy reserve. In determining the fair value of
deferred annuities and supplementary contracts without life contingencies
with interest guarantees greater than one year, a discount rate equal to
the appropriate Treasury rate, plus 150 basis points, was used to determine
the present value of the projected account value of the policy at the end
of the current guarantee period.
Deposit type funds, including pension deposit administration contracts,
dividend accumulations, and other funds left on deposit not involving life
contingencies, have interest 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.
DEBT
The carrying value of debt reported on the balance sheet approximates fair
value.
The estimated fair values of the financial instruments as of December 31,
were as follows:
<TABLE>
<CAPTION>
1997 1996
CARRYING FAIR CARRYING FAIR
VALUE VALUE VALUE VALUE
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Financial assets:
Cash and cash equivalents $ 159,307 $ 159,307 $ 172,895 $ 172,895
Short-term investments 1,078,276 1,078,276 164,967 164,967
Debt securities 7,213,966 7,316,601 6,451,078 6,500,017
Equity securities 373,388 373,388 235,351 235,351
Mortgage loans 927,501 956,041 947,076 986,900
Policy loans 1,986,728 2,104,704 1,667,784 1,645,899
--------------- ---------------- -------------- --------------
Total financial assets $ 11,739,166 $ 11,988,317 $ 9,639,151 $ 9,706,029
=============== ================ ============== ==============
Financial liabilities:
Policy liabilities $ 902,200 $ 902,200 $ 875,200 $ 875,100
Securities sold subject to repurchase
agreements 137,473 137,473
Other indebtedness 471,085 471,085 490,430 490,430
--------------- ---------------- -------------- --------------
Total financial liabilities $ 1,510,758 $ 1,510,758 $ 1,365,630 $ 1,365,530
=============== ================ ============== ==============
</TABLE>
35
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
7. OTHER INDEBTEDNESS
DECEMBER 31,
1997 1996
(IN THOUSANDS)
Short-term debt $ 15,539 $ 12,455
Bank borrowings 263,732 280,845
Notes payable 14,632 19,522
Surplus notes 175,000 175,000
Secured debt 2,182 2,608
------------ ------------
Total other indebtedness $ 471,085 $ 490,430
============ ============
Phoenix has various lines of credit established with major commercial
banks. As of December 31, 1997, Phoenix had outstanding balances totaling
$264.5 million. The total unused credit was $145.3 million. Interest rates
ranged from 5.42% to 6.63% in 1997.
On November 25, 1996, Phoenix issued $175 million of surplus notes (See
Note 3).
Maturities of other indebtedness are as follows: 1998 - $15.5 million; 1999
- $55 million; 2000 - $4 million; 2001 - $29 million; 2002 - $192 million;
2003 and thereafter - $175.5 million.
Interest expense was $32.5 million, $18.0 million and $7.7 million for the
years ended December 31, 1997, 1996 and 1995, respectively.
8. INCOME TAXES
A summary of income taxes (benefits) in the Consolidated Statement of
Income and Equity for the year ended December 31, was as follows:
1997 1996 1995
(IN THOUSANDS)
Income taxes
Current $ 54,514 $ 59,673 $ 59,590
Deferred 2,555 19,658 (16,238)
----------- ---------- ------------
Total $ 57,069 $ 79,331 $ 43,352
=========== ========== ============
36
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
The income taxes attributable to the consolidated 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>
1997 1996 1995
% % %
<S> <C> <C> <C> <C> <C> <C>
Income tax expense at statutory rate $ 80,710 35 $ 66,136 35 $ 55,318 35
Non-taxable gain on Phoenix Duff &
Phelps merger (14,203) (9)
Dividend received deduction and
tax-exempt interest (2,513) (1) (2,107) (1) (623)
Other, net (8,017) (4) 2,736 1 2,860 1
------------ ----- ------------ ----- ------------ -----
70,180 30 66,765 35 43,352 27
Differential earnings (equity tax) (13,111) (5) 12,566 7
------------ ----- ------------ ----- ------------ -----
Income taxes $ 57,069 25 $ 79,331 42 $ 43,352 27
============ ===== ============ ===== ============ =====
</TABLE>
37
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
The deferred income tax liability (asset) represents the tax effects of
temporary differences attributable to the consolidated tax return group.
The components were as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
1997 1996
(IN THOUSANDS)
<S> <C> <C>
Deferred policy acquisition costs $ 303,500 $ 220,135
Unearned premium/deferred revenue (139,817) (131,513)
Impairment reserves (26,102) (43,331)
Pension and other postretirement benefits (56,643) (58,230)
Investments 77,202 50,219
Future policyholder benefits (140,980) (37,904)
Other 45,053 15,633
------------- -------------
62,213 15,009
Net unrealized investment gains 84,134 48,320
Minimum pension liability (2,526) (1,395)
Foreign tax credit (1,109)
------------- -------------
Deferred income tax liability, net
before valuation allowance 143,821 60,825
Valuation allowance 1,109
------------- -------------
Deferred income tax liability, net $ 143,821 $ 61,934
============= =============
</TABLE>
Gross deferred income tax assets totaled $366 million and $274 million at
December 31, 1997 and 1996, respectively. Gross deferred income tax
liabilities totaled $510 million and $336 million at December 31, 1997 and
1996, respectively. It is management's assessment, based on Phoenix's
earnings and projected future taxable income, that it is more likely than
not that deferred income tax assets at December 31, 1997 and 1996, with the
exception of the foreign tax credit, will be realized.
The Internal Revenue Service is currently examining Phoenix's tax returns
for 1995 and 1996. Management does not believe that there will be a
material adverse effect on the financial statements as a result of pending
tax matters.
38
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
9. PENSION AND OTHER POSTRETIREMENT AND POSTEMPLOYMENT BENEFIT PLANS
PENSION PLANS
Phoenix has a multi-employer, non-contributory, defined benefit pension
plan covering substantially all of its employees. Retirement benefits are a
function of both years of service and level of compensation. Phoenix also
sponsors a non-qualified supplemental defined benefit plan to provide
benefits in excess of amounts allowed pursuant to Internal Revenue Code.
Phoenix's funding policy is to contribute annually an amount equal to at
least the minimum required contribution in accordance with minimum funding
standards established by the Employee Retirement Income Security Act of
1974. Contributions are intended to provide not only for benefits
attributable to service to date, but also for service expected to be earned
in the future.
Components of net periodic pension cost for the year ended December 31,
were as follows:
<TABLE>
<CAPTION>
1997 1996 1995
(IN THOUSANDS)
<S> <C> <C> <C>
Service cost - benefits earned during the year $ 10,278 $ 10,076 $ 9,599
Interest accrued on projected benefit obligation 22,650 22,660 19,880
Actual return on assets (53,093) (38,788) (62,567)
Net amortization and deferral 30,488 17,318 45,807
------------ ------------- ------------
Net periodic pension cost $ 10,323 $ 11,266 $ 12,719
============ ============= ============
</TABLE>
In 1996, Phoenix offered an early retirement program which granted an
additional benefit of five years of age and service. As a result of the
early retirement program, Phoenix recorded an additional pension expense of
$8.7 million for the year ended December 31, 1996.
39
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
The funded status of the plan for which assets exceeded accumulated benefit
obligations was as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
1997 1996
(IN THOUSANDS)
<S> <C> <C>
Actuarial present value of vested benefit obligation $ 236,443 $ 213,148
Actuarial present value of non-vested benefit obligation 16,312 14,828
------------- ------------
Accumulated benefit obligation 252,755 227,976
Present value effect of future salary increases 32,316 33,910
------------- ------------
Projected benefit obligation $ 285,071 $ 261,886
============= ============
Plan assets at fair value $ 321,555 $ 292,070
============= ============
Plan assets in excess of projected benefit obligation $ (36,484) $ (30,184)
Unrecognized net gain from past experience 60,759 52,312
Unrecognized prior service benefit 52 240
Unamortized transition asset 16,586 19,745
------------- ------------
Net pension liability (included in other liabilities) $ 40,913 $ 42,113
============= ============
</TABLE>
At December 31, 1997 and 1996, the non-qualified plan was unfunded and had
projected benefit obligations of $50.4 million and $50.0 million,
respectively. The accumulated benefit obligations as of December 31, 1997
and 1996 related to this plan were $42.8 million and $37.4 million,
respectively, and are included in other liabilities.
