[VERSION A]
PHOENIX
CORPORATE EDGE
VARIABLE UNIVERSAL LIFE
INSURANCE POLICY
Issued by
PHOENIX HOME LIFE
MUTUAL INSURANCE COMPANY
IF YOU HAVE ANY QUESTIONS, PLEASE CONTACT US AT:
[envelope] ANDESA TPA, INC.
1605 N CEDAR CREST BLVD, SUITE 502
ALLENTOWN, PA 18104
[phone] 610/439-5256
PROSPECTUS MARCH 13, 2000
This prospectus describes an individual flexible premium variable universal
life insurance policy. The policy provides lifetime insurance protection for as
long as it remains in force.
You may allocate net premiums and cash value to one or more of the
subaccounts of the VUL Account and the Guaranteed Interest Account ("GIA"). The
assets of each subaccount will be used to purchase, at net asset value, shares
of a series in the following designated underlying funds.
THE PHOENIX EDGE SERIES FUND
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MANAGED BY PHOENIX INVESTMENT COUNSEL, INC.
[diamond] Phoenix-Aberdeen International Series
[diamond] Phoenix-Engemann Capital Growth Series
[diamond] Phoenix-Engemann Nifty Fifty Series
[diamond] Phoenix-Goodwin Money Market Series
[diamond] Phoenix-Goodwin Multi-Sector Fixed Income Series
[diamond] Phoenix-Hollister Value Equity Series
[diamond] Phoenix-Oakhurst Balanced Series
[diamond] Phoenix-Oakhurst Growth and Income Series
[diamond] Phoenix-Oakhurst Strategic Allocation Series
[diamond] Phoenix-Seneca Mid-Cap Growth Series
[diamond] Phoenix-Seneca Strategic Theme Series
MANAGED BY PHOENIX-ABERDEEN INTERNATIONAL ADVISORS, LLC
[diamond] Phoenix-Aberdeen New Asia Series
MANAGED BY DUFF & PHELPS INVESTMENT MANAGEMENT CO.
[diamond] Phoenix-Duff & Phelps Real Estate Securities Series
MANAGED BY PHOENIX VARIABLE ADVISORS, INC.
[diamond] Phoenix Research Enhanced Index Series
[diamond] Phoenix-Bankers Trust Dow 30 Series
[diamond] Phoenix-Federated U.S. Government Bond Series
[diamond] Phoenix-Janus Equity Income Series
[diamond] Phoenix-Janus Flexible Income Series
[diamond] Phoenix-Janus Growth Series
[diamond] Phoenix-Morgan Stanley Focus Equity Series
[diamond] Phoenix-Schafer Mid-Cap Value Series
BT INSURANCE FUNDS TRUST
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MANAGED BY BANKERS TRUST COMPANY
[diamond] EAFE(R) Equity Index Fund
FEDERATED INSURANCE SERIES
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MANAGED BY FEDERATED INVESTMENT MANAGEMENT COMPANY
[diamond] Federated Fund for U.S. Government Securities II
[diamond] Federated High Income Bond Fund II
MORGAN STANLEY DEAN WITTER UNIVERSAL FUNDS, INC.
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MANAGED BY MORGAN STANLEY DEAN WITTER INVESTMENT MANAGEMENT INC.
[diamond] Technology Portfolio
TEMPLETON VARIABLE PRODUCTS SERIES FUND
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MANAGED BY TEMPLETON INVESTMENT COUNSEL, INC.
[diamond] Templeton Asset Allocation Fund -- Class 2
[diamond] Templeton International Fund -- Class 2
[diamond] Templeton Stock Fund -- Class 2
MANAGED BY TEMPLETON ASSET MANAGEMENT, LTD.
[diamond] Templeton Developing Markets Fund -- Class 2
MANAGED BY FRANKLIN MUTUAL ADVISERS, LLC
[diamond] Mutual Shares Investments Fund -- Class 2
WANGER ADVISORS TRUST
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MANAGED BY WANGER ASSET MANAGEMENT, L.P.
[diamond] Wanger Foreign Forty
[diamond] Wanger International Small Cap
[diamond] Wanger Twenty
[diamond] Wanger U.S. Small Cap
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It may not be in your best interest to purchase a policy to replace an
existing life insurance policy or annuity contract. You must understand the
basic features of the proposed policy and your existing coverage before you
decide to replace your present coverage. You must also know if the replacement
will result in any taxes.
The policy is not a deposit or obligation of, underwritten or guaranteed by,
any financial institution or credit union. It is not federally insured or
endorsed by the Federal Deposit Insurance Corporation or any other state or
federal agency. Policy investments are subject to risk, including the
fluctuation of policy values and possible loss of principal invested or premiums
paid.
The Securities and Exchange Commission has not approved or disapproved these
securities, nor passed upon the accuracy or adequacy of this prospectus. Any
representation to the contrary is a criminal offense.
This prospectus is valid only if accompanied or preceded by current
prospectuses for the funds. You should read and keep these prospectuses for
future reference.
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TABLE OF CONTENTS
Heading Page
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PART I--GENERAL POLICY PROVISIONS........................ 5
SUMMARY ........................................... 5
Availability.................................... 5
Underwriting.................................... 5
Charges Under the Policy........................ 5
Deductions From Premiums........................ 7
Sales Charge................................ 7
State Premium Tax Charge.................... 7
Deferred Acquisition Cost ("DAC") Tax
Charge..................................... 7
Policy Value Charges............................ 7
Administrative Charge....................... 7
Cost of Insurance........................... 7
Mortality and Expense Risk Fee.............. 7
Rider Charge................................ 7
Charges for Federal Income Taxes............ 7
Fund Charges................................ 7
Other Charges................................... 9
Partial Surrender Fee....................... 9
Loan Interest Rate Expense Charge........... 9
Reduction in Charges............................ 9
PHOENIX HOME LIFE MUTUAL INSURANCE
COMPANY AND THE VUL ACCOUNT........................ 9
Phoenix......................................... 9
The VUL Account................................. 9
PERFORMANCE HISTORY................................. 9
INVESTMENTS OF THE VUL ACCOUNT...................... 9
Participating Investment Funds.................. 9
The Phoenix Edge Series Fund................ 9
BT Insurance Funds Trust.................... 11
Federated Insurance Series.................. 11
Morgan Stanley Dean Witter Universal
Funds, Inc................................. 11
Templeton Variable Products Series Fund..... 11
Wanger Advisors Trust....................... 11
Investment Advisors............................. 12
Services of the Advisors........................ 13
Reinvestment and Redemption..................... 13
Substitution of Investments..................... 13
The GIA......................................... 13
PREMIUMS............................................ 14
Minimum Premiums................................ 14
Allocation of Issue Premium..................... 14
Free Look Period................................ 14
Account Value................................... 14
Transfer of Policy Value.................... 14
Systematic Transfers for Dollar Cost
Averaging.................................. 15
Automatic Asset Re-Balancing.................... 15
Determination of Subaccount Values.............. 15
Death Benefit Under the Policy.................. 16
Minimum Face Amount......................... 16
Death Benefit Options....................... 16
Changes in Face Amount of Insurance............. 16
Requests for Increase in Face Amount........ 16
Decreases in Face Amount and Partial
Surrenders: Effect on Death Benefit............ 17
Requests for Decrease in Face Amount........ 17
Surrenders...................................... 17
General..................................... 17
Full Surrenders............................. 17
Partial Surrenders.......................... 17
Policy Loans.................................... 17
Source of Loan.............................. 17
Interest.................................... 18
Interest Credited on Loaned Value........... 18
Repayment................................... 18
Effect of Loan.............................. 18
Lapse........................................... 18
Additional Insurance Option..................... 18
Additional Rider Benefits....................... 18
PART II--ADDITIONAL POLICY PROVISIONS................... 19
Postponement of Payments........................ 19
Payment by Check................................ 19
The Contract.................................... 19
Suicide......................................... 19
Incontestability................................ 19
Change of Owner or Beneficiary.................. 19
Assignment...................................... 19
Misstatement of Age or Sex...................... 20
Surplus......................................... 20
PAYMENT OF PROCEEDS................................. 20
Surrender and Death Benefit Proceeds............ 20
Payment Options................................. 20
Option 1--Lump sum.......................... 20
Option 2--Left to earn interest............. 20
Option 3--Payment for a specific period..... 20
Option 4--Life annuity with specified
period certain............................. 20
Option 5--Life annuity...................... 20
Option 6--Payments of a specified amount.... 20
Option 7--Joint survivorship annuity with
10-year period certain..................... 21
PART III--OTHER IMPORTANT INFORMATION................... 21
FEDERAL TAX CONSIDERATIONS.......................... 21
Introduction.................................... 21
Phoenix's Tax Status............................ 21
Policy Benefits................................. 21
Death Benefit Proceeds...................... 21
Full Surrender.............................. 21
Partial Surrender........................... 22
Loans....................................... 22
Business-Owned Policies......................... 22
Modified Endowment Contracts.................... 22
General..................................... 22
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Reduction in Benefits During the
First Seven Years.......................... 22
Distributions Affected...................... 22
Penalty Tax................................. 22
Material Change Rules....................... 22
Serial Purchase of Modified
Endowment Contracts........................ 23
Limitations on Unreasonable Mortality and
Expense Charges................................ 23
Diversification Standards....................... 23
Change of Ownership or Insured or
Assignment..................................... 24
Other Taxes..................................... 24
VOTING RIGHTS ...................................... 24
THE DIRECTORS AND EXECUTIVE OFFICERS OF
PHOENIX............................................ 24
SAFEKEEPING OF THE VUL ACCOUNT'S ASSETS ............ 26
SALES OF POLICIES .................................. 26
STATE REGULATION ................................... 26
REPORTS ............................................ 26
LEGAL PROCEEDINGS .................................. 26
LEGAL MATTERS ...................................... 26
REGISTRATION STATEMENT ............................. 26
FINANCIAL STATEMENTS ............................... 26
APPENDIX A--GLOSSARY OF SPECIAL TERMS............... 71
APPENDIX B--PERFORMANCE HISTORY..................... 72
APPENDIX C--ILLUSTRATIONS OF DEATH BENEFITS,
POLICY VALUES ("ACCOUNT VALUES") AND
CASH SURRENDER VALUES.............................. 76
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.
4
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PART I--GENERAL POLICY PROVISIONS
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SUMMARY
- -------------------------------------------------------------------------------
This is a summary that describes the general provisions of the policy.
Certain provisions of the policy described in this prospectus may differ in
a particular state because of specific state requirements.
Throughout the prospectus, Phoenix Home Life Mutual Insurance Company is
referred to as Phoenix, we, us, or our and the policyholder is referred to as
you or your.
We define the following terms in the Glossary of Appendix A:
ATTAINED AGE POLICY ANNIVERSARY
BENEFICIARY POLICY DATE
DEBT POLICY VALUE
FUNDS POLICY YEAR
GENERAL ACCOUNT SERIES
ISSUE PREMIUM SUBACCOUNTS
MONTHLY CALCULATION DATE TARGET PREMIUM
NET ASSET VALUE VALUATION DATE
PAYMENT DATE VALUATION PERIOD
PLANNED ANNUAL PREMIUM VUL ACCOUNT (ACCOUNT)
If there is ever a difference between the provisions within this prospectus
and the provisions of the policy, the policy provisions will control.
AVAILABILITY
The policy is available on a "case" basis. We may consider one person as a
case. All policies within a case are aggregated for purposes of determining
policy dates, loan rates and underwriting requirements. If an individual owns
the policy as part of a case, he or she may exercise all rights under the policy
through their employer or sponsoring organization. After termination of
employment or other such relationship, the individual may exercise such rights
directly with us.
For fully underwritten policies, the age of the insured at the time of issue
generally must be between ages 18 through 85 as of his or her birthday nearest
the policy anniversary.
For policies that are underwritten using simplified or guaranteed issue
programs, generally the maximum age of the insured at the time of issue is age
70 for simplified and 64 for guaranteed issue.
The minimum face amount of insurance per policy issued is $50,000.
You can purchase a policy to insure the life of another person provided that
you have an insurable interest in that life and the prospective Insured
consents.
UNDERWRITING
Currently, we offer three types of underwriting:
[diamond] Fully underwritten;
[diamond] Simplified issue underwriting; and
[diamond] Guaranteed issue underwriting.
Your cost of insurance charges will vary based on the type of underwriting
we use.
CHARGES UNDER THE POLICY
We deduct certain charges from your policy to compensate us for:
1. our expenses in selling the policy;
2. underwriting and issuing the policy;
3. premium and federal taxes incurred on premiums received;
4. providing insurance benefits under your policy; and
5. assuming certain risks in connection with the policy.
These charges are summarized below. These charges are described more fully
following this chart.
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<TABLE>
<CAPTION>
CHARGES UNDER THE POLICY
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CHARGES CURRENT RATE GUARANTEED RATE
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<S> <C> <C> <C>
DEDUCTIONS FROM SALES CHARGE Policy years 1 - 7: 7.0% of premiums up Policy years 1 - 7: 9.0% of premiums.
PREMIUMS to the Target Premium and 0% on amounts Policy year 8+: 3.0% of all premiums.
in excess of the Target Premium.
Policy year 8+: 0% of all premiums.
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STATE PREMIUM 0.75% to 4.0% of each premium depending This charge will always equal the
TAX on your state's applicable rate. applicable state rate.
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DEFERRED ACQUISITION 1.5% of each premium. 1.5% of each premium.
COST TAX CHARGE
(FEDERAL DAC TAX)
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POLICY VALUE CHARGES ADMINISTRATIVE CHARGE $5 per month ($60 annually) $10 per month ($120 annually) except
New York, $7.50 per month ($90
annually)
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COST OF INSURANCE A per thousand rate multiplied by the The maximum monthly cost of insurance
CHARGE amount at risk each month. This charge charge for each $1,000 of insurance is
varies by the Insured's issue age, shown on your policy's schedule pages.
policy duration, gender and
underwriting class.
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MORTALITY AND EXPENSE 0.50% annually in policy years 1-10 0.90% annually in all policy years
RISK CHARGE 0.25% annually in policy years 11+
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FUND CHARGES SEE FUND CHARGE TABLE SEE FUND CHARGE TABLE
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OTHER CHARGES PARTIAL SURRENDER FEE None 2.0% of the amount withdrawn, but not
greater than $25.
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TRANSFERS BETWEEN None $10 per transfer after the first 2
SUBACCOUNTS transfers in any given policy year,
(after 12 transfers in New York).
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LOAN INTEREST RATE The rates in effect before the 16th The Guaranteed rates before the Insured
CHARGED policy year and before the Insured reaches 65 for all states are:
reaches age 65 in all states except Policy year 1 - 10: 4.75%
New York and New Jersey are: Policy year 11 - 15: 4.50%
Policy year 1 - 10: 2.75% Policy year 16+: 4.25%
Policy year 11 - 15: 2.50%
Policy year 16+: 2.25%
The rates in effect before the 16th
policy year and before the Insured
reaches age 65 in New York and
New Jersey are:
Policy year 1 - 10: 4.75%
Policy year 11 - 15: 4.50%
Policy year 16+: 4.25%
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</TABLE>
6
<PAGE>
DEDUCTIONS FROM PREMIUMS
Before we allocate your premium to the subaccounts or the GIA we deduct a
sales charge, a state premium tax and a federal tax to cover the estimated cost
to us for deferred acquisition costs.
SALES CHARGE
We deduct a sales charge from your premium for the costs we incur in the
sales and distribution of the policies.
STATE PREMIUM TAX CHARGE
States assess premium taxes at various rates. We deduct the applicable state
rate from each premium to cover the cost of the premium taxes assessed against
us by the state.
We may increase or decrease this charge if there is a change in the tax or
change of residence.
DEFERRED ACQUISITION COST ("DAC") TAX CHARGE
This tax is associated with our federal tax liability under Internal Revenue
Code Section 848.
POLICY VALUE CHARGES
On each monthly calculation day, we deduct from your policy value the
following charges:
1. Administrative Charge
2. Cost of Insurance Charge
3. Mortality and Expense Risk Fee
4. A charge for the cost of riders if applicable
The amount deducted is allocated among the subaccounts and the unloaned
portion of the GIA based on an allocation schedule specified by you. You
initially choose this schedule in your application.
1. ADMINISTRATIVE CHARGE
We assess a monthly charge for the expenses we incur in administering the
policy. This charge reimburses us for the cost of daily administration for
services such as billing and collections, monthly processing, updating daily
values and communicating with policyholders.
2. COST OF INSURANCE
We deduct a charge to cover the cost of insurance coverage on each monthly
calculation date. This charge is based on:
[diamond] Insured's gender;
[diamond] Insured's age at issue;
[diamond] Policy year in which we make the deduction;
[diamond] Insured's tobacco use classification;
[diamond] Rating class of the policy; and
[diamond] Underwriting classification of the case.
To determine the monthly cost of insurance, we multiply the appropriate cost
of insurance rate by the difference between your policy's death benefit and the
policy value. Any change in the cost of insurance rates will apply to all
persons of the same sex, insurance age and risk class whose policies have been
in force for the same length of time.
3. MORTALITY AND EXPENSE RISK FEE
We charge the subaccounts for the mortality and expense risks we assume.
This charge is deducted from the value of each subaccount's assets attributable
to the policies.
The mortality risk we assume is that the group of lives we insure under our
policies may, on average, live for a shorter period of time than we estimated.
The expense risk we assume is that our cost of issuing and administering the
policies may be more than we estimated.
If all the money we collect from this charge is not required to cover the
cost of death benefits and other expenses, it will be a gain to us. If the money
we collect is not enough to cover our costs, we will still provide for death
benefits and expenses.
4. RIDER CHARGE
We will deduct any applicable monthly rider charges for the additional
benefit provided to you by the rider.
CHARGES FOR FEDERAL INCOME TAXES
We currently do not charge the VUL Account for federal income taxes
attributable to it. In the future, we may charge to cover these or any other tax
liability of the VUL Account.
FUND CHARGES
Please refer to the following chart for a listing of fund charges.
7
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FUND ANNUAL EXPENSES
(For the year ending December 31, 1999)
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------------
OTHER EXPENSES TOTAL EXPENSES TOTAL EXPENSES
SERIES MANAGEMENT RULE 12B-1 BEFORE BEFORE AFTER
FEES FEES REIMBURSEMENT(1) REIMBURSEMENT REIMBURSEMENT(2)
- -------------------------------------------------------------------------------------------------------------------------------
THE PHOENIX EDGE SERIES FUND
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Phoenix Research Enhanced Index .45% N/A .30% .75% .55%
Phoenix-Aberdeen International .75% N/A .26% 1.01% 1.01%
Phoenix-Aberdeen New Asia 1.00% N/A 1.39% 2.39% 1.25%
Phoenix-Bankers Trust Dow 30 .35% N/A 7.46% 7.81% .50%
Phoenix-Duff & Phelps Real Estate Securities .75% N/A .56% 1.31% 1.00%
Phoenix-Engemann Capital Growth .62% N/A .06% .68% .68%
Phoenix-Engemann Nifty Fifty .90% N/A .53% 1.43% 1.05%
Phoenix-Federated U.S. Government Bond .60% N/A 7.61% 8.21% .75%
Phoenix-Goodwin Money Market .40% N/A .17% .57% .55%
Phoenix-Goodwin Multi-Sector Fixed Income .50% N/A .21% .71% .65%
Phoenix-Hollister Value Equity .70% N/A 1.33% 2.03% .85%
Phoenix-Janus Equity Income .85% N/A 17.96% 18.81% 1.00%
Phoenix-Janus Flexible Income .80% N/A 7.38% 8.18% .95%
Phoenix-Janus Growth .85% N/A 16.44% 17.29% 1.00%
Phoenix-Morgan Stanley Focus Equity .85% N/A 7.26% 8.11% 1.00%
Phoenix-Oakhurst Balanced .54% N/A .16% .70% .70%
Phoenix-Oakhurst Growth and Income .70% N/A .31% 1.01% .85%
Phoenix-Oakhurst Strategic Allocation .58% N/A .12% .70% .70%
Phoenix-Schafer Mid-Cap Value 1.05% N/A 1.53% 2.58% 1.20%
Phoenix-Seneca Mid-Cap Growth .80% N/A 1.24% 2.04% 1.05%
Phoenix-Seneca Strategic Theme .75% N/A .22% .97% .97%
BT INSURANCE FUNDS TRUST
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EAFE(R) Equity Index Fund .45% N/A .69% 1.15% .65%
FEDERATED INSURANCE SERIES
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Federated Fund for U.S. Government Securities II .60% N/A .43% 1.03% .78%
Federated High Income Bond Fund II .60% N/A .44% 1.04% .79%
MORGAN STANLEY DEAN WITTER UNIVERSAL FUNDS, INC.
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Technology Portfolio .79% N/A 11.78% 12.57% 1.15%
TEMPLETON VARIABLE PRODUCTS SERIES FUND(3)
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Mutual Shares Investments Fund-- Class 2(4) .60% .25% 1.00% 1.91% 1.25%
Templeton Asset Allocation Fund-- Class 2 .60% .25% .14% .99% .99%
Templeton Developing Markets Fund-- Class 2 1.25% .25% .25% 1.75% 1.75%
Templeton International Fund-- Class 2 .69% .25% .16% 1.10% 1.10%
Templeton Stock Fund-- Class 2 .70% .25% .05% 1.00% 1.00%
WANGER ADVISORS TRUST
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Wanger Foreign Forty 1.00% N/A 2.45% 3.45% 1.45%
Wanger International Small Cap 1.25% N/A .24% 1.49% 1.49%
Wanger Twenty .95% N/A 1.17% 2.12% 1.35%
Wanger U.S. Small Cap .95% N/A .07% 1.02% 1.02%
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</TABLE>
1 Each series pays a portion or all of its expenses other than the management
fee. The Phoenix Research Enhanced Index Series will pay up to .10%; the
Phoenix-Engemann Capital Growth, Phoenix-Goodwin Multi-Sector Fixed Income,
Phoenix-Oakhurst Strategic Allocation, Phoenix-Goodwin Money Market,
Phoenix-Oakhurst Balanced, Phoenix-Engemann Nifty Fifty, Phoenix-Oakhurst
Growth and Income, Phoenix-Hollister Value Equity and Phoenix-Schafer Mid-Cap
Value, Phoenix-Bankers Trust Dow 30, Phoenix-Federated U.S. Government Bond,
Phoenix-Janus Equity Income, Phoenix-Janus Flexible Income, Phoenix-Janus
Growth and Phoenix-Morgan Stanley Focus Equity Series will pay up to .15%;
the Phoenix-Duff & Phelps Real Estate Securities, Phoenix-Seneca Strategic
Theme, Phoenix-Aberdeen New Asia, and Phoenix-Seneca Mid-Cap Growth Series
will pay up to .25%; and the Phoenix-Aberdeen International Series will pay
up to .40%. The Wanger Foreign Forty will pay up to .45%, the Wanger U.S.
Small Cap Series will pay up to .50%, the Wanger International Small Cap will
pay up to .60%, and the Wanger Twenty will pay up to .40%.
2 Reflects the effect of any management fee waivers and reimbursement of
expenses.
3 The fund's class 2 distribution plan or "rule 12b-1 plan" is described in the
fund's prospectus. On 2/8/00, the fund's shareholders approved a merger and
reorganization that will, on or about 5/1/00, combine the fund with a similar
fund of the Franklin Templeton Variable Insurance Products Trust ("FTVIPT").
As of 5/1/00, the expenses of the fund will be based on the combined assets
of both funds. Based on pro-forma financial statements for the combined funds
as of 12/31/99, which used expense rates of the surviving FTVIPT fund as of
that date, the fund's management fees, other expenses and total operating
expenses after 5/1/00 are estimated to be:
<TABLE>
<CAPTION>
Management Other Total
Estimated Annual Expenses from 5/1/00 Fees Expenses Operating Expenses
<S> <C> <C> <C>
Mutual Shares Investments Fund -- Class 2 0.60% 0.19% 1.04%
Asset Allocation Fund -- Class 2 0.65% 0.17% 1.07%
Developing Markets Fund -- Class 2 1.25% 0.14% 1.64%
International Fund -- Class 2 0.85% 0.07% 1.17%
Stock Fund -- Class 2 0.80% 0.05% 1.10%
</TABLE>
4 The manager and administrator agreed in advance to waive or limit their
respective fees, and the manager to assume as its own expense certain
expenses otherwise payable by the fund. With this reduction, management
fees after reimbursement were 0.00% and total operating expenses were 1.25%.
After 12/31/00, the manager and administrator may end this arrangement at
any time.
8
<PAGE>
OTHER CHARGES
PARTIAL SURRENDER FEE
We reserve the right to deduct a charge from each withdrawal.
LOAN INTEREST RATE EXPENSE CHARGE
We deduct a charge from the loan interest rate. This charge reimburses us
for expenses we incur in administering your loan. This rate varies by policy
year.
REDUCTION IN CHARGES
The policy is available for purchase by individuals, corporations and other
groups. For group or sponsored arrangements (including our employees and their
family members) and for special exchange programs that we may make available, we
reserve the right to reduce or eliminate the sales load, mortality and expense
risk charge, monthly administrative charge, monthly cost of insurance charges or
other charges normally assessed on certain multiple life cases where it is
expected that the size or nature of such cases will result in savings of sales,
underwriting, administrative or other costs.
Eligibility for the amount of these reductions will be determined by a
number of factors, including the number of Insureds, the total premium expected
to be paid, the total assets under management for the policyowner, the nature of
the relationship among individual Insureds, the purpose for which the policies
are being purchased, the expected persistency of individual policies, and other
circumstances which in our opinion are rationally related to the expected
reduction in expenses. Any variations in the charge structure will be determined
in a uniform manner reflecting differences in costs of services and not unfairly
discriminatory to policyholders.
PHOENIX HOME LIFE MUTUAL INSURANCE
COMPANY AND THE VUL ACCOUNT
- -------------------------------------------------------------------------------
PHOENIX
We are a mutual life insurance company originally chartered in Connecticut
in 1851 and redomiciled to New York in 1992. Our executive office is at One
American Row, Hartford, Connecticut 06102-5056 and our main administrative
office is at 100 Bright Meadow Boulevard, Enfield, Connecticut 06083-1900. Our
New York principal office is at 10 Krey Boulevard, East Greenbush, New York
12144. We sell insurance policies and annuity contracts through our own field
force of full-time agents and through brokers.
THE VUL ACCOUNT
The VUL Account is a separate account of Phoenix, established 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 (the "1940 Act"), as
amended, and meets the definition of a "separate account" under that Act. This
registration does not involve supervision of the management of the VUL Account
or Phoenix by the SEC.
The VUL Account is divided into subaccounts each of which is available for
allocation of policy value. Each subaccount will invest solely in shares of a
specific series of a mutual fund. In the future, we may establish additional
subaccounts which will be made available to existing policyowners to the extent
and on a basis decided by us. See "Investments of the VUL Account--Participating
Investment Funds."
We do not guarantee the investment performance of the VUL Account or any of
its subaccounts. Contributions to the overall policy value allocated to the VUL
Account depend on the chosen fund's investment performance. Thus, you bear the
full investment risk for all monies invested in the VUL Account.
The VUL Account is part of the general business of Phoenix, but the gains or
losses of the VUL Account belong solely to the VUL Account. The gains or losses
of any other business we may conduct do not affect the VUL Account. Under New
York law, the assets of the VUL Account may not be taken to pay liabilities
arising out of any other business we may conduct. Nevertheless, all obligations
arising under the policy are general corporate obligations of Phoenix.
PERFORMANCE HISTORY
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We may include the performance history of the VUL Account 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. See "Appendix B" for more information.
INVESTMENTS OF THE VUL ACCOUNT
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PARTICIPATING INVESTMENT FUNDS
THE PHOENIX EDGE SERIES FUND
Certain subaccounts invest in corresponding series of The Phoenix Edge
Series Fund. The following series are currently available:
PHOENIX RESEARCH ENHANCED INDEX SERIES: The investment objective of the
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. The series invests 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.
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PHOENIX-ABERDEEN INTERNATIONAL SERIES: The investment objective of the
series is to seek a high total return consistent with reasonable risk. The
series invests 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
Phoenix-Aberdeen International Series provides a means for investors to invest a
portion of their assets outside the United States.
PHOENIX-ABERDEEN NEW ASIA SERIES: The investment objective of the series is
to seek long-term capital appreciation. The series invests primarily in a
diversified portfolio of equity securities of issuers organized and principally
operating in Asia, excluding Japan.
PHOENIX-BANKERS TRUST DOW 30 SERIES: The series seeks to track the total
return of the Dow Jones Industrial Average (the "DJIA(SM)") before fund
expenses.
PHOENIX-DUFF & PHELPS REAL ESTATE SECURITIES SERIES: The investment
objective of the series is to seek capital appreciation and income with
approximately equal emphasis. Under normal circumstances, it invests 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.
PHOENIX-ENGEMANN CAPITAL GROWTH SERIES: The investment objective of the
series is to achieve intermediate and long-term growth of capital, with income
as a secondary consideration. The Phoenix-Engemann Capital Growth Series invests
principally in common stocks of corporations believed by management to offer
growth potential.
PHOENIX-ENGEMANN NIFTY FIFTY SERIES: The investment objective of the series
is to seek long-term capital appreciation by investing in approximately 50
different securities which offer 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.
PHOENIX-FEDERATED U.S. GOVERNMENT BOND SERIES: The investment objective of
the series is to maximize total return by investing primarily in debt
obligations of the U.S. Government, its agencies and instrumentalities.
PHOENIX-GOODWIN MONEY MARKET SERIES: The investment objective of the series
is to provide maximum current income consistent with capital preservation and
liquidity. The Phoenix-Goodwin Money Market Series invests exclusively in high
quality money market instruments.
PHOENIX-GOODWIN MULTI-SECTOR FIXED INCOME SERIES: The investment objective
of the series is to seek long-term total return. The Phoenix-Goodwin
Multi-Sector Fixed Income Series seeks to achieve its investment objective by
investing in a diversified portfolio of high yield and high quality fixed income
securities.
PHOENIX-HOLLISTER VALUE EQUITY SERIES: The primary investment objective of
the series is long-term capital appreciation, with a secondary investment
objective of current income. The Phoenix-Hollister Value Equity 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.
PHOENIX-JANUS EQUITY INCOME SERIES: The investment objective of the series
is to seek current income and long-term growth of capital.
PHOENIX-JANUS FLEXIBLE INCOME SERIES: The investment objective of the series
is to seek to obtain maximum total return, consistent with preservation of
capital.
PHOENIX-JANUS GROWTH SERIES: The investment objective of the series is to
seek long-term growth of capital, in a manner consistent with the preservation
of capital.
PHOENIX-MORGAN STANLEY FOCUS EQUITY SERIES: The investment objective of the
series is to seek capital appreciation by investing primarily in equity
securities.
PHOENIX-OAKHURST BALANCED SERIES: The investment objective of the series is
to seek reasonable income, long-term capital growth and conservation of capital.
The Phoenix-Oakhurst Balanced Series invests based on combined considerations of
risk, income, capital enhancement and protection of capital value.
PHOENIX-OAKHURST GROWTH AND INCOME SERIES: The investment objective of the
series is to seek dividend growth, current income and capital appreciation by
investing in common stocks. The Phoenix-Oakhurst Growth and Income 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-OAKHURST STRATEGIC ALLOCATION SERIES: The investment objective of
the series is to realize as high a level of total return over an extended period
of time as is considered consistent with prudent investment risk. The
Phoenix-Oakhurst Strategic Allocation Series invests in stocks, bonds and money
market instruments in accordance with the Investment Advisor's appraisal of
investments most likely to achieve the highest total return.
PHOENIX-SCHAFER MID-CAP VALUE SERIES: The primary investment objective of
the series is to seek long-term capital appreciation, with current income as the
secondary investment objective. The Phoenix-Schafer Mid-Cap Value Series will
invest in common stocks of established
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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 increase in
value.
PHOENIX-SENECA MID-CAP GROWTH SERIES: The investment objective of the 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-SENECA STRATEGIC THEME SERIES: The investment objective of the
series is to seek long-term appreciation of capital by identifying securities
benefiting from long-term trends present in the United States and abroad. The
Phoenix-Seneca Strategic Theme Series invests primarily in common stocks
believed to have substantial potential for capital growth.
BT INSURANCE FUNDS TRUST
A certain subaccount invests in a corresponding series of the BT Insurance
Funds Trust. The following series is currently available:
EAFE(R) EQUITY INDEX FUND: The series seeks to match the performance of the
Morgan Stanley Capital International EAFE(R) Index ("EAFE(R) Index"), which
emphasizes major market stock performance of companies in Europe, Australia and
the Far East. The series invests in a statistically selected sample of the
securities found in the EAFE(R) Index.
FEDERATED INSURANCE SERIES
Certain subaccounts invest in corresponding series of the Federated
Insurance Series. The following series are currently available:
FEDERATED FUND FOR U.S. GOVERNMENT SECURITIES II: The investment objective
of the series is to seek current income by investing primarily in U.S.
government securities, including mortgage-backed securities issued by U.S.
government agencies.
FEDERATED HIGH INCOME BOND FUND II: The investment objective of the series
is to seek high current income by investing primarily in a diversified portfolio
of high-yield, lower-rated corporate bonds.
MORGAN STANLEY DEAN WITTER UNIVERSAL FUNDS, INC.
A certain subaccount invests in a corresponding series of the Morgan Stanley
Dean Witter Universal Funds, Inc. The following series is currently available:
TECHNOLOGY PORTFOLIO: The investment objective of the series is to seek
long-term capital appreciation by investing primarily in equity securities of
companies that the investment advisor expects to benefit from their involvement
in technology and technology-related industries.
TEMPLETON VARIABLE PRODUCTS SERIES FUND
Certain subaccounts invest in Class 2 Shares of a corresponding fund of the
Templeton Variable Products Series Fund. The following funds are currently
available:
MUTUAL SHARES INVESTMENTS FUND: The primary investment objective of the fund
is capital appreciation with income as a secondary objective. The Mutual Shares
Investments Fund invests in domestic equity securities that the manager believes
are significantly undervalued.
TEMPLETON ASSET ALLOCATION FUND: The investment objective of the fund is a
high level of total return. The Templeton Asset Allocation Fund invests in
stocks of companies of any nation, bonds of companies and governments of any
nation and in money market instruments. Changes in the asset mix will be made in
an attempt to capitalize on total return potential produced by changing economic
conditions throughout the world.
TEMPLETON DEVELOPING MARKETS FUND: The investment objective of the fund is
long-term capital growth. The Templeton Developing Markets Fund invests
primarily in emerging market equity securities.
TEMPLETON INTERNATIONAL FUND: The investment objective of the fund is
long-term capital growth. The Templeton International Fund invests primarily in
stocks of companies located outside the United States, including emerging
markets.
TEMPLETON STOCK FUND: The investment objective of the fund is long-term
capital growth. The Templeton Stock Fund invests primarily in common stocks
issued by companies in various nations throughout the world, including the U.S.
and emerging markets.
WANGER ADVISORS TRUST
Certain subaccounts invest in corresponding series of the Wanger Advisors
Trust. The following series are currently available:
WANGER FOREIGN FORTY: The investment objective of the series is to seek
long-term capital growth. The Wanger Foreign Forty Series invests primarily in
equity securities of foreign companies with market capitalization of $1 billion
to $10 billion and focuses its investments in 40 to 60 companies in the
developed markets.
WANGER INTERNATIONAL SMALL CAP: The investment objective of the series is to
seek long-term capital growth. The Wanger International Small Cap Series invests
primarily in securities of non-U.S. companies with total common stock market
capitalization of less than $1 billion.
WANGER TWENTY: The investment objective of the series is to seek long-term
capital growth. The Wanger Twenty Series invests primarily in the stocks of U.S.
companies with market capitalization of $1 billion to $10 billion and ordinarily
focuses its investments in 20 to 25 U.S. companies.
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WANGER U.S. SMALL CAP: The investment objective of the series is to seek
long-term capital growth. The Wanger U.S. Small Cap Series invests primarily in
securities of U.S. companies with total common stock market capitalization of
less than $1 billion.
Each series will be subject to market fluctuations and the risks that come
with the ownership of any security, and there can be no assurance that any
series will achieve its stated investment objective.
In addition to being sold to the Account, shares of all of the funds also
may be sold to other separate accounts of Phoenix or its affiliates and shares
of certain funds also may be sold to the separate accounts of other insurance
companies.
It is possible that in the future it may be disadvantageous for variable
life insurance separate accounts and variable annuity separate accounts to
invest in the fund(s) simultaneously. Although neither Phoenix nor the fund(s)
trustees currently foresee any such disadvantages either to variable life
insurance policyowners or to variable annuity contractowners, the funds'
trustees intend to monitor events in order to identify any material conflicts
between variable life insurance policyowners and variable annuity contractowners
and to determine what action, if any, should be taken in response to such
conflicts. Material conflicts could, for example, result from:
[diamond] changes in state insurance laws;
[diamond] changes in federal income tax laws;
[diamond] changes in the investment management of any portfolio of the
fund(s); or
[diamond] differences in voting instructions between those given by
variable life insurance policyowners and those given by
variable annuity contractowners.
We will, at our expense, remedy such material conflicts including, if
necessary, segregating the assets underlying the variable life insurance
policies and the variable annuity contracts and establishing a new registered
investment company.
INVESTMENT ADVISORS
Phoenix Investment Counsel, Inc. ("PIC") is the investment advisor to the
following series in The Phoenix Edge Series Fund:
o Phoenix-Goodwin Money Market Series
o Phoenix-Goodwin Multi-Sector Fixed Income Series
o Phoenix-Hollister Value Equity Series
o Phoenix-Oakhurst Balanced Series
o Phoenix-Oakhurst Growth and Income Series
o Phoenix-Oakhurst Strategic Allocation Series.
Based on subadvisory agreements with the fund, PIC as the investment advisor
delegates certain investment decisions and research functions to subadvisors for
the following series:
[diamond] Phoenix-Aberdeen International Advisors, LLC ("PAIA")
o Phoenix-Aberdeen International Series
[diamond] Roger Engemann & Associates, Inc. ("Engemann")
o Phoenix-Engemann Capital Growth Series
o Phoenix-Engemann Nifty Fifty Series
[diamond] Schafer Capital Management, Inc.
o Phoenix-Schafer Mid-Cap Value Series
[diamond] Seneca Capital Management, LLC ("Seneca")
o Phoenix-Seneca Mid-Cap Growth Series
o Phoenix-Seneca Strategic Theme Series
Phoenix Variable Advisors, Inc. ("PVA") is also an investment advisor to The
Phoenix Edge Series Fund. Based on subadvisory agreements with the fund, PVA
delegates certain investment decisions and research functions to the following
subadvisors for the series listed:
[diamond] Bankers Trust Company
o Phoenix-Bankers Trust Dow 30 Series
[diamond] Federated Investment Management Company
o Phoenix-Federated U.S. Government Bond Series
[diamond] J.P. Morgan Investment Management, Inc.
o Phoenix Research Enhanced Index Series
[diamond] Janus Capital Corporation
o Phoenix-Janus Equity Income Series
o Phoenix-Janus Flexible Income Series
o Phoenix-Janus Growth Series
[diamond] Morgan Stanley Investment Management Inc.
o Phoenix-Morgan Stanley Focus Equity Series
The investment advisor to the Phoenix-Duff & Phelps Real Estate Securities
Series is Duff & Phelps Investment Management Co. ("DPIM").
The investment advisor to the Phoenix-Aberdeen New Asia Series is PAIA.
Pursuant to subadvisory agreements with the fund, PAIA delegates certain
investment decisions and research functions with respect to the Phoenix-Aberdeen
New 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 by Aberdeen Fund Managers, Inc.
The other investment advisors and their respective funds are:
[diamond] Bankers Trust Company
o EAFE(R) Equity Index Fund
[diamond] Federated Investment Management Company
o Federated Fund for U.S. Government Securities II
o Federated High Income Bond Fund II
[diamond] Franklin Mutual Advisers, LLC
o Mutual Shares Investments Fund
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[diamond] Morgan Stanley Dean Witter Investment
Management Inc.
o Technology Portfolio
[diamond] Templeton Asset Management, Ltd.
o Templeton Developing Markets Fund
[diamond] Templeton Investment Counsel, Inc.
o Templeton Asset Allocation Fund
o Templeton International Fund
o Templeton Stock Fund
[diamond] Wanger Asset Management, L.P.
o Wanger Foreign Forty
o Wanger International Small Cap
o Wanger Twenty
o Wanger U.S. Small Cap
SERVICES OF THE ADVISORS
The Advisors continually 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 of each fund. A
detailed discussion of the investment advisors and subadvisors, and the
investment advisory and subadvisory agreements, is contained in the accompanying
prospectus for the funds.
REINVESTMENT AND REDEMPTION
All dividend distributions of the fund are automatically reinvested in
shares of the fund at their net asset value on the date of distribution.
Likewise, all capital gains distributions of the fund, if any, are reinvested at
the net asset value on the record date. We redeem fund shares at their net asset
value to the extent necessary to make payments under the policy.
SUBSTITUTION OF INVESTMENTS
We reserve the right to make additions to, deletions from, or substitutions
for the investments held by the VUL Account, subject to compliance with the law
as currently applicable or as subsequently changed. In the future, we may
establish additional subaccounts within the VUL Account, each of which will
invest in shares of a designated portfolio of the fund with a specified
investment objective. If and when marketing needs and investment conditions
warrant, and at our discretion, we may establish additional portfolios. These
will be made available under existing Policies to the extent and on a basis
determined by us.
If shares of any of the portfolios of the fund should be no longer available
for investment or, if in the judgment of our management, further investment in
shares of any of the portfolios become inappropriate due to policy objectives,
we may then substitute shares of another mutual fund for shares already
purchased, or to be purchased in the future. No substitution of mutual fund
shares held by the VUL Account may take place without prior approval of the
Securities and Exchange Commission and prior notice to you. In the event of a
change, you will be given the option of transferring the policy value of the
subaccount in which the substitution is to occur to another subaccount.
THE GUARANTEED INTEREST ACCOUNT
In addition to the VUL Account, you may allocate premium or transfer policy
value to the GIA. Amounts you allocate or transfer to the GIA become part of
Phoenix's general account assets. You do not share in the investment experience
of those assets. Rather, we guarantee a 3% rate of return on your allocated
amount. For amounts transferred to the GIA due to a policy loan, the guaranteed
rate is 2% in all states except New York and New Jersey. In New York and New
Jersey the rate credited to the GIA due to a policy loan is 4%. Although we are
not obligated to credit interest at a higher rate than the minimum, we will
credit excess interest, if any, as determined by us based on information as to
expected investment yields.
Because of exemptive and exclusionary provisions, we have not registered
interests in our general account under the Securities Act of 1933. Also, we have
not registered our general account as an investment company under the Investment
Company Act of 1940, as amended. Therefore, neither the general account nor any
of its interests are subject to these Acts, and the Securities and Exchange
Commission has not reviewed the general account disclosures. These disclosures
may, however, be subject to certain provisions of the federal securities law as
to the accuracy and completeness of statements made in this prospectus.
We reserve the right to limit total deposits, including transfers, to the
GIA to no more than $250,000 during any one-week period per policy.
In general, you can make only one transfer per year from the GIA. The amount
that can be transferred out is limited to the greater of $1,000 or 25% of the
policy value in the GIA as of the date of the transfer. If you elect the
Systematic Transfer Program, approximately equal amounts may be transferred out
of the GIA. Also, the total policy value allocated to the GIA may be transferred
out of the GIA to one or more of the subaccounts of the VUL Account over a
consecutive four-year period according to the following schedule:
[diamond] Year One: 25% of the total value
[diamond] Year Two: 33% of remaining value
[diamond] Year Three: 50% of remaining value
[diamond] Year Four: 100% of remaining value
Transfers into the GIA and among the subaccounts of the VUL Account may be
made at any time. Transfers from the GIA are subject to the rules discussed in
"Appendix C" and "Transfer of Policy Value" and "Systematic Transfers for Dollar
Cost Averaging."
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PREMIUMS
- -------------------------------------------------------------------------------
MINIMUM PREMIUMS
The minimum premium is determined by case size as follows:
[diamond] 5 or more lives: $100,000 annually for the first five policy years
[diamond] Fewer than 5 lives: $250,000 annually for the first five policy years
The issue premium is due on the policy date. The Insured must be alive when
the Issue Premium is paid. After that, premiums may be paid at any time while
the policy is in force. There is no direct relationship between the "Plan
Minimum Premium" and the "Policy Target Premium." The plan minimum premium is a
case-level requirement for the plan to be issued. The target premium is used to
determine the amount of commissions paid to the producer for a given policy.
Each premium payment must be at least $100. Additional payments should be sent
to the:
VUL COLI UNIT
PO BOX 22012
ALBANY, NY 12201-2012
The number of units credited to a subaccount of the VUL Account will be
determined by dividing the portion of the net premium applied to that subaccount
by the unit value of the subaccount on the payment date.
Regardless of whether you choose the Guideline Premium Test or the Cash
Value Accumulation Test (see "Minimum Face Amount"), we reserve the right to
refund a premium paid in any year if it will exceed the maximum premium limit.
The maximum limit is established by law to qualify the policy contract as life
insurance. This limit is applied to the sum of all premiums paid under the
policy. If the total premium limit is exceeded, the policyowner will receive the
excess, with interest at an annual rate of not less than 4%, not later than 60
days after the end of the policy year in which the limit was exceeded. The
policy value then will be adjusted to reflect the refund. The total premium
limit may be exceeded if additional premium is needed to prevent lapse or if we
subsequently determine that additional premium would be permitted by federal
laws or regulations.
ALLOCATION OF ISSUE PREMIUM
We will generally allocate the issue premium less applicable charges to the
VUL Account or to the GIA upon receipt of a completed application, in accordance
with the allocation instructions in the application for a policy. However,
policies issued in certain states, and policies issued in certain states
pursuant to applications which state the policy is intended to replace existing
insurance, are issued with a Temporary Money Market Allocation Amendment. Under
this Amendment, we temporarily allocate the entire issue premium paid less
applicable charges (along with any other premiums paid during the Free Look
period) to the Phoenix-Goodwin Money Market Subaccount, and, at the expiration
of the Free Look period, the policy value of the Phoenix-Goodwin Money Market
Subaccount is allocated among the subaccounts of the VUL Account or to the GIA
in accordance with the applicant's allocation instructions in the application
for insurance.
FREE LOOK PERIOD
You have the right to review the policy. If you are not satisfied with it,
you may cancel the policy:
[diamond] by mailing it to us within 10 days after you receive it (or longer
in some states);
[diamond] within 10 days after we mail or deliver a written notice telling
you about your free look period; or
[diamond] within 45 days after completing the application,
whichever occurs latest (the "Free Look Period").
We treat a returned policy as if we never issued it and, except for policies
issued with a Temporary Money Market Allocation Amendment, we will return the
sum of the following as of the date we receive the returned policy: (1) the then
current policy value less any unpaid loans and loan interest; plus (2) any
monthly deductions, partial surrender fees and other charges made under the
policy. For policies issued with the Temporary Money Market Amendment, the
amount returned will equal any premiums paid less any unrepaid loans and loan
interest, and less any partial surrender amounts paid.
We retain the right to decline to process an application within seven days
of our receipt of the completed application for insurance. If we decline to
process the application, we will return the premium paid. Even if we have
approved the application for processing, we retain the right to decline to issue
the policy. If we decline to issue the policy, we will refund to you the same
amount as would have been refunded under the policy had it been issued but
returned for refund during the Free Look Period.
ACCOUNT VALUE
TRANSFER OF POLICY VALUE
Transfers among available subaccounts or the GIA and changes in premium
payment allocations may be requested in writing. Requests for transfers will be
executed on the date the request is received at Andesa, TPA, Inc.
Although currently there is no charge for transfers, in the future, we may
charge a fee of $10 for each transfer after the first two transfers in a policy
year (after twelve transfers in New York).
You may make only one transfer per policy year from the unloaned portion of
the GIA unless (1) the transfer(s) are made as part of a Dollar Cost Averaging
Program, or (2) we agree to make an exception to this rule. Unless you have
elected a Dollar Cost Averaging Program, the amount you may transfer cannot
exceed the greater of $1,000 or 25% of the value of the unloaned portion of the
GIA at the time of the transfer. In addition, you may transfer the total value
allocated to the unloaned portion of the GIA out of
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the GIA to one or more of the subaccounts over a consecutive four-year period
according to the following schedule:
[diamond] Year One: 25% of the total value
[diamond] Year Two: 33% of the remaining value
[diamond] Year Three: 50% of the remaining value
[diamond] Year Four: 100% of the remaining value
Transfers into the GIA and among the subaccounts may be made anytime. We
reserve the right to limit the number of subaccounts you may invest in at any
one time or over the life of the policy, if we are required to do so by any
federal or state law.
Because excessive exchanges between subaccounts can hurt fund performance,
we reserve the right to temporarily or even permanently terminate exchange
privileges or reject any specific exchange order from anyone whose transactions
appear to us to follow a timing pattern, including those who request more than
one exchange out of a subaccount within any 30-day period. We will not accept
batched transfer instructions from registered representatives (acting under
powers of attorney for multiple policyowners), unless the registered
representative's broker-dealer firm and Phoenix have entered into a third-party
transfer service agreement.
If a policy has been issued with a Temporary Money Market Allocation
Amendment, no transfers may be made until the end of the Free Look Period.
SYSTEMATIC TRANSFERS FOR DOLLAR COST AVERAGING
You may elect to transfer funds automatically among the subaccounts or the
unloaned portion of the GIA on a monthly, quarterly, semiannual or annual basis
under the Systematic Transfers for Dollar Cost Averaging Program ("Dollar Cost
Averaging Program"). Under the Dollar Cost Averaging Program, the minimum
transfer amounts are $25 monthly, $75 quarterly, $150 semiannually or $300
annually. You must have an initial value of $1,000 in the GIA or the subaccount
from which funds will be transferred ("sending subaccount"), and if the value in
that subaccount or the GIA drops below the amount to be transferred, the entire
remaining balance will be transferred and all systematic transfers stop. Funds
may be transferred from only one Sending subaccount or the GIA, but may be
allocated to more than one subaccount ("receiving subaccounts"). Under the
Dollar Cost Averaging Program, policyowners may make more than one transfer per
policy year from the GIA. These transfers must be in approximately equal amounts
and made over a minimum 18-month period.
Only one Dollar Cost Averaging Program can be active at any time. All
transfers under the Dollar Cost Averaging Program will be made on the basis of
the GIA and subaccount on the first day of the month following our receipt of
the transfer request. If the first day of the month falls on a holiday or
weekend, then the transfer will be processed on the next business day.
AUTOMATIC ASSET REBALANCING
Automated account rebalancing permits you to maintain a specified whole
number percentage of your account value in any combination of subaccounts and
the GIA. We must receive a written request in order to begin your automated
asset rebalancing program ("Asset Rebalancing"). Then, we will make transfers
at least quarterly to and from the subaccounts and the Guaranteed Interest
Account to readjust your account value to your specified percentage. Asset
Rebalancing allows you to maintain a specific fund allocation. Quarterly
rebalancing is based on your policy year. We will rebalance your account value
only on a monthly calculation date.
The effective date of the first Asset Rebalancing will be the first monthly
calculation date after we receive your request at Andesa TPA, Inc. If we receive
your request before the end of the free look period, your first rebalancing
will occur at the end of the free look period.
You may not participate in both the Dollar Cost Averaging Program and the
Asset Rebalancing at the same time.
DETERMINATION OF SUBACCOUNT VALUES
We establish the unit value of each subaccount of the VUL Account on the
first Valuation Date of that subaccount. The unit value of a subaccount on any
other Valuation Date is determined by multiplying the unit value of that
subaccount on the just prior Valuation Date by the net investment factor for
that subaccount for the then current Valuation Period. The unit value of each
subaccount on a day other than a Valuation Date is the unit value on the next
Valuation Date. Unit values are carried to six decimal places. The unit value of
each subaccount on a valuation date is determined at the end of that day.
The net investment factor for each subaccount 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 the formula:
(A) + (B)
-------- - (D) where:
(C)
(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
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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 amount of any
deposits and withdrawals made during the valuation period ending on that
date.
(D) The charge, if any, for taxes and reserves for taxes on investment income,
and realized and unrealized capital gains.
DEATH BENEFIT UNDER THE POLICY
The death benefit is the amount we pay to the designated beneficiary(ies)
when the insured dies. Upon receiving due proof of death, we pay the beneficiary
the death benefit amount determined as of the date the Insured dies. The
beneficiary may direct us to pay all or part of the benefit in cash or to apply
it under one or more of our payment options.
MINIMUM FACE AMOUNT
To qualify as life insurance under current federal tax laws, the policy has
a minimum face amount of insurance. The minimum face is determined using one of
two allowable definitions of life insurance: (1) the Cash Value Accumulation
Test or (2) the Guideline Premium Test. You chose which test to use on the
application prior to the issuance of your policy. You cannot change the way we
determine your minimum face amount after your policy is issued.
The Cash Value Accumulation Test determines the minimum face amount by
multiplying the account value plus the refund of sales load, if applicable, by
the minimum face amount percentage. The percentages depend upon the Insured's
age, gender and underwriting classification.
Under the Guideline Premium Test, the minimum face amount is also equal to
an applicable percentage of the account value plus refund of sales load, if
applicable, but the percentage varies only by age of insured.
DEATH BENEFIT OPTIONS
In your application you choose a face amount of insurance coverage and the
death benefit option. We offer three death benefit options:
[diamond] Option 1: the death benefit is the greater of the policy's face
amount on the date of death, or the minimum face amount in effect
on the date of death.
[diamond] Option 2: the death benefit is the greater of: (a) the policy's face
amount on the date of death plus the policy value on the date of
death, or (b) the minimum face amount in effect on the date of death.
[diamond] Option 3: the death benefit is the greater of: (a) the policy's face
amount on the date of death plus the sum of all premiums paid, less
withdrawals, or (b) the policy's face amount on the date of death,
or (c) the minimum face amount in effect on the date of death.
If the insured dies while the policy is in force, we will pay the death
benefit based on the option in effect on the date of death, with the following
adjustments:
[diamond] Add back in any charges taken against the account value for the
period beyond the date of death;
[diamond] Deduct any policy debt outstanding on the date of death; and
[diamond] Deduct any charges accrued against the account value unpaid as of
the date of death.
You may change the death benefit option from Option 1 to Option 2 or from
Option 2 to Option 1. You may not make a change either to or from Option 3.
Under death benefit Options 1 and 3, the death benefit is not affected by
your policy's investment experience. Under death benefit Option 2, the death
benefit amount may increase or decrease by the investment experience.
We pay interest on the death benefit from the date of death to the date the
death benefit is paid or a payment option becomes effective.
CHANGES IN FACE AMOUNT OF INSURANCE
REQUESTS FOR INCREASE IN FACE AMOUNT
Any time while this policy is in force, you may request an increase in the
face amount of insurance provided under the policy. Requests for face amount
increases must be made in writing, and we require additional evidence of
insurability. The effective date of the increase generally will be the policy
anniversary following approval of the increase. The increase may not be less
than $25,000. We will deduct any charges associated with the increase (the
increases in cost of insurance charges), from the policy value, whether or not
you pay an additional premium in connection with the increase. Also, a new Free
Look Period (see "Premiums--Free Look Period") will be established for the
amount of the increase. For a discussion of possible implications of a material
change in the policy resulting from the increase, see "Material Change Rules."
DECREASES IN FACE AMOUNT AND PARTIAL SURRENDERS: EFFECT ON DEATH BENEFIT
REQUESTS FOR DECREASE IN FACE AMOUNT
You may request a decrease in face amount at any time after the first policy
year. Unless we agree otherwise, the decrease must be at least equal to $10,000
and the face amount remaining after the decrease must be at least $25,000. All
face amount decrease requests must be in writing and will be effective on the
first monthly calculation day following the date we approve the request.
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A partial surrender or a decrease in face amount generally decreases the
death benefit. If the change is a decrease in face amount, the death benefit
under a policy would be reduced on the next monthly calculation day. If the
change is a partial surrender, the death benefit under a policy would be reduced
immediately. A decrease in the death benefit may have certain tax consequences
(see "Federal Tax Considerations").
SURRENDERS
GENERAL
At any time during the lifetime of the Insured and while the policy is in
force, you may partially or fully surrender the policy by sending a written
request to Andesa TPA, Inc. We may also require you to send the policy to us.
The amount available for surrender is the cash surrender value at the end of the
valuation period during which the surrender request is received at Andesa TPA,
Inc.
The cash surrender value is:
o policy value; less
o Any outstanding debt.
There is no surrender charge.
FULL SURRENDERS
If the policy is being fully surrendered, the policy itself must be returned
to Andesa TPA, Inc., along with the written release and surrender of all claims
in a form satisfactory to us. You may elect to have the amount paid in a lump
sum or under a payment option (see "Payment Options").
PARTIAL SURRENDERS
You may obtain a partial surrender of the policy by requesting payment of
the policy's cash surrender value. It is possible to do this at any time during
the lifetime of the Insured, while the policy is in force, with a written
request to Andesa TPA, Inc. We may require the return of the policy before
payment is made. A partial surrender will be effective on the date the written
request is received or, if required, the date the policy is received by us.
Surrender proceeds may be applied under any of the payment options described
under "Payment of Proceeds--Payment Options."
We reserve the right to deny partial surrenders of less than $500. In
addition, if the share of the policy value in any subaccount or in the GIA is
reduced as a result of a partial surrender and is less than $500, we reserve the
right to require surrender of the entire remaining balance in that subaccount or
the GIA.
Upon a partial surrender, the policy value will be reduced by the sum of the
partial surrender amount paid. This amount comes from a reduction in the
policy's share in the value of each subaccount or the GIA based on the
allocation requested at the time of the partial surrender. If no allocation
request is made, the withdrawals from each subaccount will be made in the same
manner as that provided for monthly deductions.
The cash surrender value will be reduced by the partial surrender amount
paid. The face amount of the policy will be reduced by the same amount as the
policy value is reduced as described above.
Upon partial or full surrender, we generally will pay to you the amount
surrendered within seven days after we receive the written request for the
surrender. Under certain circumstances, the surrender payment may be postponed.
See "Additional Policy Provisions--Postponement of Payments." For the federal
tax effects of partial and full surrenders, see "Federal Tax Considerations."
POLICY LOANS
You can take a loan against your policy any time while the policy is in
force. The maximum loan is:
o 90% of your policy value at the time the loan is taken; less
o any outstanding policy debt before the loan is taken; less
o interest on the loan being made and on any outstanding policy debt to
the next policy anniversary date.
Your policy must be assigned to us as collateral for the loan.
SOURCE OF LOAN
We deduct your requested loan amount from the subaccounts and the GIA, based
on the allocation requested at the time of the loan. We liquidate shares taken
from the subaccounts and transfer the resulting dollars to the GIA. These
dollars become part of the loaned portion of the GIA.
INTEREST
You will pay interest on the loan at the following noted effective annual
rates, compounded daily and payable in arrears:
In all states except New York and New Jersey, the loan interest rate in
effect following the policy anniversary nearest the insured's 65th birthday will
be 2.25%. The rates in effect before the Insured reaches age 65 follow:
[diamond] Policy years 1-10: 2.75%
[diamond] Policy years 11-15: 2.50%
[diamond] Policy years 16 and thereafter: 2.25%
In New York and New Jersey only, the loan interest rate in effect following
the policy anniversary nearest the insured's 65th birthday will be 4.25%. The
rates in effect before the Insured reaches age 65 follow:
[diamond] Policy years 1-10: 4.75%
[diamond] Policy years 11-15: 4.50%
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[diamond] Policy years 16 and thereafter: 4.25%
Interest accrues daily, becoming part of the policy debt. Interest is due
and payable on the policy anniversary. If you do not pay the interest when due,
we will add it to your loan. We treat any interest which has been capitalized
the same as if it were a new loan. We deduct this capitalized interest from the
subaccounts and the GIA in proportion to the nonloaned account value in each.
INTEREST CREDITED ON LOANED VALUE
The amount equal to any policy loan is held in the GIA. This amount is
credited with interest at a rate of 2% (4% in New York and New Jersey).
REPAYMENT
You may repay all or part of your policy debt at anytime while the policy is
in force.
If you do not repay the loan, we deduct the loan amount due from the cash
surrender value or the death benefit.
Failure to repay a policy loan or to pay loan interest will not terminate
the policy unless the policy value becomes insufficient to maintain the policy
in force.
In the future, Phoenix may not allow policy loans of less than $500, unless
such loan is used to pay a premium on another Phoenix policy.
EFFECT OF LOAN
Your policy loan reduces the death benefit and cash surrender value under
the policy by the amount of the loan. Your repayment of the loan increases the
death benefit and cash surrender value by the amount of the repayment.
As long as a loan is outstanding, a portion of your policy value equal to
the loan held in the GIA. The subaccount's investment performance does not
affect this amount. Also, you may be subject to tax consequences if you
surrender your policy while there is outstanding debt.
LAPSE
Unlike conventional life insurance policies, the payment of the issue
premium, no matter how large, or the payment of additional premiums will not
necessarily continue the policy in force to its maturity date.
If on any monthly calculation day, the policy value is less than the
required monthly deduction, a grace period of 61 days will be allowed for the
payment of an amount equal to three times the required monthly deduction.
During the grace period, the policy will continue in force but subaccount
transfers, loans, partial or full surrenders will not be permitted. Failure to
pay the additional amount within the grace period will result in lapse of the
policy, but not before 30 days after we have mailed written notice to you. If a
premium payment for the additional amount is received by us during the grace
period, any amount of premium over what is required to prevent lapse will be
allocated among the subaccounts or to the GIA according to the current premium
allocation schedule. In determining the amount of "excess" premium to be applied
to the subaccounts or the GIA, we will deduct the premium tax and the amount
needed to cover any monthly deductions made during the grace period. If the
Insured dies during the grace period, the death benefit will equal the amount of
the death benefit immediately prior to the commencement of the grace period.
ADDITIONAL INSURANCE OPTION
While the policy is in force and the Insured is insurable, the policyowner
will have the option to purchase additional insurance on the same insured with
the same guaranteed rates as the policy. We will require evidence of
insurability and charges will be adjusted for the insured's new attained age and
any change in risk classification.
ADDITIONAL RIDER BENEFITS
You may elect additional benefits under a policy, and you may cancel these
benefits at any time. A charge will be deducted monthly from the policy value
for each additional rider benefit chosen except where noted below. More details
will be included in the form of a rider to the policy if any of these benefits
are chosen. The following benefits are currently available and additional riders
may be available as described in the policy (if approved in your state).
[diamond] FLEXIBLE TERM INSURANCE RIDER--This rider provides annually renewable
term insurance coverage to age 100 for the Insured under the base
policy. The initial rider death benefit cannot exceed 10 times the
initial base policy. There is no charge for this rider.
[diamond] EXCHANGE OF INSURED RIDER--This rider allows the policyowner to
exchange the insured on a given contract. There is no charge for
this rider.
Future charges against the policy will be based on the life of the
substitute insured.
The incontestability and suicide exclusion periods, as they apply to
the substitute insured, run from the date of the exchange. Any
assignments will continue to apply.
The exchange is subject to the following adjustments:
1. If the policy value of the original policy is insufficient to
produce a positive cash surrender value for the new policy, the
owner must pay an exchange adjustment in an amount that, when
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applied as premium, will make the policy value of the new policy
greater than zero.
2. In some cases, the amount of policy value which may be applied
to the new policy may result in a death benefit which exceeds
the limit for the new policy. In that event, we will apply such
excess policy value to reduce any loan against the policy, and
the residual amount will be returned to you in cash.
3. The exchange will also be subject to our receipt of repayment of
the amount of any policy debt under the exchange policy in
excess of the loan value of the new policy on the date of
exchange.
The Internal Revenue Service has ruled that an exchange of Insureds
does not qualify for tax deferral under Code Section 1035.
Therefore, you must include in current gross income all
previously unrecognized gain in the policy upon an exchange of
the Insured.
PART II--ADDITIONAL POLICY PROVISIONS
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POSTPONEMENT OF PAYMENTS
Payment of any amount upon complete or partial surrender, policy loan, or
benefits payable at death (in excess of the initial face amount) or maturity may
be postponed:
[diamond] for up to six months from the date of the request, for any
transactions dependent upon the value of the GIA;
[diamond] 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
[diamond] whenever an emergency exists, as decided 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.
PAYMENT BY CHECK
Payments under the policy of any amounts derived from premiums paid by check
may be delayed until such time as the check has cleared your bank.
THE CONTRACT
The policy and attached copy of the application are the entire contract.
Only statements in the application can be used to void the policy. The
statements are considered representations and not warranties. Only an executive
officer of Phoenix can agree to change or waive any provisions of the policy.
SUICIDE
If the Insured commits suicide within two years after the policy's issue
date, the policy will stop and become void. We will pay you the policy value
adjusted by the addition of any monthly deductions and other fees and charges,
minus any debt owed to us under the policy.
INCONTESTABILITY
We cannot contest this policy or any attached rider after it has been in
force during the insured's lifetime or for two years from the policy date.
CHANGE OF OWNER OR BENEFICIARY
The beneficiary, as named in the policy application or subsequently changed,
will receive the policy 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 the insured, the death
benefit payable under the policy will be paid to your estate.
As long as the policy is in force, the policyowner and the beneficiary may
be changed in writing, satisfactory to us. A change in beneficiary will take
effect as of the date the notice is signed, whether or not the insured is living
when we receive the notice. We will not, however, be liable for any payment made
or action taken before receipt of the notice.
ASSIGNMENT
The policy may be assigned. We will not be bound by the assignment until a
written copy has been received and we will not be liable with respect to any
payment made prior to receipt. We assume no responsibility for determining
whether an assignment is valid.
MISSTATEMENT OF AGE OR SEX
If the age or sex of the insured has been misstated, the death benefit will
be adjusted based on what the cost of insurance charge for the most recent
monthly deduction would have purchased based on the correct age and sex.
SURPLUS
This policy is non-participating and does not pay dividends. Your policy
will not share in Phoenix's profits or surplus earnings.
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PAYMENT OF PROCEEDS
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SURRENDER AND DEATH BENEFIT PROCEEDS
Death benefit proceeds and the proceeds of full or partial surrenders will
be processed at unit values next computed after we receive the request for
surrender or due proof of death, provided such request is complete and in good
order. Payment of surrender or death proceeds usually will be made in one lump
sum within seven days, unless another payment option has been elected. Payment
of the death proceeds, however, may be delayed if the claim for payment of the
death 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.
You may elect a payment option for payment of the death 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 proceeds, unless you have made an election that does not permit such
further election or changes by the beneficiary.
A written request in a 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 payment option is $1,000.
If the policy 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.
PAYMENT OPTIONS
All or part of the surrender or death proceeds of a policy may be applied
under one or more of the following payment options or such other payment options
or alternative versions of the options listed as we may choose to make available
in the future.
OPTION 1--LUMP SUM.
Payment in one lump sum.
OPTION 2--LEFT TO EARN INTEREST.
A payment of interest during the payee's lifetime on the amount payable as a
principal sum. Interest rates are guaranteed to be at least 3% per year.
OPTION 3--PAYMENT FOR A SPECIFIC PERIOD.
Equal installments are paid for a specified period of years whether the
payee lives or dies. The first payment will be on the date of settlement. The
assumed interest rate on the unpaid balance is guaranteed not to be less than 3%
per year.
OPTION 4--LIFE ANNUITY WITH SPECIFIED PERIOD CERTAIN.
Equal installments are paid until the later of:
[diamond] the death of the payee; or
[diamond] the end of the period certain.
The first payment will be on the date of settlement.
The period certain must be chosen at the time this option is elected. The
periods certain that you may choose from are as follows:
[diamond] ten years;
[diamond] twenty years; or
[diamond] until the installments paid refund the amount applied under this
option.
If the payee is not living when the final payment falls due, that payment
will be limited to the amount which needs to be added to the payments already
made to equal the amount applied under this option.
If, for the age of the payee, a period certain is chosen that is shorter
than another period certain paying the same installment amount, we will consider
the longer period certain as having been elected.
Any life annuity provided under Option 4 is computed using an interest rate
guaranteed to be no less than 3-3/8% per year, but any life annuity providing a
period certain of 20 years or more is computed using an interest rate guaranteed
to be no less than 3-1/4% per year.
OPTION 5--LIFE ANNUITY.
Equal installments are paid only during the lifetime of the payee. The first
payment will be on the date of settlement. Any life annuity as may be provided
under Option 5 is computed using an interest rate guaranteed to be no less than
3-1/2% per year.
OPTION 6--PAYMENTS OF A SPECIFIED AMOUNT.
Equal installments of a specified amount, out of the principal sum and
interest on that sum, are paid until the principal sum remaining is less than
the amount of the installment. When that happens, the principal sum remaining
with accrued interest will be paid as a final payment. The first payment will be
on the date of settlement. The payments will include interest on the remaining
principal at a guaranteed rate of at least 3% per year. This interest will be
credited at the end of each year. If the amount of interest credited at the end
of the year exceeds the income payments made in the last 12 months, that excess
will be paid in one sum on the date credited.
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OPTION 7--JOINT SURVIVORSHIP ANNUITY WITH 10-YEAR PERIOD CERTAIN.
The first payment will be on the date of settlement. Equal installments are
paid until the latest of:
[diamond] the end of the 10-year period certain;
[diamond] the death of the insured; or
[diamond] the death of the other named annuitant.
The other annuitant must have attained age 40, must be named at the time
this option is elected and cannot later be changed. Any joint survivorship
annuity that may be provided under this option is computed using a guaranteed
interest rate to equal at least 3-3/8% per year.
For additional information concerning the above payment options, see the
policy.
PART III--OTHER IMPORTANT INFORMATION
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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 your 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 advisor
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 herein is
based upon our understanding of federal income tax laws as they are currently
interpreted, we cannot guarantee the tax status of any policy. The Internal
Revenue Service (the "IRS") makes no representation regarding the likelihood of
continuation of current federal income tax laws, Treasury regulations or of the
current interpretations. We reserve the right to make changes to the policy to
assure that it will continue to qualify as a life insurance contract for federal
income tax purposes.
PHOENIX'S TAX STATUS
We are taxed as a life insurance company under the Internal Revenue Code of
1986, as amended (the "Code"). For federal income tax purposes, neither the VUL
Account nor the GIA is a separate entity from Phoenix and their operations form
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.
POLICY BENEFITS
DEATH BENEFIT PROCEEDS
The policy, whether or not it is a "modified endowment contract" (see
"Modified Endowment Contracts"), should be treated as meeting the definition of
a life insurance contract for federal income tax purposes under Section 7702 of
the Code. As such, the death benefit proceeds thereunder should be excludable
from the gross income of the Beneficiary under Code Section 101(a)(1). Also, a
policyowner should not be considered to be in constructive receipt of the cash
value, including investment income. See, however, the sections below on possible
taxation of amounts received under the policy, via full surrender, partial
surrender or loan.
Code Section 7702 imposes certain conditions with respect to premiums
received under a policy. We monitor the premiums to assure compliance with such
conditions. However, if the premium limitation is exceeded during the year, we
may return the excess premium, with interest, to the policyowner within 60 days
after the end of the policy year, and maintain the qualification of the policy
as life insurance for federal income tax purposes.
FULL SURRENDER
Upon full surrender of a policy for its cash value, the excess, if any, of
the cash value (unreduced by any outstanding indebtedness) over the premiums
paid will be treated as ordinary income for federal income tax purposes. The
full surrender of a policy that is a modified endowment contract may result in
the imposition of an additional 10% tax on any income received.
PARTIAL SURRENDER
If the policy is a modified endowment contract, partial surrenders are fully
taxable to the extent of income in the policy and are possibly subject to an
additional 10% tax. See the discussion on modified endowment contracts below. If
the policy is not a modified endowment contract, partial surrenders still may be
taxable, as follows. Code Section 7702(f)(7) provides that where a reduction in
death
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benefits occurs during the first 15 years after a policy is issued and
there is a cash distribution associated with that reduction, the policyowner may
be taxed on all or a part of the amount distributed. A reduction in death
benefits may result from a partial surrender. After 15 years, the proceeds will
not be subject to tax, except to the extent such proceeds exceed the total
amount of premiums paid but not previously recovered. We suggest you consult
with your tax advisor in advance of a proposed decrease in death benefits or a
partial surrender as to the portion, if any, which would be subject to tax, and
in addition as to the impact such partial surrender might have under the new
rules affecting modified endowment contracts.
LOANS
We believe that any loan received under a policy will be treated as your
indebtedness. If the policy is a modified endowment contract, loans are fully
taxable to the extent of income in the policy and are possibly subject to an
additional 10% tax. See the discussion on modified endowment contracts. If the
policy is not a modified endowment contract, we believe that no part of any loan
under a policy will constitute income to you.
The deductibility by a policyowner of loan interest under a policy may be
limited under Code Section 264, depending on the circumstances. A policyowner
intending to fund premium payments through borrowing should consult a tax
advisor with respect to the tax consequences thereof. Under the "personal"
interest limitation provisions of the Code, interest on policy loans used for
personal purposes is not tax deductible. Other rules may apply to allow all or
part of the interest expense as a deduction if the loan proceeds are used for
"trade or business" or "investment" purposes. See your tax advisor for further
guidance.
BUSINESS-OWNED POLICIES
If a business or a corporation owns the policy, the Code may impose
additional restrictions. The Code limits the interest deduction on
business-owned policy loans and may impose tax upon the inside build-up of
corporate-owned life insurance policies through the corporate alternative
minimum tax.
MODIFIED ENDOWMENT CONTRACTS
GENERAL
Pursuant to Code Section 72(e), loans and other amounts received under
modified endowment contracts will, in general, be taxed to the extent of
accumulated income (generally, the excess of cash value over premiums paid).
Life insurance policies can be modified endowment contracts if they fail to meet
what is known as "the 7-pay test." The measuring stick for this test is a
hypothetical life insurance policy of equal face amount which requires 7 equal
annual premiums but which, after the seventh year is "fully paid-up," continuing
to provide a level death benefit without the need for any further premiums. A
policy becomes a modified endowment contract, if, at any time during the first
seven years, the cumulative premium paid on the policy exceeds the cumulative
premium that would have been paid under the hypothetical policy. Premiums paid
during a policy year but which are returned by us with interest within 60 days
after the end of the policy year will be excluded from the 7-pay test. A life
insurance policy received in exchange for a modified endowment contract will be
treated as a modified endowment contract.
REDUCTION IN BENEFITS DURING THE FIRST SEVEN YEARS
If there is a reduction in death benefits during the first seven policy
years, the premiums are redetermined for purposes of the 7-pay test as if the
policy originally had been issued at the reduced death benefit level and the new
limitation is applied to the cumulative amount paid for each of the first seven
policy years.
DISTRIBUTIONS AFFECTED
If a policy fails to meet the 7-pay test, it is considered a modified
endowment contract only as to distributions in the year in which the test is
failed and all subsequent policy years. However, distributions made in
anticipation of such failure (there is a presumption that distributions made
within two years prior to such failure were "made in anticipation") also are
considered distributions under a modified endowment contract. If the policy
satisfies the 7-pay test for seven years, distributions and loans generally will
not be subject to the modified endowment contract rules.
PENALTY TAX
Any amounts taxable under the modified endowment contract rule will be
subject to an additional 10% excise tax, with certain exceptions. This
additional tax will not apply in the case of distributions that are:
[diamond] made on or after the taxpayer attains age 59 1/2;
[diamond] attributable to the taxpayer's disability (within the meaning of
Code Section 72(m)(7)); or
[diamond] part of a series of substantially equal periodic payments (not less
often than annually) made for the life (or life expectancy) of the
taxpayer or the joint lives (or life expectancies) of the taxpayer
and his beneficiary.
MATERIAL CHANGE RULES
Any determination of whether the policy meets the 7-pay test will begin
again any time the policy undergoes a "material change," which includes any
increase in death benefits or any increase in or addition of a qualified
additional benefit, with the following two exceptions.
[diamond] First, if an increase is attributable to premiums paid "necessary to
fund" the lowest death benefit and qualified additional benefits
payable in the first seven policy years or to the crediting of
interest or dividends with respect to these premiums, the "increase"
does not constitute a material change.
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[diamond] Second, to the extent provided in regulations, if the death benefit
or qualified additional benefit increases as a result of a
cost-of-living adjustment based on an established broad-based index
specified in the policy, this does not constitute a material change
if:
o the cost-of-living determination period does not exceed the
remaining premium payment period under the policy; and
o the cost-of-living increase is funded ratably over the remaining
premium payment period of the policy.
A reduction in death benefits is not considered a material change unless
accompanied by a reduction in premium payments.
A material change may occur at any time during the life of the policy
(within the first seven years or thereafter), and future taxation of
distributions or loans would depend upon whether the policy satisfied the
applicable 7-pay test from the time of the material change. An exchange of
policies is considered to be a material change for all purposes.
SERIAL PURCHASE OF MODIFIED ENDOWMENT CONTRACTS
All modified endowment contracts issued by the same insurer (or affiliated
companies of the insurer) to the same policyowner within the same calendar year
will be treated as one modified endowment contract in determining the taxable
portion of any loans or distributions made to the policyowner. The Treasury has
been given specific legislative authority to issue regulations to prevent the
avoidance of the new distribution rules for modified endowment contracts. A
qualified tax advisor should be consulted about the tax consequences of the
purchase of more than one modified endowment contract within any calendar year.
LIMITATIONS ON UNREASONABLE MORTALITY AND EXPENSE CHARGES
The Code imposes limitations on unreasonable mortality and expense charges
for purposes of ensuring that a policy qualifies as a life insurance contract
for federal income tax purposes. The mortality charges taken into account to
compute permissible premium levels may not exceed those charges required to be
used in determining the federal income tax reserve for the policy, unless
Treasury regulations prescribe a higher level of charge. In addition, the
expense charges taken into account under the guideline premium test are required
to be reasonable, as defined by the Treasury regulations. We will comply with
the limitations for calculating the premium we are permitted to receive from
you.
DIVERSIFICATION STANDARDS
To comply with the Diversification Regulations under Code Section 817(h),
("Diversification Regulations") each series of the fund is required to diversify
its investments. The Diversification Regulations generally require that on the
last day of each calendar quarter the series assets be invested in no more than:
[diamond] 55% in any 1 investment
[diamond] 70% in any 2 investments
[diamond] 80% in any 3 investments
[diamond] 90% in any 4 investments
A "look-through" rule applies to treat a pro rata portion of each asset of a
series as an asset of the VUL Account; therefore, each series of the fund 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 United States 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 that 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 you may direct your investments to particular divisions of a
separate account. It is possible that a revenue ruling or other form of
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
would provide. It is possible that the policy may need to be modified to comply
with such future Treasury announcements. For these reasons, we reserve the right
to modify the policy, 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
policies continue to qualify as a life insurance contract for federal income tax
purposes.
CHANGE OF OWNERSHIP OR INSURED OR ASSIGNMENT
Changing the policyowner or the Insured or an exchange or assignment of the
policy may have tax consequences depending on the circumstances. Code Section
1035 provides that a life insurance contract can be exchanged for another life
insurance contract, without recognition of gain or loss, assuming that no money
or
23
<PAGE>
other property is received in the exchange, and that the policies relate to
the same Insured. If the surrendered policy is subject to a policy loan, this
may be treated as the receipt of money on the exchange. We recommend that any
person contemplating such actions seek the advice of a qualified tax consultant.
OTHER TAXES
Federal estate tax, state and local estate, inheritance and other tax
consequences of ownership or receipt of policy proceeds depend on the
circumstances of each policyowner or beneficiary. We do not make any
representations or guarantees regarding the tax consequences of any policy with
respect to these types of taxes.