Phoenix recorded, as a reduction of policyholders' equity, an additional
minimum pension liability of $4.7 million and $2.8 million, net of income
taxes, at December 31, 1997 and 1996, respectively, representing the excess
of accumulated benefit obligations over the fair value of plan assets and
accrued pension liabilities for the non-qualified plan. Phoenix has also
recorded an intangible asset of $18.0 million and $19.8 million as of
December 31, 1997 and 1996 related to the non-qualified plan.
The discount rate and rate of increase in future compensation levels used
in determining the actuarial present value of the projected benefit
obligation were 7.0% and 4.0%, for 1997 and 7.5% and 4.5% for 1996. The
discount rate assumption for 1997 was determined based on a study that
matched available high quality investment securities with the expected
timing of pension liability payments. The expected long-term rate of return
on retirement plan assets was 8.0%.
The pension plan's assets include corporate and government debt securities,
equity securities, real estate, venture capital funds, and shares of mutual
funds.
Phoenix also sponsors savings plans for its employees and agents which are
qualified under Internal Revenue Code Section 401(k). Employees and agents
may contribute a portion of their annual salary, subject to limitation, to
the plans. Phoenix contributes an additional amount, subject to limitation,
based on the voluntary contribution of the employee or agent. Company
contributions charged to expense with respect to these plans during the
years ended December 31, 1997, 1996 and 1995 were $3.8 million, $4.2
million and $4.2 million, respectively.
40
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
OTHER POSTRETIREMENT BENEFIT PLANS
In addition to Phoenix's pension plans, Phoenix currently provides certain
health care and life insurance benefits to retired employees, spouses and
other eligible dependents through various plans sponsored by Phoenix. A
substantial portion of Phoenix's employees may become eligible for these
benefits upon retirement. The health care plans have varying copayments and
deductibles, depending on the plan. These plans are unfunded.
Phoenix recognizes the costs and obligations of postretirement benefits
other than pensions over the employees' service period ending with the date
an employee is fully eligible to receive benefits.
The plan's funded status reconciled with amounts recognized in Phoenix's
Consolidated Balance Sheet, was as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
1997 1996
(IN THOUSANDS)
<S> <C> <C>
Accumulated postretirement benefit obligation
Retirees $ 35,900 $ 30,576
Fully eligible active plan participants 6,889 11,466
Other active plan participants 23,829 21,614
------------ -----------
Total accumulated postretirement benefit obligation 66,618 63,656
Unrecognized net gain from past experience 28,037 29,173
------------ -----------
Accrued postretirement benefit liability $ 94,655 $ 92,829
============ ===========
</TABLE>
The components of net periodic postretirement benefit cost for the year
ended December 31, were as follows:
<TABLE>
<CAPTION>
1997 1996 1995
(IN THOUSANDS)
<S> <C> <C> <C>
Service cost - benefits earned during year $ 3,136 $ 2,765 $ 3,366
Interest cost accrued on benefit obligation 4,441 4,547 5,275
Net amortization (1,527) (1,577) (458)
---------- ---------- ---------
Net periodic postretirement benefit cost $ 6,050 $ 5,735 $ 8,183
========== ========== =========
</TABLE>
41
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
In addition to the net periodic postretirement benefit cost, Phoenix
expensed an additional $3.0 million for postretirement benefits related to
the early retirement program for the year ended December 31, 1996.
The discount rate used in determining the accumulated postretirement
benefit obligation was 7.0% at December 31, 1997 and 7.5% at December 31,
1996.
For purposes of measuring the accumulated postretirement benefit obligation
at December 31, 1997, health care costs were assumed to increase 9.5% in
1997, declining thereafter until the ultimate rate of 5.5% is reached in
2002 and remains at that level thereafter. For purposes of measuring the
accumulated postretirement benefit obligation at December 31, 1996, health
care costs were assumed to increase 9.5% in 1996, declining thereafter
until the ultimate rate of 5.5% is reached in 2002 and remained at that
level thereafter. The health care cost trend rate assumption has a
significant effect on the amounts reported. For example, increasing the
assumed health care cost trend rates by one percentage point in each year
would increase the accumulated postretirement benefit obligation by $5.3
million and the annual service and interest cost by $.8 million, before
taxes. Gains and losses that occur because actual experience differs from
the estimates are amortized over the average future service period of
employees.
OTHER POSTEMPLOYMENT BENEFITS
Phoenix recognizes the costs and obligations of severance, disability and
related life insurance and health care benefits to be paid to inactive or
former employees after employment but before retirement. Postemployment
benefit expense was $.4 million for 1997, $.4 million for 1996 and $.5
million for 1995.
42
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
10. SEGMENT INFORMATION
Phoenix operates principally in seven segments: Individual Insurance, Group
Life and Health Insurance, Life Reinsurance, General Lines Brokerage,
Securities Management, Real Estate Management and Other Operations. Other
Operations includes unallocated investment income, expenses and realized
investment gains related to capital in excess of segment requirements;
assets include equity securities.
Summarized below is financial information with respect to the business
segments:
<TABLE>
<CAPTION>
DECEMBER 31,
1997 1996 1995
(IN THOUSANDS)
<S> <C> <C> <C>
REVENUES
Individual Insurance $ 2,028,230 $ 1,796,572 $ 1,752,338
Group Life and Health Insurance 459,405 462,551 421,771
Life Reinsurance 162,843 143,314 128,813
General Lines Brokerage 64,093 61,809 40,977
Securities Management 177,894 164,966 112,206
Real Estate Management 15,319 13,550 13,562
Other Operations 80,496 82,273 48,873
----------------- ----------------- -----------------
Total $ 2,988,280 $ 2,725,035 $ 2,518,540
================= ================= =================
OPERATING INCOME
Individual Insurance $ 132,308 $ 63,013 $ 43,094
Group Life and Health Insurance 31,276 11,220 19,921
Life Reinsurance 10,592 8,078 17,656
General Lines Brokerage (21,652) (2,935) (1,887)
Securities Management 38,813 44,440 23,667
Real Estate Management (2,433) (3,783) (184)
Other Operations 41,695 68,928 15,204
----------------- ----------------- -----------------
Total $ 230,599 $ 188,961 $ 117,471
================= ================= =================
IDENTIFIABLE ASSETS
Individual Insurance $ 15,679,598 $ 12,961,648
Group Life and Health Insurance 655,800 596,800
Life Reinsurance 313,500 304,300
General Lines Brokerage 111,900 117,300
Securities Management 615,112 376,000
Real Estate Management 278,500 319,400
Other Operations 864,309 777,600
----------------- -----------------
Total $ 18,518,719 $ 15,453,048
================= =================
</TABLE>
43
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
11. LEASES AND RENTALS
Rental expenses for operating leases, principally with respect to
buildings, amounted to $14.9 million, $14.8 million and $14.6 million in
1997, 1996, and 1995, respectively. Future minimum rental payments under
non-cancelable operating leases were approximately $51.0 million as of
December 31, 1997, payable as follows: 1998 - $15.7 million; 1999 - $12.9
million; 2000 - $10.1 million; 2001 - $5.6 million; 2002 - $3.6 million;
and $3.1 million thereafter.
12. PROPERTY AND EQUIPMENT
Property, equipment and leasehold improvements, consisting primarily of
office buildings occupied by Phoenix, are stated at depreciated cost. Real
estate occupied by Phoenix was $109.0 million and $97.2 million,
respectively, at December 31, 1997 and 1996. Phoenix provides for
depreciation using straight line and accelerated methods over the estimated
useful lives of the related assets which generally range from five to forty
years. Accumulated depreciation and amortization was $164.4 million and
$144.1 million at December 31, 1997 and 1996, respectively.
13. DIRECT BUSINESS WRITTEN AND REINSURANCE
As is customary practice in the insurance industry, Phoenix assumes and
cedes reinsurance as a means of diversifying underwriting risk. The maximum
amount of individual life insurance retained by Phoenix on any one life is
$8 million for single life and joint first-to-die policies and $10 million
for joint last-to-die policies, with excess amounts ceded to reinsurers.
For reinsurance ceded, Phoenix remains liable in the event that assuming
reinsurers are unable to meet the contractual obligations. Amounts
recoverable from reinsurers are estimated in a manner consistent with the
claim liability associated with the reinsured policy.