VOTING RIGHTS
- -------------------------------------------------------------------------------
We will vote the funds' shares held by the subaccounts at any regular and
special meetings of shareholders of the funds. To the extent required by law,
such voting will be pursuant 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 decide that we are
permitted to vote the funds' shares at our 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.
Funds' shares held in a subaccount for which no timely instructions are
received, and funds' shares which are not otherwise attributable to
policyowners, will be voted by Phoenix in proportion to the voting instructions
that are received with respect to all policies participating in that subaccount.
Instructions to abstain on any item to be voted upon will be applied to reduce
the votes eligible to be cast by Phoenix.
You will receive proxy materials, reports and other materials related 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 portfolios of the funds or to approve or disapprove an investment
advisory contract for the funds. In addition, Phoenix itself may disregard
voting instructions in favor of changes initiated by a policyowner in the
investment policies or the Investment Advisor of the funds if Phoenix reasonably
disapproves of 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 decide that the change would have an adverse effect on the General Account
because the proposed investment policy for a series may result in overly
speculative or unsound investments. In the event Phoenix does disregard voting
instructions, a summary of that action and the reasons for such action will be
included in the next periodic report to policyowners.
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 the Phoenix policyholders, you (or payee) may cast only one vote
as the holder of a policy, irrespective of policy value or the number of the
policies you hold.
THE DIRECTORS AND
EXECUTIVE OFFICERS OF PHOENIX
- --------------------------------------------------------------------------------
Phoenix is managed by its Board of Directors. 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
John C. Bacot Chairman and Chief Executive
Officer, The Bank of New York
New York, New York
Arthur P. Byrne Chairman, President and Chief
Executive Officer, The Wiremold
Company
West Hartford, Connecticut
Richard N. Cooper Professor, Center for
International Affairs, Harvard
University, Cambridge,
Massachusetts; 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
and Chief Executive Officer,
Phoenix Home Life Mutual
Insurance Company
Hartford, Connecticut
John E. Haire President,
The Fortune Group
New York, New York
24
<PAGE>
DIRECTORS PRINCIPAL OCCUPATION
Jerry J. Jasinowski President, National Association
of Manufacturers
Washington, D.C.
John W. Johnstone Chairman, Governance & Nominating
Committees, Arch Chemicals, Inc.,
Westport, Connecticut; formerly
Chairman, President and
Chief Executive Officer,
Olin Corporation
Norwalk, Connecticut
Marilyn E. LaMarche Limited Managing Director, Lazard
Freres & Company, L.L.C.
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, The DeMatteis Center of
St. Francis Hospital
Roslyn, New York
Robert G. Wilson Retired, formerly Chairman
and Chief Executive Officer,
Ecologic Waste Services, Inc.
Miami, Florida
Dona D. Young President, Phoenix Home Life
Mutual Insurance Company
Hartford, Connecticut
EXECUTIVE OFFICERS PRINCIPAL OCCUPATION
Robert W. Fiondella Chairman of the Board
and Chief Executive Officer
Philip R. McLoughlin Executive Vice President,
Investments
Carl T. Chadburn Executive Vice President
David W. Searfoss Executive Vice President,
Chief Financial Officer
Dona D. Young President
Nathaniel C. Brinn Senior Vice President,
Strategic Development
Martin J. Gavin Senior Vice President,
Trust Operations
Randall C. Giangiulio Senior Vice President,
Group Life and Health
Michael J. Gilotti Senior Vice President
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
Charles L. Olson Senior Vice President,
Trust Sales and Marketing
David R. Pepin Senior Vice President
Robert E. Primmer Senior Vice President,
Individual Distribution
Tracy L. Rich Senior Vice President and General
Counsel
Joel D. Sanders Senior Vice President,
Group Sales and Marketing
Frederick W. Sawyer, III Senior Vice President
John F. Solan, Jr. Senior Vice President,
Strategic Development
Simon Y. Tan Senior Vice President,
Individual 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 Phoenix during the
last five years.
SAFEKEEPING OF THE VUL ACCOUNT'S ASSETS
- -------------------------------------------------------------------------------
We hold the assets of the VUL Account. The assets of the VUL Account are
kept physically segregated and held separate and apart from our General Account.
We maintain records of all purchases and redemptions of shares of the funds.
SALES OF POLICIES
- -------------------------------------------------------------------------------
Policies may be purchased from registered representatives of W.S. Griffith &
Co., Inc. ("WSG"), a
25
<PAGE>
New York corporation incorporated on August 7, 1970, licensed to sell Phoenix
insurance policies as well as policies, annuity contracts and funds of companies
affiliated with Phoenix. WSG, an indirect, wholly-owned 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. Phoenix Equity Planning Corporation ("PEPCO") serves as national
distributor of the Policies. PEPCO is an indirect, wholly-owned subsidiary of
Phoenix Investment Partners, Ltd. ("PXP"), in which Phoenix owns a majority
interest.
Policies also may be purchased from other broker-dealers registered under
the 1934 Act whose representatives are authorized by applicable law to sell
Policies under terms of agreements provided by PEPCO. Sales commissions will be
paid to registered representatives on purchase payments we receive under these
Policies. Phoenix will pay a maximum total sales commission of 19% of premiums
to PEPCO. Additionally, agents or selling brokers may receive asset-based
compensation. The maximum asset-based compensation is 0.90% of the policy value.
To the extent that the sales charge under the Policies is less than the sales
commissions paid with respect to the Policies, we will pay the shortfall from
our General Account assets, which will include any profits we may derive under
the policies.
STATE REGULATION
- -------------------------------------------------------------------------------
We are subject to the provisions of the New York insurance laws applicable
to stock 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 the other states and jurisdictions in which we do
insurance business.
State regulation of Phoenix includes certain limitations on the investments
which we may make, including investments for the VUL Account and the GIA. This
regulation does not include, however, any supervision over the investment
policies of the VUL Account.
REPORTS
- -------------------------------------------------------------------------------
Policyowners will be furnished with those reports required by the 1940 Act
and related regulations or by any other applicable law or regulation.
LEGAL PROCEEDINGS
- -------------------------------------------------------------------------------
The VUL Account is not engaged in any litigation. Phoenix is not involved in
any litigation that would have a material adverse effect on our ability to meet
our obligations under the policies.
LEGAL MATTERS
- -------------------------------------------------------------------------------
Edwin L. Kerr, Counsel of Phoenix Home Life Mutual Insurance Company, has
passed upon the organization of Phoenix, its authority to issue variable life
insurance Policies and the validity of the policy, and upon legal matters
relating to the federal securities and income tax laws for Phoenix.
REGISTRATION STATEMENT
- -------------------------------------------------------------------------------
A Registration Statement has been filed with the SEC, under the Securities
Act of 1933 ("1933 Act") with respect to the securities offered. This prospectus
is a summary of the contents of the policy and other legal documents and does
not contain all the information set forth in the Registration Statement and its
exhibits. We refer you to the registration statement and its exhibits for
further information concerning the VUL Account, Phoenix and the policy.
FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
The financial statements of Phoenix contained herein should be considered
only as bearing upon Phoenix's ability to meet its obligations under the policy,
and they should not be considered as bearing on the investment performance of
the VUL Account.
There are no financial statements of the VUL Account subaccounts for the
period ended December 31, 1999 and no sales occurred during this period.
26
<PAGE>
PHOENIX HOME LIFE
MUTUAL INSURANCE COMPANY
CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999
27
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
Report of Independent Accountants............................................ 29
Consolidated Balance Sheet at December 31, 1999 and 1998..................... 30
Consolidated Statement of Income, Comprehensive Income and Equity
for the Years Ended December 31, 1999, 1998 and 1997 ....................... 31
Consolidated Statement of Cash Flows for the Years Ended
December 31, 1999, 1998 and 1997 ........................................... 32
Notes to Consolidated Financial Statements ............................... 33-69
28
<PAGE>
[LOGO] PRICEWATERHOUSECOOPERS
- --------------------------------------------------------------------------------
PRICEWATERHOUSECOOPERS LLP
100 Pearl Street
Hartford CT 06103-4508
Telephone (860) 241 7000
Facsimile (860) 241 7590
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors
and Policyholders of
Phoenix Home Life Mutual Insurance Company
In our opinion, the accompanying consolidated balance sheet and the related
consolidated statements of income, comprehensive 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,
1999 and 1998, and the results of their operations and their cash flows for each
of the three years in the period ended December 31, 1999, in conformity with
accounting principles generally accepted in the United States. These financial
statements are the responsibility of the Company's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these statements in accordance with
auditing standards generally accepted in the United States, which require that
we plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for the opinion expressed above.
As indicated in Note 20, the Company has revised its accounting for venture
capital partnerships.
/s/ PriceWaterhouseCoopers LLP
February 15, 2000
29
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
CONSOLIDATED BALANCE SHEET
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
DECEMBER 31,
1999 1998
(IN THOUSANDS)
<S> <C> <C>
ASSETS
Investments:
Held-to-maturity debt securities, at amortized cost $ 1,990,169 $ 1,725,439
Available-for-sale debt securities, at fair value 5,506,779 5,987,426
Equity securities, at fair value 461,613 301,649
Mortgage loans 716,831 797,343
Real estate 92,027 91,975
Policy loans 2,042,557 2,008,259
Venture capital partnerships 338,122 191,162
Other invested assets 300,474 232,131
Short-term investments 133,367 185,983
------------------ -----------------
Total investments 11,581,939 11,521,367
Cash and cash equivalents 187,610 115,187
Accrued investment income 174,894 164,812
Deferred policy acquisition costs 1,306,728 1,049,934
Premiums, accounts and notes receivable 119,231 61,489
Reinsurance recoverables 18,772 18,908
Property and equipment, net 137,758 142,153
Goodwill and other intangible assets, net 593,267 477,895
Net assets of discontinued operations (Note 11) 187,595 283,793
Other assets 51,434 36,940
Separate account assets 5,923,888 4,798,949
------------------ -----------------
Total assets $ 20,283,116 $ 18,671,427
================== =================
LIABILITIES
Policy liabilities and accruals $ 11,438,032 $ 11,110,280
Notes payable 499,392 386,575
Deferred income taxes 86,262 116,104
Other liabilities 474,179 430,956
Separate account liabilities 5,923,888 4,798,949
------------------ -----------------
Total liabilities 18,421,753 16,842,864
------------------ -----------------
Contingent liabilities (Note 18)
MINORITY INTEREST IN NET ASSETS
OF CONSOLIDATED SUBSIDIARIES 100,112 92,008
------------------ -----------------
EQUITY
Retained earnings 1,731,146 1,642,264
Accumulated other comprehensive income 30,105 94,291
------------------ -----------------
Total equity 1,761,251 1,736,555
------------------ -----------------
Total liabilities and equity $ 20,283,116 $ 18,671,427
================== =================
</TABLE>
The accompanying notes are an integral part of these statements.
30
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
CONSOLIDATED STATEMENT OF INCOME, COMPREHENSIVE INCOME AND EQUITY
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
1999 1998 1997
(IN THOUSANDS)
<S> <C> <C> <C>
REVENUES
Premiums $ 1,134,207 $ 1,154,730 $ 1,076,157
Insurance and investment product fees 591,786 493,415 367,540
Net investment income 950,344 851,603 714,367
Net realized investment gains 35,675 58,202 111,043
------------- -------------- -------------
Total revenues 2,712,012 2,557,950 2,269,107
------------- -------------- -------------
BENEFITS AND EXPENSES
Policy benefits and increase in policy liabilities 1,352,419 1,403,166 1,201,929
Policyholder dividends 360,509 351,653 343,611
Amortization of deferred policy acquisition costs 146,603 137,663 102,617
Amortization of goodwill and other intangible assets 37,963 23,126 9,366
Interest expense 32,659 25,911 24,300
Other operating expenses 520,603 428,756 367,016
------------- -------------- -------------
Total benefits and expenses 2,450,756 2,370,275 2,048,839
------------- -------------- -------------
INCOME FROM CONTINUING OPERATIONS
BEFORE INCOME TAXES AND MINORITY INTEREST 261,256 187,675 220,268
Income taxes 107,881 65,046 47,241
------------- -------------- -------------
INCOME FROM CONTINUING OPERATIONS
BEFORE MINORITY INTEREST 153,375 122,629 173,027
Minority interest in net income of consolidated subsidiaries 10,064 10,512 10,623
------------- -------------- -------------
NET INCOME FROM CONTINUING OPERATIONS 143,311 112,117 162,404
DISCONTINUED OPERATIONS (NOTE 11)
Gain from operations, net of income taxes 17,555 25,012 7,248
Loss on disposal, net of income taxes (71,984)
------------- -------------- -------------
NET INCOME 88,882 137,129 169,652
------------- -------------- -------------
OTHER COMPREHENSIVE (LOSS) INCOME, NET OF INCOME TAXES
Unrealized (losses) gains on securities (61,246) (46,967) 98,287
Reclassification adjustment for net realized gains
included in net income (1,452) (12,980) (30,213)
Minimum pension liability adjustment (1,488) (1,526) (2,101)
------------- -------------- -------------
Total other comprehensive (loss) income (64,186) (61,473) 65,973
------------- -------------- -------------
COMPREHENSIVE INCOME 24,696 75,656 235,625
------------- -------------- -------------
EQUITY, BEGINNING OF YEAR - RESTATED (NOTE 20) 1,736,555 1,660,899 1,425,274
------------- -------------- -------------
EQUITY, END OF YEAR $ 1,761,251 $ 1,736,555 $ 1,660,899
============= ============== =============
</TABLE>
The accompanying notes are an integral part of these statements.
31
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
CONSOLIDATED STATEMENT OF CASH FLOWS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
1999 1998 1997
(IN THOUSANDS)
<S> <C> <C> <C>
CASH FLOW FROM CONTINUING OPERATIONS ACTIVITIES
Net income from continuing operations $ 143,311 $ 112,117 $ 162,404
Net (loss) income from discontinued operations (54,429) 25,012 7,248
ADJUSTMENTS TO RECONCILE NET INCOME TO NET CASH
PROVIDED BY CONTINUING OPERATIONS:
Net realized investment gains (35,675) (58,202) (111,465)
Amortization and depreciation 69,367 51,076 61,876
Equity in undistributed earnings of affiliates and partnerships (138,215) (44,119) (38,588)
Deferred income taxes (benefit) (14,102) 398 25,298
(Increase) in receivables (67,688) (23,846) (46,178)
Increase (decrease) in deferred policy acquisition costs 3,493 (26,945) (44,406)
Increase in policy liabilities and accruals 329,660 368,528 494,462
Increase in other assets/other liabilities, net 53,901 58,795 54,230
Other, net 2,752 1,660 7,752
------------ ------------- -------------
Net cash provided by operating activities of continuing operations 346,804 439,462 565,385
Net cash (used for) provided by operating activities of
discontinued operations (105,537) 104,512 88,907
------------ ------------- -------------
CASH FLOW FROM INVESTING ACTIVITIES OF CONTINUING OPERATIONS
Proceeds from sales, maturities or repayments
of available-for-sale debt securities 1,702,889 1,322,381 1,082,132
Proceeds from maturities or repayments of held-to-maturity debt
securities 186,710 267,746 200,946
Proceeds from disposals of equity securities 163,530 45,204 51,373
Proceeds from mortgage loan maturities or repayments 124,864 200,419 164,213
Proceeds from sale of real estate and other invested assets 37,952 439,917 213,224
Proceeds from distributions of venture capital partnerships 26,730 18,550 5,650
Proceeds from sale of subsidiaries and affiliates 15,000 16,300
Purchase of available-for-sale debt securities (1,672,705) (2,400,058) (1,547,855)
Purchase of held-to-maturity debt securities (427,472) (585,370) (183,371)
Purchase of equity securities (162,391) (85,002) (88,573)
Purchase of subsidiaries (187,621) (6,647) (246,400)
Purchase of mortgage loans (25,268) (75,974) (140,831)
Purchase of real estate and other invested assets (71,407) (134,224) (50,599)
Purchase of venture capital partnerships (108,461) (67,200) (39,994)
Change in short term investments, net 52,616 855,117 23,135
Increase in policy loans (34,298) (21,532) (59,699)
Capital expenditures (20,505) (25,052) (44,380)
Other investing activities, net 1,697 (6,540) (1,750)
------------ ------------- -------------
Net cash used for investing activities of continuing operations (398,140) (241,965) (662,779)
Net cash provided by (used for) investing activities of
discontinued operations 157,267 (101,532) (93,239)
------------ ------------- -------------
CASH FLOW FROM FINANCING ACTIVITIES OF CONTINUING OPERATIONS
Withdrawals of contractholder deposit funds,
net of deposits and interest credited (1,908) (11,124) (17,902)
Proceeds from repayment of securities sold
subject to repurchase agreements 28,398 (137,473) 137,473
Proceeds from borrowings 124,500 136 215,359
Repayment of borrowings (11,683) (55,589) (243,293)
Dividends paid to minority shareholders in consolidated
subsidiaries (4,240) (4,938) (6,895)
Other financing activities (361) (5,664) (1,250)
------------ ------------- -------------
Net cash provided by (used for) financing activities of
continuing operations 134,706 (214,652) 83,492
Net cash (used for) provided by financing activities of
discontinued operations (62,677) (7,739) 4,489
------------ ------------- -------------
NET CHANGE IN CASH AND CASH EQUIVALENTS OF CONTINUING OPERATIONS 83,370 (17,155) (13,902)
NET CHANGE IN CASH AND CASH EQUIVALENTS OF DISCONTINUED OPERATIONS (10,947) (4,759) 157
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR 115,187 137,101 150,846
------------ ------------- -------------
CASH AND CASH EQUIVALENTS, END OF YEAR $ 187,610 $ 115,187 $ 137,101
============ ============= =============
SUPPLEMENTAL CASH FLOW INFORMATION
Income taxes paid, net $ 106,372 $ 44,508 $ 76,167
Interest paid on indebtedness $ 34,791 $ 32,834 $ 32,300
</TABLE>
The accompanying notes are an integral part of these statements.
32
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
1. DESCRIPTION OF BUSINESS
Phoenix Home Life Mutual Insurance Company and its subsidiaries (Phoenix)
market a wide range of insurance and investment products and services
including individual participating life insurance, term, universal and
variable life insurance, annuities, and investment advisory and mutual fund
distribution services. These products and services are distributed among
three reportable segments: Individual, Investment Management and Corporate &
Other. See Note 10 - "Segment Information."
Additionally, in 1999, Phoenix discontinued the operations of four of its
business units: the Reinsurance Operations, the Property and Casualty
Brokerage Operations, the Real Estate Management Operations and the Group
Insurance Operations. See Note 11 - "Discontinued Operations."
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 significant influence over operating and financial policies, and
generally at least a 20% ownership interest, are reported on the equity
basis.
These consolidated financial statements have been prepared in accordance
with accounting principles generally accepted in the United States (GAAP).
The preparation of financial statements in conformity with GAAP requires
management to make estimates and assumptions that affect the reported
amounts of assets and liabilities at the date of the financial statements
and the reported amounts of revenues and expenses during the reporting
period. Actual results could differ from those estimates. Significant
estimates used in determining insurance and contractholder liabilities,
related reinsurance recoverables, income taxes, contingencies and valuation
allowances for investment assets are discussed throughout the Notes to
Consolidated Financial Statements. Significant inter-company accounts and
transactions have been eliminated. Amounts for 1998 and 1997 have been
retroactively restated to account for income from venture capital
partnership investments and leveraged lease investments. See Note 20 -
"Prior Period Adjustments" for venture capital investment and leveraged
lease investment information. Certain reclassifications have been made to
the 1998 and 1997 amounts to conform with the 1999 presentation.
VALUATION OF INVESTMENTS
Investments in debt securities include bonds, mortgage-backed and
asset-backed securities. 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 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.
33
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
For the mortgage-backed and asset-backed bond portion of the debt security
portfolio, Phoenix recognizes income using a constant effective yield based
on anticipated prepayments and the estimated economic life of the
securities. When actual prepayments differ significantly from anticipated
prepayments, the effective yield is recalculated to reflect actual payments
to date, and anticipated future payments and any resulting adjustment is
included in net investment income.
Equity securities are classified as available-for-sale and are reported at
fair value, based principally on their quoted market prices, with unrealized
gains or losses included in 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.
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.
Venture capital partnership and other 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.
These earnings or losses are included in investment income. Venture capital
partnerships generally account for the underlying investments held in the
partnerships at fair value. These investments can include public and private
common and preferred stock, notes, warrants and other investments.
Investments that are publicly traded are generally valued at closing market
prices. Investments that are not publicly traded, which are usually subject
to restrictions on resale, are generally valued at cost or at estimated fair
value, as determined in good faith by the general partner after giving
consideration to operating results, financial conditions, recent sales
prices of issuers' securities and other pertinent information. Some general
partners will discount the fair value of private investments held to reflect
these restrictions. These valuations subject the earnings to volatility.
Beginning in 1999, Phoenix includes equity in undistributed unrealized
capital gains and losses on investments held in the venture capital
partnerships in net investment income. Prior to 1999, these amounts were not
recorded. Prior years have been restated to reflect this change. See Note 20
- "Prior Period Adjustments" for additional information on venture capital
partnership investments.
34
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
Other invested assets include leveraged lease investments. These investments
represent the net of the estimated residual value of the lease assets,
rental receivables, and unearned and deferred income to be allocated over
the lease term. Investment income is calculated using the interest method
and is recognized only in periods in which the net investment is positive.
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 component of 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, off-balance sheet
financial instruments such as investment and loan commitments, financial
guarantees, interest rate swaps, interest rate caps, interest rate floors
and swaptions. These instruments have credit risk and also may be subject to
risk of loss due to interest rate and market fluctuations.
Phoenix enters into interest rate swap agreements to reduce market risks
from changes in interest rates. Phoenix does not enter into interest rate
swap agreements for trading purposes. Under interest rate swap agreements,
Phoenix exchanges cashflows with another party, at specified intervals, for
a set length of time based on a specified notional principal amount.
Typically, one of the cash flow streams is based on a fixed interest rate
set at the inception of the contract, and the other is a variable rate that
periodically resets. Generally, no premium is paid to enter into the
contract and no payment of principal is made by either party. The amounts to
be received or paid on these swap agreements are accrued and recognized in
net investment income.
Phoenix enters into interest rate floor, interest rate cap and swaption
contracts as a hedge for its assets and liabilities against substantial
changes in interest rates. Phoenix does not enter into interest rate floor,
interest rate cap and swaption contracts for trading purposes. Interest rate
floor and interest rate cap agreements are contracts with a counterparty
which require the payment of a premium and give Phoenix the right to receive
over the maturity of the contract, the difference between the floor or cap
interest rate and a market interest rate on specified future dates based on
an underlying notional principal. Swaption contracts are options to enter
into an interest rate swap transaction on a specified future date and at a
specified price. Upon the exercise of a swaption, Phoenix would either
receive a swap agreement at the pre-specified terms or cash for the market
value of the swap. Phoenix pays the premium for these instruments on a
quarterly basis over the maturity of the contract, and recognizes these
payments in net investment income.
Phoenix enters into foreign currency swap agreements to hedge against
fluctuations in foreign currency exposure. Under these agreements, Phoenix
agrees to exchange with another party, principal and periodic interest
payments denominated in foreign currency for payments denominated in U.S.
dollars. The amounts to be received or paid on these foreign currency swap
agreements is recognized in net investment income. To reduce counterparty
credit risks and
35
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
diversify counterparty exposure, Phoenix only enters into derivative
contracts with highly rated financial institutions.
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 new business, are deferred. Deferred
policy acquisition costs (DAC) 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 policies, 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 insurance policies, limited pay and investment type
contracts, deferred policy acquisition costs are amortized in proportion to
total estimated gross profits over the expected average life of the
contracts using estimated gross margins arising principally from investment,
mortality and expense margins and surrender charges based on historical and
anticipated experience, updated at the end of each accounting period.
GOODWILL 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 their estimated lives.
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
36
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
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.
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 date 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 1999 and prior
years. 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.
37
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
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.
RECENT ACCOUNTING PRONOUNCEMENTS
In June, 1999, The Financial Accounting Standards Board issued Statement of
Financial Accounting Standards (SFAS) No. 137, "Accounting for Derivative
Instruments and Hedging Activities - Deferral of the Effective Date of SFAS
No. 133". Because of the complexities associated with transactions involving
derivative instruments and their prevalent use as hedging instruments and,
because of the difficulties associated with the implementation of Statement
133, the effective date of SFAS No. 133 "Accounting for Derivative
Instruments and Hedging Activities" was delayed until fiscal years beginning
after June 15, 2000. SFAS No. 133, initially issued on June 15, 1998,
requires that all derivative instruments be recorded on the balance sheet at
their fair value. Changes in the fair value of derivatives are recorded each
period in current earnings or other comprehensive income, depending on
whether a derivative is designated as part of a hedge transaction and, if it
is, the type of hedge transaction. For fair-value hedge transactions in
which Phoenix is hedging changes in an asset's, liability's or firm
commitment's fair value, changes in the fair value of the derivative
instrument will generally be offset in the income statement by changes in
the hedged item's fair value. For cash-flow hedge transactions, in which
Phoenix is hedging the variability of cashflows related to a variable-rate
asset, liability, or a forecasted transaction, changes in the fair value of
the derivative instrument will be reported in other comprehensive income.
The gains and losses on the derivative instrument that are reported in other
comprehensive income will be reclassified as earnings in the period in which
earnings are impacted by the variability of the cash flows of the hedged
item. The ineffective portion of all hedges will be recognized in current
period earnings.
Phoenix has not yet determined the impact that the adoption of SFAS 133 will
have on its earnings or statement of financial position.
Phoenix adopted SFAS No. 130, "Reporting Comprehensive Income," as of
January 1, 1998. This statement establishes standards for the reporting and
display of comprehensive income and its components in a full set of
financial statements. This statement defines the components of comprehensive
income as those items that were previously reported only as components of
equity and were excluded from net income.
In 1998, Phoenix adopted SFAS No. 131, "Disclosures about Segments of an
Enterprise and Related Information." This statement supersedes SFAS No. 14,
"Financial Reporting for Segments of a Business Enterprise," replacing the "
industry segment" approach with the "management" approach. The management
approach designates the internal organization that is used by management for
making operating decisions and assessing performance as the source of
Phoenix's reportable segments. The adoption of this statement did not affect
the results of operations or financial position but did affect the
disclosure of segment information.
In 1998, Phoenix adopted SFAS No. 132, "Employers' Disclosures about
Pensions and Other Postretirement Benefits," which amends SFAS No. 87, "
Employers' Accounting for Pensions," SFAS No. 88, "Employers' Accounting for
Settlements and Curtailments of Defined Benefit Pension Plans and for
Termination Benefits," and SFAS No. 106, "Employers' Accounting for
Postretirement Benefits Other than Pensions". The new statement revises and
standardizes
38
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
employers' disclosures about pension and other postretirement benefit plans.
Adoption of this statement did not affect the results of operations or
financial position of Phoenix.
On January 1, 1999, Phoenix adopted Statement of Position (SOP) 97-3,
"Accounting by Insurance and Other Enterprises for Insurance-Related
Assessments." SOP 97-3 provides guidance for assessments related to
insurance activities. The adoption of SOP 97-3 did not have a material
impact on Phoenix's results from operations or financial position.
On January 1, 1999, Phoenix adopted SOP 98-1, "Accounting for the Costs of
Computer Software Developed or Obtained for Internal Use." SOP 98-1 provides
guidance for determining when an entity should capitalize or expense
external and internal costs of computer software developed or obtained for
internal use. The adoption of SOP 98-1 did not have a material impact on
Phoenix's results from operations or financial position.
On January 1, 1999, Phoenix adopted SOP 98-5, "Reporting on the Costs of
Start-Up Activities." SOP 98-5 requires that start-up costs capitalized
prior to January 1, 1999 should be written off and any future start-up costs
be expenses as incurred. The adoption of SOP 98-5 did not have a material
impact on Phoenix's results from operations or financial position.
3. SIGNIFICANT TRANSACTIONS
DISCONTINUED OPERATIONS
During 1999, Phoenix discontinued the operations of four of its business
units; the Reinsurance Operations, the Property and Casualty Brokerage
Operations, the Real Estate Management Operation and the Group Insurance
Operations. Disclosures concerning the financial impact of these
transactions are contained in Note 11 - "Discontinued Operations."
PFG HOLDINGS, INC.
On October 29, 1999, PM Holdings, a wholly-owned subsidiary of Phoenix,
purchased 100% of PFG Holdings, Inc. 8% cumulative preferred stock
convertible into a 67% interest in common stock for $5 million in cash. In
addition Phoenix has an option to purchase all the outstanding common stock
during year six at a value to 80% of the appraised value of the common stock
at that time. As of the statement date this option had not been executed.
Since the investment represents a majority interest Phoenix has consolidated
this entity for GAAP as if the preferred stock had been converted and
established a minority interest for outside shareholders. The transaction
resulted in goodwill of $3.8 million to be amortized over 10 years.
PFG Holdings was formed to purchase three of The Guarantee Life Companies'
operating subsidiaries: AGL Life Assurance Company, PFG Distribution Company
and Philadelphia Financial Group. These subsidiaries develop, market and
underwrite specialized private placement variable life and annuity products.
AGL Life Assurance Company must maintain at least $10 million of capital and
surplus to satisfy certain regulatory minimum capital requirements. PM
Holdings provided financing at the purchase date of $11 million to PFG
Holdings in order for AGL Life Assurance to meet this minimum requirement.
The debt is an 8.34% senior secured note maturing in 2009.
39
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
EMPRENDIMIENTO COMPARTIDO, S.A., (EMCO)
At January 1, 1999 PM Holdings held 9.1 million shares of EMCO, representing
a 35% ownership interest the Argentine financial services company that
provides pension management, annuities and life insurance products. On June
23, 1999, PM Holdings became the majority owner of EMCO when it purchased
13.9 million shares of common stock from the Banco del Suquia, S.A. for
$29.5 million, plus $10.0 million for a five year covenant not-to-compete.
Payment for the stock will be made in three installments: $10.0 million, 180
days from closing; $10.0 million, 360 days from closing; and $9.5 million,
540 days from closing, all subject to interest of 7.06%. The covenant was
paid at the time of closing.
In addition, EMCO purchased, for its treasury, 3.0 million shares of its
outstanding common stock held by two banks. This, in combination with the
purchase described above, increased PM Holdings ownership interest from 35%
to 100% of the then outstanding stock.
On November 12, 1999, PM Holdings sold 11.5 million shares (50% interest) of
EMCO common stock for $40.0 million generating a pre-tax gain of $11.3
million. PM Holdings received $15.0 million in cash plus a $9.0 million
two-year 8% interest bearing note, and a $16.0 million five-year 8% interest
bearing note. PM Holdings uses the equity method of accounting to account
for its remaining 50% interest in EMCO.
After the sale, the remaining excess of the purchase price over the fair
value of the acquired net tangible assets totaled $17.0 million. That
consisted of a covenant not-to-compete of $5.0 million which is being
amortized over five years and goodwill of $12.0 million which is being
amortized over ten years.
PHOENIX NEW ENGLAND TRUST
On October 29, 1999, PM Holdings indirectly acquired 100% of the common
stock of New London Trust, a banking subsidiary of Sun Life of Canada, for
$30.0 million in cash. New London Trust, renamed Phoenix New England Trust,
is a New Hampshire based federal savings bank that operates a trust division
with assets under management of approximately $1 billion. Immediately
following this acquisition, on November 1, 1999, PM Holdings sold the New
London Trust's New Hampshire retail banking operations to Lake Sunapee Bank
and Mascoma Savings Bank in New Hampshire and the Connecticut branches to
Westbank Corporation, for a total of $25.2 million in cash. No gain or loss
was recognized on this sale. PM Holdings retained the trust business and
four trust offices of New London Trust, located in New Hampshire and
Vermont.
LOMBARD INTERNATIONAL ASSURANCE, S.A.
On November 5, 1999, PM Holdings purchased 12% of the common stock of
Lombard International Assurance, S.A., a Pan-European financial services
company, for $29.1 million in cash. Lombard provides investment-linked
insurance products to high-net-worth individuals in eight European
countries. This investment is classified as equity securities in the
Consolidated Balance Sheet.
40
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
PHOENIX INVESTMENT PARTNERS, LTD.
On March 1, 1999, Phoenix Investment Partners completed its acquisition of
the retail mutual fund and closed-end fund business of the New York City
based Zweig Group. Under the terms of the agreement, Phoenix Investment
Partners paid $135.0 million at closing and will pay up to an additional
$29.0 million over the next three years based on revenue growth of the Zweig
funds. The Zweig Group managed approximately $3.3 billion of assets as of
December 31,1999.
On December 3, 1998, Phoenix Investment Partners completed the sale of its
49% interest in Canadian investment firm Beutel, Goodman & Company, Ltd. for
$47.0 million. Phoenix Investment Partners received $37.0 million in cash
and a $10.0 million three-year interest bearing note. The transaction
resulted in a before-tax gain of approximately $17.5 million. Phoenix's
interest represents an after-tax realized gain of approximately $6.8
million.
Phoenix owns approximately 60% of the outstanding Phoenix Investment
Partners' common stock. In addition, Phoenix owns 45% of Phoenix Investment
Partners' convertible subordinated debentures.
ABERDEEN ASSET MANAGEMENT PLC
On February 18, 1999, PM Holdings purchased an additional 15.1 million
shares of the common stock of Aberdeen Asset Management for $29.4 million.
As of December 31, 1999, PM Holdings owned 21% of the outstanding common
stock of Aberdeen Asset Management, a Scottish asset management firm. The
investment is reported on the equity basis and classified as other invested
assets in the Consolidated Balance Sheet.
DIVIDEND SCALE REDUCTION
In consideration of the decline of interest rates in the financial markets,
Phoenix's Board of Directors voted in October of 1998 to adopt a reduced
dividend scale, effective for dividends payable on or after January 1, 1999.
Dividends for individual participating policies were reduced 60 basis points
in most cases, an average reduction of approximately 8%. The effect was a
decrease of approximately $15.7 million in the policyholder dividends
expense in 1998. In October 1999, Phoenix's Board of Directors voted to
maintain the dividend scale for dividends payable on or after January 1,
2000.
REAL ESTATE SALES
On December 15, 1998, Phoenix sold 47 commercial real estate properties with
a carrying value of $269.8 million, and 4 joint venture real estate
partnerships with a carrying value of $10.5 million, for approximately $309
million in cash. This transaction, along with the sale of 18 other
properties and partnerships during 1998, which had a carrying value of $36.7
million, resulted in pre-tax gains of approximately $67.5 million. As of
December 31, 1999, Phoenix had 3 commercial real estate properties remaining
with a carrying value of $42.9 million and 5 joint venture real estate
partnerships with a carrying value of $49.1 million.
41
<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, 1999 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 $ 27,595 $ 416 $ (1,033) $ 26,978
Foreign government bonds 3,032 (796) 2,236
Corporate securities 1,776,174 12,945 (95,707) 1,693,412
Mortgage-backed and asset-backed
securities 285,387 1,361 (19,166) 267,582
-------------- ------------- ------------- -------------
Total held-to-maturity securities 2,092,188 14,722 (116,702) 1,990,208
Less: held-to-maturity securities of
discontinued operations 102,019 736 (5,835) 96,920
-------------- ------------- ------------- -------------
Total held-to-maturity securities of
continuing operations 1,990,169 13,986 (110,867) 1,893,288
-------------- ------------- ------------- -------------
AVAILABLE-FOR-SALE:
U.S. government and agency bonds 283,697 1,955 (6,537) 279,115
State and political subdivision bonds 495,860 4,765 (21,751) 478,874
Foreign government bonds 273,868 23,700 (3,990) 293,578
Corporate securities 2,353,228 18,578 (102,773) 2,269,033
Mortgage-backed and asset-backed
securities 2,977,136 17,916 (103,264) 2,891,788
-------------- ------------- ------------- -------------
Total available-for-sale securities 6,383,789 66,914 (238,315) 6,212,388
Less: available-for-sale securities of
discontinued operations 725,077 7,600 (27,068) 705,609
-------------- ------------- ------------- -------------
Total available-for-sale securities of
continuing operations 5,658,712 59,314 (211,247) 5,506,779
-------------- ------------- ------------- -------------
TOTAL DEBT SECURITIES OF CONTINUING
OPERATIONS $ 7,648,881 $ 73,300 $ (322,114) $ 7,400,067
============== ============== ============= =============
EQUITY SECURITIES $ 311,100 $ 176,593 $ (24,211) $ 463,482
Less: equity securities of discontinued
operations 1,869 1,869
-------------- ------------- ------------- -------------
TOTAL EQUITY SECURITIES OF CONTINUING
OPERATIONS $ 309,231 $ 176,593 $ (24,211) $ 461,613
============== ============ ============= =============
</TABLE>
42
<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, 1998 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 $ 10,562 $ 643 $ (78) $ 11,127
Foreign government bonds 3,036 (743) 2,293
Corporate securities 1,695,789 98,896 (13,823) 1,780,862
Mortgage-backed and asset-backed
securities 172,300 6,201 (12) 178,489
-------------- ------------- ------------- -------------
Total held-to-maturity securities 1,881,687 105,740 (14,656) 1,972,771
Less: held-to-maturity securities of
discontinued operations 156,248 8,776 (1,216) 163,808
-------------- ------------- ------------- -------------
Total held-to-maturity securities of
continuing operations 1,725,439 96,964 (13,440) 1,808,963
-------------- ------------- ------------- -------------
AVAILABLE-FOR-SALE:
U.S. government and agency bonds 497,089 34,454 (422) 531,121
State and political subdivision bonds 529,977 43,622 (104) 573,495
Foreign government bonds 293,968 28,814 (18,691) 304,091
Corporate securities 1,993,720 110,525 (36,656) 2,067,589
Mortgage-backed and asset-backed
securities 3,121,690 110,172 (14,618) 3,217,244
-------------- ------------- ------------- -------------
Total available-for-sale securities 6,436,444 327,587 (70,491) 6,693,540
Less: available-for-sale securities of
discontinued operations 678,992 34,558 (7,436) 706,114
-------------- ------------- ------------- -------------
Total available-for-sale securities of
continuing operations 5,757,452 293,029 (63,055) 5,987,426
-------------- ------------- ------------- -------------
TOTAL DEBT SECURITIES OF CONTINUING
OPERATIONS $ 7,482,891 $ 389,993 $ (76,495) $ 7,796,389
============== ============= ============= =============
EQUITY SECURITIES $ 223,915 $ 102,018 $ (21,388) $ 304,545
Less: equity securities of discontinued
operations 2,896 2,896
-------------- ------------- ------------- -------------
TOTAL EQUITY SECURITIES OF CONTINUING
OPERATIONS $ 221,019 $ 102,018 $ (21,388) $ 301,649
============== ============ ============= =============
</TABLE>
43
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
The sale of fixed maturities held-to-maturity relate to certain securities,
with amortized cost of $3.9 million, $19.6 million and $59.1 million, for
the years ended December 31, 1999, 1998 and 1997, respectively, which were
sold specifically due to a significant decline in the issuers' credit
quality. The related realized losses, net of the sales, were $0.2 million,
$0.8 million and $10.1 million in 1999, 1998 and 1997, respectively.