Additional information on direct business written and reinsurance assumed
and ceded for the years ended December 31, was as follows:
<TABLE>
<CAPTION>
1997 1996 1995
(IN THOUSANDS)
<S> <C> <C> <C>
Direct premiums $ 1,592,800 $ 1,473,869 $ 1,455,459
Reinsurance assumed 329,927 276,630 271,498
Reinsurance ceded (282,121) (231,677) (270,082)
----------------- -------------------- -----------------
Net premiums $ 1,640,606 $ 1,518,822 $ 1,456,875
================= ==================== =================
Direct policy and contract claims incurred $ 626,834 $ 575,824 $ 605,545
Reinsurance assumed 410,704 170,058 256,529
Reinsurance ceded (373,127) (160,646) (292,357)
----------------- -------------------- -----------------
Net policy and contract claims incurred $ 664,411 $ 585,236 $ 569,717
================= ==================== =================
Direct life insurance in force $ 120,394,664 $ 108,816,856 $ 102,606,749
Reinsurance assumed 84,806,585 61,109,836 36,724,852
Reinsurance ceded (74,764,639) (51,525,976) (34,093,090)
----------------- -------------------- -----------------
Net insurance in force $ 130,436,610 $ 118,400,716 $ 105,238,511
================= ==================== =================
</TABLE>
44
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
Irrevocable letters of credit aggregating $134.8 million at December 31,
1997 have been arranged with United States commercial banks in favor of
Phoenix to collateralize the ceded reserves.
14. PARTICIPATING LIFE INSURANCE
Participating life insurance in force was 79.6% and 80.0% of the face value
of total individual life insurance in force at December 31, 1997 and 1996,
respectively. The premiums on participating life insurance policies were
83.5%, 84.1% and 84.7% of total individual life insurance premiums in 1997,
1996 and 1995, respectively.
15. DEFERRED POLICY ACQUISITION COSTS
The following reflects the amount of policy acquisition costs deferred and
amortized for the years ended December 31:
<TABLE>
<CAPTION>
1997 1996 1995
(IN THOUSANDS)
<S> <C> <C> <C>
Balance at beginning of year $ 926,274 $ 816,128 $ 1,128,227
Acquisition cost deferred 295,189 153,873 143,519
Amortized to expense during the year (105,071) (95,255) (113,788)
Adjustment to equity during the year (77,985) 51,528 (341,830)
----------------- -------------- ----------------
Balance at end of year $ 1,038,407 $ 926,274 $ 816,128
================= ============== ================
</TABLE>
16. MINORITY INTEREST
Phoenix's interests in Phoenix Duff & Phelps Corporation and American
Phoenix Corporation, through its wholly-owned subsidiary PM Holdings are
represented by ownership of approximately 60% and 92%, respectively, of the
outstanding shares of common stock at December 31, 1997. Earnings and
policyholders' equity attributable to minority shareholders are included in
minority interest in the consolidated financial statements along with
Phoenix Duff & Phelps' preferred stock.
17. CONTINGENCIES
FINANCIAL GUARANTEES
Phoenix is contingently liable for financial guarantees provided in the
ordinary course of business on the repayment of principal and interest on
certain industrial revenue bonds. The contractual amounts of financial
guarantees reflect Phoenix's maximum exposure to credit loss in the event
of nonperformance. The principal amount of bonds guaranteed by Phoenix at
December 31, 1997 and 1996 was $88.7 million and $88.8 million,
respectively. Management believes that any loss contingencies which may
arise from Phoenix's financial guarantees would not have a material adverse
effect on Phoenix's liquidity or financial condition.
45
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
LITIGATION
In 1996, Phoenix announced the settlement of a class action suit which was
approved by a New York State Supreme Court judge on January 3, 1997. The
suit related to the sale of individual participating life insurance and
universal life insurance policies from 1980 to 1995. An after tax provision
of $25 million was recorded in 1995. In addition, $7 million after-tax was
expensed in 1996. Phoenix estimates the cost of settlement to be $40
million after tax. Management believes, after consideration of the
provisions made in these financial statements, this suit will not have a
material effect on Phoenix's consolidated financial position.
Phoenix is a defendant in various legal proceedings arising in the normal
course of business. In the opinion of management, based on the advice of
legal counsel after consideration of the provisions made in these financial
statements, the ultimate resolution of these proceedings will not have a
material effect on Phoenix's consolidated financial position.
18. STATUTORY FINANCIAL INFORMATION
The insurance subsidiaries 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, 1997, there were no
material practices not prescribed by the Insurance Department of the State
of New York. Statutory surplus differs from policyholders' 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, surplus notes are not included in
policyholders' equity, 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 Phoenix as reported to
regulatory authorities to the net income as reported in these financial
statements for the year ended December 31:
<TABLE>
<CAPTION>
1997 1996 1995
(IN THOUSANDS)
<S> <C> <C> <C>
Statutory net income $ 60,702 $ 72,961 $ 64,198
Deferred policy acquisition costs, net 48,821 58,618 29,766
Future policy benefits (9,145) (16,793) (15,763)
Pension and postretirement expenses (7,955) (23,275) (12,691)
Investment valuation allowances 88,813 76,631 56,745
Interest maintenance reserve 17,544 (5,158) 5,829
Deferred income taxes (36,250) (67,064) (10,021)
Other, net 2,118 4,808 (4,314)
------------ ------------- ------------
Net income, as reported $ 164,648 $ 100,728 $ 113,749
============ ============= ============
</TABLE>
46
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
The following reconciles the statutory surplus and asset valuation reserve
(AVR) of Phoenix as reported to regulatory authorities to policyholders'
equity as reported in these financial statements:
<TABLE>
<CAPTION>
DECEMBER 31,
1997 1996
(IN THOUSANDS)
<S> <C> <C>
Statutory surplus, surplus notes and AVR $ 1,152,820 $ 1,102,200
Deferred policy acquisition costs, net 1,227,782 1,037,664
Future policy benefits (395,436) (379,820)
Pension and postretirement expenses (169,383) (152,112)
Investment valuation allowances (40,032) (139,562)
Interest maintenance reserve 33,794 6,897
Deferred income taxes (12,051) 82,069
Surplus notes (157,500) (157,500)
Other, net (11,904) (2,367)
-------------- --------------
Policyholders' equity, as reported $ 1,628,090 $ 1,397,469
============== ==============
</TABLE>
The New York State Insurance Department recognizes only statutory
accounting practices for determining and reporting the financial condition
and results of operations of an insurance company, for determining its
solvency under New York Insurance Law, and for determining whether its
financial condition warrants the payment of a dividend to its
policyholders. No consideration is given by the Department to financial
statements prepared in accordance with generally accepted accounting
principles in making such determinations.
47
<PAGE>
PHOENIX HOME LIFE
VARIABLE UNIVERSAL LIFE ACCOUNT
FINANCIAL STATEMENTS
The Subaccounts of the Phoenix Home Life Variable Universal Life Account to
which allocations under the Rider may be made will be activated upon the
effective date of this registration statement, therefore, financial data with
respect to these Subaccounts is not available.
48
<PAGE>
APPENDIX A
Illustrations of Death Benefits and Rider Cash Values
The tables on the following pages illustrate how a VIA's death benefits and
Rider Cash Value could vary over time assuming constant hypothetical gross
(after tax) annual investment returns of 0%, 6% and 12%. The VIA benefits will
differ from those shown in the tables if the annual investment returns are not
absolutely constant. That is, the figures will be different if the returns
averaged 0%, 6% or 12% over a period of years, but went above or below those
figures in individual policy years. The VIA benefits also will differ, depending
on your asset allocations to each Subaccount of the VUL Account, if the overall
actual rates of return averaged 0%, 6% or 12%, but went above or below those
figures for the individual Subaccounts. The tables are for standard risk males
and females who have never smoked. In states where cost of insurance rates are
not based on the Insured's sex, the tables designated "male" apply to all
standard risk insureds who have never smoked. Cash values may be lower for
smokers or former smokers or for risk classes involving higher mortality risk.
The death benefit and Rider Cash Value amounts reflect the following current
charges:
1. Monthly deduction charge, which can vary in amount from month to month. Cost
of insurance charge. The tables illustrate cost of insurance at both the
current rates and at the maximum rates guaranteed in the Policies. (See
"Charges and Deductions--Cost of Insurance.")
2. Mortality and expense risk charge, which is a daily charge equivalent to
.50% on an annual basis against the VUL Account for mortality and expense
risks. (See "Charges and Deductions--Mortality and Expense Risk Charge.")
These illustrations also assume an average investment advisory fee of .72%
on an annual basis, of the average daily net asset value of each of the Series
of the Funds. These illustrations also assume other ongoing average Fund
expenses of .21%. All other Fund expenses, except capital items such as
brokerage commissions, are paid by the Adviser or Phoenix. Management may decide
to limit the amount of expense reimbursement in the future. If expense
reimbursement had not been in place for the fiscal year ended December 31, 1997,
average total operating expenses for the Series would have been approximately
1.11% of the average net assets. See "Charges and Deductions--Investment
Management Charge."
Taking into account the mortality and expense risk charge and the investment
advisory fees and expenses, the gross annual investment return rates of 0%, 6%
and 12% on the Funds' assets are equivalent to net annual investment return
rates of approximately -1.72%, 4.23% and 10.19%, respectively. For individual
illustrations, interest rates ranging between 0% and 12% may be selected in
place of the 0%, 6% and 12% rates.
The hypothetical returns shown in the tables are without any tax charges
that may be attributable to the VUL Account in the future. If such tax charges
are imposed in the future, then in order to produce after tax returns equal to
those illustrated for 0%, 6% and 12%, a sufficiently higher amount in excess of
the hypothetical interest rates would have to be earned. (See "Charges and
Deductions--Other Charges--Taxes.")
The second column of each table shows the amount that would accumulate if an
amount equal to the premiums paid were invested to earn interest, after taxes,
at 5% compounded annually. These tables show that if a Policy is returned in its
very early years for payment of its Rider Cash Value, that Rider Cash Value may
be low in comparison to the amount of the premiums accumulated with interest.
Thus, the cost of owning a Rider for a relatively short time may be high.
On request, we will furnish the Rider Owner with a comparable illustration
based on the age and sex of the proposed insured person(s), standard risk
assumptions and the initial face amount and planned premium chosen.
49
<PAGE>
Page 1 of 2
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
Statutory Home Office: East Greenbush, New York
MALE 40 NEVERSMOKE
<TABLE>
<CAPTION>
THE VARIABLE INSURANCE ADDITIONS RIDER
ASSUMING CURRENT CHARGES
DIVIDENDS
APPLIED TO RIDER RIDER RIDER
DIVIDENDS VIAS CASH VIA DEATH CASH VIA DEATH CASH VIA DEATH
APPLIED TO ACCUM. VALUE BENEFIT VALUE BENEFIT VALUE BENEFIT
YEAR VIAS @ 5.0% @ 0% @ 0% @ 6% @ 6% @ 12% @ 12%
----- ---------- ---------- ------ --------- ------- --------- ------ ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1 1,614 1,695 1,584 8,095 1,680 8,095 1,776 8,095
2 365 2,163 1,913 8,095 2,130 8,095 2,358 8,632
3 473 2,767 2,344 8,300 2,712 9,602 3,119 11,040
4 580 3,515 2,873 9,826 3,430 11,731 4,073 13,931
5 690 4,415 3,500 11,584 4,292 14,208 5,246 17,364
6 803 5,479 4,226 13,566 5,307 17,037 6,660 21,380
7 920 6,719 5,053 15,666 6,486 20,107 8,346 25,873
8 1,073 8,182 6,016 18,108 7,872 23,694 10,369 31,211
9 1,228 9,880 7,112 20,697 9,475 27,574 12,765 37,147
10 1,383 11,826 8,340 23,518 11,305 31,881 15,572 43,912
11 1,545 14,040 9,702 26,488 13,377 36,521 18,836 51,424
12 1,715 16,542 11,205 29,695 15,709 41,630 22,613 59,924
13 1,983 19,452 12,941 33,258 18,411 47,318 27,057 69,538
14 2,250 22,787 14,903 37,109 21,498 53,529 32,235 80,265
15 2,520 26,572 17,089 41,186 24,984 60,212 38,218 92,106
16 2,813 30,854 19,516 45,669 28,909 67,648 45,109 105,555
17 3,110 35,663 22,182 50,354 33,292 75,573 52,998 120,307
18 3,310 40,921 24,985 55,218 38,047 84,083 61,874 136,741
19 3,503 46,645 27,915 60,017 43,179 92,835 71,820 154,414
20 3,708 52,871 30,978 64,745 48,713 101,811 82,951 173,368
@ 65 57,366 92,626 48,288 87,885 82,998 151,057 160,709 292,492
</TABLE>
Based on 0% interest rate and guaranteed charges, the Rider will lapse in year
34.
VIA death benefit and Rider Cash Values are based on hypothetical gross interest
rates shown, assume current and guaranteed charges and no surrenders of VIA or
withdrawals, and are calculated at the end of the Rider Year. Dividends applied
to VIAs shown are allocated at the beginning of the Rider Year. Values shown
reflect an effective annual asset charge of 1.73% for 15 years, then 1.18%
(includes mortality and expense risk charge of 0.8% for 15 years, then 0.25% and
average fund operating expenses of 0.93% applicable to the investment
Subaccounts of the VUL Separate Account). Hypothetical gross interest rates are
presented for illustrative purposes only to illustrate dividends allocated
entirely to the investment Subaccounts of the VUL Separate Account and do not in
any way represent actual results or suggest that such results will be achieved
in the future. Actual values will differ from those shown whenever actual
investment results differ from hypothetical gross interest rates illustrated.
50
<PAGE>
Page 2 of 2
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
Statutory Home Office: East Greenbush, New York
MALE 40 NEVERSMOKE
<TABLE>
<CAPTION>
THE VARIABLE INSURANCE ADDITIONS RIDER
ASSUMING GUARANTEED CHARGES
DIVIDENDS
APPLIED TO RIDER RIDER RIDER
DIVIDENDS VIAS CASH VIA DEATH CASH VIA DEATH CASH VIA DEATH
APPLIED TO ACCUM. VALUE BENEFIT VALUE BENEFIT VALUE BENEFIT
YEAR VIAS @ 5.0% @ 0% @ 0% @ 6% @ 6% @ 12% @ 12%
----- ---------- ---------- ------ --------- ------- --------- ------ ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1 1,614 1,695 1,576 8,095 1,672 8,095 1,768 8,095
2 365 2,163 1,898 8,095 2,115 8,095 2,342 8,572
3 473 2,767 2,322 8,220 2,687 9,513 3,090 10,939
4 580 3,515 2,841 9,717 3,392 11,601 4,028 13,777
5 690 4,415 3,456 11,440 4,238 14,027 5,177 17,138
6 803 5,479 4,168 13,379 5,231 16,792 6,561 21,061
7 920 6,719 4,978 15,431 6,382 19,786 8,206 25,438
8 1,073 8,182 5,918 17,814 7,734 23,279 10,175 30,627
9 1,228 9,880 6,988 20,336 9,295 27,048 12,501 36,380
10 1,383 11,826 8,184 23,080 11,071 31,221 15,218 42,916
11 1,545 14,040 9,510 25,961 13,078 35,704 18,370 50,149
12 1,715 16,542 10,967 29,064 15,330 40,624 22,002 58,305
13 1,983 19,452 12,649 32,509 17,934 46,091 26,264 67,500
14 2,250 22,787 14,547 36,223 20,901 52,043 31,213 77,720
15 2,520 26,572 16,657 40,143 24,242 53,423 36,909 88,952
16 2,813 30,854 18,992 44,443 27,990 65,497 43,442 101,655
17 3,110 35,663 21,550 48,919 32,160 73,003 50,887 115,514
18 3,310 40,921 24,227 53,541 36,659 81,017 59,213 130,861
19 3,503 46,645 27,009 58,070 41,488 89,199 68,486 147,245
20 3,708 52,871 29,904 62,499 46,664 97,527 78,795 164,683
@ 65 57,366 92,626 45,960 83,648 78,040 142,033 149,077 271,320
</TABLE>
Based on 0% interest rate and guaranteed charges, the Rider will lapse in year
34.
VIA death benefit and Rider Cash Values are based on hypothetical gross interest
rates shown, assume current and guaranteed charges and no surrenders of VIA or
withdrawals, and are calculated at the end of the Rider Year. Dividends applied
to VIAs shown are allocated at the beginning of the Rider Year. Values shown
reflect an effective annual asset charge of 1.73% for 15 years, then 1.18%
(includes mortality and expense risk charge of 0.8% for 15 years, then 0.25% and
average fund operating expenses of 0.93% applicable to the investment
Subaccounts of the VUL Separate Account). Hypothetical gross interest rates are
presented for illustrative purposes only to illustrate dividends allocated
entirely to the investment Subaccounts of the VUL Separate Account and do not in
any way represent actual results or suggest that such results will be achieved
in the future. Actual values will differ from those shown whenever actual
investment results differ from hypothetical gross interest rates illustrated.