The amortized cost and fair value of debt securities, by contractual sinking
fund payment and maturity, as of December 31, 1999 are shown below. Actual
maturity may differ from contractual maturity 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 $ 118,171 $ 116,992 $ 43,180 $ 43,483
Due after one year through five years 583,115 564,215 534,417 532,676
Due after five years through ten years 587,568 566,505 1,146,805 1,104,661
Due after ten years 517,946 474,913 1,682,250 1,639,771
Mortgage-backed and
asset-backed securities 285,388 267,583 2,977,137 2,891,797
-------------- -------------- --------------- -------------
Total $ 2,092,188 $ 1,990,208 $ 6,383,789 $ 6,212,388
Less: securities of discontinued
operations 102,019 96,920 725,077 705,609
-------------- -------------- --------------- -------------
Total securities of continuing
operations $ 1,990,169 $ 1,893,288 $ 5,658,712 $ 5,506,779
============== ============== =============== =============
</TABLE>
Carrying values for investments in mortgage-backed and asset-backed
securities, excluding U.S. government guaranteed investments, were as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
1999 1998
(IN THOUSANDS)
<S> <C> <C>
Planned amortization class $ 168,027 $ 433,668
Asset-backed 956,892 910,594
Mezzanine 194,849 280,162
Commercial 735,238 641,485
Sequential pay 1,039,001 982,576
Pass through 77,154 119,065
Other 6,014 21,994
-------------- --------------------
Total mortgage-backed and asset-backed securities $ 3,177,175 $ 3,389,544
============== ====================
</TABLE>
44
<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,
1999 1998 1999 1998
(IN THOUSANDS) (IN THOUSANDS)
<S> <C> <C> <C> <C>
PROPERTY TYPE:
Office buildings $ 183,912 $ 221,244 $ 30,545 $ 38,343
Retail 208,606 203,927 14,111 36,858
Apartment buildings 252,947 261,894 41,744 21,553
Industrial buildings 82,699 121,789 1,600
Other 2,950 19,089 8,859 32
Valuation allowances (14,283) (30,600) (3,232) (6,411)
----------------- ----------------- ----------------- ----------------
Total $ 716,831 $ 797,343 $ 92,027 $ 91,975
================= ================= = ================ ================
GEOGRAPHIC REGION:
Northeast $ 149,336 $ 169,368 $ 59,582 $ 47,709
Southeast 198,604 213,916 32 32
North central 164,150 176,683 744 11,453
South central 105,062 98,956 21,232 22,649
West 113,962 169,020 13,669 16,543
Valuation allowances (14,283) (30,600) (3,232) (6,411)
----------------- ------------------ ---------------- ----------------
Total $ 716,831 $ 797,343 $ 92,027 $ 91,975
================= ================== ================ ================
</TABLE>
At December 31, 1999, scheduled mortgage loan maturities were as follows:
2000 - $92 million; 2001 - $87 million; 2002 - $32 million; 2003 - $109
million; 2004 - $38 million; 2005 - $35 million, and $338 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 $6.7
million and $2.3 million of its mortgage loans during 1999 and 1998,
respectively, on terms which differed from those granted to new borrowers.
The carrying value of delinquent and in process of foreclosure mortgage
loans at December 31, 1999 and 1998 is $6.0 million and $17.2 million,
respectively. There are valuation allowances of $5.4 million and $14.7
million, respectively, on these mortgages.
45
<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>
1999
Mortgage loans $ 30,600 $ 9,697 $ (26,014) $ 14,283
Real estate 6,411 183 (3,362) 3,232
----------------- ----------------- ------------------ ------------------
Total $ 37,011 $ 9,880 $ (29,376) $ 17,515
================= ================= ================== ==================
1998
Mortgage loans $ 35,800 $ 50,603 $ (55,803) $ 30,600
Real estate 28,501 5,108 (27,198) 6,411
----------------- ----------------- ------------------ ------------------
Total $ 64,301 $ 55,711 $ (83,001) $ 37,011
================= ================= ================== ==================
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
================= ================= ================== ==================
</TABLE>
NON-INCOME PRODUCING MORTGAGE LOANS AND BONDS
The net carrying values of non-income producing mortgage loans were $0.0
million and $15.6 million at December 31, 1999 and 1998, respectively. The
net carrying value of non-income producing bonds were $0.0 million and $22.3
at December 31, 1999 and 1998, respectively.
46
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
DERIVATIVE INSTRUMENTS
Derivative instruments at December 31, are summarized below:
<TABLE>
<CAPTION>
1999 1998
($ IN THOUSANDS)
<S> <C> <C>
Swaptions:
Notional amount $ 1,600,000
Weighted average strike rate 5.02%
Index rate (1) 10 Yr. CMS
Fair value $ (8,200)
Interest rate floors:
Notional amount $ 1,210,000 $ 570,000
Weighted average strike rate 4.57% 4.59%
Index rate (1) 2-10 Yr. CMT/CMS 5-10 Yr. CMT
Fair value $ (7,542) $ 1,423
Interest rate swaps:
Notional amount $ 474,037 $ 424,573
Weighted average received rate 6.33% 6.27%
Weighted average paid rate 6.09% 5.82%
Fair value $ 1,476 $ 10,989
Foreign currency swaps:
Notional amount $ 8,074
Weighted average received rate 12.04%
Weighted average paid rate 10.00%
Fair value $ 213
Interest rate caps:
Notional amount $ 50,000 $ 50,000
Weighted average strike rate 7.95% 7.95%
Index rate (1) 10 Yr. CMT 10 Yr. CMT
Fair value $ 842 $ (96)
</TABLE>
(1) Constant maturity treasury yields (CMT) and constant maturity swap
yields (CMS).
The increase in net investment income related to interest rate swap
contracts was $1.0 million and $2.1 million for the years ended December 31,
1999 and 1998, respectively. The decrease in net investment income related
to interest rate floor, interest rate cap and swaption contracts was $2.3
million and $0.2 million for the years ended December 31, 1999 and 1998,
respectively, representing quarterly premium payments on these instruments
which are being paid over the life of the contracts. The estimated fair
value of these instruments represent what Phoenix would have to pay or
receive if the contracts were terminated.
47
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
Phoenix is exposed to credit risk in the event of nonperformance by
counterparties to these financial instruments, but management of the Phoenix
does not expect counterparties to fail to meet their financial obligations,
given their high credit ratings. The credit exposure of these instruments is
the positive fair value at the reporting date.
Management of Phoenix considers the likelihood of any material loss on these
instruments to be remote.
VENTURE CAPITAL PARTNERSHIPS
Phoenix invests in venture capital limited partnerships. These partnerships
focus on early-stage ventures, primarily in the information technology and
life science industries, as well as direct equity investments in leveraged
buyouts and corporate acquisitions.
Phoenix records its equity in the earnings of the partnerships in net
investment income.
The components of net investment income due to venture capital partnerships
for the year ended December 31, were as follows:
<TABLE>
<CAPTION>
1999 1998 1997
(IN THOUSANDS)
<S> <C> <C> <C>
Operating losses $ (8,921) $ (2,746) $ (2,131)
Realized gains on cash and stock distributions 84,725 23,360 31,336
Unrealized gains on investments held in the partnerships 64,091 19,009 4,531
---------- ----------- ----------
Total venture capital partnership net investment income $ 139,895 $ 39,623 $ 33,736
========== =========== ==========
</TABLE>
OTHER INVESTED ASSETS
Other invested assets, consisting primarily of partnership interests and
equity in unconsolidated affiliates, were as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
1999 1998
(IN THOUSANDS)
<S> <C> <C>
Transportation and equipment leases $ 82,063 $ 80,953
Affordable housing partnerships 22,247 10,854
Investment in Aberdeen Asset Management 99,074 72,257
Investment in EMCO of Argentina 13,423 10,681
Investment in other affiliates 12,389 12,706
Seed money in separate accounts 33,279 26,587
Other partnership interests 41,953 22,697
------------------ ------------------
Total other invested assets $ 304,428 $ 236,735
Less: other invested assets of discontinued operations 3,954 4,604
------------------ ------------------
Total other invested assets of continuing operations $ 300,474 $ 232,131
================== =================
</TABLE>
48
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NET INVESTMENT INCOME
The components of net investment income for the year ended December 31,
were as follows:
<TABLE>
<CAPTION>
1999 1998 1997
(IN THOUSANDS)
<S> <C> <C> <C>
Debt securities $ 641,076 $ 598,892 $ 509,702
Equity securities 8,272 6,469 4,277
Mortgage loans 66,285 83,101 85,662
Policy loans 148,998 146,477 122,562
Real estate 9,716 38,338 18,939
Leveraged leases 2,202 2,746 2,692
Venture capital partnerships 139,895 39,623 33,736
Other invested assets 2,544 1,750 2,160
Short-term investments 22,543 23,825 18,768
------------ ----------- ------------
Sub-total 1,041,531 941,221 798,498
Less investment expenses 23,505 23,328 22,621
------------ ----------- ------------
Net investment income $ 1,018,026 $ 917,893 $ 775,877
Less: net investment income of discontinued operations 67,682 66,290 61,510
------------ ----------- ------------
Total net investment income of continuing operations $ 950,344 $ 851,603 $ 714,367
============ =========== ============
</TABLE>
Investment income of $2.7 million was not accrued on certain delinquent
mortgage loans and defaulted bonds at December 31, 1999. 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 $36.5 million and $40.8 million at December 31,
1999 and 1998, respectively. Interest income on restructured mortgage loans
that would have been recorded in accordance with the original terms of such
loans amounted to $4.1 million, $4.9 million and $5.3 million in 1999, 1998
and 1997, respectively. Actual interest income on these loans included in
net investment income was $3.5 million, $4.0 million and $3.8 million in
1999, 1998 and 1997, respectively.
49
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
INVESTMENT GAINS AND LOSSES
Net unrealized gains and (losses) on securities available-for-sale and
carried at fair value for the year ended December 31, were as follows:
<TABLE>
<CAPTION>
1999 1998 1997
(IN THOUSANDS)
<S> <C> <C> <C>
Debt securities $ (428,497) $ (7,040) $ 112,194
Equity securities 71,752 (91,880) 74,547
Deferred policy acquisition costs 260,287 6,694 (80,603)
Deferred income taxes (33,760) (32,279) 38,064
----------------- ---------------- ----------------
Net unrealized investment (losses) gains
on securities available-for-sale $ (62,698) $ (59,947) $ 68,074
================= ================ ================
</TABLE>
Realized investment gains and losses for the year ended December 31, were
as follows:
<TABLE>
<CAPTION>
1999 1998 1997
(IN THOUSANDS)
<S> <C> <C> <C>
Debt securities $ (20,416 ) $ (4,295) $ 19,315
Equity securities 16,648 11,939 26,290
Mortgage loans 18,534 (6,895) 3,805
Real estate 2,915 67,522 44,668
Other invested assets 18,432 (4,709) 17,387
----------- ----------- -----------
Net realized investment gains 36,113 63,562 111,465
Less realized from discontinued operations 438 5,360 422
----------- ----------- -----------
Net realized investment gains from continuing
operations $ 35,675 $ 58,202 $ 111,043
============ ============ ===========
</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>
1999 1998 1997
(IN THOUSANDS)
<S> <C> <C> <C>
Proceeds from disposals $ 1,106,929 $ 912,696 $ 821,339
Gross gains on sales $ 21,808 $ 17,442 $ 27,954
Gross losses on sales $ 39,122 $ 33,641 $ 5,309
</TABLE>
50
<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:
<TABLE>
<CAPTION>
DECEMBER 31,
1999 1998
(IN THOUSANDS)
<S> <C> <C>
Phoenix Investment Partners gross amounts:
Goodwill $ 384,576 $ 321,793
Investment management contracts 235,976 169,006
Non-compete covenant 5,000 5,000
Other 10,894 472
------------- -------------
Totals 636,446 496,271
------------- -------------
Other gross amounts:
Goodwill 32,554 16,631
Intangible asset related to pension plan benefits 11,739 16,229
Other 1,206 693
------------- -------------
Totals 45,499 33,553
------------- -------------
Total gross goodwill and other intangible assets 681,945 529,824
Accumulated amortization - Phoenix Investment Partners (79,912) (49,615)
Accumulated amortization - other (8,766) (2,314)
------------- -------------
Total net goodwill and other intangible assets $ 593,267 $ 477,895
============= =============
</TABLE>
6. NOTES PAYABLE
<TABLE>
<CAPTION>
DECEMBER 31,
1999 1998
(IN THOUSANDS)
<S> <C> <C>
Short-term debt $ 21,598 $ 1,938
Bank borrowings 260,284 168,278
Notes payable 1,146
Subordinated debentures 41,364 41,359
Surplus notes 175,000 175,000
---------------- ----------------
Total notes payable $ 499,392 $ 386,575
================ ================
</TABLE>
Phoenix has various lines of credit established with major commercial banks.
As of December 31, 1999, Phoenix had outstanding balances totaling $436.7
million. The total unused credit was $369.0 million. Interest rates ranged
from 5.26% to 7.48% in 1999.
Maturities of other indebtedness are as follows: 2000 - $21.6 million; 2001
- $26.0 million; 2002 $200.0 million; 2003 - $0.0 million; 2004 - $35.0
million; 2005 and thereafter - $216.8 million. Interest expense was $32.7
million, $25.9 million and $24.3 million for the years ended December 31,
1999, 1998 and 1997, respectively.
51
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
7. INCOME TAXES
A summary of income taxes (benefits) applicable to income before income
taxes and minority interest for the year ended December 31, was as follows:
<TABLE>
<CAPTION>
1999 1998 1997
(IN THOUSANDS)
<S> <C> <C> <C>
Income taxes
Current $ 121,448 $ 61,889 $ 39,583
Deferred (13,567) 3,157 7,658
----------------- ---------------- ----------------
Total $ 107,881 $ 65,046 $ 47,241
================= ================ ================
</TABLE>
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>
1999 1998 1997
% % %
<S> <C> <C> <C>
Income tax expense at statutory 91,440 65,685 77,095
rate $ 35 $ 35 $ 35
Dividend received deduction and
tax-exempt interest (3,034) (1) (3,273) (2) (1,684) (1)
Other, net 7,922 3 2,634 2 (15,059) (7)
------------ ------- ------------ ------- ------------ -------
96,328 37 65,046 35 60,352 27
Differential earnings (equity tax) 11,553 4 (13,111) (6)
------------ ------- ------------ ------- ------------ -------
Income taxes $ 107,881 41 $ 65,046 35 $ 47,241 21
============ ======= ============ ======= ============ =======
</TABLE>
52
<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,
1999 1998
(IN THOUSANDS)
<S> <C> <C>
Deferred policy acquisition costs $ 282,725 $ 294,917
Unearned premium/deferred revenue (135,124) (139,346)
Impairment reserves (15,556) (23,111)
Pension and other postretirement benefits (68,902) (57,720)
Investments 177,204 122,032
Future policyholder benefits (181,205) (151,168)
Other 4,683 31,595
-------------- ------------
63,825 77,199
Net unrealized investment gains 26,587 42,254
Minimum pension liability (4,150) (3,349)
-------------- ------------
Deferred income tax liability, net $ 86,262 $ 116,104
============== ============
</TABLE>
Gross deferred income tax assets totaled $405 million and $375 million at
December 31, 1999 and 1998, respectively. Gross deferred income tax
liabilities totaled $491 million and $491 million at December 31, 1999 and
1998, 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, 1999 and 1998 will be
realized.
8. 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 the 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 years ended December 31,
were as follows:
<TABLE>
<CAPTION>
1999 1998 1997
(IN THOUSANDS)
<S> <C> <C> <C>
Components of net periodic benefit cost
Service cost $ 11,887 $ 11,046 $ 10,278
Interest cost 24,716 22,958 22,650
Curtailments 21,604
Expected return on plan assets (28,544) (25,083) (22,055)
Amortization of net transition asset (2,369) (2,369) (2,369)
Amortization of prior service cost 1,795 1,795 1,795
Amortization of net (gain) loss (2,709) (1,247) 25
--------------- -------------- --------------
Net periodic benefit cost $ 26,380 $ 7,100 $ 10,324
=============== ============== ==============
</TABLE>
53
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
In 1999, Phoenix offered a special retirement program under which qualified
participants' benefits under the employee pension plan were enhanced by
adding five years to age and five years to pension plan service. Of the 320
eligible employees, 146 accepted the special retirement program. As a result
of the special retirement program, Phoenix recorded an additional pension
expense of $21.6 million for the year ended December 31, 1999.
The aggregate change in projected benefit obligation, change in plan assets,
and funded status of the plan were as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
1999 1998
(IN THOUSANDS)
<S> <C> <C>
Change in projected benefit obligation
Projected benefit obligation at beginning of year $ 353,462 $ 335,436
Service cost 11,887 11,046
Interest cost 24,716 22,958
Plan amendments 23,871
Curtailments (6,380)
Actuarial loss (4,887) 1,958
Benefit payments (19,841) (17,936)
-------------- ---------------
Benefit obligation at end of year $ 382,828 $ 353,462
-------------- ---------------
Change in plan assets
Fair value of plan assets at beginning of year $ 364,819 $ 321,555
Actual return on plan assets 78,951 58,225
Employer contributions 3,883 2,975
Benefit payments (19,841) (17,936)
-------------- ---------------
Fair value of plan assets at end of year $ 427,812 $ 364,819
-------------- ---------------
Funded status of the plan $ 44,984 $ 11,357
Unrecognized net transition asset (11,847) (14,217)
Unrecognized prior service cost 11,705 16,185
Unrecognized net gain (129,936) (75,921)
-------------- ---------------
Net amount recognized $ (85,094) $ (62,596)
============== ===============
Amounts recognized in the Consolidated Balance
Sheet consist of:
Accrued benefit liability $ (108,690) $ (88,391)
Intangible asset 11,739 16,229
Accumulated other comprehensive income 11,857 9,566
-------------- ---------------
$ (85,094) $ (62,596)
============== ===============
</TABLE>
At December 31, 1999 and 1998, the non-qualified plan was not funded and had
projected benefit obligations of $72.3 million and $57.2 million,
respectively. The accumulated benefit obligations as of December 31, 1999
and 1998 related to this plan were $60.1 million and $48.4 million,
respectively, and are included in other liabilities.
Phoenix recorded, as a reduction of equity, an additional minimum pension
liability of $7.7 million and $6.2 million, net of income taxes, at December
31, 1999 and 1998, 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 $11.7 million and $16.2 million as of December 31, 1999
and 1998 related to the non-qualified plan.
54
<PAGE>
The discount rate used in determining the actuarial present value of the
projected benefit obligation was 7.5% and 7.0% for 1999 and 1998,
respectively. The discount rate assumption for 1999 was determined based on
a study that matched available high quality investment securities with the
expected timing of pension liability payments. The rate of increase in
future compensation levels used in determining the actuarial present value
of the projected benefit obligation was 4.5% and 4.0% for 1999 and 1998,
respectively. The expected long-term rate of return on retirement plan
assets was 8.0% in 1999 and 1998.
The assets within the pension plan include corporate and government debt
securities, equity securities, real estate, venture capital partnerships,
and shares of mutual funds.
Phoenix also sponsors savings plans for its employees and agents that are
qualified under Internal Revenue Code Section 401(k). Employees and agents
may contribute a portion of their annual salary, subject to certain
limitations, 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, 1999, 1998 and 1997 were $4.0 million, $4.1
million and $3.8 million, respectively.
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 components of net periodic postretirement benefit cost for the year
ended December 31, were as follows:
<TABLE>
<CAPTION>
1999 1998 1997
(IN THOUSANDS)
<S> <C> <C> <C>
Components of net periodic benefit cost
Service cost $ 3,313 $ 3,436 $ 3,136
Interest cost 4,559 4,572 4,441
Curtailments 5,456
Amortization of net gain (1,493) (1,232) (1,527)
------------- ------------ ------------
Net periodic benefit cost $ 11,835 $ 6,776 $ 6,050
============= ============ ============
</TABLE>
As a result of the special retirement program, Phoenix recorded an
additional postretirement benefit expense of $5.5 million for the year ended
December 31, 1999.
55
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
The plan's change in projected benefit obligation, change in plan assets,
and funded status were as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
1999 1998
(IN THOUSANDS)
<S> <C> <C>
Change in projected postretirement benefit obligation
Projected benefit obligation at beginning of year $ 70,943 $ 66,618
Service cost 3,313 3,436
Interest cost 4,559 4,572
Plan Amendments 5,785
Curtailments (328)
Actuarial (gain) loss (8,622) 397
Benefit payments (4,459) (4,080)
--------------- ---------------
Projected benefit obligation at end of year 71,191 70,943
--------------- ---------------
Change in plan assets
Employer contributions 4,459 4,080
Benefit payments (4,459) (4,080)
--------------- ---------------
Fair value of plan assets at end of year
--------------- ---------------
Funded status of the plan (71,191) (70,943)
Unrecognized net gain (33,538) (26,408)
--------------- ---------------
Accrued benefit liability $ (104,729) $ (97,351)
=============== ===============
</TABLE>
The discount rate used in determining the accumulated postretirement benefit
obligation was 7.5% and 7.0% at December 31, 1999 and 1998, respectively.
For purposes of measuring the accumulated postretirement benefit obligation
the health care costs were assumed to increase 7.5% and 8.5% in 1999 and
1998, respectively, declining thereafter until the ultimate rate of 5.5% is
reached in 2002 and remains 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 $4.3 million and the annual service and
interest cost by $0.6 million, before income taxes. Decreasing the assumed
health care cost trend rates by one percentage point in each year would
decrease the accumulated postretirement benefit obligation by $4.1 million
and the annual service and interest cost by $0.5 million, before income
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. Other
postemployment benefit expenses were $0.5 million for 1999, ($0.5) million
for 1998 and $0.4 million for 1997.
56
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
9. COMPREHENSIVE INCOME
The components of, and related income tax effects for, other comprehensive
income for the years ended December 31, were as follows:
<TABLE>
<CAPTION>
1999 1998 1997
(IN THOUSANDS)
<S> <C> <C> <C>
UNREALIZED (LOSSES) GAINS ON SECURITIES
AVAILABLE-FOR-SALE:
Before-tax amount $ (94,224) $ (72,255) $ 151,210
Income tax (benefit) expense (32,978) (25,288) 52,923
-------------- -------------- --------------
Totals (61,246) (46,967) 98,287
-------------- -------------- --------------
RECLASSIFICATION ADJUSTMENT FOR NET GAINS
REALIZED IN NET INCOME:
Before-tax amount (2,234) (19,970) (46,481)
Income tax (benefit) (782) (6,990) (16,268)
-------------- -------------- --------------
Totals (1,452) (12,980) (30,213)
-------------- -------------- --------------
NET UNREALIZED (LOSSES) GAINS ON SECURITIES
AVAILABLE-FOR-SALE:
Before-tax amount (96,458) (92,225) 104,729
Income tax (benefit) expense (33,760) (32,278) 36,655
-------------- -------------- --------------
Totals $ (62,698) $ (59,947) $ 68,074
============== ============== ==============
MINIMUM PENSION LIABILITY ADJUSTMENT:
Before-tax amount $ (2,289) $ (2,347) $ (3,232)
Income tax (benefit) (801) (821) (1,131)
-------------- -------------- --------------
Totals $ (1,488) $ (1,526) $ (2,101)
============== ============== ==============
</TABLE>
The following table summarizes accumulated other comprehensive income for
the years ended December 31:
<TABLE>
<CAPTION>
1999 1998 1997
(IN THOUSANDS)
<S> <C> <C> <C>
NET UNREALIZED (LOSSES) GAINS ON SECURITIES
AVAILABLE-FOR-SALE:
Balance, beginning of year $ 100,510 $ 160,457 $ 92,383
Change during period (62,698) (59,947) 68,074
-------------- -------------- --------------
Balance, end of year 37,812 100,510 160,457
-------------- -------------- --------------
MINIMUM PENSION LIABILITY ADJUSTMENT:
Balance, beginning of year (6,219) (4,693) (2,592)
Change during period (1,488) (1,526) (2,101)
-------------- -------------- --------------
Balance, end of year (7,707) (6,219) (4,693)
-------------- -------------- --------------
ACCUMULATED OTHER COMPREHENSIVE INCOME:
Balance, beginning of year 94,291 155,764 89,791
Change during period (64,186) (61,473) 65,973
-------------- -------------- --------------
Balance, end of year $ 30,105 $ 94,291 $ 155,764
============== ============== ==============
</TABLE>
57
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
10. SEGMENT INFORMATION
Phoenix offers a wide range of financial products and services. These
businesses have been grouped into three reportable segments.
The Individual segment includes the individual life insurance and annuity
products including participating whole life, universal life, variable life,
term life and variable annuities.
The Investment Management segment includes retail and institutional mutual
fund management and distribution including open-end funds, closed-end funds
and wrap accounts.
Corporate and Other contains several smaller subsidiaries and investment
activities which do not meet the thresholds of reportable segments as
defined in SFAS No. 131. They include venture capital investments,
international operations, trust operations and other investments.
The majority of Phoenix's revenue is derived in the United States. Revenue
derived from outside the United States is not material and revenue derived
from any single customer does not exceed ten percent of total consolidated
revenues.
The accounting policies of the segments are the same as those described in
Note 2 - "Summary of Significant Accounting Policies." Phoenix evaluates the
performance of each operating segment based on profit or loss from
operations before income taxes and nonrecurring items. Phoenix does not
include certain nonrecurring items to the segments. They are reported as
unallocated items and include expenses associated with various lawsuits and
legal disputes, postretirement medical expenses associated with an early
retirement program and realized gains associated with the sales of
subsidiaries. See Note 8 - " Pension and Other Postretirement and
Postemployment Benefit Plans."
Included in the following tables is certain information with respect to
Phoenix's operating segments as of and for each of the years ended December
31, 1999, 1998 and 1997, as well as amounts not allocated to the segments
which was described previously.
<TABLE>
<CAPTION>
DECEMBER 31,
1999 1998 1997
(IN MILLIONS)
<S> <C> <C> <C>
TOTAL ASSETS
Individual $ 17,990.3 $ 16,919.5 $ 15,709.8
Investment Management 747.4 591.9 647.9
Corporate & Other 1,357.8 876.2 1,124.4
Discontinued operations 187.6 283.8 250.9
-------------- -------------- -------------
Total 20,283.1 18,671.4 17,733.0
============== ============== =============
DEFERRED POLICY ACQUISITION COSTS
Individual $ 1,306.7 $ 1,049.9 $ 1,016.3
============== ============== =============
</TABLE>
58
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1999 1998 1997
(IN MILLIONS)
<S> <C> <C> <C>
PREMIUMS, INSURANCE AND INVESTMENT PRODUCT FEES
Individual $ 1,361.4 $ 1,416.7 $ 1,259.2
Investment Management 293.9 231.0 140.7
Corporate & Other 115.2 41.1 84.1
Less: intersegment revenues (44.5) (40.7) (40.3)
--------------- --------------- --------------
Total 1,726.0 1,648.1 1,443.7
--------------- --------------- --------------
INVESTMENT INCOME
Individual 768.2 768.5 640.3
Investment Management 6.0 2.7 3.0
Corporate & Other 176.1 80.4 71.1
--------------- --------------- --------------
Total 950.3 851.6 714.4
--------------- --------------- --------------
NET REALIZED INVESTMENT GAINS
Individual 15.9 (17.8) 65.7
Corporate & Other 3.9 10.5 45.3
Gains on sale of subsidiaries 16.0 65.5
--------------- --------------- --------------
Total 35.8 58.2 111.0
--------------- --------------- --------------
POLICY BENEFITS AND DIVIDENDS
Individual 1,611.3 1,718.2 1,499.7
Corporate & Other 101.6 36.6 45.8
--------------- --------------- --------------
Total 1,712.9 1,754.8 1,545.5
--------------- --------------- --------------
AMORTIZATION OF DEFERRED POLICY ACQUISITION COSTS
Individual 146.6 137.7 102.6
--------------- --------------- --------------
Total 146.6 137.7 102.6
--------------- --------------- --------------
AMORTIZATION OF GOODWILL AND INTANGIBLES
Individual 4.2 0.3 0.5
Investment Management 30.3 22.0 9.1
Corporate & Other 3.5 0.8 (0.2)
--------------- --------------- --------------
Total 38.0 23.1 9.4
--------------- --------------- --------------
INTEREST EXPENSE
Investment Management 18.9 14.7 3.6
Corporate & Other 13.8 11.2 20.7
--------------- --------------- --------------
Total 32.7 25.9 24.3
--------------- --------------- --------------
OTHER OPERATING EXPENSES
Individual 289.4 268.1 234.6
Investment Management 203.5 156.1 101.9
Corporate & Other 65.0 40.7 69.2
Unallocated amounts 7.2 4.5 1.7
Less: intersegment expenses (44.5) (40.7) (40.4)
--------------- --------------- --------------
Total 520.6 428.7 367.0
--------------- --------------- --------------
INCOME (LOSS) FROM CONTINUING OPERATIONS
BEFORE INCOME TAXES AND MINORITY INTEREST
Individual 94.0 43.2 127.9
Investment Management 47.2 40.8 29.2
Corporate & Other 111.3 42.7 64.9
Unallocated amounts & intersegment eliminations 8.8 61.0 (1.7)
--------------- --------------- --------------
Total $ 261.3 $ 187.7 $ 220.3
=============== =============== ==============
</TABLE>
59
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
11. DISCONTINUED OPERATIONS
During 1999, Phoenix discontinued the operations of four of its business
units which in prior years had been reflected as reportable business
segments: the Reinsurance Operations, the Property and Casualty Brokerage
Operations, the Real Estate Management Operation and the Group Insurance
Operations. The discontinuation of these business units resulted from the
sale of several operations, a signed agreement to sell one of the operations
and the implementation of plans to withdraw from the remaining businesses.
REINSURANCE OPERATIONS
During 1999, Phoenix completed a comprehensive strategic review of its life
reinsurance segment and decided to exit these operations through a
combination of sale, reinsurance and placement of certain components into
run-off. Accordingly, Phoenix estimated sales proceeds, reinsurance premiums
and net claims run-off, resulting in the recognition of a $173 million
pre-tax loss ($113 million after-tax loss) on the disposal of life
reinsurance discontinued operations. The life reinsurance segment consisted
primarily of individual life reinsurance operations as well as group
personal accident and group health reinsurance business. The significant
components of the loss on the disposal of life reinsurance discontinued
operations in 1999 were as follows:
On August 1, 1999, Phoenix sold its individual life reinsurance operations
and certain group health reinsurance business to Employers Reinsurance
Corporation for $130 million. The transaction was structured as a
reinsurance and asset sale transaction, resulting in a pre-tax gain of $113
million. The pre-tax income from operations for the seven months prior to
disposal was $19 million.
On June 30, 1999, PM Holdings sold 100% of the common stock of Financial
Administrative Services, Inc. (FAS), its third-party administration
subsidiary, to CYBERTEK, a wholly-owned subsidiary of Policy Management
Systems Corporation. Proceeds from the sale were $8.0 million for the common
stock plus $1.0 million for a covenant not-to-compete, resulting in an
after-tax gain of $2.0 million.
Phoenix retained ownership of the preferred stock of FAS, which under the
terms of the agreement, CYBERTEK will purchase in six equal annual
installments commencing March 31, 2001 through March 31, 2006. The purchase
price will be determined annually based upon earnings, but in total, will
range from a minimum of $4.0 million to a maximum of $16.0 million.
During 1999, Phoenix placed the remaining group personal accident and group
health reinsurance operations into run-off. Management has adopted a formal
plan to terminate the related treaties as early as contractually permitted
and is not entering into any new contracts. Based upon the most recent
information available, Phoenix reviewed the run-off block and estimated the
amount and timing of future net premiums, claims and expenses. Consequently,
Phoenix increased reserve estimates on the run-off block by $180 million. In
addition, as part of the exit strategy, Phoenix purchased finite aggregate
excess of loss reinsurance to further protect Phoenix from unfavorable
results in the run-off block. The finite reinsurance is subject to an
aggregate retention of $100 million on the run-off block. Phoenix may
commute the agreement at any time after September 30, 2004, subject to
automatic commutation effective September 30, 2019. Phoenix paid an initial
premium of $130 million.
The additional estimated reserves and finite reinsurance coverage are
expected to cover the run-off of the business; however, the nature of the
underlying risks is such that the claims may take years to reach the
reinsurers involved. Therefore, Phoenix expects to pay claims out of
existing estimated reserves over a number of years as the level of business
diminishes.
60
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
Additionally, certain group personal accident reinsurance business has
become the subject of disputes concerning the placement of the business with
reinsurers and the recovery of the reinsurance. This business primarily
concerns certain occupational accident reinsurance "facilities" and a
reinsurance pool (the Unicover Pool) underwritten and managed by Unicover
Managers, Inc. (Unicover). Phoenix participated as a reinsurer in the
Unicover Pool. The Unicover Pool and "facilities" were reinsured in large
part by a reinsurance facility underwritten and managed by Centaur
Underwriting Limited (Centaur) in which Phoenix also participated. Phoenix
terminated its participation in the Centaur facility effective October 1,
1998 and in the Unicover Pool effective March 1, 1999. However, claims
arising from business underwritten while Phoenix was a participant continue
to run off. On September 21, 1999, Phoenix initiated arbitration proceedings
seeking to rescind certain contracts arising from its participation in the
Centaur facility with respect to reinsurance of the Unicover business. In
January 2000, Phoenix settled two Unicover-related matters (see Note 21 -
"Subsequent Events"). A substantial portion of the risk associated with the
Unicover Pool and "facilities" and the Centaur program was further
retroceded by Phoenix to other unaffiliated insurance entities, providing
Phoenix with significant security. Certain of these retrocessionaires have
given notice that they challenge their obligations under their contracts and
are in arbitration or litigation with Phoenix.
Additionally, certain group personal accident excess of loss reinsurance
contracts created in the London market during 1994 - 1997 have become the
subject of disputes concerning the placement of the business with reinsurers
and the recovery of reinsurance. Several arbitration proceedings are
currently pending.
Given the uncertainty associated with litigation and other dispute
resolution proceedings, and the expected long term development of net claims
payments, the estimated amount of the loss on disposal of life reinsurance
discontinued operations may differ from actual results. However, it is
management's opinion, after consideration of the provisions made in these
financial statements, as described above, that future developments will not
have a material effect on Phoenix's consolidated financial position.
PROPERTY AND CASUALTY BROKERAGE OPERATIONS
On July 1, 1999, PM Holdings sold its property and casualty brokerage
business to Hilb, Rogal and Hamilton Company (HRH) for $48.1 million
including $0.2 million for a covenant not-to-compete. Total proceeds
consisted of $32.0 million in convertible debentures, $15.9 million for
865,042 shares of HRH common stock, valued at $18.38 per share on the sale
date, and $0.2 million in cash. The pre-tax gain realized on the sale was
$40.1 million. The HRH common stock is classified as common stock and the
convertible debentures are classified as bonds in the Consolidated Balance
Sheet. As of December 31, 1999 Phoenix owns 7% of the outstanding HRH common
stock, 15% on a diluted basis.
REAL ESTATE MANAGEMENT OPERATIONS
On March 31, 1999, Phoenix sold its real estate management subsidiary,
Phoenix Realty Advisors, to Henderson Investors International Holdings, B.V.
for $7.9 million in cash. The pre-tax gain realized on this transaction was
$7.1 million.
61
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
GROUP INSURANCE OPERATIONS
On December 9, 1999, Phoenix signed a definitive agreement to sell its Group
Life and Health business, including five companies, Phoenix American Life,
Phoenix Dental Services, Phoenix Group Services, California Benefits and
Clinical Disability Management, to GE Financial Assurance Holdings, Inc.
Proceeds from the sale are estimated to be $285 million, including cash of
$240 million and 3.1% of the common stock of GE Life and Annuity Assurance
Company. Phoenix expects the transaction to be completed in the second
quarter of 2000, subject to regulatory approval.
The assets and liabilities of the discontinued operations have been excluded
from the assets and liabilities of continuing operations and separately
identified on the Consolidated Balance Sheet. Net assets of the discontinued
operations totaled $187.6 million and $283.8 million as of December 31, 1999
and 1998, respectively. Asset and liability balances of the continuing
operation as of December 31, 1998, have been restated to conform with the
current year presentation. Likewise, the Consolidated Statement of Income,
Comprehensive Income and Equity has been restated for 1998 and 1997 to
exclude the operating results of discontinued operations from continuing
operations. The operating results of discontinued operations and the gain or
loss on disposal are presented below.
<TABLE>
<CAPTION>
GAIN (LOSS) FROM OPERATIONS OF YEAR ENDED DECEMBER 31,
DISCONTINUED OPERATIONS 1999 1998 1997
(IN THOUSANDS)
<S> <C> <C> <C>
Revenues:
Reinsurance Operations $ 306,671 $ 163,503
Group Insurance Operations $ 453,813 503,825 483,956
Property and Casualty Brokerage Operations 25,968 72,579 64,093
Real Estate Management 1,189 12,707 15,319
-------------- ------------- --------------
Total revenues 480,970 895,782 726,871
-------------- ------------- --------------
Gain (loss) from operations:
Reinsurance Operations 14,081 10,611
Group Insurance Operations 28,672 29,212 31,686
Property and Casualty Brokerage Operations 1,534 2,515 (19,911)
Real Estate Management (2,645) (4,037) (2,616)
-------------- ------------- --------------
Gain from discontinued operations before income
taxes 27,561 41,771 19,770
Income taxes 10,006 16,759 12,522
-------------- ------------- --------------
Gain from discontinued operations, net of taxes $ 17,555 $ 25,012 $ 7,248
-------------- ------------- --------------
</TABLE>
62
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED
LOSS ON DISPOSAL OF DISCONTINUED OPERATIONS DECEMBER 31, 1999
(IN THOUSANDS)
<S> <C>
(Loss) gain on disposal:
Reinsurance Operations $ (173,061)
Property and Casualty Brokerage Operations 40,131
Real Estate Management 5,870
-------------
Loss on disposal of discontinued operations before
income taxes (127,060)
Income taxes (55,076)
-------------
Loss on disposal of discontinued operations, net of
income taxes $ (71,984)
-------------
</TABLE>
12. PROPERTY, EQUIPMENT AND LEASEHOLD IMPROVEMENTS
Property, equipment and leasehold improvements, consisting primarily of
office buildings occupied by Phoenix, are stated at depreciated cost. Real
estate occupied by Phoenix was $101.7 million and $106.7 million at December
31, 1999 and 1998, respectively. 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 $182.3 million and $161.2 million at
December 31, 1999 and 1998, respectively.
Rental expenses for operating leases, principally with respect to buildings,
amounted to $16.3 million, $16.9 million and $16.9 million in 1999, 1998,
and 1997, respectively, for continuing operations. Future minimum rental
payments under non-cancelable operating leases for continuing operations
were approximately $40.2 million as of December 31, 1999, payable as
follows: 2000 - $13.5 million; 2001 - $10.5 million; 2002 - $7.3 million;
2003 - $5.1 million; 2004 - $2.8 million; and $1.0 million thereafter.
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. For direct
issues, the maximum of individual life insurance retained by Phoenix on any
one life is $8 million for single life and joint first-to-die policies and
to $10 million for joint last-to-die policies, with excess amounts ceded to
reinsurers. Phoenix reinsures 80% of the mortality risk on the inforce block
of the Confederation Life business acquired on December 31, 1997, and 90% of
the mortality risk on certain new issues of term and universal life
products. In addition, Phoenix entered into a separate reinsurance agreement
on October 1, 1998 to reinsure 80% of the mortality risk on a substantial
portion of its otherwise retained individual life insurance business. In
1999, Phoenix reinsured the mortality risk on the remaining 20% of this
business. Amounts recoverable from reinsurers are estimated in a manner
consistent with the claim liability associated with the reinsured policy.
63
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
Additional information on direct business written and reinsurance assumed
and ceded for the years ended December 31, was as follows:
<TABLE>
<CAPTION>
1999 1998 1997
(IN THOUSANDS)
<S> <C> <C> <C>
Direct premiums $ 1,762,359 $ 1,719,393 $ 1,592,800
Reinsurance assumed 416,194 505,262 329,927
Reinsurance ceded (537,847) (371,854) (282,121)
-------------- --------------- --------------
Net premiums 1,640,706 1,852,801 1,640,606
Less net premiums of discontinued operations (506,499) (698,071) (564,449)
-------------- --------------- --------------
Net premiums of continuing operations $ 1,134,207 $ 1,154,730 $ 1,076,157
============== =============== ==============
Direct policy and contract claims incurred $ 707,105 $ 728,062 $ 629,112
Reinsurance assumed 563,807 433,242 410,704
Reinsurance ceded (500,282) (407,780) (373,127)
-------------- --------------- --------------
Net policy and contract claims incurred 770,630 753,524 666,689
Less net incurred claims of discontinued operations (552,423) (471,688) (422,373)
-------------- --------------- --------------
Net policy and contract claims incurred
of continuing operations $ 218,207 $ 281,836 $ 244,316
============== =============== ==============
Direct life insurance in force $ 31,052,050 $ 121,442,041 $ 20,394,664
Reinsurance assumed 139,649,850 110,632,110 84,806,585
Reinsurance ceded (207,192,046) (135,817,986) (74,764,639)
-------------- --------------- --------------
Net insurance in force 63,509,854 96,256,165 30,436,610
Less insurance in force of discontinued operations (1,619,452) (24,330,166) (13,811,408)
-------------- --------------- --------------
Net insurance in force of continuing operations $ 61,890,402 $ 71,925,999 $ 16,625,202
============== =============== ==============
</TABLE>
Irrevocable letters of credit aggregating $36.2 million at December 31, 1999
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 66.9% and 72.3% of the face value
of total individual life insurance in force at December 31, 1999 and 1998,
respectively. The premiums on participating life insurance policies were
76.8%, 79.4% and 83.5% of total individual life insurance premiums in 1999,
1998, and 1997, respectively.