51
<PAGE>
Page 1 of 2
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
Statutory Home Office: East Greenbush, New York
FEMALE 40 NEVERSMOKE
<TABLE>
<CAPTION>
THE VARIABLE INSURANCE ADDITIONS RIDER
ASSUMING CURRENT CHARGES
DIVIDENDS
APPLIED TO RIDER RIDER RIDER
DIVIDENDS VIAS CASH VIA DEATH CASH VIA DEATH CASH VIA DEATH
APPLIED TO ACCUM. VALUE BENEFIT VALUE BENEFIT VALUE BENEFIT
YEAR VIAS @ 5.0% @ 0% @ 0% @ 6% @ 6% @ 12% @ 12%
----- ---------- ---------- ------ --------- ------- --------- ------ ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1 1,634 1,716 1,605 7,202 1,702 7,219 1,800 7,631
2 450 2,274 2,019 8,297 2,242 9,217 2,478 10,183
3 548 2,963 2,521 10,009 2,907 11,540 3,332 13,227
4 648 3,792 3,112 11,982 3,702 14,255 4,382 16,870
5 748 4,767 3,791 14,140 4,635 17,289 5,648 21,066
6 845 5,892 4,552 16,433 5,707 20,602 7,147 25,803
7 950 7,184 5,402 18,854 6,932 24,192 8,913 31,108
8 1,063 8,660 6,347 21,454 8,324 28,137 10,981 37,116
9 1,178 10,330 7,387 24,230 9,893 32,450 13,382 43,893
10 1,295 12,206 8,522 27,101 11,647 37,038 16,151 51,362
11 1,418 14,305 9,756 30,049 13,600 41,887 19,333 59,545
12 1,550 16,648 11,095 33,065 15,768 46,989 22,976 68,469
13 1,723 19,289 12,578 36,351 18,202 52,606 27,172 78,527
14 1,900 22,249 14,204 39,914 20,917 58,776 31,976 89,854
15 2,078 25,543 15,972 43,445 23,923 65,070 37,452 101,870
16 2,268 29,202 17,890 47,231 27,244 71,925 43,677 115,308
17 2,468 33,253 19,965 51,112 30,904 79,114 50,736 129,886
18 2,628 37,675 22,155 55,166 34,872 86,832 58,667 146,082
19 2,780 42,478 24,449 59,168 39,155 94,756 67,549 163,469
20 2,945 47,694 26,860 63,121 43,778 102,879 77,490 182,102
@ 65 48,535 80,976 40,717 82,656 72,610 147,399 147,164 298,744
</TABLE>
Based on 0% interest rate and guaranteed charges, the Rider will lapse in year
34.
VIA death benefit and Rider Cash Values are based on hypothetical gross interest
rates shown, assume current and guaranteed charges and no surrenders of VIA or
withdrawals, and are calculated at the end of the Rider Year. Dividends applied
to VIAs shown are allocated at the beginning of the Rider Year. Values shown
reflect an effective annual asset charge of 1.73% for 15 years, then 1.18%
(includes mortality and expense risk charge of 0.8% for 15 years, then 0.25% and
average fund operating expenses of 0.93% applicable to the investment
Subaccounts of the VUL Separate Account). Hypothetical gross interest rates are
presented for illustrative purposes only to illustrate dividends allocated
entirely to the investment Subaccounts of the VUL Separate Account and do not in
any way represent actual results or suggest that such results will be achieved
in the future. Actual values will differ from those shown whenever actual
investment results differ from hypothetical gross interest rates illustrated.
52
<PAGE>
Page 2 of 2
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
Statutory Home Office: East Greenbush, New York
FEMALE 40 NEVERSMOKE
<TABLE>
<CAPTION>
THE VARIABLE INSURANCE ADDITIONS RIDER
ASSUMING GUARANTEED CHARGES
DIVIDENDS
APPLIED TO RIDER RIDER RIDER
DIVIDENDS VIAS CASH VIA DEATH CASH VIA DEATH CASH VIA DEATH
APPLIED TO ACCUM. VALUE BENEFIT VALUE BENEFIT VALUE BENEFIT
YEAR VIAS @ 5.0% @ 0% @ 0% @ 6% @ 6% @ 12% @ 12%
----- ---------- ---------- ------ --------- ------- --------- ------ ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1 1,634 1,716 1,599 7,202 1,696 7,202 1,794 7,605
2 450 2,274 2,006 8,245 2,228 9,159 2,462 10,120
3 548 2,953 2,499 9,923 2,882 11,440 3,303 13,112
4 648 3,792 3,079 11,856 3,663 14,102 4,334 16,685
5 748 4,767 3,744 13,966 4,576 17,069 5,573 20,789
6 845 5,892 4,489 16,205 5,623 20,301 7,038 25,408
7 950 7,184 5,319 18,563 6,818 23,795 8,758 30,567
8 1,063 8,660 6,240 21,092 8,173 27,624 10,767 36,391
9 1,178 10,330 7,252 23,787 9,695 31,799 13,091 42,940
10 1,295 12,206 8,354 26,566 11,392 36,227 15,765 50,132
11 1,418 14,305 9,549 29,412 13,276 40,891 18,825 57,981
12 1,550 16,648 10,844 32,316 15,363 45,781 22,318 66,508
13 1,723 19,289 12,275 35,475 17,700 51,152 26,327 76,084
14 1,900 22,249 13,841 38,893 20,296 57,033 30,899 86,828
15 2,078 25,543 15,540 42,268 23,164 63,007 36,091 98,169
16 2,268 29,202 17,379 45,880 26,323 69,492 41,969 110,800
17 2,468 33,253 19,364 49,572 29,792 76,267 48,608 124,438
18 2,628 37,675 21,452 53,417 33,539 83,514 56,033 139,523
19 2,780 42,478 23,634 57,196 37,569 90,917 64,311 155,632
20 2,945 47,694 25,921 60,915 41,903 98,473 73,534 172,806
@ 65 48,535 80,976 38,922 79,012 68,541 139,139 137,045 278,202
</TABLE>
Based on 0% interest rate and guaranteed charges, the Rider will lapse in year
34.
VIA death benefit and Rider Cash Values are based on hypothetical gross interest
rates shown, assume current and guaranteed charges and no surrenders of VIA or
withdrawals, and are calculated at the end of the Rider Year. Dividends applied
to VIAs shown are allocated at the beginning of the Rider Year. Values shown
reflect an effective annual asset charge of 1.73% for 15 years, then 1.18%
(includes mortality and expense risk charge of 0.8% for 15 years, then 0.25% and
average fund operating expenses of 0.93% applicable to the investment
Subaccounts of the VUL Separate Account). Hypothetical gross interest rates are
presented for illustrative purposes only to illustrate dividends allocated
entirely to the investment Subaccounts of the VUL Separate Account and do not in
any way represent actual results or suggest that such results will be achieved
in the future. Actual values will differ from those shown whenever actual
investment results differ from hypothetical gross interest rates illustrated.
53
<PAGE>
PART II. OTHER INFORMATION
UNDERTAKING TO FILE REPORTS
Subject to the terms and conditions of Section 15(d) of the Securities
Exchange Act of 1934, the undersigned registrant hereby undertakes to file with
the Securities and Exchange Commission such supplementary and periodic
information, documents and reports as may be prescribed by any rule or
regulation of the Commission heretofore or hereafter duly adopted pursuant to
authority conferred in that Section.
RULE 484 UNDERTAKING
Section 723 of the New York Business Corporation Law, as made applicable to
insurance companies by Section 108 of the New York Insurance Law, 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 VI Section 6.1 of the By-Laws of Phoenix Home Life provides that:
"To the full extent permitted by the laws of the State of New York, the Company
shall indemnify any person made or threatened to be made a party to any action,
proceeding or investigation, whether civil or criminal, by reason of the fact
that such person ... is or was a Director or Officer of the Company; or ...
serves or served another corporation, partnership, joint venture, trust,
employee benefit plan or other enterprise in any capacity at the request of the
Company, and also is or was a Director or Officer of the Company ... The Company
shall also indemnify any [such] person ... by reason of the fact that such
person or such person's testator or intestate is or was an employee or agent of
the Company ...."
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.
REPRESENTATION PURSUANT TO SECTION 26(e)(2)(A)
UNDER THE INVESTMENT COMPANY ACT OF 1940.
Pursuant to Section 26(e)(2)(A) of the Investment Company Act of 1940, as
amended, Phoenix Home Life Mutual Insurance Company represents that the fees and
charges deducted under the Policies, in the aggregate, are reasonable in
relation to the services rendered, the expenses expected to be incurred and the
risks to be assumed thereunder by Phoenix Home Life Mutual Insurance Company.
II-1
<PAGE>
CONTENTS OF REGISTRATION STATEMENT
This Form S-6 Registration Statement comprises the following papers and
documents:
The facing sheet.
The cross-reference sheet to Form N-8B-2.
The Prospectus describing Phoenix Home Life Mutual Insurance Company
Amendment and Rider Forms TR10 and TR11 and riders thereto, "Variable
Insurance Additions Amendment and Rider," consisting of 53 pages.
The undertaking to file reports.
The Rule 484 undertaking.
Representation Pursuant to Section 26(e)(2)(A) of the Investment Company Act
of 1940.
The signature page.
The powers of attorney for Mr. Booth and Ms. Young are filed herewith.
Powers of attorney for all others are incorporated herein by reference to
registrant's Post-Effective Amendment No. 1 to Form S-6, Registration No.
333-23171, filed on February 28, 1998.
Written consents of the following persons:
(a) Edwin L. Kerr, Esq.*
(b) Jorden Burt Boros Cicchetti Berenson & Johnson LLP*
(c) Price Waterhouse, LLP*
(d) Paul M. Fischer, F.S.A.*
The following exhibits:
1. The following exhibits correspond to those required by paragraph A to the
instructions as to exhibits in Form N-8B-2:
A. (1) Resolution of the Board of Directors of Depositor establishing the
VUL Account is incorporated herein by reference to registrant's
Post-Effective Amendment No. 15 to Form S-6, Registration No.
33-23251, filed on April 30, 1998.
(2) Not Applicable.
(3) Distribution of Policies:
(a) Master Service and Distribution Compliance Agreement between
Depositor and Phoenix Equity Planning Corporation dated
December 31, 1996, incorporated by reference to registrant's
Post-Effective Amendment No. 15 to Form S-6, Registration
No. 33-23251, filed on April 30, 1998.
(b) Form of Broker Dealer Supervisory and Service Agreement
between Phoenix Equity Planning Corporation and Independent
Brokers with respect to the sale of Policies, incorporated
by reference to registrant's Post-Effective Amendment No. 15
to Form S-6, Registration No. 33-23251, filed on April 30,
1998.
(c) Not Applicable.
(4) Not Applicable.
(5) Specimen Policies with optional riders.
Variable Insurance Additions Rider Form TR10, filed via Edgar
herewith.
(6) (a) Charter of Phoenix Home Life Mutual Insurance Company is
incorporated herein by reference to registrant's
Post-Effective Amendment No. 12 to Form S-6, Registration
No. 33-23251, filed on February 13, 1996.
(b) By-laws of Phoenix Home Life Mutual Insurance Company is
incorporated herein by reference to registrant's
Post-Effective Amendment No. 12 to Form S-6, Registration
No. 33-23251, filed on February 13, 1996.
(7) Not Applicable.
(8) Not Applicable.
(9) Not Applicable.
(10) Not Applicable.
II-2
<PAGE>
2. Opinion of Edwin L. Kerr, Esq., Counsel of Depositor as to the legality of
the securities being registered.*
3. Not Applicable. No financial statement will be omitted from the Prospectus
pursuant to Instruction 1(b) or (c) of Part I.
4. Not Applicable.
5. Not Applicable.
6. Consent of Jorden Burt Boros Cicchetti Berenson & Johnson, LLP.*
7. Consent of Price Waterhouse, LLP.*
8. Consent of Edwin L. Kerr, Esq.*
9. Consent of Paul M. Fischer, F.S.A., CLU, ChFC*
______________
* To Be Filed By Amendment.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant,
Phoenix Home Life Variable Universal Life Account 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 the 9th day
of July, 1998.
PHOENIX HOME LIFE VARIABLE UNIVERSAL LIFE ACCOUNT
-------------------------------------------------
(Registrant)
By: PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
------------------------------------------
(Depositor)
By: /s/ John H. Beers
----------------------------------------------
*John H. Beers, Vice President
and Associate General Counsel
ATTEST: /s/ Nancy J. Engberg
---------------------------------------------
Nancy J. Engberg, Assistant Secretary
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities indicated on the 9th day of July, 1998.
SIGNATURE TITLE
--------- -----
Director
-------------------------------------
*Sal H. Alfiero
Director
-------------------------------------
*J. Carter Bacot
Director
-------------------------------------
*Carol H. Baldi
Director
-------------------------------------
**Richard H. Booth
Director
-------------------------------------
*Peter C. Browning
Director
-------------------------------------
*Arthur P. Byrne
Director
-------------------------------------
*Richard N. Cooper
Director
-------------------------------------
*Gordon J. Davis
Chairman of the Board,
------------------------------------- President and Chief
*Robert W. Fiondella Executive Officer
(Principal Executive Officer)
Director
-------------------------------------
*Jerry J. Jasinowski
S-1
<PAGE>
SIGNATURE TITLE
--------- -----
Director
-------------------------------------
*John W. Johnstone
Director
-------------------------------------
*Marilyn E. LaMarche
Director
-------------------------------------
*Philip R. McLoughlin
Director
-------------------------------------
*Indra Nooyi
Executive Vice President
------------------------------------- and Chief Financial
*David W. Searfoss Officer (Principal Accounting
and Financial Officer)
Director
-------------------------------------
*Robert F. Vizza
Director
-------------------------------------
*Robert G. Wilson
Director
-------------------------------------
**Dona D. Young
By: /s/ John H. Beers
---------------------------------------------------
*John H. Beers as Attorney-in-Fact pursuant to Powers of Attorney,
previously filed.
**John H. Beers as Attorney-in-Fact pursuant to Powers of Attorney filed
herewith.
S-2
<PAGE>
POWERS OF ATTORNEY
<PAGE>
POWER OF ATTORNEY
I, the undersigned member of the Board Of Directors and Officer of Phoenix
Home Life Mutual Insurance Company, hereby constitute and appoint John H. Beers,
Donald E. Bertrand and Edwin L. Kerr or either of them as my true and lawful
attorneys and agents with full power to sign for me in the capacity indicated
below, any or all Registration Statements or amendments thereto filed with the
Securities and Exchange Commission under the Securities Act of 1933 and/or the
Investment Company Act of 1940 relating to securities issued or sold by Phoenix
Home Life Mutual Insurance Company or any of its separate accounts, and hereby
ratify and confirm my signature as it may be signed by said attorneys and
agents.
WITNESS my hand and seal on the date set forth below.
/s/Dona D. Young , Director July 9, 1998
- ------------------------------------
Dona D. Young
<PAGE>
POWER OF ATTORNEY
I, the undersigned member of the Board Of Directors and Officer of Phoenix
Home Life Mutual Insurance Company, hereby constitute and appoint John H. Beers,
Donald E. Bertrand and Edwin L. Kerr or either of them as my true and lawful
attorneys and agents with full power to sign for me in the capacity indicated
below, any or all Registration Statements or amendments thereto filed with the
Securities and Exchange Commission under the Securities Act of 1933 and/or the
Investment Company Act of 1940 relating to securities issued or sold by Phoenix
Home Life Mutual Insurance Company or any of its separate accounts, and hereby
ratify and confirm my signature as it may be signed by said attorneys and
agents.
WITNESS my hand and seal on the date set forth below.
/s/Richard H. Booth , Director July 9, 1998
- ------------------------------------
Richard H. Booth
EXHIBIT 1.A.5
VARIABLE INSURANCE ADDITIONS RIDER
FORM TR10
<PAGE>
VARIABLE INSURANCE ADDITIONS RIDER
The death benefit and cash values of the Variable Insurance
Additions will vary over time according to the investment
experience of the accounts in which the cash value is
invested. Therefore, they may increase or decrease.