64
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
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>
1999 1998 1997
(IN THOUSANDS)
<S> <C> <C> <C>
Balance at beginning of year $ 1,049,934 $ 1,016,295 $ 908,616
Acquisition cost deferred 143,110 164,608 288,281
Amortized to expense during the year (146,603) (137,663) (102,617)
Adjustment to net unrealized investment
gains (losses) included in other
comprehensive income 260,287 6,694 (77,985)
----------------- ---------------- -----------------
Balance at end of year $ 1,306,728 $ 1,049,934 $ 1,016,295
================= ================ =================
</TABLE>
Amortized to expense during the year for 1999 includes a $6.3 million
adjustment due to worse than expected persistency in one of the variable
annuity product lines and a $6.9 million adjustment to traditional life due
to an adjustment to death claims used in determining DAC amortization.
16. MINORITY INTEREST
Phoenix's interests in Phoenix Investment Partners and PFG Holdings, through
its wholly-owned subsidiary PM Holdings, are represented by ownership of
approximately 60% and 67%, respectively, of the outstanding shares of common
stock at December 31, 1999. Earnings and equity attributable to minority
shareholders are included in minority interest in the consolidated financial
statements.
17. 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 consolidated 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 analysis 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.
65
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
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.
DERIVATIVE INSTRUMENTS
Phoenix's derivative instruments include interest rate swap, cap and floor
agreements, swaptions and foreign currency swap agreements. Fair values for
these contracts are based on current settlement values. These values are
based on brokerage quotes that utilize pricing models or formulas based upon
current assumptions for the respective agreements.
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 130 and 800 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.
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.
66
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTES PAYABLE
The fair value of notes payable is determined based on contractual cash
flows discounted at market rates.
FAIR VALUE SUMMARY
The estimated fair values of the financial instruments as of December 31,
were as follows:
<TABLE>
<CAPTION>
1999 1998
CARRYING FAIR CARRYING FAIR
VALUE VALUE VALUE VALUE
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Financial assets:
Cash and cash equivalents $ 187,610 $ 187,610 $ 115,187 $ 115,187
Short-term investments 133,367 133,367 185,983 185,983
Debt securities 7,496,948 7,400,067 7,712,865 7,796,389
Equity securities 461,613 461,613 301,649 301,649
Mortgage loans 716,831 680,569 797,343 831,919
Derivative instruments (13,211) 12,316
Policy loans 2,042,558 2,040,497 2,008,260 2,122,389
---------------- --------------- --------------- ----------------
Total financial assets $ 11,038,927 $ 10,890,512 $ 11,121,287 $ 11,365,832
================ =============== =============== ================
Financial liabilities:
Policy liabilities $ 709,696 $ 709,357 $ 783,400 $ 783,400
Notes payable 499,392 490,831 386,575 395,744
---------------- ---------------- ---------------- ----------------
Total financial liabilities $ 1,209,088 $ 1,200,188 $ 1,169,975 $ 1,179,144
================ =============== =============== ===============
</TABLE>
18. CONTINGENCIES
LITIGATION
Certain group personal accident reinsurance business has become the subject
of disputes concerning the placement of the business with reinsurers and the
recovery of the reinsurance (see Note 11 - "Discontinued Operations" and
Note 21 - "Subsequent Events")
19. 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. Except for the accounting policy involving
federal income taxes described next, there were no material practices not
prescribed by the State of New York Insurance Department (the Insurance
Department), as of December 31, 1999, 1998 and 1997. Phoenix's statutory
federal income tax liability is principally based on estimates of federal
income tax due. A deferred income tax liability has also been established
for estimated taxes on unrealized gains for common stock and venture capital
equity partnerships. Current New York law does not allow the recording of
deferred income taxes. Phoenix has received approval from the Insurance
Department for this practice.
67
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
Statutory surplus differs from equity reported in accordance with GAAP for
life insurance companies primarily because policy acquisition costs are
expensed when incurred, investment reserves are based on different
assumptions, surplus notes are not included in 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>
1999 1998 1997
(IN THOUSANDS)
<S> <C> <C> <C>
Statutory net income $ 131,286 $ 108,652 $ 66,599
Deferred policy acquisition costs, net (28,099) 18,538 48,821
Future policy benefits (23,686) (53,847) (9,145)
Pension and postretirement expenses (8,638) (17,334) (7,955)
Investment valuation allowances 15,141 107,229 87,920
Interest maintenance reserve (7,232) 1,415 17,544
Deferred income taxes 3,919 (39,983) (36,250)
Other, net 6,191 12,459 2,118
-------------- -------------- --------------
Net income, as reported $ 88,882 $ 137,129 $ 169,652
============== ============== ==============
</TABLE>
The following reconciles the statutory surplus and asset valuation reserve
(AVR) of Phoenix as reported to regulatory authorities to equity as reported
in these financial statements:
<TABLE>
<CAPTION>
DECEMBER 31,
1999 1998
(IN THOUSANDS)
<S> <C> <C>
Statutory surplus, surplus notes and AVR $ 1,427,333 $ 1,205,635
Deferred policy acquisition costs, net 1,231,217 1,259,316
Future policy benefits (478,184) (465,268)
Pension and postretirement expenses (193,007) (174,273)
Investment valuation allowances (206,531) 34,873
Interest maintenance reserve 24,767 35,303
Deferred income taxes 65,595 (25,593)
Surplus notes (159,444) (157,500)
Other, net 49,505 24,062
------------------ ------------------
Equity, as reported $ 1,761,251 $ 1,736,555
================== ==================
</TABLE>
The 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 Insurance Department to financial statements prepared in accordance with
generally accepted accounting principles in making such determinations.
68
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
20. PRIOR PERIOD ADJUSTMENTS
In 1999, Phoenix revised the accounting for venture capital partnerships to
include unrealized capital gains and losses on investments held in the
partnerships. These gains and losses are recorded in investment income.
Opening retained earnings at December 31, 1996 has been increased by $17.6
million. The consolidated balance sheet as of December 31, 1998 was revised
by increasing the following balances: other invested assets by $50.6
million, deferred income taxes by $17.7 million and retained earnings by
$32.9 million. The effect on the Consolidated Statement of Income,
Comprehensive Income and Equity was an increase in net income of $12.4
million and $2.9 million for the years ended 1998 and 1997, respectively.
In 1998, Phoenix revised the accounting for partnerships involved in
leveraged lease arrangements for 1997 and 1996. Opening retained earnings at
December 31, 1995 has been increased by $7.7 million. The Consolidated
Balance Sheet as of December 31, 1997 was revised by increasing the
following balances: other invested assets by $18.9 million, deferred income
taxes by $6.6 million and retained earnings by $12.3 million. The effect on
the Consolidated Statement of Income, Comprehensive Income and Equity was an
increase in net income of $2.1 million and $2.5 million for the years ended
1997 and 1996, respectively.
21. SUBSEQUENT EVENTS
OCCUPATIONAL ACCIDENT REINSURANCE
On January 21, 2000, Phoenix, in connection with its participation in the
Centaur facility, and two other companies completed a settlement agreement
with Reliance Insurance Company (Reliance) with respect to certain
reinsurance contracts covering occupational accident business reinsured by
Reliance as a Unicover-managed "facility." The Reliance business was the
largest portion of occupational accident reinsurance business underwritten
by Unicover. Under the terms of the settlement agreement, Phoenix ended the
contracts for a total payment of $115.0 million.
On January 13, 2000, Phoenix and four other companies, in connection with
their participation in the Unicover Pool, completed a settlement agreement
with EBI Indemnity Company and other affiliates of the Orion Group (EBI)
with respect to certain reinsurance contracts covering occupational accident
business which EBI ceded to the Unicover Pool. These contracts represented
the largest source of premium to the Unicover Pool. Under the terms of the
settlement agreement, the Unicover Pool members ended the contracts for a
total payment of $43.0 million, of which Phoenix's share was approximately
$10.0 million.
Phoenix included the cost of these settlements, net of reinsurance, in its
estimate of the loss on discontinued life reinsurance operations. See Note
11 - "Discontinued Operations."
69
<PAGE>
PHOENIX HOME LIFE
VARIABLE UNIVERSAL LIFE ACCOUNT
As of March 13, 2000, there had been no sales of the product described in this
prospectus and, therefore, no deposits were made to Phoenix Home Life Variable
Universal Life Account. Accordingly, no financial statements are available for
the VUL Account.
70
<PAGE>
APPENDIX A
- --------------------------------------------------------------------------------
GLOSSARY OF SPECIAL TERMS
The following is a list of terms and their meanings when used in this
prospectus.
ATTAINED AGE: The age of the insured on the birthday nearest the most recent
policy anniversary.
BENEFICIARY: The person or persons specified by the policyowner as entitled to
receive the death benefits under a policy.
DEATH BENEFIT GUARANTEE: An additional benefit rider available with the policy
that guarantees a death benefit equal to the initial face amount or the face
amount as later increased or decreased, provided that minimum required premiums
are paid. See "Additional Rider Benefits."
DEBT: Outstanding loans against a policy, plus accrued interest.
FUNDS: The Phoenix Edge Series Fund, BT Insurance Funds Trust, Federated
Insurance Series, Morgan Stanley Dean Witter Universal Funds, Inc., Templeton
Variable Products Series Fund and Wanger Advisors Trust.
GENERAL ACCOUNT: The general asset account of Phoenix.
ISSUE PREMIUM: The premium payment made in connection with issuing the policy.
MONTHLY CALCULATION DAY: The first monthly calculation day is the same day as
the policy date. Subsequent monthly calculation days are the same day of each
month thereafter or, if such day does not fall within a given month, the last
day of that month will be the monthly calculation day.
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 a series'
holdings plus other assets, minus liabilities and then dividing the result by
the number of shares outstanding.
PAYMENT DATE: The valuation date on which we receive a premium payment or loan
repayment, unless it is received after the close of the New York Stock Exchange
("NYSE"), in which case it will be the next valuation date.
PLANNED ANNUAL PREMIUM: The premium amount that the policyowner agrees to pay
each policy year. It must be at least equal to the minimum required premium for
the face amount of insurance selected but may be no greater than the maximum
premium allowed for the face amount selected.
POLICY ANNIVERSARY: Each anniversary of the policy date.
POLICY DATE: The policy date as shown on the Schedule Page of the policy. It is
the date from which we measure policy years and policy anniversaries.
POLICY VALUE: The sum of a policy's share in the values of each subaccount of
the VUL Account plus the policy's share in the values of the GIA.
POLICY YEAR: The first policy year is the 1-year period from the policy date up
to, but not including, the first policy anniversary. Each succeeding policy year
is the 1-year period from the policy anniversary up to, but not including, the
next policy anniversary.
SERIES: A separate investment portfolio of the fund.
SUBACCOUNTS: Accounts within the VUL Account to which nonloaned assets under a
policy are allocated.
TARGET PREMIUM: The level annual premium at which the sales load is reduced on a
current basis.
VALUATION DATE: For any subaccount, each date on which we calculate the net
asset value of a fund.
VALUATION PERIOD: For any subaccount, the period in days from the end of one
valuation date through the next.
VUL ACCOUNT (ACCOUNT): Phoenix Home Life Variable Universal Life Account, a
separate account of the company.
71
<PAGE>
APPENDIX B
PERFORMANCE HISTORY
- -------------------------------------------------------------------------------
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, PREMIUM
TAX CHARGES, PREMIUM SALES CHARGES AND SURRENDER CHARGES, IF APPLICABLE. FOR
THIS INFORMATION SEE APPENDIX C "ILLUSTRATIONS OF DEATH BENEFITS, POLICY VALUES
("ACCOUNT VALUES") AND CASH SURRENDER VALUES." Performance information may be
expressed as yield and effective yield of the Phoenix-Goodwin Money Market
Subaccount, as yield of the Phoenix-Goodwin Multi-Sector Fixed Income Subaccount
and as total return of any subaccount. Current yield for the Phoenix-Goodwin
Money Market Subaccount will be based on the income earned by the subaccount
over a given 7-day period (less a hypothetical charge reflecting deductions for
expenses 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 Phoenix-Goodwin 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
7-day period, which period will end on the date of the most recent financial
statements. The yield for the subaccount during this 7-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 Phoenix-Goodwin
Money Market Subaccount based on a 7-day period ending December 31, 1999.
Example:
Assumptions:
Value of hypothetical pre-existing account with exactly one
unit at the beginning of the period:................ 1.000000
Value of the same account (excluding capital changes) at the
end of the 7-day period:............................ 1.001003
Calculation:
Ending account value ............................... 1.001003
Less beginning account value ....................... 1.000000
Net change in account value ........................ 0.001003
Base period return:
(adjusted change/beginning account value) .......... 0.001003
Current yield = return x (365/7) = ................... 5.23%
Effective yield = [(1 + return)(365/7)] - 1 = .......... 5.37%
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 charges which
will be deducted on the VUL Account level.
For the Phoenix-Goodwin Multi-Sector Fixed Income 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 total return, it usually 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 Risk, Issue Expense and Monthly
Administrative Charges.
For those subaccounts within the VUL Account that have not been available
for one of the quoted periods, the average annual total return quotations will
show the investment performance such subaccount would have achieved (reduced by
the applicable charges) had it been available to invest in shares of the fund
for the period quoted.
The following performance tables display historical investment results of
the subaccounts of the VUL Account. This information may be useful in helping
potential investors in deciding which subaccounts to choose and in assessing the
competence of the investment advisors. The performance figures shown should be
considered in light of the investment objectives and policies, characteristics
and quality of the subaccounts and market conditions during the periods of time
quoted. The performance figures should not be considered as estimates or
predictions of future performance. Investment return of the subaccounts are not
guaranteed and will fluctuate. Below are quotations of average annual total
return calculated as described above for all subaccounts with at least one year
of results. POLICY CHARGES (INCLUDING COST OF INSURANCE, PREMIUM TAX CHARGES,
PREMIUM SALES CHARGES AND SURRENDER CHARGES) ARE NOT REFLECTED.
72
<PAGE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURN FOR THE PERIOD ENDED DECEMBER 31, 1999(1,3)
- -----------------------------------------------------------------------------------------------------------------------------------
SERIES INCEPTION DATE 1 YEAR 5 YEARS 10 YEARS SINCE INCEPTION
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Phoenix Research Enhanced Index Series..................... 7/15/97 17.59% N/A N/A 21.45%
- -----------------------------------------------------------------------------------------------------------------------------------
Phoenix-Aberdeen International Series...................... 5/1/90 28.14% 18.15% N/A 11.73%
- -----------------------------------------------------------------------------------------------------------------------------------
Phoenix-Aberdeen New Asia Series........................... 9/17/96 49.49% N/A N/A -2.01%
- -----------------------------------------------------------------------------------------------------------------------------------
Phoenix-Bankers Trust Dow 30 Series........................ 12/15/99 N/A N/A N/A 2.45%
- -----------------------------------------------------------------------------------------------------------------------------------
Phoenix-Duff & Phelps Real Estate Securities Series........ 5/1/95 3.64% N/A N/A 9.26%
- -----------------------------------------------------------------------------------------------------------------------------------
Phoenix-Engemann Capital Growth Series..................... 1/1/83 28.31% 23.46% 18.60% 19.29%
- -----------------------------------------------------------------------------------------------------------------------------------
Phoenix-Engemann Nifty Fifty Series........................ 3/2/98 30.80% N/A N/A 30.93%
- -----------------------------------------------------------------------------------------------------------------------------------
Phoenix-Federated U.S. Government Securities Series........ 12/15/99 N/A N/A N/A -1.54%
- -----------------------------------------------------------------------------------------------------------------------------------
Phoenix-Goodwin Money Market Series........................ 10/10/82 3.68% 4.08% 3.99% 5.50%
- -----------------------------------------------------------------------------------------------------------------------------------
Phoenix-Goodwin Multi-Sector Fixed Income Series........... 1/1/83 4.31% 8.19% 8.00% 9.13%
- -----------------------------------------------------------------------------------------------------------------------------------
Phoenix-Hollister Value Equity Series...................... 3/2/98 23.00% N/A N/A 17.76%
- -----------------------------------------------------------------------------------------------------------------------------------
Phoenix-Janus Equity Income Series......................... 12/15/99 N/A N/A N/A 5.79%
- -----------------------------------------------------------------------------------------------------------------------------------
Phoenix-Janus Flexible Income Series....................... 12/15/99 N/A N/A N/A -0.05%
- -----------------------------------------------------------------------------------------------------------------------------------
Phoenix-Janus Growth Series................................ 12/15/99 N/A N/A N/A 5.93%
- -----------------------------------------------------------------------------------------------------------------------------------
Phoenix-Morgan Stanley Focus Equity Series................. 12/15/99 N/A N/A N/A 6.24%
- -----------------------------------------------------------------------------------------------------------------------------------
Phoenix-Oakhurst Balanced Series........................... 5/1/92 10.37% 15.30% N/A 11.47%
- -----------------------------------------------------------------------------------------------------------------------------------
Phoenix-Oakhurst Growth and Income Series.................. 3/2/98 15.78% N/A N/A 19.30%
- -----------------------------------------------------------------------------------------------------------------------------------
Phoenix-Oakhurst Strategic Allocation Series............... 9/17/84 10.07% 14.78% 12.24% 12.95%
- -----------------------------------------------------------------------------------------------------------------------------------
Phoenix-Schafer Mid-Cap Value Series....................... 3/2/98 -11.32% N/A N/A -12.91%
- -----------------------------------------------------------------------------------------------------------------------------------
Phoenix-Seneca Mid-Cap Growth Series....................... 3/2/98 44.08% N/A N/A 35.20%
- -----------------------------------------------------------------------------------------------------------------------------------
Phoenix-Seneca Strategic Theme Series...................... 1/29/96 53.45% N/A N/A 29.90%
- -----------------------------------------------------------------------------------------------------------------------------------
EAFE(R) Equity Index Fund.................................. 8/22/97 26.26% N/A N/A 15.79%
- -----------------------------------------------------------------------------------------------------------------------------------
Federated Fund for U.S. Government Securities II........... 3/1/94 -1.69% 4.58% N/A 4.28%
- -----------------------------------------------------------------------------------------------------------------------------------
Federated High Income Bond Fund II......................... 3/28/94 1.21% 9.45% N/A 7.17%
- -----------------------------------------------------------------------------------------------------------------------------------
Technology Portfolio....................................... 11/30/99 N/A N/A N/A 23.70%
- -----------------------------------------------------------------------------------------------------------------------------------
Mutual Shares Investments Fund-- Class 2(2)................ 5/1/98 8.14% N/A N/A 9.18%
- -----------------------------------------------------------------------------------------------------------------------------------
Templeton Asset Allocation Fund-- Class 2(2)............... 11/28/88 21.27% 15.73% 11.81% 12.04%
- -----------------------------------------------------------------------------------------------------------------------------------
Templeton Developing Markets Fund-- Class 2(2)............. 9/15/96 51.78% N/A N/A -5.63%
- -----------------------------------------------------------------------------------------------------------------------------------
Templeton International Fund-- Class 2(2).................. 5/1/92 21.95% 15.63% N/A 13.80%
- -----------------------------------------------------------------------------------------------------------------------------------
Templeton Stock Fund-- Class 2(2).......................... 11/4/88 27.45% 16.19% 12.29% 12.40%
- -----------------------------------------------------------------------------------------------------------------------------------
Wanger Foreign Forty....................................... 2/1/99 N/A N/A N/A 82.28%
- -----------------------------------------------------------------------------------------------------------------------------------
Wanger International Small Cap............................. 5/1/95 124.32% N/A N/A 37.51%
- -----------------------------------------------------------------------------------------------------------------------------------
Wanger Twenty.............................................. 2/1/99 N/A N/A N/A 32.92%
- -----------------------------------------------------------------------------------------------------------------------------------
Wanger U.S. Small Cap...................................... 5/1/95 23.75% N/A N/A 25.36%
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
1 The average annual total return is the annual compound return that results
from holding an initial investment of $10,000 for the time period indicated.
Returns are net of $150 Issue Expense Charge, $5 Monthly Administrative Fee,
Investment Management Fees and Mortality and Expense Risk Charges.
2 Because Class 2 shares were not offered until May 1, 1997 (November 10, 1998
for Mutual Shares Investments), performance shown for periods prior to that
date represent the historical results of Class 1 shares. Performance since
that date reflect Class 2's high annual fees and expenses resulting from its
Rule 12b-1 plan. Maximum annual plan expenses are 0.25%.
3 Performance data quoted represents the investment return of the appropriate
series adjusted for the Phoenix Corporate Edge charges had the subaccount
started on the inception date of the appropriate series.
73
<PAGE>
Advertisements, sales literature and other communications may contain
information about any series' or Advisor's current investment strategies and
management style. Current strategies and style may change to respond to a
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.
Occasionally, The VUL Account may include in advertisements containing total
return, the ranking of those performance figures relating to such figures for
groups of subaccounts having similar investment objectives as categorized by
ranking services such as:
Lipper Analytical Services, Inc. Morningstar, Inc.
CDA Investment Technologies, Inc. Weisenberger Financial Services, 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 Advisor 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 Personal Investor
The funds may occasionally 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:
S&P 500 Dow Jones Industrial Average
Europe Australia Far East Index (EAFE) Consumers Price Index
Shearson Lehman Corporate Index Shearson Lehman T-Bond Index
The S&P 500 is a commonly quoted market value-weighted and unmanaged index
showing the changes in the aggregate market value of 500 common stocks relative
to the base period 1940-43. The S&P 500 is composed almost entirely of common
stocks of companies listed on the NYSE, although the common stocks of a few
companies listed on the American Stock Exchange or traded over the counter are
included. The 500 companies represented include 400 industrial, 60
transportation and 40 financial services concerns. The S&P 500 represents about
70-80% of the market value of all issues traded on the NYSE.
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.
74
<PAGE>
ANNUAL TOTAL RETURN(1,3)
<TABLE>
<CAPTION>
- -------------------------------------------- ------ ------- ------- ------- ------ ------- ------- ------- ------ ------- -------
Series 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993
- -------------------------------------------- ------ ------- ------- ------- ------ ------- ------- ------- ------ ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Phoenix Research Enhanced Index N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A
- ---------------------------------------------------------------------------------------------------------------------------------
Phoenix-Aberdeen International N/A N/A N/A N/A N/A N/A N/A N/A 19.74% -12.83% 38.46%
- ---------------------------------------------------------------------------------------------------------------------------------
Phoenix-Aberdeen New Asia N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A
- ---------------------------------------------------------------------------------------------------------------------------------
Phoenix-Bankers Trust Dow 30 N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A
- ---------------------------------------------------------------------------------------------------------------------------------
Phoenix-Duff & Phelps Real Estate N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A
Securities
- ---------------------------------------------------------------------------------------------------------------------------------
Phoenix-Engemann Capital Growth 32.89% 10.67% 34.92% 20.47% 6.93% 3.92% 36.19% 4.05% 42.75% 10.30% 19.71%
- ---------------------------------------------------------------------------------------------------------------------------------
Phoenix-Engemann Nifty Fifty N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A
- ---------------------------------------------------------------------------------------------------------------------------------
Phoenix-Federated U.S. Government N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A
Securities
- ---------------------------------------------------------------------------------------------------------------------------------
Phoenix-Goodwin Money Market 8.37% 10.23% 8.03% 6.51% 6.51% 7.45% 9.20% 8.22% 5.98% 3.58% 2.88%
- ---------------------------------------------------------------------------------------------------------------------------------
Phoenix-Goodwin Multi-Sector Fixed Income 6.00% 11.35% 20.61% 19.29% 1.08% 10.49% 8.24% 5.22% 19.59% 10.08% 15.92%
- ---------------------------------------------------------------------------------------------------------------------------------
Phoenix-Hollister Value Equity N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A
- ---------------------------------------------------------------------------------------------------------------------------------
Phoenix-Janus Equity Income N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A
- ---------------------------------------------------------------------------------------------------------------------------------
Phoenix-Janus Flexible Income N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A
- ---------------------------------------------------------------------------------------------------------------------------------
Phoenix-Janus Growth N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A
- ---------------------------------------------------------------------------------------------------------------------------------
Phoenix-Morgan Stanley Focus Equity N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A
- ---------------------------------------------------------------------------------------------------------------------------------
Phoenix-Oakhurst Balanced N/A N/A N/A N/A N/A N/A N/A N/A N/A 9.63% 8.61%
- ---------------------------------------------------------------------------------------------------------------------------------
Phoenix-Oakhurst Growth and Income N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A
- ---------------------------------------------------------------------------------------------------------------------------------
Phoenix-Oakhurst Strategic Allocation N/A N/A 27.34% 15.69% 12.56% 2.34% 19.90% 5.77% 29.32% 10.66% 11.01%
- ---------------------------------------------------------------------------------------------------------------------------------
Phoenix-Schafer Mid-Cap Value N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A
- ---------------------------------------------------------------------------------------------------------------------------------
Phoenix-Seneca Mid-Cap Growth N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A
- ---------------------------------------------------------------------------------------------------------------------------------
Phoenix-Seneca Strategic Theme N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A
- ---------------------------------------------------------------------------------------------------------------------------------
EAFE(R) Equity Index Fund N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A
- ---------------------------------------------------------------------------------------------------------------------------------
Federated Fund for U.S. Government N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A
Securities II
- ---------------------------------------------------------------------------------------------------------------------------------
Federated High Income Bond Fund II N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A
- ---------------------------------------------------------------------------------------------------------------------------------
Technology Portfolio N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A
- ---------------------------------------------------------------------------------------------------------------------------------
Mutual Shares Investments Fund-- Class 2(2) N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A
- ---------------------------------------------------------------------------------------------------------------------------------
Templeton Asset Allocation Fund--Class 2(2) N/A N/A N/A N/A N/A N/A 13.03% -8.21% 27.44% 7.83% 25.87%
- ---------------------------------------------------------------------------------------------------------------------------------
Templeton Developing Markets Fund-- Class N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A
2(2)
- ---------------------------------------------------------------------------------------------------------------------------------
Templeton International Fund-- Class 2(2) N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A 46.47%
- ---------------------------------------------------------------------------------------------------------------------------------
Templeton Stock Fund-- Class 2(2) N/A N/A N/A N/A N/A N/A 14.39% -11.28% 27.23% 6.87% 33.74%
- ---------------------------------------------------------------------------------------------------------------------------------
Wanger Foreign Forty N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A
- ---------------------------------------------------------------------------------------------------------------------------------
Wanger International Small Cap N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A
- ---------------------------------------------------------------------------------------------------------------------------------
Wanger Twenty N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A
- ---------------------------------------------------------------------------------------------------------------------------------
Wanger US Small Cap N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A
- ---------------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------- ------- ------ ------- ------- ------ -------
Series 1994 1995 1996 1997 1998 1999
- -------------------------------------------- ------- ------ ------- ------- ------ -------
<S> <C> <C> <C> <C> <C> <C>
Phoenix Research Enhanced Index N/A N/A N/A N/A 31.69% 18.83%
- ------------------------------------------------------------------------------------------
Phoenix-Aberdeen International 0.06% 9.59% 18.66% 12.05% 27.94% 29.51%
- ------------------------------------------------------------------------------------------
Phoenix-Aberdeen New Asia N/A N/A N/A -32.41% -4.45% 50.98%
- ------------------------------------------------------------------------------------------
Phoenix-Bankers Trust Dow 30 N/A N/A N/A N/A N/A N/A
- ------------------------------------------------------------------------------------------
Phoenix-Duff & Phelps Real Estate N/A N/A 33.13% 22.07%-21.20% 4.78%
Securities
- ------------------------------------------------------------------------------------------
Phoenix-Engemann Capital Growth 1.46% 30.89% 12.59% 21.09% 30.02% 29.68%
- ------------------------------------------------------------------------------------------
Phoenix-Engemann Nifty Fifty N/A N/A N/A N/A N/A 32.16%
- ------------------------------------------------------------------------------------------
Phoenix-Federated U.S. Government N/A N/A N/A N/A N/A N/A
Securities
- ------------------------------------------------------------------------------------------
Phoenix-Goodwin Money Market 3.84% 5.70% 5.03% 5.19% 5.10% 4.82%
- ------------------------------------------------------------------------------------------
Phoenix-Goodwin Multi-Sector Fixed Income -5.49% 23.54% 12.43% 11.09% -4.15% 5.46%
- ------------------------------------------------------------------------------------------
Phoenix-Hollister Value Equity N/A N/A N/A N/A N/A 24.34%
- ------------------------------------------------------------------------------------------
Phoenix-Janus Equity Income N/A N/A N/A N/A N/A N/A
- ------------------------------------------------------------------------------------------
Phoenix-Janus Flexible Income N/A N/A N/A N/A N/A N/A
- ------------------------------------------------------------------------------------------
Phoenix-Janus Growth N/A N/A N/A N/A N/A N/A
- ------------------------------------------------------------------------------------------
Phoenix-Morgan Stanley Focus Equity N/A N/A N/A N/A N/A N/A
- ------------------------------------------------------------------------------------------
Phoenix-Oakhurst Balanced -2.84% 23.35% 10.57% 17.94% 19.02% 11.58%
- ------------------------------------------------------------------------------------------
Phoenix-Oakhurst Growth and Income N/A N/A N/A N/A N/A 17.02%
- ------------------------------------------------------------------------------------------
Phoenix-Oakhurst Strategic Allocation -1.41% 18.20% 9.06% 20.74% 20.80% 11.27%
- ------------------------------------------------------------------------------------------
Phoenix-Schafer Mid-Cap Value N/A N/A N/A N/A N/A -10.29%
- ------------------------------------------------------------------------------------------
Phoenix-Seneca Mid-Cap Growth N/A N/A N/A N/A N/A 45.65%
- ------------------------------------------------------------------------------------------
Phoenix-Seneca Strategic Theme N/A N/A N/A 17.17% 44.72% 55.01%
- ------------------------------------------------------------------------------------------
EAFE(R) Equity Index Fund N/A N/A N/A N/A 21.60% 27.61%
- ------------------------------------------------------------------------------------------
Federated Fund for U.S. Government N/A 8.77% 4.20% 8.58% 7.66% -0.59%
Securities II
- ------------------------------------------------------------------------------------------
Federated High Income Bond Fund II N/A 20.38% 14.31% 13.83% 2.70% 2.32%
- ------------------------------------------------------------------------------------------
Technology Portfolio N/A N/A N/A N/A N/A N/A
- ------------------------------------------------------------------------------------------
Mutual Shares Investments Fund-- Class 2(2) N/A N/A N/A N/A N/A 9.30%
- ------------------------------------------------------------------------------------------
Templeton Asset Allocation Fund--Class 2(2) -3.23% 22.26% 18.59% 15.27% 6.10% 22.55%
- ------------------------------------------------------------------------------------------
Templeton Developing Markets Fund-- Class N/A N/A N/A -29.39% -21.04% 53.30%
2(2)
- ------------------------------------------------------------------------------------------
Templeton International Fund-- Class 2(2) -2.86% 15.05% 23.30% 13.51% 9.08% 23.25%
- ------------------------------------------------------------------------------------------
Templeton Stock Fund-- Class 2(2) -2.47% 24.96% 22.15% 11.60% 0.98% 28.80%
- ------------------------------------------------------------------------------------------
Wanger Foreign Forty N/A N/A N/A N/A N/A N/A
- ------------------------------------------------------------------------------------------
Wanger International Small Cap N/A N/A 32.04% -1.46% 16.34% 126.50%
- ------------------------------------------------------------------------------------------
Wanger Twenty N/A N/A N/A N/A N/A N/A
- ------------------------------------------------------------------------------------------
Wanger US Small Cap N/A N/A 46.63% 29.43% 8.69% 25.08%
- ------------------------------------------------------------------------------------------
</TABLE>
1 Returns are net of the investment management fees of the Phoenix Corporate
Edge subaccounts. Percent change does not include the effect of the monthly
administrative fees, or mortality and expense risk fees.
2 Because Class 2 shares were not offered until May 1, 1997 (November 10, 1998
for Mutual Shares Investments), performance shown for periods prior to that
date represent the historical results of Class 1 shares. Performance since
that date reflect Class 2's high annual fees and expenses resulting from its
Rule 12b-1 plan. Maximum annual plan expenses are 0.25%.
3 Performance data quoted represents the investment return of the appropriate
series adjusted for the Phoenix Corporate Edge charges had the subaccount
started on the inception date of the appropriate series.
THESE RATES OF RETURN ARE NOT AN ESTIMATE OR GUARANTEE OF FUTURE PERFORMANCE.
75
<PAGE>
APPENDIX C
ILLUSTRATIONS OF DEATH BENEFITS, POLICY VALUES ("ACCOUNT VALUES") AND
CASH SURRENDER VALUES
- -------------------------------------------------------------------------------
The tables on the following pages illustrate how a policy's death benefits,
account values and cash surrender value could vary over time assuming constant
hypothetical gross (after tax) annual investment returns of 0%, 6% and 12%. The
policy 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 policy benefits
also will differ, depending on your premium 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 are nonsmokers. 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 are nonsmokers. Account values
and cash surrender values may be lower for risk classes involving higher
mortality risk. Planned premium payments are assumed to be paid at the beginning
of each policy year.
The death benefit, account value and cash surrender value amounts reflect
the following current and guaranteed charges:
1. A current sales charge of 7.0% of premiums up to the target premium
and 0% on amounts in excess of the target premium in policy years 1-7
and 0% of all premiums in policy years 8+. A guaranteed sales charge
of 9.0% of premiums in policy years 1-7 and 3.0% of all premiums in
years 8+. See "Charges under the Policy" table.
2. Monthly administrative charge of $5 per month ($10 per month
guaranteed maximum in all states except New York. In New York
guaranteed maximum is $7.50 per month). See "Charges under the
Policy" table.
3. An average premium tax charge of 2.25%.
4. A federal tax charge of 1.5%.
5. 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 under the Policy" table.
6. Mortality and expense risk charge, which is a monthly charge
equivalent to .50% on an annual basis (or .25% on an annual basis
after the 10th policy year) of your policy value. Guaranteed maximum
mortality and expenses risk charge is .90% annually in all policy
years. See "Charges under the Policy" table.
These illustrations also assume an average investment advisory fee of .70%
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 .30%. All other fund expenses, except capital items such as
brokerage commissions, are paid by the Advisor 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, 1999,
average total operating expenses for the series would have been approximately
.97% of the average net assets.
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 -1.00%, 5.00% and 11.00%, 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.
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 cash surrender value, that cash surrender
value may be low in comparison to the amount of the premiums accumulated with
interest. Thus, the cost of owning a policy for a relatively short time may be
high.
On request, we will furnish the policyowner 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.
76
<PAGE>
<TABLE>
<CAPTION>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY PAGE 1 OF 2
FACE AMOUNT: $100,000
MALE 35 ADVANTAGE SELECT INITIAL ANNUAL PREMIUM: $1,000
PHOENIX CORPORATE EDGE--A FLEXIBLE PREMIUM VARIABLE UNIVERSAL LIFE INSURANCE POLICY OPTION 1
ASSUMING CURRENT CHARGES
CASH CASH CASH
ASSUMED PREMIUM ACCOUNT SURRENDER DEATH ACCOUNT SURRENDER DEATH ACCOUNT SURRENDER DEATH
PREMIUM ACCUM. VALUE VALUE BENEFIT VALUE VALUE BENEFIT VALUE VALUE BENEFIT
YEAR PAYMENTS @5.0% @0% @0% @0% @6% @6% @6% @12% @12% @12%
-------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 1,000 1,050 739 739 100,000 788 788 100,000 837 837 100,000
2 1,000 2,153 1,464 1,464 100,000 1,608 1,608 100,000 1,758 1,758 100,000
3 1,000 3,310 2,175 2,175 100,000 2,461 2,461 100,000 2,772 2,772 100,000
4 1,000 4,526 2,871 2,871 100,000 3,348 3,348 100,000 3,887 3,887 100,000
5 1,000 5,802 3,550 3,550 100,000 4,269 4,269 100,000 5,113 5,113 100,000
6 1,000 7,142 4,213 4,213 100,000 5,226 5,226 100,000 6,461 6,461 100,000
7 1,000 8,549 4,858 4,858 100,000 6,216 6,216 100,000 7,943 7,943 100,000
8 1,000 10,027 5,551 5,551 100,000 7,314 7,314 100,000 9,647 9,647 100,000
9 1,000 11,578 6,222 6,222 100,000 8,449 8,449 100,000 11,518 11,518 100,000
10 1,000 13,207 6,869 6,869 100,000 9,622 9,622 100,000 13,572 13,572 100,000
11 1,000 14,917 7,544 7,544 100,000 10,894 10,894 100,000 15,902 15,902 100,000
12 1,000 16,713 8,196 8,196 100,000 12,213 12,213 100,000 18,471 18,471 100,000
13 1,000 18,599 8,823 8,823 100,000 13,580 13,580 100,000 21,303 21,303 100,000
14 1,000 20,579 9,426 9,426 100,000 14,996 14,996 100,000 24,429 24,429 100,000
15 1,000 22,657 10,002 10,002 100,000 16,463 16,463 100,000 27,879 27,879 100,000
16 1,000 24,840 10,551 10,551 100,000 17,983 17,983 100,000 31,689 31,689 100,000
17 1,000 27,132 11,072 11,072 100,000 19,557 19,557 100,000 35,901 35,901 100,000
18 1,000 29,539 11,562 11,562 100,000 21,187 21,187 100,000 40,558 40,558 100,000
19 1,000 32,066 12,021 12,021 100,000 22,875 22,875 100,000 45,710 45,710 103,761
20 1,000 34,719 12,447 12,447 100,000 24,623 24,623 100,000 51,386 51,386 113,564
@ 65 1,000 69,761 13,933 13,933 100,000 48,311 48,311 100,000 166,339 166,339 276,123
</TABLE>
Based on 0% interest rate and guaranteed charges, the policy will lapse in year
29.
Death benefit, account value and cash surrender value are based on hypothetical
gross interest rates shown, assume current and guaranteed charges and no policy
loans or withdrawals, and are calculated at the end of the policy year. Assumed
Premium Payments shown are assumed paid in full at the beginning of the policy
year. Payment of premiums shown other than in full at the beginning of the
policy year would reduce values and benefits below the hypothetical illustrated
amounts shown. Values shown reflect an effective annual asset charge of 1.00%
(includes average fund operating expenses of 0.30% applicable to the investment
subaccounts of the VUL Separate Account). Hypothetical gross interest rates are
presented for illustrative purposes only to illustrate funds 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. A GIA
providing interest at a minimum guaranteed rate of 3% also is available under
this product through the General Account.
This illustration assumes a premium tax of 2.25%.