This Rider is attached to and made a part of the policy as
of the Rider Date. Except as stated in the Rider, it is
subject to all of the provisions contained in the policy.
POLICY NUMBER: 2000000
INSURED: John Doe
RIDER DATE: January 1, 1998
DEFINITIONS CONVERSION DATE: The Valuation Date on or next following
the Rider Date.
GENERAL ACCOUNT: The General Account supports all insurance
and annuity obligations of Phoenix Home Life Mutual
Insurance Company, and is made up of all of its general
assets other than those allocated to any separate account.
MONTHLY CALCULATION DAY: The first Monthly Calculation Day
is the Conversion Date. Subsequent Monthly Calculation Days
are the Valuation Dates on or next following the same day of
each month as the policy Date of Issue. If a month ends
before reaching that day, the Monthly Calculation Day will
be the Valuation Date on or next following the last day of
the month.
PAID-UP ADDITIONS: Non-variable paid-up additions as
described in the policy.
PROPORTIONATE: An allocation is Proportionate if the ratios
of this Rider's Subaccount values to each other are the same
before and after the allocation.
RIDER CASH VALUE: The cash value of the Variable Insurance
Additions. It is the sum of this Rider's share in the value
of each Subaccount of the Separate Account, and so will vary
over time according to investment experience of those
Subaccounts.
SEPARATE ACCOUNT: Phoenix Home Life Variable Universal Life
Account.
SUBACCOUNTS: The accounts within our Separate Account which
are made available for the allocation of assets under this
Rider.
UNIT: A standard of measurement used to determine the share
of this Rider in the value of each Subaccount of the
Separate Account.
TR10 1
<PAGE>
VALUATION DATE: Every day the New York Stock Exchange is
open for trading and Phoenix Home Life Mutual Insurance
Company is open for business.
VALUATION PERIOD: The period in days from the end of one
Valuation Date through the next Valuation Date.
VARIABLE INSURANCE ADDITIONS: Units of variable insurance,
as described in this Rider, that are in addition to the
insurance under the basic policy. Their death benefit and
cash value will vary over time according to the investment
experience of the Subaccounts in which the Rider Cash Value
is invested.
WE, US, OUR: Phoenix Home Life Mutual Insurance Company.
YOU, YOUR: The owner of the policy.
THE PURCHASE OF On the Conversion Date, any Paid-up Additions under the
VARIABLE INSURANCE policy will be terminated, and their cash value applied to
ADDITIONS purchase Variable Insurance Additions. After the Conversion
Date, any annual dividends apportioned to your policy will
be applied to purchase additional Variable Insurance
Additions. Such annual dividends do not include dividends
on any Paid-up Additions.
SUBACCOUNT
ALLOCATION Any amount applied to purchase Variable Insurance Additions
will be allocated to the Subaccounts of the Separate Account
according to the asset allocation schedule in Your election
form, or as last changed by You. You may change the
allocation schedule by telephone or by written notice to Us.
Descriptions of the Subaccounts are included in the
prospectus for this Rider.
The number of Units credited to each Subaccount of the
Separate Account will be determined by dividing the portion
of the dollar amount allocated to that Subaccount by the
unit value of that Subaccount on the date the allocation is
made.
DEATH BENEFIT The Variable Insurance Additions Death Benefit at any time
is the amount of death benefit provided by the Rider Cash
Value when applied as a net single premium. The net single
premium is based on the attained age and sex of the insured,
and on the interest rate and mortality table stated in the
policy's Basis of Calculations section.
Upon receipt of due proof of death of the insured while this
Rider is in effect, We will pay the Variable Insurance
Additions Death Benefit according to the terms of the
policy.
SURRENDER BENEFIT You may liquidate all or a portion of Your policy's Variable
Insurance Additions at any time. Upon Our receipt of Your
written request, We will pay You the Rider Cash Value, or
such portion thereof, in cash. If You liquidate all Variable
Insurance Additions, this Rider will terminate.
TR10 2
<PAGE>
MONTHLY DEDUCTIONS An insurance charge will be deducted on each Monthly
Calculation Day from the Rider Cash Value by reducing the
number of Units of each Subaccount of the Separate Account.
The allocation of the charge to the Subaccounts will be
Proportionate. The number of Units deducted will equal the
applicable charge divided by the Subaccount unit value on
the Monthly Calculation Day.
Upon Your request, We will take monthly deductions from only
certain specified Subaccounts. The charge will then be
allocated on a Proportionate basis among those Subaccounts
only. We will follow the instructions in Your election form,
or as last changed by You. Changes will only apply to future
charges. In the event that Your value in the specified
Subaccounts is insufficient, the remaining deduction will be
taken on a Proportionate basis from the other Subaccounts.
Each monthly deduction will pay for the cost of insurance
from that Monthly Calculation Day up to, but not including,
the next Monthly Calculation Day. The cost of insurance is
equal to the cost of insurance rate for that policy month
multiplied by the result of:
(a) the Variable Insurance Additions Death Benefit on the
Monthly Calculation Day; minus,
(b) the Rider Cash Value on the Monthly Calculation Day.
The cost of insurance rate for the current month is based on
the insured's attained age, sex and risk classification. The
current cost of insurance rates We use to compute the
monthly insurance charge will not exceed the rates given in
the Table of Guaranteed Maximum Cost of Insurance Rates
attached to this Rider. Any change we make in the current
cost of insurance rates will be uniform by class and based
on our future mortality, expense and lapse expectations. The
declared cost of insurance rates for an insured will not be
affected by a change in the insured's health or occupation.
LOAN VALUE Unlike Paid-Up Additions, Variable Insurance Additions may
not be assigned as collateral for policy loans. The Rider
Cash Value is not directly includable in the loan value of
the policy. However, when an increase in the maximum loan
value of the policy is needed to process the full amount of
a policy loan request or to secure indebtedness under the
policy, Paid-Up Additions, having cash value includable in
the policy's loan value, will be purchased through the
automatic release and surrender of a portion of Your
Variable Insurance Additions to the extent needed for the
resultant cash value of the Paid-Up Additions to
sufficiently increase the policy's maximum loan value. This
automatic release and surrender of a portion of Your
Variable Insurance Additions to increase the policy's
maximum loan value will not apply to automatic premium loans
under the policy.
Variable Insurance Additions terminated due to a release and
surrender to increase the policy's maximum loan value
through the purchase of Paid-Up Additions may not later be
restored either directly or through loan repayment.
TR10 3
<PAGE>
THE SEPARATE
ACCOUNT The Separate Account has been established by Us as a
separate account pursuant to New York law and is registered
as a unit investment trust under the Investment Company Act
of 1940 (1940 Act). Income and realized and unrealized gains
and losses from assets in the Separate Account are credited
to or charged against it without regard to Our other income,
gains or losses. We own the Separate Account assets and keep
them separate from Our General Account. Separate Account
assets will be valued on each Valuation Date. The portion of
the Separate Account equal to reserves and liabilities for
policies or riders supported by the Separate Account will
not be charged with any liabilities arising out of Our other
business. We reserve the right to use assets of the Separate
Account in excess of these reserves and liabilities for any
purpose.
SEPARATE ACCOUNT The Separate Account has several Subaccounts as described in
SUBACCOUNTS the Prospectus for this Rider. We may add and delete
Subaccounts subject to approval by the Securities and
Exchange Commission and, where required, by the insurance
supervisory official of the state where this policy is
delivered. We use the assets of the Separate Account to buy
shares of the underlying funds described in the Prospectus
according to Your allocation instructions. The funds are
registered under the 1940 Act as open-end diversified
investment management companies. The funds have separate
portfolios that correspond to the Subaccounts of the
Separate Account. Assets of each such Subaccount are
invested in shares of the corresponding portfolio.
A portfolio of a fund may make a material change in its
investment policy. If that occurs, You will be notified of
the change. In addition, no change will be made in the
investment policy of any of the Subaccounts of the Separate
Account without approval of the appropriate insurance
supervisory official of Our domiciliary state of New York.
The process for making such changes is on file with the
insurance supervisory official of the state where the Rider
is delivered. If, in Our judgment, a portfolio of the fund
becomes unsuitable for investment by a Subaccount of the
Separate Account for any reason, We may substitute shares of
another portfolio of the fund or shares of another fund. Any
such change will be subject to approval by the Securities
and Exchange Commission and, where required, by the
insurance supervisory official of the state where this
policy is delivered.