77
<PAGE>
<TABLE>
<CAPTION>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY PAGE 2 OF 2
FACE AMOUNT: $100,000
MALE 35 ADVANTAGE SELECT INITIAL ANNUAL PREMIUM: $1,000
PHOENIX CORPORATE EDGE--A FLEXIBLE PREMIUM VARIABLE UNIVERSAL LIFE INSURANCE POLICY OPTION 1
ASSUMING GUARANTEED CHARGES
CASH CASH CASH
ASSUMED PREMIUM ACCOUNT SURRENDER DEATH ACCOUNT SURRENDER DEATH ACCOUNT SURRENDER DEATH
PREMIUM ACCUM. VALUE VALUE BENEFIT VALUE VALUE BENEFIT VALUE VALUE BENEFIT
YEAR PAYMENTS @5.0% @0% @0% @0% @6% @6% @6% @12% @12% @12%
-------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 1,000 1,050 533 533 100,000 574 574 100,000 616 616 100,000
2 1,000 2,153 1,045 1,045 100,000 1,162 1,162 100,000 1,284 1,284 100,000
3 1,000 3,310 1,536 1,536 100,000 1,761 1,761 100,000 2,007 2,007 100,000
4 1,000 4,526 2,003 2,003 100,000 2,371 2,371 100,000 2,788 2,788 100,000
5 1,000 5,802 2,444 2,444 100,000 2,989 2,989 100,000 3,632 3,632 100,000
6 1,000 7,142 2,858 2,858 100,000 3,613 3,613 100,000 4,544 4,544 100,000
7 1,000 8,549 3,240 3,240 100,000 4,241 4,241 100,000 5,527 5,527 100,000
8 1,000 10,027 3,652 3,652 100,000 4,936 4,936 100,000 6,656 6,656 100,000
9 1,000 11,578 4,029 4,029 100,000 5,635 5,635 100,000 7,877 7,877 100,000
10 1,000 13,207 4,372 4,372 100,000 6,336 6,336 100,000 9,201 9,201 100,000
11 1,000 14,917 4,690 4,690 100,000 7,057 7,057 100,000 10,661 10,661 100,000
12 1,000 16,713 4,970 4,970 100,000 7,780 7,780 100,000 12,252 12,252 100,000
13 1,000 18,599 5,210 5,210 100,000 8,503 8,503 100,000 13,984 13,984 100,000
14 1,000 20,579 5,410 5,410 100,000 9,225 9,225 100,000 15,875 15,875 100,000
15 1,000 22,657 5,563 5,563 100,000 9,943 9,943 100,000 17,940 17,940 100,000
16 1,000 24,840 5,670 5,670 100,000 10,653 10,653 100,000 20,197 20,197 100,000
17 1,000 27,132 5,720 5,720 100,000 11,348 11,348 100,000 22,664 22,664 100,000
18 1,000 29,539 5,708 5,708 100,000 12,022 12,022 100,000 25,363 25,363 100,000
19 1,000 32,066 5,626 5,626 100,000 12,665 12,665 100,000 28,317 28,317 100,000
20 1,000 34,719 5,464 5,464 100,000 13,270 13,270 100,000 31,554 31,554 100,000
@ 65 1,000 69,761 -- -- -- 14,385 14,385 100,000 96,379 96,379 159,990
</TABLE>
Based on 0% interest rate and guaranteed charges, the policy will lapse in year
29.
Death benefit, account value and cash surrender value are based on hypothetical
gross interest rates shown, assume current and guaranteed charges and no policy
loans or withdrawals, and are calculated at the end of the policy year. Assumed
Premium Payments shown are assumed paid in full at the beginning of the policy
year. Payment of premiums shown other than in full at the beginning of the
policy year would reduce values and benefits below the hypothetical illustrated
amounts shown. Values shown reflect an effective annual asset charge of 1.00%
(includes average fund operating expenses of 0.30% applicable to the investment
subaccounts of the VUL Separate Account). Hypothetical gross interest rates are
presented for illustrative purposes only to illustrate funds 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. A GIA
providing interest at a minimum guaranteed rate of 3% also is available under
this product through the General Account.
This illustration assumes a premium tax of 2.25%.
78
<PAGE>
<TABLE>
<CAPTION>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY PAGE 1 OF 2
FACE AMOUNT: $100,000
FEMALE 35 ADVANTAGE SELECT INITIAL ANNUAL PREMIUM: $1,000
PHOENIX CORPORATE EDGE--A FLEXIBLE PREMIUM VARIABLE UNIVERSAL LIFE INSURANCE POLICY OPTION 1
ASSUMING CURRENT CHARGES
CASH CASH CASH
ASSUMED PREMIUM ACCOUNT SURRENDER DEATH ACCOUNT SURRENDER DEATH ACCOUNT SURRENDER DEATH
PREMIUM ACCUM. VALUE VALUE BENEFIT VALUE VALUE BENEFIT VALUE VALUE BENEFIT
YEAR PAYMENTS @5.0% @0% @0% @0% @6% @6% @6% @12% @12% @12%
-------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 1,000 1,050 767 767 100,000 816 816 100,000 866 866 100,000
2 1,000 2,153 1,517 1,517 100,000 1,665 1,665 100,000 1,818 1,818 100,000
3 1,000 3,310 2,251 2,251 100,000 2,545 2,545 100,000 2,863 2,863 100,000
4 1,000 4,526 2,968 2,968 100,000 3,459 3,459 100,000 4,012 4,012 100,000
5 1,000 5,802 3,666 3,666 100,000 4,406 4,406 100,000 5,272 5,272 100,000
6 1,000 7,142 4,346 4,346 100,000 5,386 5,386 100,000 6,656 6,656 100,000
7 1,000 8,549 5,005 5,005 100,000 6,401 6,401 100,000 8,175 8,175 100,000
8 1,000 10,027 5,713 5,713 100,000 7,524 7,524 100,000 9,920 9,920 100,000
9 1,000 11,578 6,400 6,400 100,000 8,687 8,687 100,000 11,839 11,839 100,000
10 1,000 13,207 7,066 7,066 100,000 9,894 9,894 100,000 13,949 13,949 100,000
11 1,000 14,917 7,761 7,761 100,000 11,201 11,201 100,000 16,342 16,342 100,000
12 1,000 16,713 8,439 8,439 100,000 12,563 12,563 100,000 18,986 18,986 100,000
13 1,000 18,599 9,100 9,100 100,000 13,983 13,983 100,000 21,908 21,908 100,000
14 1,000 20,579 9,743 9,743 100,000 15,461 15,461 100,000 25,139 25,139 100,000
15 1,000 22,657 10,369 10,369 100,000 17,003 17,003 100,000 28,713 28,713 100,000
16 1,000 24,840 10,977 10,977 100,000 18,609 18,609 100,000 32,667 32,667 100,000
17 1,000 27,132 11,566 11,566 100,000 20,282 20,282 100,000 37,042 37,042 100,000
18 1,000 29,539 12,135 12,135 100,000 22,025 22,025 100,000 41,886 41,886 100,000
19 1,000 32,066 12,682 12,682 100,000 23,841 23,841 100,000 47,245 47,245 107,247
20 1,000 34,719 13,206 13,206 100,000 25,731 25,731 100,000 53,157 53,157 117,479
@ 65 1,000 69,761 17,096 17,096 100,000 52,587 52,587 100,000 175,593 175,593 291,484
</TABLE>
Based on 0% interest rate and guaranteed charges, the policy will lapse in year
36.
Death benefit, account value and cash surrender value are based on hypothetical
gross interest rates shown, assume current and guaranteed charges and no policy
loans or withdrawals, and are calculated at the end of the policy year. Assumed
Premium Payments shown are assumed paid in full at the beginning of the policy
year. Payment of premiums shown other than in full at the beginning of the
policy year would reduce values and benefits below the hypothetical illustrated
amounts shown. Values shown reflect an effective annual asset charge of 1.00%
(includes average fund operating expenses of 0.30% applicable to the investment
subaccounts of the VUL Separate Account). Hypothetical gross interest rates are
presented for illustrative purposes only to illustrate funds 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. A GIA
providing interest at a minimum guaranteed rate of 3% also is available under
this product through the General Account.
This illustration assumes a premium tax of 2.25%.
79
<PAGE>
<TABLE>
<CAPTION>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY PAGE 2 OF 2
FACE AMOUNT: $100,000
FEMALE 35 ADVANTAGE SELECT INITIAL ANNUAL PREMIUM: $1,000
PHOENIX CORPORATE EDGE--A FLEXIBLE PREMIUM VARIABLE UNIVERSAL LIFE INSURANCE POLICY OPTION 1
ASSUMING GUARANTEED CHARGES
CASH CASH CASH
ASSUMED PREMIUM ACCOUNT SURRENDER DEATH ACCOUNT SURRENDER DEATH ACCOUNT SURRENDER DEATH
PREMIUM ACCUM. VALUE VALUE BENEFIT VALUE VALUE BENEFIT VALUE VALUE BENEFIT
YEAR PAYMENTS @5.0% @0% @0% @0% @6% @6% @6% @12% @12% @12%
-------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 1,000 1,050 578 578 100,000 621 621 100,000 664 664 100,000
2 1,000 2,153 1,137 1,137 100,000 1,259 1,259 100,000 1,387 1,387 100,000
3 1,000 3,310 1,677 1,677 100,000 1,915 1,915 100,000 2,174 2,174 100,000
4 1,000 4,526 2,194 2,194 100,000 2,586 2,586 100,000 3,029 3,029 100,000
5 1,000 5,802 2,688 2,688 100,000 3,270 3,270 100,000 3,957 3,957 100,000
6 1,000 7,142 3,156 3,156 100,00 3,967 3,967 100,000 4,964 4,964 100,000
7 1,000 8,549 3,598 3,598 100,000 4,676 4,676 100,000 6,057 6,057 100,000
8 1,000 10,027 4,071 4,071 100,000 5,459 5,459 100,000 7,311 7,311 100,000
9 1,000 11,578 4,517 4,517 100,000 6,258 6,258 100,000 8,680 8,680 100,000
10 1,000 13,207 4,937 4,937 100,000 7,073 7,073 100,000 10,173 10,173 100,000
11 1,000 14,917 5,343 5,343 100,000 7,926 7,926 100,000 11,836 11,836 100,000
12 1,000 16,713 5,723 5,723 100,000 8,800 8,800 100,000 13,662 13,662 100,000
13 1,000 18,599 6,077 6,077 100,000 9,695 9,695 100,000 15,669 15,669 100,000
14 1,000 20,579 6,401 6,401 100,000 10,611 10,611 100,000 17,875 17,875 100,000
15 1,000 22,657 6,695 6,695 100,000 11,547 11,547 100,000 20,303 20,303 100,000
16 1,000 24,840 6,957 6,957 100,000 12,502 12,502 100,000 22,976 22,976 100,000
17 1,000 27,132 7,184 7,184 100,000 13,476 13,476 100,000 25,923 25,923 100,000
18 1,000 29,539 7,373 7,373 100,000 14,468 14,468 100,000 29,173 29,173 100,000
19 1,000 32,066 7,520 7,520 100,000 15,473 15,473 100,000 32,760 32,760 100,000
20 1,000 34,719 7,624 7,624 100,000 16,493 16,493 100,000 36,724 36,724 100,000
@ 65 1,000 69,761 5,283 5,283 100,000 28,664 28,664 100,000 118,365 118,365 196,486
</TABLE>
Based on 0% interest rate and guaranteed charges, the policy will lapse in year
36.
Death benefit, account value and cash surrender value are based on hypothetical
gross interest rates shown, assume current and guaranteed charges and no policy
loans or withdrawals, and are calculated at the end of the policy year. Assumed
Premium Payments shown are assumed paid in full at the beginning of the policy
year. Payment of premiums shown other than in full at the beginning of the
policy year would reduce values and benefits below the hypothetical illustrated
amounts shown. Values shown reflect an effective annual asset charge of 1.00%
(includes average fund operating expenses of 0.30% applicable to the investment
subaccounts of the VUL Separate Account). Hypothetical gross interest rates are
presented for illustrative purposes only to illustrate funds 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. A GIA
providing interest at a minimum guaranteed rate of 3% also is available under
this product through the General Account.
This illustration assumes a premium tax of 2.25%.
80
<PAGE>
<TABLE>
<CAPTION>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY PAGE 1 OF 2
FACE AMOUNT: $100,000
MALE 35 ADVANTAGE SELECT INITIAL ANNUAL PREMIUM: $1,000
PHOENIX CORPORATE EDGE--A FLEXIBLE PREMIUM VARIABLE UNIVERSAL LIFE INSURANCE POLICY OPTION 2
ASSUMING CURRENT CHARGES
CASH CASH CASH
ASSUMED PREMIUM ACCOUNT SURRENDER DEATH ACCOUNT SURRENDER DEATH ACCOUNT SURRENDER DEATH
PREMIUM ACCUM. VALUE VALUE BENEFIT VALUE VALUE BENEFIT VALUE VALUE BENEFIT
YEAR PAYMENTS @5.0% @0% @0% @0% @6% @6% @6% @12% @12% @12%
-------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 1,000 1,050 738 738 100,739 787 787 100,788 836 836 100,836
2 1,000 2,153 1,462 1,462 101,463 1,606 1,606 101,606 1,755 1,755 101,756
3 1,000 3,310 2,171 2,171 102,172 2,457 2,457 102,457 2,766 2,766 102,767
4 1,000 4,526 2,864 2,864 102,864 3,340 3,340 103,341 3,877 3,877 103,878
5 1,000 5,802 3,540 3,540 103,540 4,257 4,257 104,257 5,097 5,097 105,098
6 1,000 7,142 4,198 4,198 104,199 5,207 5,207 105,207 6,437 6,437 106,437
7 1,000 8,549 4,837 4,837 104,838 6,189 6,189 106,189 7,906 7,906 107,906
8 1,000 10,027 5,524 5,524 105,524 7,276 7,276 107,276 9,593 9,593 109,594
9 1,000 11,578 6,186 6,186 106,186 8,397 8,397 108,397 11,442 11,442 111,443
10 1,000 13,207 6,821 6,821 106,822 9,551 9,551 109,552 13,466 13,466 113,467
11 1,000 14,917 7,486 7,486 107,487 10,805 10,805 110,805 15,762 15,762 115,763
12 1,000 16,713 8,126 8,126 108,126 12,100 12,100 112,101 18,287 18,287 118,287
13 1,000 18,599 8,738 8,738 108,739 13,437 13,437 113,438 21,061 21,061 121,062
14 1,000 20,579 9,323 9,323 109,323 14,817 14,817 114,817 24,112 24,112 124,112
15 1,000 22,657 9,878 9,878 109,878 16,238 16,238 116,239 27,466 27,466 127,466
16 1,000 24,840 10,402 10,402 110,403 17,703 17,703 117,704 31,154 31,154 131,155
17 1,000 27,132 10,895 10,895 110,895 19,211 19,211 119,212 35,211 35,211 135,212
18 1,000 29,539 11,353 11,353 111,353 20,761 20,761 120,761 39,673 39,673 139,673
19 1,000 32,066 11,774 11,774 111,775 22,353 22,353 122,353 44,580 44,580 144,581
20 1,000 34,719 12,157 12,157 112,157 23,985 23,985 123,986 49,978 49,978 149,979
@ 65 1,000 69,761 12,653 12,653 112,653 43,733 43,733 143,734 159,872 159,872 265,388
</TABLE>
Based on 0% interest rate and guaranteed charges, the policy will lapse in year
28.
Death benefit, account value and cash surrender value are based on hypothetical
gross interest rates shown, assume current and guaranteed charges and no policy
loans or withdrawals, and are calculated at the end of the policy year. Assumed
Premium Payments shown are assumed paid in full at the beginning of the policy
year. Payment of premiums shown other than in full at the beginning of the
policy year would reduce values and benefits below the hypothetical illustrated
amounts shown. Values shown reflect an effective annual asset charge of 1.00%
(includes average fund operating expenses of 0.30% applicable to the investment
subaccounts of the VUL Separate Account). Hypothetical gross interest rates are
presented for illustrative purposes only to illustrate funds 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. A GIA
providing interest at a minimum guaranteed rate of 3% also is available under
this product through the General Account.
This illustration assumes a premium tax of 2.25%.
81
<PAGE>
<TABLE>
<CAPTION>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY PAGE 2 OF 2
FACE AMOUNT: $100,000
MALE 35 ADVANTAGE SELECT INITIAL ANNUAL PREMIUM: $1,000
PHOENIX CORPORATE EDGE--A FLEXIBLE PREMIUM VARIABLE UNIVERSAL LIFE INSURANCE POLICY OPTION 2
ASSUMING GUARANTEED CHARGES
CASH CASH CASH
ASSUMED PREMIUM ACCOUNT SURRENDER DEATH ACCOUNT SURRENDER DEATH ACCOUNT SURRENDER DEATH
PREMIUM ACCUM. VALUE VALUE BENEFIT VALUE VALUE BENEFIT VALUE VALUE BENEFIT
YEAR PAYMENTS @5.0% @0% @0% @0% @6% @6% @6% @12% @12% @12%
-------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 1,000 1,050 531 531 100,532 573 573 100,573 614 614 100,615
2 1,000 2,153 1,041 1,041 101,042 1,157 1,157 101,158 1,279 1,279 101,279
3 1,000 3,310 1,528 1,528 101,529 1,752 1,752 101,752 1,996 1,996 101,996
4 1,000 4,526 1,990 1,990 101,990 2,355 2,355 102,355 2,769 2,769 102,769
5 1,000 5,802 2,423 2,423 102,424 2,963 2,963 102,963 3,600 3,600 103,601
6 1,000 7,142 2,828 2,828 102,829 3,575 3,575 103,575 4,494 4,494 104,495
7 1,000 8,549 3,200 3,200 103,200 4,186 4,186 104,187 5,453 5,453 105,454
8 1,000 10,027 3,598 3,598 103,599 4,860 4,860 104,861 6,550 6,550 106,550
9 1,000 11,578 3,960 3,960 103,960 5,533 5,533 105,533 7,729 7,729 107,729
10 1,000 13,207 4,284 4,284 104,285 6,202 6,202 106,203 8,997 8,997 108,997
11 1,000 14,917 4,581 4,581 104,581 6,883 6,883 106,883 10,386 10,386 110,386
12 1,000 16,713 4,836 4,836 104,837 7,558 7,558 107,559 11,885 11,885 111,885
13 1,000 18,599 5,049 5,049 105,050 8,224 8,224 108,225 13,502 13,502 113,503
14 1,000 20,579 5,218 5,218 105,218 8,879 8,879 108,879 15,249 15,249 115,249
15 1,000 22,657 5,338 5,338 105,338 9,516 9,516 109,517 17,133 17,133 117,134
16 1,000 24,840 5,406 5,406 105,407 10,132 10,132 110,133 19,166 19,166 119,167
17 1,000 27,132 5,415 5,415 105,416 10,717 10,717 110,718 21,355 21,355 121,356
18 1,000 29,539 5,359 5,359 105,359 11,262 11,262 111,263 23,709 23,709 123,710
19 1,000 32,066 5,228 5,228 105,229 11,756 11,756 111,757 26,236 26,236 126,237
20 1,000 34,719 5,015 5,015 105,015 12,186 12,186 112,187 28,944 28,944 128,945
@ 65 1,000 69,761 -- -- -- 9,000 9,000 109,000 74,813 74,813 174,814
</TABLE>
Based on 0% interest rate and guaranteed charges, the policy will lapse in year
28.
Death benefit, account value and cash surrender value are based on hypothetical
gross interest rates shown, assume current and guaranteed charges and no policy
loans or withdrawals, and are calculated at the end of the policy year. Assumed
Premium Payments shown are assumed paid in full at the beginning of the policy
year. Payment of premiums shown other than in full at the beginning of the
policy year would reduce values and benefits below the hypothetical illustrated
amounts shown. Values shown reflect an effective annual asset charge of 1.00%
(includes average fund operating expenses of 0.30% applicable to the investment
subaccounts of the VUL Separate Account). Hypothetical gross interest rates are
presented for illustrative purposes only to illustrate funds 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. A GIA
providing interest at a minimum guaranteed rate of 3% also is available under
this product through the General Account.
This illustration assumes a premium tax of 2.25%.
82
<PAGE>
<TABLE>
<CAPTION>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY PAGE 1 OF 2
FACE AMOUNT: $100,000
FEMALE 35 ADVANTAGE SELECT INITIAL ANNUAL PREMIUM: $1,000
PHOENIX CORPORATE EDGE--A FLEXIBLE PREMIUM VARIABLE UNIVERSAL LIFE INSURANCE POLICY OPTION 2
ASSUMING CURRENT CHARGES
CASH CASH CASH
ASSUMED PREMIUM ACCOUNT SURRENDER DEATH ACCOUNT SURRENDER DEATH ACCOUNT SURRENDER DEATH
PREMIUM ACCUM. VALUE VALUE BENEFIT VALUE VALUE BENEFIT VALUE VALUE BENEFIT
YEAR PAYMENTS @5.0% @0% @0% @0% @6% @6% @6% @12% @12% @12%
-------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 1,000 1,050 766 766 100,767 816 816 100,816 865 865 100,866
2 1,000 2,153 1,516 1,516 101,517 1,663 1,663 101,664 1,816 1,816 101,817
3 1,000 3,310 2,248 2,248 102,249 2,542 2,542 102,542 2,859 2,859 102,860
4 1,000 4,526 2,963 2,963 102,963 3,453 3,453 103,453 4,004 4,004 104,005
5 1,000 5,802 3,658 3,658 103,659 4,396 4,396 104,396 5,260 5,260 105,260
6 1,000 7,142 4,334 4,334 104,334 5,371 5,371 105,371 6,636 6,636 106,637
7 1,000 8,549 4,988 4,988 104,988 6,378 6,378 106,379 8,145 8,145 108,145
8 1,000 10,027 5,689 5,689 105,690 7,492 7,492 107,492 9,876 9,876 109,876
9 1,000 11,578 6,369 6,369 106,369 8,643 8,643 108,643 11,775 11,775 111,775
10 1,000 13,207 7,026 7,026 107,027 9,833 9,833 109,834 13,859 13,859 113,860
11 1,000 14,917 7,712 7,712 107,713 11,125 11,125 111,126 16,223 16,223 116,224
12 1,000 16,713 8,380 8,380 108,380 12,467 12,467 112,468 18,830 18,830 118,830
13 1,000 18,599 9,029 9,029 109,029 13,862 13,862 113,863 21,704 21,704 121,705
14 1,000 20,579 9,658 9,658 109,659 15,312 15,312 115,313 24,876 24,876 124,876
15 1,000 22,657 10,269 10,269 110,269 16,819 16,819 116,820 28,375 28,375 128,376
16 1,000 24,840 10,858 10,858 110,859 18,384 18,384 118,384 32,236 32,236 132,236
17 1,000 27,132 11,426 11,426 111,427 20,008 20,008 120,008 36,495 36,495 136,496
18 1,000 29,539 11,972 11,972 111,972 21,693 21,693 121,694 41,195 41,195 141,195
19 1,000 32,066 12,493 12,493 112,493 23,439 23,439 123,440 46,380 46,380 146,380
20 1,000 34,719 12,987 12,987 112,988 25,248 25,248 125,249 52,099 52,099 152,100
@ 65 1,000 69,761 16,202 16,202 116,203 49,514 49,514 149,514 171,193 171,193 284,180
</TABLE>
Based on 0% interest rate and guaranteed charges, the policy will lapse in year
36.
Death benefit, account value and cash surrender value are based on hypothetical
gross interest rates shown, assume current and guaranteed charges and no policy
loans or withdrawals, and are calculated at the end of the policy year. Assumed
Premium Payments shown are assumed paid in full at the beginning of the policy
year. Payment of premiums shown other than in full at the beginning of the
policy year would reduce values and benefits below the hypothetical illustrated
amounts shown. Values shown reflect an effective annual asset charge of 1.00%
(includes average fund operating expenses of 0.30% applicable to the investment
subaccounts of the VUL Separate Account). Hypothetical gross interest rates are
presented for illustrative purposes only to illustrate funds 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. A GIA
providing interest at a minimum guaranteed rate of 3% also is available under
this product through the General Account.
This illustration assumes a premium tax of 2.25%.
83
<PAGE>
<TABLE>
<CAPTION>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY PAGE 2 OF 2
FACE AMOUNT: $100,000
FEMALE 35 ADVANTAGE SELECT INITIAL ANNUAL PREMIUM: $1,000
PHOENIX CORPORATE EDGE--A FLEXIBLE PREMIUM VARIABLE UNIVERSAL LIFE INSURANCE POLICY OPTION 2
ASSUMING GUARANTEED CHARGES
CASH CASH CASH
ASSUMED PREMIUM ACCOUNT SURRENDER DEATH ACCOUNT SURRENDER DEATH ACCOUNT SURRENDER DEATH
PREMIUM ACCUM. VALUE VALUE BENEFIT VALUE VALUE BENEFIT VALUE VALUE BENEFIT
YEAR PAYMENTS @5.0% @0% @0% @0% @6% @6% @6% @12% @12% @12%
-------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 1,000 1,050 577 577 100,577 620 620 100,620 663 663 100,663
2 1,000 2,153 1,134 1,134 101,134 1,256 1,256 101,256 1,383 1,383 101,383
3 1,000 3,310 1,670 1,670 101,670 1,907 1,907 101,907 2,165 2,165 102,165
4 1,000 4,526 2,183 2,183 102,183 2,572 2,572 102,572 3,012 3,012 103,013
5 1,000 5,802 2,670 2,670 102,671 3,248 3,248 103,249 3,930 3,930 103,930
6 1,000 7,142 3,131 3,131 103,131 3,934 3,934 103,935 4,921 4,921 104,922
7 1,000 8,549 3,562 3,562 103,563 4,629 4,629 104,629 5,994 5,994 105,994
8 1,000 10,027 4,024 4,024 104,024 5,393 5,393 105,394 7,220 7,220 107,220
9 1,000 11,578 4,457 4,457 104,457 6,169 6,169 106,170 8,551 8,551 108,551
10 1,000 13,207 4,860 4,860 104,861 6,957 6,957 106,957 9,997 9,997 109,997
11 1,000 14,917 5,248 5,248 105,248 7,775 7,775 107,775 11,598 11,598 111,598
12 1,000 16,713 5,606 5,606 105,607 8,607 8,607 108,607 13,345 13,345 113,346
13 1,000 18,599 5,936 5,936 105,936 9,453 9,453 109,453 15,253 15,253 115,254
14 1,000 20,579 6,233 6,233 106,234 10,310 10,310 110,311 17,337 17,337 117,337
15 1,000 22,657 6,497 6,497 106,498 11,178 11,178 111,178 19,612 19,612 119,612
16 1,000 24,840 6,725 6,725 106,726 12,052 12,052 112,053 22,096 22,096 122,096
17 1,000 27,132 6,915 6,915 106,916 12,932 12,932 112,932 24,809 24,809 124,810
18 1,000 29,539 7,065 7,065 107,065 13,814 13,814 113,814 27,773 27,773 127,773
19 1,000 32,066 7,167 7,167 107,168 14,691 14,691 114,691 31,006 31,006 131,007
20 1,000 34,719 7,223 7,223 107,223 15,563 15,563 115,563 34,538 34,538 134,538
@ 65 1,000 69,761 4,168 4,168 104,169 23,882 23,882 123,882 104,286 104,286 204,286
</TABLE>
Based on 0% interest rate and guaranteed charges, the policy will lapse in year
36.
Death benefit, account value and cash surrender value are based on hypothetical
gross interest rates shown, assume current and guaranteed charges and no policy
loans or withdrawals, and are calculated at the end of the policy year. Assumed
Premium Payments shown are assumed paid in full at the beginning of the policy
year. Payment of premiums shown other than in full at the beginning of the
policy year would reduce values and benefits below the hypothetical illustrated
amounts shown. Values shown reflect an effective annual asset charge of 1.00%
(includes average fund operating expenses of 0.30% applicable to the investment
subaccounts of the VUL Separate Account). Hypothetical gross interest rates are
presented for illustrative purposes only to illustrate funds 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. A GIA
providing interest at a minimum guaranteed rate of 3% also is available under
this product through the General Account.
This illustration assumes a premium tax of 2.25%.
84
<PAGE>
<TABLE>
<CAPTION>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY PAGE 1 OF 2
FACE AMOUNT: $100,000
MALE 35 ADVANTAGE SELECT INITIAL ANNUAL PREMIUM: $1,000
PHOENIX CORPORATE EDGE--A FLEXIBLE PREMIUM VARIABLE UNIVERSAL LIFE INSURANCE POLICY OPTION 3
ASSUMING CURRENT CHARGES
CASH CASH CASH
ASSUMED PREMIUM ACCOUNT SURRENDER DEATH ACCOUNT SURRENDER DEATH ACCOUNT SURRENDER DEATH
PREMIUM ACCUM. VALUE VALUE BENEFIT VALUE VALUE BENEFIT VALUE VALUE BENEFIT
YEAR PAYMENTS @5.0% @0% @0% @0% @6% @6% @6% @12% @12% @12%
-------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 1,000 1,050 738 738 101,000 787 787 101,000 836 836 101,000
2 1,000 2,153 1,462 1,462 102,000 1,605 1,605 102,000 1,755 1,755 102,000
3 1,000 3,310 2,170 2,170 103,000 2,456 2,456 103,000 2,766 2,766 103,000
4 1,000 4,526 2,862 2,862 104,000 3,339 3,339 104,000 3,877 3,877 104,000
5 1,000 5,802 3,537 3,537 105,000 4,255 4,255 105,000 5,097 5,097 105,000
6 1,000 7,142 4,194 4,194 106,000 5,203 5,203 106,000 6,436 6,436 106,000
7 1,000 8,549 4,830 4,830 107,000 6,184 6,184 107,000 7,906 7,906 107,000
8 1,000 10,027 5,514 5,514 108,000 7,270 7,270 108,000 9,595 9,595 108,000
9 1,000 11,578 6,172 6,172 109,000 8,390 8,390 109,000 11,447 11,447 109,000
10 1,000 13,207 6,804 6,804 110,000 9,544 9,544 110,000 13,477 13,477 110,000
11 1,000 14,917 7,464 7,464 111,000 10,796 10,796 111,000 15,781 15,781 111,000
12 1,000 16,713 8,098 8,098 112,000 12,091 12,091 112,000 18,316 18,316 112,000
13 1,000 18,599 8,704 8,704 113,000 13,429 13,429 113,000 21,108 21,108 113,000
14 1,000 20,579 9,280 9,280 114,000 14,809 14,809 114,000 24,182 24,182 114,000
15 1,000 22,657 9,825 9,825 115,000 16,233 16,233 115,000 27,570 27,570 115,000
16 1,000 24,840 10,337 10,337 116,000 17,701 17,701 116,000 31,306 31,306 116,000
17 1,000 27,132 10,814 10,814 117,000 19,214 19,214 117,000 35,426 35,426 117,000
18 1,000 29,539 11,254 11,254 118,000 20,772 20,772 118,000 39,975 39,975 118,000
19 1,000 32,066 11,654 11,654 119,000 22,375 22,375 119,000 44,997 44,997 119,000
20 1,000 34,719 12,011 12,011 120,000 24,022 24,022 120,000 50,548 50,548 120,000
@ 65 1,000 69,761 11,529 11,529 131,000 44,643 44,643 131,000 163,874 163,874 272,032
</TABLE>
Based on 0% interest rate and guaranteed charges, the policy will lapse in year
26.
Death benefit, account value and cash surrender value are based on hypothetical
gross interest rates shown, assume current and guaranteed charges and no policy
loans or withdrawals, and are calculated at the end of the policy year. Assumed
Premium Payments shown are assumed paid in full at the beginning of the policy
year. Payment of premiums shown other than in full at the beginning of the
policy year would reduce values and benefits below the hypothetical illustrated
amounts shown. Values shown reflect an effective annual asset charge of 1.00%
(includes average fund operating expenses of 0.30% applicable to the investment
subaccounts of the VUL Separate Account). Hypothetical gross interest rates are
presented for illustrative purposes only to illustrate funds 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. A GIA
providing interest at a minimum guaranteed rate of 3% also is available under
this product through the General Account.
This illustration assumes a premium tax of 2.25%.
85
<PAGE>
<TABLE>
<CAPTION>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY PAGE 2 OF 2
FACE AMOUNT: $100,000
MALE 35 ADVANTAGE SELECT INITIAL ANNUAL PREMIUM: $1,000
PHOENIX CORPORATE EDGE--A FLEXIBLE PREMIUM VARIABLE UNIVERSAL LIFE INSURANCE POLICY OPTION 3
ASSUMING GUARANTEED CHARGES
CASH CASH CASH
ASSUMED PREMIUM ACCOUNT SURRENDER DEATH ACCOUNT SURRENDER DEATH ACCOUNT SURRENDER DEATH
PREMIUM ACCUM. VALUE VALUE BENEFIT VALUE VALUE BENEFIT VALUE VALUE BENEFIT
YEAR PAYMENTS @5.0% @0% @0% @0% @6% @6% @6% @12% @12% @12%
-------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 1,000 1,050 531 531 101,000 572 572 101,000 614 614 101,000
2 1,000 2,153 1,039 1,039 102,000 1,155 1,155 102,000 1,277 1,277 102,000
3 1,000 3,310 1,523 1,523 103,000 1,747 1,747 103,000 1,992 1,992 103,000
4 1,000 4,526 1,981 1,981 104,000 2,346 2,346 104,000 2,761 2,761 104,000
5 1,000 5,802 2,408 2,408 105,000 2,949 2,949 105,000 3,588 3,588 105,000
6 1,000 7,142 2,804 2,804 106,000 3,553 3,553 106,000 4,476 4,476 106,000
7 1,000 8,549 3,165 3,165 107,000 4,155 4,155 107,000 5,428 5,428 107,000
8 1,000 10,027 3,550 3,550 108,000 4,817 4,817 108,000 6,517 6,517 108,000
9 1,000 11,578 3,894 3,894 109,000 5,474 5,474 109,000 7,686 7,686 109,000
10 1,000 13,207 4,197 4,197 110,000 6,126 6,126 110,000 8,945 8,945 110,000
11 1,000 14,917 4,467 4,467 111,000 6,784 6,784 111,000 10,324 10,324 111,000
12 1,000 16,713 4,691 4,691 112,000 7,433 7,433 112,000 11,814 11,814 112,000
13 1,000 18,599 4,865 4,865 113,000 8,067 8,067 113,000 13,425 13,425 113,000
14 1,000 20,579 4,987 4,987 114,000 8,684 8,684 114,000 15,168 15,168 114,000
15 1,000 22,657 5,052 5,052 115,000 9,278 9,278 115,000 17,054 17,054 115,000
16 1,000 24,840 5,055 5,055 116,000 9,842 9,842 116,000 19,097 19,097 116,000
17 1,000 27,132 4,985 4,985 117,000 10,366 10,366 117,000 21,307 21,307 117,000
18 1,000 29,539 4,835 4,835 118,000 10,839 10,839 118,000 23,697 23,697 118,000
19 1,000 32,066 4,593 4,593 119,000 11,246 11,246 119,000 26,282 26,282 119,000
20 1,000 34,719 4,245 4,245 120,000 11,573 11,573 120,000 29,077 29,077 120,000
@ 65 1,000 69,761 -- -- -- 4,293 4,293 131,000 83,148 83,148 138,027
</TABLE>
Based on 0% interest rate and guaranteed charges, the policy will lapse in year
26.
Death benefit, account value and cash surrender value are based on hypothetical
gross interest rates shown, assume current and guaranteed charges and no policy
loans or withdrawals, and are calculated at the end of the policy year. Assumed
Premium Payments shown are assumed paid in full at the beginning of the policy
year. Payment of premiums shown other than in full at the beginning of the
policy year would reduce values and benefits below the hypothetical illustrated
amounts shown. Values shown reflect an effective annual asset charge of 1.00%
(includes average fund operating expenses of 0.30% applicable to the investment
subaccounts of the VUL Separate Account). Hypothetical gross interest rates are
presented for illustrative purposes only to illustrate funds 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. A GIA
providing interest at a minimum guaranteed rate of 3% also is available under
this product through the General Account.
This illustration assumes a premium tax of 2.25%.
86
<PAGE>
<TABLE>
<CAPTION>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY PAGE 1 OF 2
FACE AMOUNT: $100,000
FEMALE 35 ADVANTAGE SELECT INITIAL ANNUAL PREMIUM: $1,000
PHOENIX CORPORATE EDGE--A FLEXIBLE PREMIUM VARIABLE UNIVERSAL LIFE INSURANCE POLICY OPTION 3
ASSUMING CURRENT CHARGES
CASH CASH CASH
ASSUMED PREMIUM ACCOUNT SURRENDER DEATH ACCOUNT SURRENDER DEATH ACCOUNT SURRENDER DEATH
PREMIUM ACCUM. VALUE VALUE BENEFIT VALUE VALUE BENEFIT VALUE VALUE BENEFIT
YEAR PAYMENTS @5.0% @0% @0% @0% @6% @6% @6% @12% @12% @12%
-------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 1,000 1,050 766 766 101,000 816 816 101,000 865 865 101,000
2 1,000 2,153 1,516 1,516 102,000 1,663 1,663 102,000 1,816 1,816 102,000
3 1,000 3,310 2,248 2,248 103,000 2,541 2,541 103,000 2,859 2,859 103,000
4 1,000 4,526 2,962 2,962 104,000 3,452 3,452 104,000 4,004 4,004 104,000
5 1,000 5,802 3,656 3,656 105,000 4,394 4,394 105,000 5,260 5,260 105,000
6 1,000 7,142 4,330 4,330 106,000 5,369 5,369 106,000 6,637 6,637 106,000
7 1,000 8,549 4,983 4,983 107,000 6,376 6,376 107,000 8,146 8,146 107,000
8 1,000 10,027 5,682 5,682 108,000 7,489 7,489 108,000 9,879 9,879 108,000
9 1,000 11,578 6,358 6,358 109,000 8,639 8,639 109,000 11,781 11,781 109,000
10 1,000 13,207 7,012 7,012 110,000 9,829 9,829 110,000 13,871 13,871 110,000
11 1,000 14,917 7,695 7,695 111,000 11,121 11,121 111,000 16,242 16,242 111,000
12 1,000 16,713 8,358 8,358 112,000 12,463 12,463 112,000 18,859 18,859 112,000
13 1,000 18,599 9,002 9,002 113,000 13,859 13,859 113,000 21,748 21,748 113,000
14 1,000 20,579 9,626 9,626 114,000 15,310 15,310 114,000 24,940 24,940 114,000
15 1,000 22,657 10,229 10,229 115,000 16,820 16,820 115,000 28,466 28,466 115,000
16 1,000 24,840 10,811 10,811 116,000 18,388 18,388 116,000 32,364 32,364 116,000
17 1,000 27,132 11,370 11,370 117,000 20,018 20,018 117,000 36,673 36,673 117,000
18 1,000 29,539 11,904 11,904 118,000 21,710 21,710 118,000 41,438 41,438 118,000
19 1,000 32,066 12,412 12,412 119,000 23,467 23,467 119,000 46,708 46,708 119,000
20 1,000 34,719 12,892 12,892 120,000 25,289 25,289 120,000 52,539 52,539 120,000
@ 65 1,000 69,761 15,626 15,626 131,000 50,269 50,269 131,000 173,758 173,758 288,440
</TABLE>
Based on 0% interest rate and guaranteed charges, the policy will lapse in year
33.
Death benefit, account value and cash surrender value are based on hypothetical
gross interest rates shown, assume current and guaranteed charges and no policy
loans or withdrawals, and are calculated at the end of the policy year. Assumed
Premium Payments shown are assumed paid in full at the beginning of the policy
year. Payment of premiums shown other than in full at the beginning of the
policy year would reduce values and benefits below the hypothetical illustrated
amounts shown. Values shown reflect an effective annual asset charge of 1.00%
(includes average fund operating expenses of 0.30% applicable to the investment
subaccounts of the VUL Separate Account). Hypothetical gross interest rates are
presented for illustrative purposes only to illustrate funds 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. A GIA
providing interest at a minimum guaranteed rate of 3% also is available under
this product through the General Account.
This illustration assumes a premium tax of 2.25%.