VOTING RIGHTS Although We are the legal owner of the fund shares, We will
vote the shares at regular and special meetings of the
shareholders of the fund in accordance with instructions
received from You and the other owners of the policies and
riders. Any shares held by Us will be voted in the same
proportion as voted by You and the other owners of the
policies and riders. However, we reserve the right to vote
the shares of the fund without direction from You if there
is a change in the law which would permit this to be done.
TR10 4
<PAGE>
SHARE OF
SEPARATE ACCOUNT
SUBACCOUNT VALUES The share of this Rider in the value of each Subaccount of
the Separate Account on a Valuation Date is the unit value
of that Subaccount on that date multiplied by the number of
this Rider's Units in that Subaccount after all transactions
for the Valuation Period ending on that day have been
processed. For any day which does not fall on a Valuation
Date, the share of this Rider in the value of each
Subaccount is determined using the number of Units on that
day after all transactions for that day have been processed
and the Unit Values on the next Valuation Date.
UNIT VALUE The Unit Value of each Subaccount of the Separate Account
was set by Us on the first Valuation Date of each such
Subaccount. The Unit Value on any other Valuation Date is
determined by multiplying the Unit Value on the just prior
Valuation Date by the Net Investment Factor for the then
current Valuation Period. The Unit Value on a day other than
a Valuation Date is the Unit Value on the next Valuation
Date. The Unit Value on a Valuation Date is determined at
the end of that day.
NET INVESTMENT
FACTOR The Net Investment Factor for each Subaccount of the
Separate Account is determined by the investment performance
of the assets held by the Subaccount during the valuation
period. Each valuation will follow applicable law and
accepted procedures. The Net Investment Factor is determined
by dividing the sum of items (A) and (B) by item (C), and
then subtracting item (D).
(A) The value of the assets in the Subaccount on the current
Valuation Date, including accrued net investment income
and realized and unrealized capital gains and losses,
but excluding the net value of any transactions during
the current Valuation Period.
(B) The amount of any dividend (or, if applicable, any
capital gain distribution) received by the Subaccount
if the "ex-dividend" date for shares of the fund occurs
during the current Valuation Period.
(C) The value of the assets in the Subaccount as of the just
prior Valuation Date including accrued net investment
income and realized and unrealized capital gains and
losses, and including the net value of all transactions
during the Valuation Period ending on that date.
(D) The number of days in the current Valuation Period
multiplied by the sum of (1) the daily mortality and
expense risk charge equal to .0000137 (based on an
annual rate of 0.50%); and (2) the charge, currently
zero, for taxes and reserves for taxes on investment
income and realized and unrealized capital gains, if
any such tax should be imposed in the future.
TRANSFERS You may transfer all or a portion of this Rider's cash value
among one or more of the Subaccounts of the Separate
Account. We reserve the right to limit the number of
transfers You may make. However, You can make up to six
transfers per contract year.
TR10 5
<PAGE>
TRANSACTION RULES Requests for transactions will usually be processed within 7
days after We receive the written request. However, We may,
at Our discretion, postpone any transfers or surrenders of
Variable Insurance Additions for any period during which the
New York Stock Exchange is closed for trading (except for
normal holiday closing) or when the Securities and Exchange
Commission has determined that a state of emergency exists
which may make processing such transactions impractical.
ANNUAL REPORT We will annually send You a report for this Rider that will
show:
[bullet] the then current Rider Cash Value and the Variable
Insurance Additions Death Benefit;
[bullet] the amounts applied to purchase Variable Insurance
Additions, and any Variable Insurance Additions
surrendered since the last report;
[bullet] an account of the change in Rider Cash Value since
the last report; and
[bullet] such additional information as required by
applicable law of regulation.
TERMINATION OF
THIS RIDER This Rider, and any Variable Insurance Additions provided
under this Rider, will terminate upon the earliest of any of
the events listed below:
(a) policy surrender, at which time We will pay You the
Rider Cash Value;
(b) policy lapse, at which time the Rider Cash Value will be
added to the lapse value to provide insurance under a
lapse option;
(c) full surrender of existing Variable Insurance Additions,
at which time We will pay You the Rider Cash Value;
(d) Our receipt of a written request from You to cancel this
Rider, at which time We will apply the Rider Cash Value
to purchase Paid-Up Additions;
(e) Our decision to terminate all Variable Insurance
Additions (for example, because of an insufficient
volume on a company-wide basis for Us to reasonably
continue the option), at which time We will apply Your
Rider Cash Value to purchase Paid-Up Additions.
Phoenix Home Life Mutual Insurance Company
/s/ Dona D. Young
Secretary
TR10 6
<PAGE>
GUARANTEED MAXIMUM MONTHLY COST OF INSURANCE RATES
BASED ON 1980 CSO
<TABLE>
<CAPTION>
Age Male Female Age Male Female
--- ---- ------ --- ---- ------
<S> <C> <C> <C> <C> <C> <C>
0 0.0003483 0.0002408 50 0.0005592 0.0004133
1 0.0000892 0.0000725 51 0.0006083 0.0004425
2 0.0000825 0.0000675 52 0.0006633 0.0004750
3 0.0000817 0.0000658 53 0.0007258 0.0005125
4 0.0000792 0.0000642 54 0.0007967 0.0005508
5 0.0000750 0.0000633 55 0.0008725 0.0005908
6 0.0000717 0.0000608 56 0.0009550 0.0006308
7 0.0000667 0.0000600 57 0.0010408 0.0006692
8 0.0000633 0.0000583 58 0.0011325 0.0007058
9 0.0000617 0.0000575 59 0.0012308 0.0007450
10 0.0000608 0.0000567 60 0.0013400 0.0007892
11 0.0000642 0.0000575 61 0.0014617 0.0008442
12 0.0000708 0.0000600 62 0.0015992 0.0009133
13 0.0000825 0.0000625 63 0.0017550 0.0010017
14 0.0000958 0.0000667 64 0.0019283 0.0011042
15 0.0001108 0.0000708 65 0.0021183 0.0012158
16 0.0001258 0.0000750 66 0.0023208 0.0013333
17 0.0001392 0.0000792 67 0.0025367 0.0014525
18 0.0001483 0.0000817 68 0.0027658 0.0015700
19 0.0001550 0.0000850 69 0.0030142 0.0016967
20 0.0001583 0.0000875 70 0.0032925 0.0018425
21 0.0001592 0.0000892 71 0.0036083 0.0020192
22 0.0001575 0.0000908 72 0.0039708 0.0022392
23 0.0001550 0.0000925 73 0.0043867 0.0025092
24 0.0001517 0.0000950 74 0.0048492 0.0028275
25 0.0001475 0.0000967 75 0.0053492 0.0031867
26 0.0001442 0.0000992 76 0.0058775 0.0035808
27 0.0001425 0.0001017 77 0.0064267 0.0040033
28 0.0001417 0.0001050 78 0.0069917 0.0044542
29 0.0001425 0.0001083 79 0.0075875 0.0049458
30 0.0001442 0.0001125 80 0.0082367 0.0054992
31 0.0001483 0.0001167 81 0.0089567 0.0061333
32 0.0001525 0.0001208 82 0.0097708 0.0068667
33 0.0001592 0.0001250 83 0.0106883 0.0077108
34 0.0001667 0.0001317 84 0.0116875 0.0086508
35 0.0001758 0.0001375 85 0.0127458 0.0096750
36 0.0001867 0.0001467 86 0.0138408 0.0107742
37 0.0002000 0.0001575 87 0.0149625 0.0119433
38 0.0002150 0.0001700 88 0.0161058 0.0131817
39 0.0002325 0.0001850 89 0.0172742 0.0144950
40 0.0002517 0.0002017 90 0.0184808 0.0158958
41 0.0002742 0.0002200 91 0.0197483 0.0174058
42 0.0002967 0.0002392 92 0.0211208 0.0190675
43 0.0003225 0.0002575 93 0.0226758 0.0209592
44 0.0003492 0.0002767 94 0.0246583 0.0232758
45 0.0003792 0.0002967 95 0.0274967 0.0264433
46 0.0004100 0.0003167 96 0.0320458 0.0313117
47 0.0004433 0.0003375 97 0.0400167 0.0395808
48 0.0004783 0.0003608 98 0.0548317 0.0546542
49 0.0005175 0.0003858 99 0.0833333 0.0833333
</TABLE>
TR10