87
<PAGE>
<TABLE>
<CAPTION>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY PAGE 2 OF 2
FACE AMOUNT: $100,000
FEMALE 35 ADVANTAGE SELECT INITIAL ANNUAL PREMIUM: $1,000
PHOENIX CORPORATE EDGE--A FLEXIBLE PREMIUM VARIABLE UNIVERSAL LIFE INSURANCE POLICY OPTION 3
ASSUMING GUARANTEED CHARGES
CASH CASH CASH
ASSUMED PREMIUM ACCOUNT SURRENDER DEATH ACCOUNT SURRENDER DEATH ACCOUNT SURRENDER DEATH
PREMIUM ACCUM. VALUE VALUE BENEFIT VALUE VALUE BENEFIT VALUE VALUE BENEFIT
YEAR PAYMENTS @5.0% @0% @0% @0% @6% @6% @6% @12% @12% @12%
-------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 1,000 1,050 576 576 101,000 619 619 101,000 662 662 101,000
2 1,000 2,153 1,132 1,132 102,000 1,254 1,254 102,000 1,382 1,382 102,000
3 1,000 3,310 1,666 1,666 103,000 1,904 1,904 103,000 2,162 2,162 103,000
4 1,000 4,526 2,176 2,176 104,000 2,566 2,566 104,000 3,008 3,008 104,000
5 1,000 5,802 2,659 2,659 105,000 3,239 3,239 105,000 3,922 3,922 105,000
6 1,000 7,142 3,114 3,114 106,000 3,920 3,920 106,000 4,910 4,910 106,000
7 1,000 8,549 3,537 3,537 107,000 4,607 4,607 107,000 5,978 5,978 107,000
8 1,000 10,027 3,989 3,989 108,000 5,364 5,364 108,000 7,200 7,200 108,000
9 1,000 11,578 4,409 4,409 109,000 6,130 6,130 109,000 8,527 8,527 109,000
10 1,000 13,207 4,798 4,798 110,000 6,906 6,906 110,000 9,970 9,970 110,000
11 1,000 14,917 5,166 5,166 111,000 7,710 7,710 111,000 11,569 11,569 111,000
12 1,000 16,713 5,503 5,503 112,000 8,526 8,526 112,000 13,317 13,317 112,000
13 1,000 18,599 5,807 5,807 113,000 9,353 9,353 113,000 15,230 15,230 113,000
14 1,000 20,579 6,073 6,073 114,000 10,190 10,190 114,000 17,323 17,323 114,000
15 1,000 22,657 6,301 6,301 115,000 11,033 11,033 115,000 19,616 19,616 115,000
16 1,000 24,840 6,487 6,487 116,000 11,880 11,880 116,000 22,128 22,128 116,000
17 1,000 27,132 6,628 6,628 117,000 12,729 12,729 117,000 24,884 24,884 117,000
18 1,000 29,539 6,720 6,720 118,000 13,576 13,576 118,000 27,909 27,909 118,000
19 1,000 32,066 6,756 6,756 119,000 14,414 14,414 119,000 31,228 31,228 119,000
20 1,000 34,719 6,733 6,733 120,000 15,241 15,241 120,000 34,877 34,877 120,000
@ 65 1,000 69,761 1,497 1,497 131,000 22,481 22,481 131,000 110,980 110,980 184,228
</TABLE>
Based on 0% interest rate and guaranteed charges, the policy will lapse in year
33.
Death benefit, account value and cash surrender value are based on hypothetical
gross interest rates shown, assume current and guaranteed charges and no policy
loans or withdrawals, and are calculated at the end of the policy year. Assumed
Premium Payments shown are assumed paid in full at the beginning of the policy
year. Payment of premiums shown other than in full at the beginning of the
policy year would reduce values and benefits below the hypothetical illustrated
amounts shown. Values shown reflect an effective annual asset charge of 1.00%
(includes average fund operating expenses of 0.30% applicable to the investment
subaccounts of the VUL Separate Account). Hypothetical gross interest rates are
presented for illustrative purposes only to illustrate funds 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. A GIA
providing interest at a minimum guaranteed rate of 3% also is available under
this product through the General Account.
This illustration assumes a premium tax of 2.25%.
88
<PAGE>
[VERSION B]
PHOENIX
EXECUTIVE BENEFIT
DEVELOPED FOR CLARK BARDES
VARIABLE UNIVERSAL LIFE
INSURANCE POLICY
Issued by
PHOENIX HOME LIFE
MUTUAL INSURANCE COMPANY
IF YOU HAVE ANY QUESTIONS, PLEASE CONTACT US AT:
[envelope] ANDESA TPA, INC.
1605 N CEDAR CREST BLVD, SUITE 502
ALLENTOWN, PA 18104
[phone] 610/439-5256
PROSPECTUS MARCH 13, 2000
This prospectus describes an individual flexible premium variable universal life
insurance policy. The policy provides lifetime insurance protection for as long
as it remains in force.
You may allocate net premiums and cash value to one or more of the subaccounts
of the VUL Account and the GIA ("GIA"). The assets of each subaccount will be
used to purchase, at net asset value, shares of a series in the following
designated underlying funds.
THE PHOENIX EDGE SERIES FUND
- ----------------------------
MANAGED BY PHOENIX INVESTMENT COUNSEL, INC.
[diamond] Phoenix-Aberdeen International Series
[diamond] Phoenix-Engemann Capital Growth Series
[diamond] Phoenix-Engemann Nifty Fifty Series
[diamond] Phoenix-Goodwin Money Market Series
[diamond] Phoenix-Goodwin Multi-Sector Fixed Income Series
[diamond] Phoenix-Hollister Value Equity Series
[diamond] Phoenix-Oakhurst Balanced Series
[diamond] Phoenix-Oakhurst Growth and Income Series
[diamond] Phoenix-Oakhurst Strategic Allocation Series
[diamond] Phoenix-Seneca Mid-Cap Growth Series
[diamond] Phoenix-Seneca Strategic Theme Series
MANAGED BY PHOENIX-ABERDEEN INTERNATIONAL ADVISORS, LLC
[diamond] Phoenix-Aberdeen New Asia Series
MANAGED BY DUFF & PHELPS INVESTMENT MANAGEMENT CO.
[diamond] Phoenix-Duff & Phelps Real Estate Securities Series
MANAGED BY PHOENIX VARIABLE ADVISORS, INC.
[diamond] Phoenix Research Enhanced Index Series
[diamond] Phoenix-Bankers Trust Dow 30 Series
[diamond] Phoenix-Federated U.S. Government Bond Series
[diamond] Phoenix-Janus Equity Income Series
[diamond] Phoenix-Janus Flexible Income Series
[diamond] Phoenix-Janus Growth Series
[diamond] Phoenix-Morgan Stanley Focus Equity Series
[diamond] Phoenix-Schafer Mid-Cap Value Series
BT INSURANCE FUNDS TRUST
- ------------------------
MANAGED BY BANKERS TRUST COMPANY
[diamond] EAFE(R) Equity Index Fund
FEDERATED INSURANCE SERIES
- --------------------------
MANAGED BY FEDERATED INVESTMENT MANAGEMENT COMPANY
[diamond] Federated Fund for U.S. Government Securities II
[diamond] Federated High Income Bond Fund II
MORGAN STANLEY DEAN WITTER UNIVERSAL FUNDS, INC.
- ------------------------------------------------
MANAGED BY MORGAN STANLEY DEAN WITTER INVESTMENT MANAGEMENT INC.
[diamond] Technology Portfolio
TEMPLETON VARIABLE PRODUCTS SERIES FUND
- ---------------------------------------
MANAGED BY TEMPLETON INVESTMENT COUNSEL, INC.
[diamond] Templeton Asset Allocation Fund -- Class 2
[diamond] Templeton International Fund -- Class 2
[diamond] Templeton Stock Fund -- Class 2
MANAGED BY TEMPLETON ASSET MANAGEMENT, LTD.
[diamond] Templeton Developing Markets Fund -- Class 2
MANAGED BY FRANKLIN MUTUAL ADVISERS, LLC
[diamond] Mutual Shares Investments Fund -- Class 2
WANGER ADVISORS TRUST
- ---------------------
MANAGED BY WANGER ASSET MANAGEMENT, L.P.
[diamond] Wanger Foreign Forty
[diamond] Wanger International Small Cap
[diamond] Wanger Twenty
[diamond] Wanger U.S. Small Cap
1
<PAGE>
It may not be in your best interest to purchase a policy to replace an
existing life insurance policy or annuity contract. You must understand the
basic features of the proposed policy and your existing coverage before you
decide to replace your present coverage. You must also know if the replacement
will result in any taxes.
The policy is not a deposit or obligation of, underwritten or guaranteed by,
any financial institution or credit union. It is not federally insured or
endorsed by the Federal Deposit Insurance Corporation or any other state or
federal agency. Policy investments are subject to risk, including the
fluctuation of policy values and possible loss of principal invested or premiums
paid.
The Securities and Exchange Commission has not approved nor disapproved
these securities, nor passed upon the accuracy or adequacy of this prospectus.
Any representation to the contrary is a criminal offense.
This prospectus is valid only if accompanied or preceded by current
prospectuses for the funds. You should read and keep these prospectuses for
future reference.
2
<PAGE>
TABLE OF CONTENTS
Heading Page
- -------------------------------------------------------------------
PART I--GENERAL POLICY PROVISIONS....................... 5
SUMMARY ............................................ 5
Availability.................................... 5
Underwriting.................................... 5
Charges Under the Policy........................ 5
Deductions From Premiums........................ 7
Sales Charge................................ 7
State Premium Tax Charge.................... 7
Deferred Acquisition Cost ("DAC") Tax
Charge..................................... 7
Policy Value Charges............................ 7
Administrative Charge....................... 7
Cost of Insurance........................... 7
Mortality and Expense Risk Fee.............. 7
Rider Charge................................ 7
Charges for Federal Income Taxes............ 7
Fund Charges................................ 7
Other Charges................................... 9
Partial Surrender Fee....................... 9
Loan Interest Rate Expense Charge........... 9
Reduction in Charges............................ 9
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
AND THE VUL ACCOUNT................................ 10
Phoenix......................................... 10
The VUL Account................................. 10
PERFORMANCE HISTORY................................. 10
INVESTMENTS OF THE VUL ACCOUNT...................... 10
Participating Investment Funds.................. 10
The Phoenix Edge Series Fund................ 10
BT Insurance Funds Trust.................... 11
Federated Insurance Series.................. 11
Morgan Stanley Dean Witter Universal
Funds, Inc................................. 12
Templeton Variable Products Series Fund..... 12
Wanger Advisors Trust....................... 12
Investment Advisors............................. 13
Services of the Advisors........................ 13
Reinvestment and Redemption..................... 13
Substitution of Investments..................... 14
The GIA......................................... 14
PREMIUMS............................................ 14
Minimum Premiums................................ 14
Allocation of Issue Premium..................... 15
Free Look Period................................ 15
Account Value................................... 15
Transfer of Policy Value.................... 15
Systematic Transfers for Dollar Cost
Averaging.................................. 16
Automatic Asset Re-Balancing.................... 16
Determination of Subaccount Values.............. 16
Death Benefit Under the Policy.................. 16
Minimum Face Amount......................... 17
Death Benefit Options....................... 17
Changes in Face Amount of Insurance............. 17
Requests for Increase in Face Amount........ 17
Decreases in Face Amount and Partial
Surrenders: Effect on Death Benefit............ 17
Requests for Decrease in Face Amount........ 17
Surrenders...................................... 17
General..................................... 17
Full Surrenders............................. 18
Partial Surrenders.......................... 18
Policy Loans.................................... 18
Source of Loan.............................. 18
Interest.................................... 18
Interest Credited on Loaned Value........... 19
Repayment................................... 19
Effect of Loan.............................. 19
Lapse........................................... 19
Additional Insurance Option..................... 19
Additional Rider Benefits....................... 19
PART II--ADDITIONAL POLICY PROVISIONS................... 20
Postponement of Payments........................ 20
Payment by Check................................ 20
The Contract.................................... 20
Suicide......................................... 20
Incontestability................................ 20
Change of Owner or Beneficiary.................. 20
Assignment...................................... 20
Misstatement of Age or Sex...................... 20
Surplus......................................... 20
PAYMENT OF PROCEEDS................................. 20
Surrender and Death Benefit Proceeds............ 20
Payment Options................................. 21
Option 1--Lump sum.......................... 21
Option 2--Left to earn interest............. 21
Option 3--Payment for a specific period..... 21
Option 4--Life annuity with specified
period certain............................. 21
Option 5--Life annuity...................... 21
Option 6--Payments of a specified amount.... 21
Option 7--Joint survivorship annuity with
10-year period certain..................... 21
PART III--OTHER IMPORTANT INFORMATION................... 22
FEDERAL TAX CONSIDERATIONS.......................... 22
Introduction.................................... 22
Phoenix's Tax Status............................ 22
Policy Benefits................................. 22
Death Benefit Proceeds...................... 22
Full Surrender.............................. 22
Partial Surrender........................... 22
Loans....................................... 22
Business-Owned Policies......................... 23
Modified Endowment Contracts.................... 23
General..................................... 23
Reduction in Benefits During the First
Seven Years................................ 23
Distributions Affected...................... 23
3
<PAGE>
Penalty Tax................................. 23
Material Change Rules....................... 23
Serial Purchase of Modified Endowment
Contracts.................................. 24
Limitations on Unreasonable Mortality and
Expense Charges................................ 24
Diversification Standards....................... 24
Change of Ownership or Insured or
Assignment..................................... 24
Other Taxes..................................... 24
VOTING RIGHTS ...................................... 24
THE DIRECTORS AND EXECUTIVE OFFICERS OF
PHOENIX............................................ 25
SAFEKEEPING OF THE VUL ACCOUNT'S ASSETS ............ 26
SALES OF POLICIES .................................. 26
STATE REGULATION ................................... 27
REPORTS ............................................ 27
LEGAL PROCEEDINGS .................................. 27
LEGAL MATTERS ...................................... 27
REGISTRATION STATEMENT ............................. 27
FINANCIAL STATEMENTS ............................... 27
APPENDIX A--GLOSSARY OF SPECIAL TERMS............... 72
APPENDIX B--PERFORMANCE HISTORY..................... 73
APPENDIX C--ILLUSTRATIONS OF DEATH BENEFITS,
POLICY VALUES ("ACCOUNT VALUES") AND
CASH SURRENDER VALUES.............................. 77
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.
4
<PAGE>
PART I--GENERAL POLICY PROVISIONS
- -------------------------------------------------------------------------------
SUMMARY
- -------------------------------------------------------------------------------
This is a summary that describes the general provisions of the policy.
Certain provisions of the policy described in this prospectus may differ in
a particular state because of specific state requirements.
Throughout the prospectus, Phoenix Home Life Mutual Insurance Company is
referred to as Phoenix, we, us, or our and the policyholder is referred to as
you or your.
We define the following terms in the Glossary of Appendix A:
ATTAINED AGE POLICY ANNIVERSARY
BENEFICIARY POLICY DATE
DEBT POLICY VALUE
FUNDS POLICY YEAR
GENERAL ACCOUNT SERIES
ISSUE PREMIUM SUBACCOUNTS
MONTHLY CALCULATION DATE TARGET PREMIUM
NET ASSET VALUE VALUATION DATE
PAYMENT DATE VALUATION PERIOD
PLANNED ANNUAL PREMIUM VUL ACCOUNT (ACCOUNT)
If there is ever a difference between the provisions within this prospectus
and the provisions of the policy, the policy provisions will control.
AVAILABILITY
The policy is available on a "case" basis. We may consider one person as a
case. All policies within a case are aggregated for purposes of determining
policy dates, loan rates and underwriting requirements. If an individual owns
the policy as part of a case, he or she may exercise all rights under the policy
through their employer or sponsoring organization. After termination of
employment or other such relationship, the individual may exercise such rights
directly with us.
For fully underwritten policies, the age of the insured at the time of issue
generally must be between ages 18 through 85 as of his or her birthday nearest
the policy anniversary.
For policies that are underwritten using simplified or guaranteed issue
programs, generally the maximum age of the insured at the time of issue is age
70 for simplified and 64 for guaranteed issue.
The minimum face amount of insurance per policy issued is $50,000.
You can purchase a policy to insure the life of another person provided that
you have an insurable interest in that life and the prospective Insured
consents.
UNDERWRITING
Currently, we offer 3 types of underwriting:
[diamond] fully underwritten;
[diamond] simplified issue underwriting; and
[diamond] guaranteed issue underwriting.
Your cost of insurance charges will vary based on the type of underwriting
we use.
CHARGES UNDER THE POLICY
We deduct certain charges from your policy to compensate us for:
1. our expenses in selling the policy;
2. underwriting and issuing the policy;
3. premium and federal taxes incurred on premiums received;
4. providing insurance benefits under your policy; and
5. assuming certain risks in connection with the policy.
These charges are summarized below. These charges are described more fully
following this chart.
5
<PAGE>
<TABLE>
<CAPTION>
CHARGES UNDER THE POLICY
- ---------------------------------------------------------------------------------------------------------------------------------
CHARGES CURRENT RATE GUARANTEED RATE
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
DEDUCTIONS FROM SALES CHARGE Policy years 1 - 7: 5.0% of premiums up Policy years 1 - 7: 5.0% of premiums up
PREMIUMS to the target premium and 0% on amounts to the target premium and 3.0% on
in excess of the target premium. amounts in excess of the target premium.
Policy year 8+: 0% of all premiums. Policy year 8+: 2.0% of all premiums.
----------------------------------------------------------------------------------------------------------
STATE PREMIUM 0.75% to 4.0% of each premium up to the This charge will always equal the
TAX Target Premium depending on your applicable state rate.
state's applicable rate.
----------------------------------------------------------------------------------------------------------
DEFERRED ACQUISITION 1.5% of each premium up to the Target 1.5% of each premium up to the Target
COST TAX CHARGE Premium. Premium.
(FEDERAL DAC TAX)
- ---------------------------------------------------------------------------------------------------------------------------------
POLICY VALUE CHARGES ADMINISTRATIVE CHARGE $5 per month ($60 annually) $10 per month ($120 annually) except
New York, $7.50 per month ($90
annually)
----------------------------------------------------------------------------------------------------------
COST OF INSURANCE A per thousand rate multiplied by the The maximum monthly cost of insurance
CHARGE amount at risk each month. This charge charge for each $1,000 of insurance is
varies by the Insured's issue age, shown on your policy's schedule pages.
policy duration, gender and
underwriting class.
----------------------------------------------------------------------------------------------------------
MORTALITY AND EXPENSE 0.40% annually in policy years 1-10 0.90% annually in all policy years
RISK CHARGE 0.25% annually in policy years 11+
----------------------------------------------------------------------------------------------------------
FUND CHARGES SEE FUND CHARGE TABLE SEE FUND CHARGE TABLE
- ---------------------------------------------------------------------------------------------------------------------------------
OTHER CHARGES PARTIAL SURRENDER FEE None 2.0% of the amount withdrawn, but not
greater than $25.
- ---------------------------------------------------------------------------------------------------------------------------------
TRANSFERS BETWEEN None $10 per transfer after the first 2
SUBACCOUNTS transfers in any given policy year,
(after 12 transfers in New York).
----------------------------------------------------------------------------------------------------------
LOAN INTEREST RATE The rates in effect before the 16th The Guaranteed rates before the Insured
CHARGED policy year and before the Insured reaches 65 for all states are:
reaches age 65 in all states except Policy year 1 - 10: 4.75%
New York and New Jersey are: Policy year 11 - 15: 4.50%
Policy year 1 - 10: 2.75% Policy year 16+: 4.25%
Policy year 11 - 15: 2.50%
Policy year 16+: 2.25%
The rates in effect before the 16th
policy year and before the Insured
reaches age 65 in New York and
New Jersey are:
Policy year 1 - 10: 4.75%
Policy year 11 - 15: 4.50%
Policy year 16+: 4.25%
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
6
<PAGE>
DEDUCTIONS FROM PREMIUMS
Before we allocate your premium to the subaccounts or the GIA we deduct a
sales charge, a state premium tax and a federal tax to cover the estimated cost
to us for deferred acquisition costs.
SALES CHARGE
We deduct a sales charge from your premium for the costs we incur in the
sales and distribution of the policies. We will refund a portion of the sales
charge to you as part of the cash surrender value if you surrender your policy
within the first 3 policy years according to the following schedule:
Policy Year 1: 100.00%
Policy Year 2: 66.67%
Policy Year 3: 33.33%
STATE PREMIUM TAX CHARGE
States assess premium taxes at various rates. We deduct the applicable state
rate from each premium to cover the cost of the premium taxes assessed against
us by the state.
We may increase or decrease this charge if there is a change in the tax or
change of residence.
DEFERRED ACQUISITION COST ("DAC") TAX CHARGE
This tax is associated with our federal tax liability under Internal Revenue
Code Section 848.
POLICY VALUE CHARGES
On each monthly calculation day, we deduct from your policy value the
following charges:
1. Administrative Charge
2. Cost of Insurance Charge
3. Mortality and Expense Risk Fee
4. A charge for the cost of riders if applicable
The amount deducted is allocated among the subaccounts and the unloaned
portion of the GIA based on an allocation schedule specified by you. You
initially choose this schedule in your application.
1. ADMINISTRATIVE CHARGE
We assess a monthly charge for the expenses we incur in administering the
policy. This charge reimburses us for the cost of daily administration for
services such as billing and collections, monthly processing, updating daily
values and communicating with policyholders.
2. COST OF INSURANCE
We deduct a charge to cover the cost of insurance coverage on each monthly
calculation date. This charge is based on:
[diamond] Insured's gender;
[diamond] Insured's age at issue;
[diamond] Policy year in which we make the deduction;
[diamond] Insured's tobacco use classification;
[diamond] Rating class of the policy; and
[diamond] Underwriting classification of the case.
To determine the monthly cost of insurance, we multiply the appropriate cost
of insurance rate by the difference between your policy's death benefit and the
policy value. Any change in the cost of insurance rates will apply to all
persons of the same sex, insurance age and risk class whose policies have been
in force for the same length of time.
3. MORTALITY AND EXPENSE RISK FEE
We charge the subaccounts for the mortality and expense risks we assume.
This charge is deducted from the value of each subaccount's assets attributable
to the policies.
The mortality risk we assume is that the group of lives we insure under our
policies may, on average, live for a shorter period of time than we estimated.
The expense risk we assume is that our cost of issuing and administering the
policies may be more than we estimated.
If all the money we collect from this charge is not required to cover the
cost of death benefits and other expenses, it will be a gain to us. If the money
we collect is not enough to cover our costs, we will still provide for death
benefits and expenses.
4. RIDER CHARGE
We will deduct any applicable monthly rider charges for the additional
benefit provided to you by the rider.
CHARGES FOR FEDERAL INCOME TAXES
We currently do not charge the VUL Account for federal income taxes
attributable to it. In the future, we may charge to cover these or any other tax
liability of the VUL Account.
FUND CHARGES
Please refer to the following chart for a listing of fund charges.
7
<PAGE>
<TABLE>
<CAPTION>
FUND ANNUAL EXPENSES
(For the year ending December 31, 1999)
- -------------------------------------------------------------------------------------------------------------------------------
OTHER EXPENSES TOTAL EXPENSES TOTAL EXPENSES
SERIES MANAGEMENT RULE 12B-1 BEFORE BEFORE AFTER
FEES FEES REIMBURSEMENT(1) REIMBURSEMENT REIMBURSEMENT(2)
- -------------------------------------------------------------------------------------------------------------------------------
THE PHOENIX EDGE SERIES FUND
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Phoenix Research Enhanced Index .45% N/A .30% .75% .55%
Phoenix-Aberdeen International .75% N/A .26% 1.01% 1.01%
Phoenix-Aberdeen New Asia 1.00% N/A 1.39% 2.39% 1.25%
Phoenix-Bankers Trust Dow 30 .35% N/A 7.46% 7.81% .50%
Phoenix-Duff & Phelps Real Estate Securities .75% N/A .56% 1.31% 1.00%
Phoenix-Engemann Capital Growth .62% N/A .06% .68% .68%
Phoenix-Engemann Nifty Fifty .90% N/A .53% 1.43% 1.05%
Phoenix-Federated U.S. Government Bond .60% N/A 7.61% 8.21% .75%
Phoenix-Goodwin Money Market .40% N/A .17% .57% .55%
Phoenix-Goodwin Multi-Sector Fixed Income .50% N/A .21% .71% .65%
Phoenix-Hollister Value Equity .70% N/A 1.33% 2.03% .85%
Phoenix-Janus Equity Income .85% N/A 17.96% 18.81% 1.00%
Phoenix-Janus Flexible Income .80% N/A 7.38% 8.18% .95%
Phoenix-Janus Growth .85% N/A 16.44% 17.29% 1.00%
Phoenix-Morgan Stanley Focus Equity .85% N/A 7.26% 8.11% 1.00%
Phoenix-Oakhurst Balanced .54% N/A .16% .70% .70%
Phoenix-Oakhurst Growth and Income .70% N/A .31% 1.01% .85%
Phoenix-Oakhurst Strategic Allocation .58% N/A .12% .70% .70%
Phoenix-Schafer Mid-Cap Value 1.05% N/A 1.53% 2.58% 1.20%
Phoenix-Seneca Mid-Cap Growth .80% N/A 1.24% 2.04% 1.05%
Phoenix-Seneca Strategic Theme .75% N/A .22% .97% .97%
BT INSURANCE FUNDS TRUST
- -------------------------------------------------------------------------------------------------------------------------------
EAFE(R) Equity Index Fund .45% N/A .69% 1.15% .65%
FEDERATED INSURANCE SERIES
- -------------------------------------------------------------------------------------------------------------------------------
Federated Fund for U.S. Government Securities II .60% N/A .43% 1.03% .78%
Federated High Income Bond Fund II .60% N/A .44% 1.04% .79%
MORGAN STANLEY DEAN WITTER UNIVERSAL FUNDS, INC.
- -------------------------------------------------------------------------------------------------------------------------------
Technology Portfolio .79% N/A 11.78% 12.57% 1.15%
TEMPLETON VARIABLE PRODUCTS SERIES FUND(3)
- -------------------------------------------------------------------------------------------------------------------------------
Mutual Shares Investments Fund-- Class 2(4) .60% .25% 1.00% 1.91% 1.25%
Templeton Asset Allocation Fund-- Class 2 .60% .25% .14% .99% .99%
Templeton Developing Markets Fund-- Class 2 1.25% .25% .25% 1.75% 1.75%
Templeton International Fund-- Class 2 .69% .25% .16% 1.10% 1.10%
Templeton Stock Fund-- Class 2 .70% .25% .05% 1.00% 1.00%
WANGER ADVISORS TRUST
- -------------------------------------------------------------------------------------------------------------------------------
Wanger Foreign Forty 1.00% N/A 2.45% 3.45% 1.45%
Wanger International Small Cap 1.25% N/A .24% 1.49% 1.49%
Wanger Twenty .95% N/A 1.17% 2.12% 1.35%
Wanger U.S. Small Cap .95% N/A .07% 1.02% 1.02%
- -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
1 Each series pays a portion or all of its expenses other than the management
fee. The Phoenix Research Enhanced Index Series will pay up to .10%; the
Phoenix-Engemann Capital Growth, Phoenix-Goodwin Multi-Sector Fixed Income,
Phoenix-Oakhurst Strategic Allocation, Phoenix-Goodwin Money Market,
Phoenix-Oakhurst Balanced, Phoenix-Engemann Nifty Fifty, Phoenix-Oakhurst
Growth and Income, Phoenix-Hollister Value Equity and Phoenix-Schafer Mid-Cap
Value, Phoenix-Bankers Trust Dow 30, Phoenix-Federated U.S. Government Bond,
Phoenix-Janus Equity Income, Phoenix-Janus Flexible Income, Phoenix-Janus
Growth and Phoenix-Morgan Stanley Focus Equity Series will pay up to .15%;
the Phoenix-Duff & Phelps Real Estate Securities, Phoenix-Seneca Strategic
Theme, Phoenix-Aberdeen New Asia, and Phoenix-Seneca Mid-Cap Growth Series
will pay up to .25%; and the Phoenix-Aberdeen International Series will pay
up to .40%. The Wanger Foreign Forty will pay up to .45%, the Wanger U.S.
Small Cap Series will pay up to .50%, the Wanger International Small Cap will
pay up to .60%, and the Wanger Twenty will pay up to .40%.
2 Reflects the effect of any management fee waivers and reimbursement of
expenses.
3 The fund's class 2 distribution plan or "rule 12b-1 plan" is described in the
fund's prospectus. On 2/8/00, the fund's shareholders approved a merger and
reorganization that will, on or about 5/1/00, combine the fund with a similar
fund of the Franklin Templeton Variable Insurance Products Trust ("FTVIPT").
As of 5/1/00, the expenses of the fund will be based on the combined assets
of both funds. Based on pro-forma financial statements for the combined funds
as of 12/31/99, which used expense rates of the surviving FTVIPT fund as of
that date, the fund's management fees, other expenses and total operating
expenses after 5/1/00 are estimated to be:
<TABLE>
<CAPTION>
Management Other Total
Estimated Annual Expenses from 5/1/00 Fees Expenses Operating Expenses
<S> <C> <C> <C>
Mutual Shares Investments Fund -- Class 2 0.60% 0.19% 1.04%
Asset Allocation Fund -- Class 2 0.65% 0.17% 1.07%
Developing Markets Fund -- Class 2 1.25% 0.14% 1.64%
International Fund -- Class 2 0.85% 0.07% 1.17%
Stock Fund -- Class 2 0.80% 0.05% 1.10%
</TABLE>
4 The manager and administrator agreed in advance to waive or limit their
respective fees, and the manager to assume as its own expense certain
expenses otherwise payable by the fund. With this reduction, management
fees after reimbursement were 0.00% and total operating expenses were 1.25%.
After 12/31/00, the manager and administrator may end this arrangement at
any time.
8
<PAGE>
OTHER CHARGES
PARTIAL SURRENDER FEE
We reserve the right to deduct a charge from each withdrawal.
LOAN INTEREST RATE EXPENSE CHARGE
We deduct a charge from the loan interest rate. This charge reimburses us
for expenses we incur in administering your loan. This rate varies by policy
year.
REDUCTION IN CHARGES
The policy is available for purchase by individuals, corporations and other
groups. For group or sponsored arrangements (including our employees and their
family members) and for special exchange programs that we may make available, we
reserve the right to reduce or eliminate the sales load, mortality and expense
risk charge, monthly administrative charge, monthly cost of insurance charges
or other charges normally assessed on certain multiple life cases where it is
expected that the size or nature of such cases will result in savings of sales,
underwriting, administrative or other costs.
Eligibility for the amount of these reductions will be determined by a
number of factors, including the number of Insureds, the total premium expected
to be paid, the total assets under management for the policyowner, the nature of
the relationship among individual insureds, the purpose for which the policies
are being purchased, the expected persistency of individual policies, and other
circumstances which in our opinion are rationally related to the expected
reduction in expenses. Any variations in the charge structure will be determined
in a uniform manner reflecting differences in costs of services and not unfairly
discriminatory to policyholders.
9
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY AND THE VUL ACCOUNT
- -------------------------------------------------------------------------------
PHOENIX
We are a mutual life insurance company originally chartered in Connecticut
in 1851 and redomiciled to New York in 1992. Our executive office is at One
American Row, Hartford, Connecticut 06102-5056 and our main administrative
office is at 100 Bright Meadow Boulevard, Enfield, Connecticut 06083-1900. Our
New York principal office is at 10 Krey Boulevard, East Greenbush, New York
12144. We sell insurance policies and annuity contracts through our own field
force of full-time agents and through brokers.
THE VUL ACCOUNT
The VUL Account is a separate account of Phoenix, established 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 (the "1940 Act"), as
amended, and meets the definition of a "separate account" under that Act. This
registration does not involve supervision of the management of the VUL Account
or Phoenix by the SEC.
The VUL Account is divided into subaccounts each of which is available for
allocation of policy value. Each subaccount will invest solely in shares of a
specific series of a mutual fund. In the future, we may establish additional
subaccounts which will be made available to existing policyowners to the extent
and on a basis decided by us. See "Investments of the VUL Account--Participating
Investment Funds."
We do not guarantee the investment performance of the VUL Account or any of
its subaccounts. Contributions to the overall policy value allocated to the VUL
Account depend on the chosen fund's investment performance. Thus, you bear the
full investment risk for all monies invested in the VUL Account.
The VUL Account is part of the general business of Phoenix, but the gains or
losses of the VUL Account belong solely to the VUL Account. The gains or losses
of any other business we may conduct do not affect the VUL Account. Under New
York law, the assets of the VUL Account may not be taken to pay liabilities
arising out of any other business we may conduct. Nevertheless, all obligations
arising under the policy are general corporate obligations of Phoenix.
PERFORMANCE HISTORY
- -------------------------------------------------------------------------------
We may include the performance history of the VUL Account 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. See "Appendix B" for more information.
INVESTMENTS OF THE VUL ACCOUNT
- -------------------------------------------------------------------------------
PARTICIPATING INVESTMENT FUNDS
THE PHOENIX EDGE SERIES FUND
Certain subaccounts invest in corresponding series of The Phoenix Edge
Series Fund. The following series are currently available:
PHOENIX RESEARCH ENHANCED INDEX SERIES: The investment objective of the
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. The series invests 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.
PHOENIX-ABERDEEN INTERNATIONAL SERIES: The investment objective of the
series is to seek a high total return consistent with reasonable risk. The
series invests 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
Phoenix-Aberdeen International Series provides a means for investors to invest a
portion of their assets outside the United States.
PHOENIX-ABERDEEN NEW ASIA SERIES: The investment objective of the series is
to seek long-term capital appreciation. The series invests primarily in a
diversified portfolio of equity securities of issuers organized and principally
operating in Asia, excluding Japan.
PHOENIX-BANKERS TRUST DOW 30 SERIES: The series seeks to track the total
return of the Dow Jones Industrial Average(SM) (the "DJIA(SM)") before fund
expenses.
PHOENIX-DUFF & PHELPS REAL ESTATE SECURITIES SERIES: The investment
objective of the series is to seek capital appreciation and income with
approximately equal emphasis. Under normal circumstances, it invests 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.
PHOENIX-ENGEMANN CAPITAL GROWTH SERIES: The investment objective of the
series is to achieve intermediate and long-term growth of capital, with income
as a secondary consideration. The Phoenix-Engemann Capital Growth Series invests
principally in common stocks of corporations believed by management to offer
growth potential.
PHOENIX-ENGEMANN NIFTY FIFTY SERIES: The investment objective of the series
is to seek long-term
10
<PAGE>
capital appreciation by investing in approximately 50 different securities which
offer 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.
PHOENIX-FEDERATED U.S. GOVERNMENT BOND SERIES: The investment objective of
the series is to maximize total return by investing primarily in debt
obligations of the U.S. Government, its agencies and instrumentalities.
PHOENIX-GOODWIN MONEY MARKET SERIES: The investment objective of the series
is to provide maximum current income consistent with capital preservation and
liquidity. The Phoenix-Goodwin Money Market Series invests exclusively in high
quality money market instruments.
PHOENIX-GOODWIN MULTI-SECTOR FIXED INCOME SERIES: The investment objective
of the series is to seek long-term total return. The Phoenix-Goodwin
Multi-Sector Fixed Income Series seeks to achieve its investment objective by
investing in a diversified portfolio of high yield and high quality fixed income
securities.
PHOENIX-HOLLISTER VALUE EQUITY SERIES: The primary investment objective of
the series is long-term capital appreciation, with a secondary investment
objective of current income. The Phoenix-Hollister Value Equity 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.
PHOENIX-JANUS EQUITY INCOME SERIES: The investment objective of the series
is to seek current income and long-term growth of capital.
PHOENIX-JANUS FLEXIBLE INCOME SERIES: The investment objective of the series
is to seek to obtain maximum total return, consistent with preservation of
capital.
PHOENIX-JANUS GROWTH SERIES: The investment objective of the series is to
seek long-term growth of capital, in a manner consistent with the preservation
of capital.
PHOENIX-MORGAN STANLEY FOCUS EQUITY SERIES: The investment objective of the
series is to seek capital appreciation by investing primarily in equity
securities.
PHOENIX-OAKHURST BALANCED SERIES: The investment objective of the series is
to seek reasonable income, long-term capital growth and conservation of capital.
The Phoenix-Oakhurst Balanced Series invests based on combined considerations of
risk, income, capital enhancement and protection of capital value.
PHOENIX-OAKHURST GROWTH AND INCOME SERIES: The investment objective of the
series is to seek dividend growth, current income and capital appreciation by
investing in common stocks. The Phoenix-Oakhurst Growth and Income 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-OAKHURST STRATEGIC ALLOCATION SERIES: The investment objective of
the series is to realize as high a level of total return over an extended period
of time as is considered consistent with prudent investment risk. The
Phoenix-Oakhurst Strategic Allocation Series invests in stocks, bonds and money
market instruments in accordance with the Investment Advisor's appraisal of
investments most likely to achieve the highest total return.
PHOENIX-SCHAFER MID-CAP VALUE SERIES: The primary investment objective of
the series is to seek long-term capital appreciation, with current income as the
secondary investment objective. The Phoenix-Schafer Mid-Cap Value 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 increase in value.
PHOENIX-SENECA MID-CAP GROWTH SERIES: The investment objective of the 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-SENECA STRATEGIC THEME SERIES: The investment objective of the
series is to seek long-term appreciation of capital by identifying securities
benefiting from long-term trends present in the United States and abroad. The
Phoenix-Seneca Strategic Theme Series invests primarily in common stocks
believed to have substantial potential for capital growth.
BT INSURANCE FUNDS TRUST
A certain subaccount invests in a corresponding series of the BT Insurance
Funds Trust. The following series is currently available:
EAFE(R) EQUITY INDEX FUND: The series seeks to match the performance of the
Morgan Stanley Capital International EAFE(R) Index ("EAFE(R) Index"), which
emphasizes major market stock performance of companies in Europe, Australia and
the Far East. The series invests in a statistically selected sample of the
securities found in the EAFE(R) Index.
FEDERATED INSURANCE SERIES
Certain subaccounts invest in corresponding series of the Federated
Insurance Series. The following series are currently available:
FEDERATED FUND FOR U.S. GOVERNMENT SECURITIES II: The investment objective
of the series is to seek current income by investing primarily in U.S.
government
11
<PAGE>
securities, including mortgage-backed securities issued by U.S. government
agencies.
FEDERATED HIGH INCOME BOND FUND II: The investment objective of the series
is to seek high current income by investing primarily in a diversified portfolio
of high-yield, lower-rated corporate bonds.
MORGAN STANLEY DEAN WITTER UNIVERSAL FUNDS, INC.
A certain subaccount invests in a corresponding series of the Morgan Stanley
Dean Witter Universal Funds, Inc. The following series is currently available:
TECHNOLOGY PORTFOLIO: The investment objective of the series is to seek
long-term capital appreciation by investing primarily in equity securities of
companies that the investment advisor expects to benefit from their involvement
in technology and technology-related industries.
TEMPLETON VARIABLE PRODUCTS SERIES FUND
Certain subaccounts invest in Class 2 Shares of a corresponding fund of the
Templeton Variable Products Series Fund. The following funds are currently
available:
MUTUAL SHARES INVESTMENTS FUND: The primary investment objective of the fund
is capital appreciation with income as a secondary objective. The Mutual Shares
Investments Fund invests in domestic equity securities that the manager believes
are significantly undervalued.
TEMPLETON ASSET ALLOCATION FUND: The investment objective of the fund is a
high level of total return. The Templeton Asset Allocation Fund invests in
stocks of companies of any nation, bonds of companies and governments of any
nation and in money market instruments. Changes in the asset mix will be made in
an attempt to capitalize on total return potential produced by changing economic
conditions throughout the world.
TEMPLETON DEVELOPING MARKETS FUND: The investment objective of the fund is
long-term capital appreciation. The Templeton Developing Markets Fund invests
primarily in emerging market equity securities.
TEMPLETON INTERNATIONAL FUND: The investment objective of the fund is
long-term capital growth. The Templeton International Fund invests primarily in
stocks of companies located outside the United States, including emerging
markets.
TEMPLETON STOCK FUND: The investment objective of the fund is long-term
capital growth. The Templeton Stock Fund invests primarily in common stocks
issued by companies in various nations throughout the world, including the U.S.
and emerging markets.
WANGER ADVISORS TRUST
Certain subaccounts invest in corresponding series of the Wanger Advisors
Trust. The following series are currently available:
WANGER FOREIGN FORTY: The investment objective of the series is to seek
long-term capital growth. The Wanger Foreign Forty invests primarily in equity
securities of foreign companies with market capitalization of $1 billion to $10
billion and focuses its investments in 40 to 60 companies in the developed
markets.
WANGER INTERNATIONAL SMALL CAP: The investment objective of the series is to
seek long-term capital growth. The Wanger International Small Cap invests
primarily in securities of non-U.S. companies with total common stock market
capitalization of less than $1 billion.
WANGER TWENTY: The investment objective of the series is to seek long-term
capital growth. The Wanger Twenty invests primarily in the stocks of U.S.
companies with market capitalization of $1 billion to $10 billion and ordinarily
focuses its investments in 20 to 25 U.S. companies.
WANGER U.S. SMALL CAP: The investment objective of the series is to seek
long-term capital growth. The Wanger U.S. Small Cap invests primarily in
securities of U.S. companies with total common stock market capitalization of
less than $1 billion.
Each series will be subject to market fluctuations and the risks that come
with the ownership of any security, and there can be no assurance that any
series will achieve its stated investment objective.
In addition to being sold to the Account, shares of all of the funds also
may be sold to other separate accounts of Phoenix or its affiliates and shares
of certain funds also may be sold to the separate accounts of other insurance
companies.
It is possible that in the future it may be disadvantageous for variable
life insurance separate accounts and variable annuity separate accounts to
invest in the fund(s) simultaneously. Although neither Phoenix nor the fund(s)
trustees currently foresee any such disadvantages either to variable life
insurance policyowners or to variable annuity Contractowners, the funds'
trustees intend to monitor events in order to identify any material conflicts
between variable life insurance policyowners and variable annuity Contractowners
and to determine what action, if any, should be taken in response to such
conflicts. Material conflicts could, for example, result from:
[diamond] changes in state insurance laws;
[diamond] changes in federal income tax laws;
[diamond] changes in the investment management of any portfolio of the fund(s);
or
[diamond] differences in voting instructions between those given by variable
life insurance policyowners and those given by variable annuity
Contractowners.
We will, at our expense, remedy such material conflicts including, if
necessary, segregating the assets underlying
12
<PAGE>
the variable life insurance policies and the variable annuity contracts and
establishing a new registered investment company.
INVESTMENT ADVISORS
Phoenix Investment Counsel, Inc. ("PIC") is an investment advisor to the
following series in The Phoenix Edge Series Fund:
o Phoenix-Goodwin Money Market Series
o Phoenix-Goodwin Multi-Sector Fixed Income Series
o Phoenix-Hollister Value Equity Series
o Phoenix-Oakhurst Balanced Series
o Phoenix-Oakhurst Growth and Income Series
o Phoenix-Oakhurst Strategic Allocation Series
Based on subadvisory agreements with the fund, PIC as an investment advisor
delegates certain investment decisions and research functions to subadvisors for
the following series:
[diamond] Phoenix-Aberdeen International Advisors, LLC ("PAIA")
o Phoenix-Aberdeen International Series
[diamond] Roger Engemann & Associates, Inc. ("Engemann")
o Phoenix-Engemann Capital Growth Series
o Phoenix-Engemann Nifty Fifty Series
[diamond] Seneca Capital Management, LLC ("Seneca")
o Phoenix-Seneca Mid-Cap Growth Series
o Phoenix-Seneca Strategic Theme Series
Phoenix Variable Advisors, Inc. ("PVA") is also an investment advisor to The
Phoenix Edge Series Fund. Based on subadvisory agreements with the fund, PVA
delegates certain investment decisions and research functions to the following
subadvisors for the series listed:
[diamond] Bankers Trust Company
o Phoenix-Bankers Trust Dow 30 Series
[diamond] Federated Investment Management Company
o Phoenix-Federated U.S. Government Bond Series
[diamond] J.P. Morgan Investment Management, Inc.
o Phoenix Research Enhanced Index Series
[diamond] Janus Capital Corporation
o Phoenix-Janus Equity Income Series
o Phoenix-Janus Flexible Income Series
o Phoenix-Janus Growth Series
[diamond] Morgan Stanley Asset Management Inc.
o Phoenix-Morgan Stanley Focus Equity Series
[diamond] Schafer Capital Management, Inc.
o Phoenix-Schafer Mid-Cap Value Series
The investment advisor to the Phoenix-Duff & Phelps Real Estate Securities
Series is Duff & Phelps Investment Management Co. ("DPIM").
The investment advisor to the Phoenix-Aberdeen New Asia Series is PAIA.
Pursuant to subadvisory agreements with the fund, PAIA delegates certain
investment decisions and research functions with respect to the Phoenix-Aberdeen
New 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 by Aberdeen Fund Managers, Inc. PVA is a wholly
owned subsidiary of PM Holdings, Inc.
The other investment advisors and their respective funds are:
[diamond] Bankers Trust Company
o EAFE(R) Equity Index Fund
[diamond] Federated Investment Management Company
o Federated Fund for U.S. Government Securities II
o Federated High Income Bond Fund II
[diamond] Franklin Mutual Advisers, LLC
o Mutual Shares Investments Fund
[diamond] Morgan Stanley Dean Witter Investment
Management Inc.
o Technology Portfolio
[diamond] Templeton Asset Management, Ltd.
o Templeton Developing Markets Fund
[diamond] Templeton Investment Counsel, Inc.
o Templeton Asset Allocation Fund
o Templeton International Fund
o Templeton Stock Fund
[diamond] Wanger Asset Management, L.P.
o Wanger Foreign Forty
o Wanger International Small Cap
o Wanger Twenty
o Wanger U.S. Small Cap
SERVICES OF THE ADVISORS
The Advisors continually 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 of each fund. A
detailed discussion of the investment advisors and subadvisors, and the
investment advisory and subadvisory agreements, is contained in the accompanying
prospectus for the funds.
REINVESTMENT AND REDEMPTION
All dividend distributions of the fund are automatically reinvested in
shares of the fund at their net asset value on the date of distribution.
Likewise, all capital gains distributions of the fund, if any, are reinvested at
the net asset value on the record date. We redeem fund shares at their net asset
value to the extent necessary to make payments under the policy.
13
<PAGE>
SUBSTITUTION OF INVESTMENTS
We reserve the right to make additions to, deletions from, or substitutions
for the investments held by the VUL Account, subject to compliance with the law
as currently applicable or as subsequently changed. In the future, we may
establish additional subaccounts within the VUL Account, each of which will
invest in shares of a designated portfolio of the fund with a specified
investment objective. If and when marketing needs and investment conditions
warrant, and at our discretion, we may establish additional portfolios. These
will be made available under existing Policies to the extent and on a basis
determined by us.
If shares of any of the portfolios of the fund should be no longer available
for investment or, if in the judgment of our management, further investment in
shares of any of the portfolios become inappropriate due to policy objectives,
we may then substitute shares of another mutual fund for shares already
purchased, or to be purchased in the future. No substitution of mutual fund
shares held by the VUL Account may take place without prior approval of the
Securities and Exchange Commission and prior notice to you. In the event of a
change, you will be given the option of transferring the policy value of the
subaccount in which the substitution is to occur to another subaccount.
THE GUARANTEED INTEREST ACCOUNT
In addition to the VUL Account, you may allocate premium or transfer policy
value to the GIA. Amounts you allocate or transfer to the GIA become part of
Phoenix's general account assets. You do not share in the investment experience
of those assets. Rather, we guarantee a 3% rate of return on your allocated
amount. For amounts transferred to the GIA due to a policy loan, the guaranteed
rate is 2% in all states except New York and New Jersey. In New York and New
Jersey the rate credited to the GIA due to a policy loan is 4%. Although we are
not obligated to credit interest at a higher rate than the minimum, we will
credit excess interest, if any, as determined by us based on information as to
expected investment yields.
Because of exemptive and exclusionary provisions, we have not registered
interests in our general account under the Securities Act of 1933. Also, we have
not registered our general account as an investment company under the Investment
Company Act of 1940, as amended. Therefore, neither the general account nor any
of its interests are subject to these Acts, and the Securities and Exchange
Commission has not reviewed the general account disclosures. These disclosures
may, however, be subject to certain provisions of the federal securities law as
to the accuracy and completeness of statements made in this prospectus.
We reserve the right to limit total deposits, including transfers, to the
GIA to no more than $250,000 during any one-week period per policy.
In general, you can make only one transfer per year from the GIA. The amount
that can be transferred out is limited to the greater of $1,000 or 25% of the
policy value in the GIA as of the date of the transfer. If you elect the
Systematic Transfer Program, approximately equal amounts may be transferred out
of the GIA. Also, the total policy value allocated to the GIA may be transferred
out of the GIA to one or more of the subaccounts of the VUL Account over a
consecutive 4-year period according to the following schedule:
[diamond] Year One: 25% of the total value
[diamond] Year Two: 33% of remaining value
[diamond] Year Three: 50% of remaining value
[diamond] Year Four: 100% of remaining value
Transfers into the GIA and among the subaccounts of the VUL Account may be
made at any time. Transfers from the GIA are subject to the rules discussed in
"Appendix C," "Transfer of policy value" and "Systematic Transfer Program."
PREMIUMS
- -------------------------------------------------------------------------------
MINIMUM PREMIUMS
The minimum premium is determined by case size as follows:
[diamond] 5 or more lives: $100,000 annually for the first 5 policy years
[diamond] Fewer than 5 lives: $250,000 annually for the first 5 policy years
The issue premium is due on the policy date. The Insured must be alive when
the Issue Premium is paid. After that, premiums may be paid at any time while
the policy is in force. There is no direct relationship between the "Plan
Minimum Premium" and the "Policy Target Premium." The plan minimum premium is a
case-level requirement for the plan to be issued. The target premium is used to
determine the amount of commissions paid to the producer for a given policy.
Each premium payment must be at least $100. Additional payments should be sent
to the:
VUL COLI UNIT
PO BOX 22012
ALBANY, NY 12201-2012
The number of units credited to a subaccount of the VUL Account will be
determined by dividing the portion of the net premium applied to that subaccount
by the unit value of the subaccount on the payment date.
Regardless of whether you choose the Guideline Premium Test or the Cash
value Accumulation Test (see "Minimum Face Amount"), we reserve the right to
refund a premium paid in any year if it will exceed the maximum premium limit.
The maximum limit is established by law to
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qualify the policy contract as life insurance. This limit is applied to the sum
of all premiums paid under the policy. If the total premium limit is exceeded,
the policyowner will receive the excess, with interest at an annual rate of not
less than 4%, not later than 60 days after the end of the policy year in which
the limit was exceeded. The policy value then will be adjusted to reflect the
refund. The total premium limit may be exceeded if additional premium is needed
to prevent lapse or if we subsequently determine that additional premium would
be permitted by federal laws or regulations.
ALLOCATION OF ISSUE PREMIUM
We will generally allocate the issue premium less applicable charges to the
VUL Account or to the GIA upon receipt of a completed application, in accordance
with the allocation instructions in the application for a policy. However,
policies issued in certain states, and policies issued in certain states
pursuant to applications which state the policy is intended to replace existing
insurance, are issued with a Temporary Money Market Allocation Amendment. Under
this Amendment, we temporarily allocate the entire issue premium paid less
applicable charges (along with any other premiums paid during the Free Look
period) to the Phoenix-Goodwin Money Market Subaccount of the VUL Account, and,
at the expiration of the Free Look period, the policy value of the Phoenix-
Goodwin Money Market Subaccount is allocated among the subaccounts of the VUL
Account or to the GIA in accordance with the applicant's allocation instructions
in the application for insurance.
FREE LOOK PERIOD
You have the right to review the policy. If you are not satisfied with it,
you may cancel the policy:
[diamond] by mailing it to us within 10 days after you receive it (or longer in
some states);
[diamond] within 10 days after we mail or deliver a written notice telling you
about your free look period; or
[diamond] within 45 days after completing the application, whichever occurs
latest (the "Free Look Period").
We treat a returned policy as if we never issued it and, except for policies
issued with a Temporary Money Market Allocation Amendment, we will return the
sum of the following as of the date we receive the returned policy: (1) the then
current policy value less any unpaid loans and loan interest; plus (2) any
monthly deductions, partial surrender fees and other charges made under the
policy. For policies issued with the Temporary Money Market Amendment, the
amount returned will equal any premiums paid less any unrepaid loans and loan
interest, and less any partial surrender amounts paid.
We retain the right to decline to process an application within 7 days of
our receipt of the completed application for insurance. If we decline to process
the application, we will return the premium paid. Even if we have approved the
application for processing, we retain the right to decline to issue the policy.
If we decline to issue the policy, we will refund to you the same amount as
would have been refunded under the policy had it been issued but returned for
refund during the Free Look Period.
ACCOUNT VALUE
TRANSFER OF POLICY VALUE
Transfers among available subaccounts or the GIA and changes in premium
payment allocations may be requested in writing. Requests for transfers will be
executed on the date the request is received at Andesa, TPA, Inc.
Although currently there is no charge for transfers, in the future, we may
charge a fee of $10 for each transfer after the first 2 transfers in a policy
year (after twelve transfers in New York).
You may make only one transfer per policy year from the unloaned portion of
the GIA unless (1) the transfer(s) are made as part of a Dollar Cost Averaging
Program, or (2) we agree to make an exception to this rule. Unless you have
elected a Dollar Cost Averaging Program, the amount you may transfer cannot
exceed the greater of $1,000 or 25% of the value of the unloaned portion of the
GIA at the time of the transfer. In addition, you may transfer the total value
allocated to the unloaned portion of the GIA out of the GIA to one or more of
the subaccounts over a consecutive 4-year period according to the following
schedule:
[diamond] Year One: 25% of the total value
[diamond] Year Two: 33% of the remaining value
[diamond] Year Three: 50% of the remaining value
[diamond] Year Four: 100% of the remaining value
Transfers into the GIA and among the subaccounts may be made anytime. We
reserve the right to limit the number of subaccounts you may invest in at any
one time or over the life of the policy, if we are required to do so by any
federal or state law.
Because excessive exchanges between subaccounts can hurt fund performance,
we reserve the right to temporarily or even permanently terminate exchange
privileges or reject any specific exchange order from anyone whose transactions
appear to us to follow a timing pattern, including those who request more than
one exchange out of a subaccount within any 30-day period. We will not accept
batched transfer instructions from registered representatives (acting under
powers of attorney for multiple policyowners), unless the registered
representative's broker-dealer firm and Phoenix have entered into a third-party
transfer service agreement.
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If a policy has been issued with a Temporary Money Market Allocation
Amendment, no transfers may be made until the end of the Free Look Period.
SYSTEMATIC TRANSFERS FOR DOLLAR COST AVERAGING
You may elect to transfer funds automatically among the subaccounts or the
unloaned portion of the GIA on a monthly, quarterly, semiannual or annual basis
under the Systematic Transfers for Dollar Cost Averaging Program ("Dollar Cost
Averaging Program"). Under the Dollar Cost Averaging Program, the minimum
transfer amounts are $25 monthly, $75 quarterly, $150 semiannually or $300
annually. You must have an initial value of $1,000 in the GIA or the subaccount
from which funds will be transferred ("Sending Subaccount"), and if the value in
that subaccount or the GIA drops below the amount to be transferred, the entire
remaining balance will be transferred and all systematic transfers stop. funds
may be transferred from only one Sending Subaccount or the GIA, but may be
allocated to more than one subaccount ("Receiving Subaccounts"). Under the
Dollar Cost Averaging Program, policyowners may make more than one transfer per
policy year from the GIA. These transfers must be in approximately equal amounts
and made over a minimum 18-month period.
Only one Dollar Cost Averaging Program can be active at any time. All
transfers under the Dollar Cost Averaging Program will be made on the basis of
the GIA and subaccount on the first day of the month following our receipt of
the transfer request. If the first day of the month falls on a holiday or
weekend, then the transfer will be processed on the next business day.
AUTOMATIC ASSET REBALANCING
Automated account rebalancing permits you to maintain a specified whole
number percentage of your account value in any combination of subaccounts and
the GIA. We must receive a written request in order to begin your automated
asset rebalancing program ("Asset Rebalancing"). Then, we will make transfers
at least quarterly to and from the subaccounts and the GIA to readjust your
account value to your specified percentage. Asset Rebalancing allows you to
maintain a specific fund allocation. Quarterly rebalancing is based on your
policy year. We will rebalance your account value only on a monthly calculation
date.
The effective date of the first Asset Rebalancing will be the first monthly
calculation date after we receive your request at Andesa TPA, Inc. If we receive
your request before the end of the Free Look Period, your first rebalancing
will occur at the end of the Free Look Period.
You may not participate in both the Dollar Cost Averaging Program and the
Asset Rebalancing at the same time.
DETERMINATION OF SUBACCOUNT VALUES
We establish the unit value of each subaccount of the VUL Account on the
first valuation date of that subaccount. The unit value of a subaccount on any
other valuation date is determined by multiplying the unit value of that
subaccount on the just prior valuation date by the net investment factor for
that subaccount for the then current valuation period. The unit value of each
subaccount on a day other than a valuation date is the unit value on the next
valuation date. Unit values are carried to 6 decimal places. The unit value of
each subaccount on a valuation date is determined at the end of that day.
The net investment factor for each subaccount 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 the formula:
(A)+(B)
------ -(D) where:
(C)
(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 amount of any
deposits and withdrawals made during the valuation period ending on that
date.
(D) The charge, if any, for taxes and reserves for taxes on investment income,
and realized and unrealized capital gains.
DEATH BENEFIT UNDER THE POLICY
The death benefit is the amount we pay to the designated beneficiary(ies)
when the insured dies. Upon receiving due proof of death, we pay the beneficiary
the death benefit amount determined as of the date the insured dies. The
beneficiary may direct us to pay all or part of the benefit in cash or to apply
it under one or more of our payment options.
MINIMUM FACE AMOUNT
To qualify as life insurance under current federal tax laws, the policy has
a minimum face amount of insurance. The minimum face is determined using 1 of 2
allowable definitions of life insurance: (1) the Cash value Accumulation Test or
(2) the Guideline Premium Test.
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You chose which test to use on the application prior to the issuance of your
policy. You cannot change the way we determine your minimum face amount after
your policy is issued.
The Cash value Accumulation Test determines the minimum face amount by
multiplying the account value plus the refund of sales load, if applicable, by
the minimum face amount percentage. The percentages depend upon the insured's
age, gender and underwriting classification.
Under the Guideline Premium Test, the minimum face amount is also equal to
an applicable percentage of the account value plus refund of sales load, if
applicable, but the percentage varies only by age of insured.
DEATH BENEFIT OPTIONS
In your application you choose a face amount of insurance coverage and the
death benefit option. We offer 3 death benefit options:
[diamond] Option 1: the death benefit is the greater of the policy's face
amount on the date of death, or the minimum face amount in effect on
the date of death.
[diamond] Option 2: the death benefit is the greater of: (a) the policy's face
amount on the date of death plus the policy value on the date of
death, or (b) the minimum face amount in effect on the date of
death.
[diamond] Option 3: the death benefit is the greater of: (a) the policy's face
amount on the date of death plus the sum of all premiums paid, less
withdrawals, or (b) the policy's face amount on the date of death,
or (c) the minimum face amount in effect on the date of death.
If the insured dies while the policy is in force, we will pay the death
benefit based on the option in effect on the date of death, with the following
adjustments:
[diamond] Add back in any charges taken against the account value for the
period beyond the date of death;
[diamond] Deduct any policy debt outstanding on the date of death; and
[diamond] Deduct any charges accrued against the account value unpaid as of
the date of death.
You may change the death benefit option from Option 1 to Option 2 or from
Option 2 to Option 1. You may not make a change either to or from Option 3.
Under death benefit Options 1 and 3, the death benefit is not affected by
your policy's investment experience. Under death benefit Option 2, the death
benefit amount may increase or decrease by the investment experience.
We pay interest on the death benefit from the date of death to the date the
death benefit is paid or a payment option becomes effective.
CHANGES IN FACE AMOUNT OF INSURANCE
REQUESTS FOR INCREASE IN FACE AMOUNT
Any time while this policy is in force, you may request an increase in the
face amount of insurance provided under the policy. Requests for face amount
increases must be made in writing, and we require additional evidence of
insurability. The effective date of the increase generally will be the policy
anniversary following approval of the increase. The increase may not be less
than $25,000. We will deduct any charges associated with the increase (the
increases in cost of insurance charges), from the policy value, whether or not
you pay an additional premium in connection with the increase. Also, a new Free
Look Period (see "Premiums--Free Look Period") will be established for the
amount of the increase. For a discussion of possible implications of a material
change in the policy resulting from the increase, see "Material Change Rules."
DECREASES IN FACE AMOUNT AND PARTIAL SURRENDERS: EFFECT ON DEATH BENEFIT
REQUESTS FOR DECREASE IN FACE AMOUNT
You may request a decrease in face amount at any time after the first policy
year. Unless we agree otherwise, the decrease must be at least equal to $10,000
and the face amount remaining after the decrease must be at least $25,000. All
face amount decrease requests must be in writing and will be effective on the
first monthly calculation day following the date we approve the request.
A partial surrender or a decrease in face amount generally decreases the
death benefit. If the change is a decrease in face amount, the death benefit
under a policy would be reduced on the next monthly calculation day. If the
change is a partial surrender, the death benefit under a policy would be reduced
immediately. A decrease in the death benefit may have certain tax consequences.
See "Federal Tax Considerations."
SURRENDERS
GENERAL
At any time during the lifetime of the insured and while the policy is in
force, you may partially or fully surrender the policy by sending a written
request to Andesa TPA, Inc. We may also require you to send the policy to us.
The amount available for surrender is the cash surrender value at the end of the
valuation period during which the surrender request is received at Andesa TPA,
Inc.
The cash surrender value is:
o policy value; less
o any outstanding debt; plus
o the refund of sales charge, if applicable.
There is no surrender charge.
If the policy is surrendered within the first 3 policy years, you will
receive a refund of sales charge as part of your cash surrender value. A portion
of the first year sales
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charge will be returned to you according to the following schedule:
[diamond] Full surrender in policy year 1: 100.00%
[diamond] Full surrender in policy year 2: 66.67%
[diamond] Full surrender in policy year 3: 33.33%
FULL SURRENDERS
If the policy is being fully surrendered, the policy itself must be returned
to Andesa TPA, Inc., along with the written release and surrender of all claims
in a form satisfactory to us. You may elect to have the amount paid in a lump
sum or under a payment option. See "Payment Options."
PARTIAL SURRENDERS
You may obtain a partial surrender of the policy by requesting payment of
the policy's cash surrender value. It is possible to do this at any time during
the lifetime of the Insured, while the policy is in force, with a written
request to Andesa TPA, Inc. We may require the return of the policy before
payment is made. A partial surrender will be effective on the date the written
request is received or, if required, the date the policy is received by us.
Surrender proceeds may be applied under any of the payment options described
under "Payment Options."
We reserve the right to deny partial surrenders of less than $500. In
addition, if the share of the policy value in any subaccount or in the GIA is
reduced as a result of a partial surrender and is less than $500, we reserve the
right to require surrender of the entire remaining balance in that subaccount or
the GIA.
Upon a partial surrender, the policy value will be reduced by the sum of the
partial surrender amount paid. This amount comes from a reduction in the
policy's share in the value of each subaccount or the GIA based on the
allocation requested at the time of the partial surrender. If no allocation
request is made, the withdrawals from each subaccount will be made in the same
manner as that provided for monthly deductions.
The cash surrender value will be reduced by the partial surrender amount
paid plus the partial surrender fee. The face amount of the policy will be
reduced by the same amount as the policy value is reduced as described above.
Upon partial or full surrender, we generally will pay to you the amount
surrendered within 7 days after we receive the written request for the
surrender. Under certain circumstances, the surrender payment may be postponed.
See "Additional Policy Provisions--Postponement of Payments." For the federal
tax effects of partial and full surrenders, see "Federal Tax Considerations."
POLICY LOANS
You can take a loan against your policy any time while the policy is in
force. The maximum loan is:
o 90% of your policy value at the time the loan is taken; less
o any outstanding policy debt before the loan is taken; less
o interest on the loan being made and on any outstanding policy debt to the
next policy anniversary date.
Your policy must be assigned to us as collateral for the loan.
SOURCE OF LOAN
We deduct your requested loan amount from the subaccounts and the GIA, based
on the allocation requested at the time of the loan. We liquidate shares taken
from the subaccounts and transfer the resulting dollars to the GIA. These
dollars become part of the loaned portion of the GIA.
INTEREST
You will pay interest on the loan at the following noted effective annual
rates, compounded daily and payable in arrears:
In all states except New York and New Jersey, the loan interest rate in
effect following the policy anniversary nearest the insured's 65th birthday will
be 2.25%. The rates in effect before the Insured reaches age 65 follow:
[diamond] Policy years 1-10: 2.75%
[diamond] Policy years 11-15: 2.50%
[diamond] Policy years 16 and thereafter: 2.25%
In New York and New Jersey only, the loan interest rate in effect following
the policy anniversary nearest the insured's 65th birthday will be 4.25%. The
rates in effect before the Insured reaches age 65 follow:
[diamond] Policy years 1-10: 4.75%
[diamond] Policy years 11-15: 4.50%
[diamond] Policy years 16 and thereafter: 4.25%
Interest accrues daily, becoming part of the policy debt. Interest is due
and payable on the policy anniversary. If you do not pay the interest when due,
we will add it to your loan. We treat any interest which has been capitalized
the same as if it were a new loan. We deduct this capitalized interest from the
subaccounts and the GIA in proportion to the nonloaned account value in each.
INTEREST CREDITED ON LOANED VALUE
The amount equal to any policy loan is held in the GIA. This amount is
credited with interest at a rate of 2% (4% in New York and New Jersey).
REPAYMENT
You may repay all or part of your policy debt at anytime while the policy is
in force.
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If you do not repay the loan, we deduct the loan amount due from the cash
surrender value or the death benefit.
Failure to repay a policy loan or to pay loan interest will not terminate
the policy unless the policy value becomes insufficient to maintain the policy
in force.
In the future, Phoenix may not allow policy loans of less than $500, unless
such loan is used to pay a premium on another Phoenix policy.
EFFECT OF LOAN
Your policy loan reduces the death benefit and cash surrender value under
the policy by the amount of the loan. Your repayment of the loan increases the
death benefit and cash surrender value by the amount of the repayment.
As long as a loan is outstanding, a portion of your policy value equal to
the loan is held in the GIA. The subaccount's investment performance does not
affect this amount. Also, you may be subject to tax consequences if you
surrender your policy while there is outstanding debt.
LAPSE
Unlike conventional life insurance policies, the payment of the Issue
Premium, no matter how large, or the payment of additional premiums will not
necessarily continue the policy in force to its maturity date.
If on any monthly calculation day during the first 3 policy years, the
policy value plus the refund of any applicable sales charge is insufficient to
cover the monthly deduction, a grace period of 61 days will be allowed for the
payment of an amount equal to 3 times the required monthly deduction. If on any
monthly calculation day during any subsequent policy year, the policy value is
less than the required monthly deduction, a grace period of 61 days will be
allowed for the payment of an amount equal to 3 times the required monthly
deduction.
During the grace period, the policy will continue in force but subaccount
transfers, loans, partial or full surrenders will not be permitted. Failure to
pay the additional amount within the grace period will result in lapse of the
policy, but not before 30 days after we have mailed written notice to you. If a
premium payment for the additional amount is received by us during the grace
period, any amount of premium over what is required to prevent lapse will be
allocated among the subaccounts or to the GIA according to the current premium
allocation schedule. In determining the amount of "excess" premium to be applied
to the subaccounts or the GIA, we will deduct the premium tax and the amount
needed to cover any monthly deductions made during the grace period. If the
Insured dies during the grace period, the death benefit will equal the amount of
the death benefit immediately prior to the commencement of the grace period.
ADDITIONAL INSURANCE OPTION
While the policy is in force and the Insured is insurable, the policyowner
will have the option to purchase additional insurance on the same insured with
the same guaranteed rates as the policy. We will require evidence of
insurability and charges will be adjusted for the Insured's new attained age and
any change in risk classification.
ADDITIONAL RIDER BENEFITS
You may elect additional benefits under a policy, and you may cancel these
benefits at any time. A charge will be deducted monthly from the policy value
for each additional rider benefit chosen except where noted below. More details
will be included in the form of a rider to the policy if any of these benefits
are chosen. The following benefits are currently available and additional riders
may be available as described in the policy (if approved in your state).
[diamond] FLEXIBLE TERM INSURANCE RIDER--This rider provides annually
renewable term insurance coverage to age 100 for the insured under
the base policy. The initial rider death benefit cannot exceed 10
times the initial base policy. There is no charge for this rider.
[diamond] EXCHANGE OF INSURED RIDER--This rider allows the policyowner to
exchange the insured on a given contract. There is no charge for
this rider.
Future charges against the policy will be based on the life of the
substitute insured.
The incontestability and suicide exclusion periods, as they apply to
the substitute insured, run from the date of the exchange. Any
assignments will continue to apply.
The exchange is subject to the following adjustments:
1. If the policy value of the original policy is insufficient to
produce a positive cash surrender value for the new policy, the
owner must pay an exchange adjustment in an amount that, when
applied as premium, will make the policy value of the new policy
greater than zero.
2. In some cases, the amount of policy value which may be applied to
the new policy may result in a death benefit which exceeds the
limit for the new policy. In that event, we will apply such
excess policy value to reduce any loan against the policy, and
the residual amount will be returned to you in cash.
3. The exchange will also be subject to our receipt of repayment of
the amount of any policy debt under the exchange policy in excess
of the loan value of the new policy on the date of exchange.
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The Internal Revenue Service has ruled that an exchange of
insureds does not qualify for tax deferral under Code Section
1035. Therefore, you must include in current gross income all
previously unrecognized gain in the policy upon an exchange of
the insured.
PART II--ADDITIONAL POLICY PROVISIONS
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POSTPONEMENT OF PAYMENTS
Payment of any amount upon complete or partial surrender, policy loan, or
benefits payable at death (in excess of the initial face amount) or maturity may
be postponed:
[diamond] for up to 6 months from the date of the request, for any
transactions dependent upon the value of the GIA;
[diamond] 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
[diamond] whenever an emergency exists, as decided 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.
PAYMENT BY CHECK
Payments under the policy of any amounts derived from premiums paid by check
may be delayed until such time as the check has cleared your bank.
THE CONTRACT
The policy and attached copy of the application are the entire contract.
Only statements in the application can be used to void the policy. The
statements are considered representations and not warranties. Only an executive
officer of Phoenix can agree to change or waive any provisions of the policy.
SUICIDE
If the insured commits suicide within 2 years after the policy's date of
Issue, the policy will stop and become void. We will pay you the policy value
adjusted by the addition of any monthly deductions and other fees and charges,
minus any debt owed to us under the policy.
INCONTESTABILITY
We cannot contest this policy or any attached rider after it has been in
force during the Insured's lifetime or for 2 years from the policy date.
CHANGE OF OWNER OR BENEFICIARY
The beneficiary, as named in the policy application or subsequently changed,
will receive the policy 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 the insured, the death
benefit payable under the policy will be paid to your estate.
As long as the policy is in force, the policyowner and the beneficiary may
be changed in writing, satisfactory to us. A change in beneficiary will take
effect as of the date the notice is signed, whether or not the insured is living
when we receive the notice. We will not, however, be liable for any payment made
or action taken before receipt of the notice.
ASSIGNMENT
The policy may be assigned. We will not be bound by the assignment until a
written copy has been received and we will not be liable with respect to any
payment made prior to receipt. We assume no responsibility for determining
whether an assignment is valid.
MISSTATEMENT OF AGE OR SEX
If the age or sex of the insured has been misstated, the death benefit will
be adjusted based on what the cost of insurance charge for the most recent
monthly deduction would have purchased based on the correct age and sex.
SURPLUS
This policy is nonparticipating and does not pay dividends. Your policy will
not share in Phoenix's profits or surplus earnings.
PAYMENT OF PROCEEDS
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SURRENDER AND DEATH BENEFIT PROCEEDS
Death benefit proceeds and the proceeds of full or partial surrenders will
be processed at unit values next computed after we receive the request for
surrender or due proof of death, provided such request is complete and in good
order. Payment of surrender or death proceeds usually will be made in one lump
sum within 7 days, unless another payment option has been elected. Payment of
the death proceeds, however, may be delayed if the claim for payment of the
death 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.
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You may elect a payment option for payment of the death 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 proceeds, unless you have made an election that does not permit such
further election or changes by the beneficiary.
A written request in a 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 payment option is $1,000.
If the policy 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.
PAYMENT OPTIONS
All or part of the surrender or death proceeds of a policy may be applied
under one or more of the following payment options or such other payment options
or alternative versions of the options listed as we may choose to make available
in the future.
OPTION 1--LUMP SUM.
Payment in one lump sum.
OPTION 2--LEFT TO EARN INTEREST.
A payment of interest during the payee's lifetime on the amount payable as a
principal sum. Interest rates are guaranteed to be at least 3% per year.
OPTION 3--PAYMENT FOR A SPECIFIC PERIOD.
Equal installments are paid for a specified period of years whether the
payee lives or dies. The first payment will be on the date of settlement. The
assumed interest rate on the unpaid balance is guaranteed not to be less than 3%
per year.
OPTION 4--LIFE ANNUITY WITH SPECIFIED PERIOD CERTAIN.
Equal installments are paid until the later of:
[diamond] the death of the payee; or
[diamond] the end of the period certain.
The first payment will be on the date of settlement.
The period certain must be chosen at the time this option is elected. The
periods certain that you may choose from are as follows:
[diamond] 10 years;
[diamond] twenty years; or
[diamond] until the installments paid refund the amount applied under this
option.
If the payee is not living when the final payment falls due, that payment
will be limited to the amount which needs to be added to the payments already
made to equal the amount applied under this option.
If, for the age of the payee, a period certain is chosen that is shorter
than another period certain paying the same installment amount, we will consider
the longer period certain as having been elected.
Any life annuity provided under Option 4 is computed using an interest rate
guaranteed to be no less than 3-3/8% per year, but any life annuity providing a
period certain of 20 years or more is computed using an interest rate guaranteed
to be no less than 3-1/4% per year.
OPTION 5--LIFE ANNUITY.
Equal installments are paid only during the lifetime of the payee. The first
payment will be on the date of settlement. Any life annuity as may be provided
under Option 5 is computed using an interest rate guaranteed to be no less than
3-1/2% per year.
OPTION 6--PAYMENTS OF A SPECIFIED AMOUNT.
Equal installments of a specified amount, out of the principal sum and
interest on that sum, are paid until the principal sum remaining is less than
the amount of the installment. When that happens, the principal sum remaining
with accrued interest will be paid as a final payment. The first payment will be
on the date of settlement. The payments will include interest on the remaining
principal at a guaranteed rate of at least 3% per year. This interest will be
credited at the end of each year. If the amount of interest credited at the end
of the year exceeds the income payments made in the last 12 months, that excess
will be paid in one sum on the date credited.
OPTION 7--JOINT SURVIVORSHIP ANNUITY WITH 10-YEAR PERIOD CERTAIN.
The first payment will be on the date of settlement. Equal installments are
paid until the latest of:
[diamond] the end of the 10-year period certain;
[diamond] the death of the insured; or
[diamond] the death of the other named annuitant.
The other annuitant must have attained age 40, must be named at the time
this option is elected and cannot later be changed. Any joint survivorship
annuity that may be provided under this option is computed using a guaranteed
interest rate to equal at least 3-3/8% per year.
For additional information concerning the above payment options, see the
policy.
21
<PAGE>
PART III--OTHER IMPORTANT INFORMATION
- -------------------------------------------------------------------------------
FEDERAL TAX CONSIDERATIONS
- -------------------------------------------------------------------------------
INTRODUCTION
The ultimate effect of federal income taxes on values under the VUL Account
and on the economic benefit to you or your 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 advisor
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 herein is
based upon our understanding of federal income tax laws as they are currently
interpreted, we cannot guarantee the tax status of any policy. The Internal
Revenue Service (the "IRS") makes no representation regarding the likelihood of
continuation of current federal income tax laws, Treasury regulations or of the
current interpretations. We reserve the right to make changes to the policy to
assure that it will continue to qualify as a life insurance contract for federal
income tax purposes.
PHOENIX'S TAX STATUS
We are taxed as a life insurance company under the Internal Revenue Code of
1986, as amended (the "Code"). For federal income tax purposes, neither the VUL
Account nor the GIA is a separate entity from Phoenix and their operations form
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.
POLICY BENEFITS
DEATH BENEFIT PROCEEDS
The policy, whether or not it is a "modified endowment contract" (see
"Modified Endowment Contracts"), should be treated as meeting the definition of
a life insurance contract for federal income tax purposes under Section 7702 of
the Code. As such, the death benefit proceeds thereunder should be excludable
from the gross income of the beneficiary under Code Section 101(a)(1). Also, a
policyowner should not be considered to be in constructive receipt of the cash
value, including investment income. See, however, the sections below on possible
taxation of amounts received under the policy, via full surrender, partial
surrender or loan.
Code Section 7702 imposes certain conditions with respect to premiums
received under a policy. We monitor the premiums to assure compliance with such
conditions. However, if the premium limitation is exceeded during the year, we
may return the excess premium, with interest, to the policyowner within 60 days
after the end of the policy year, and maintain the qualification of the policy
as life insurance for federal income tax purposes.
FULL SURRENDER
Upon full surrender of a policy for its cash value, the excess, if any, of
the cash value (unreduced by any outstanding indebtedness) over the premiums
paid will be treated as ordinary income for federal income tax purposes. The
full surrender of a policy that is a modified endowment contract may result in
the imposition of an additional 10% tax on any income received.
PARTIAL SURRENDER
If the policy is a modified endowment contract, partial surrenders are fully
taxable to the extent of income in the policy and are possibly subject to an
additional 10% tax. See the discussion on modified endowment contracts below. If
the policy is not a modified endowment contract, partial surrenders still may be
taxable, as follows. Code Section 7702(f)(7) provides that where a reduction in
death benefits occurs during the first 15 years after a policy is issued and
there is a cash distribution associated with that reduction, the policyowner may
be taxed on all or a part of the amount distributed. A reduction in death
benefits may result from a partial surrender. After 15 years, the proceeds will
not be subject to tax, except to the extent such proceeds exceed the total
amount of premiums paid but not previously recovered. We suggest you consult
with your tax advisor in advance of a proposed decrease in death benefits or a
partial surrender as to the portion, if any, which would be subject to tax, and
in addition as to the impact such partial surrender might have under the new
rules affecting modified endowment contracts.
LOANS
We believe that any loan received under a policy will be treated as your
indebtedness. If the policy is a modified endowment contract, loans are fully
taxable to the extent of income in the policy and are possibly subject to an
additional 10% tax. See the discussion on modified
22
<PAGE>
endowment contracts. If the policy is not a modified endowment contract, we
believe that no part of any loan under a policy will constitute income to you.
The deductibility by a policyowner of loan interest under a policy may be
limited under Code Section 264, depending on the circumstances. A policyowner
intending to fund premium payments through borrowing should consult a tax
advisor with respect to the tax consequences thereof. Under the "personal"
interest limitation provisions of the Code, interest on policy loans used for
personal purposes is not tax deductible. Other rules may apply to allow all or
part of the interest expense as a deduction if the loan proceeds are used for
"trade or business" or "investment" purposes. See your tax advisor for further
guidance.
BUSINESS-OWNED POLICIES
If a business or a corporation owns the policy, the Code may impose
additional restrictions. The Code limits the interest deduction on
business-owned policy loans and may impose tax upon the inside build-up of
corporate-owned life insurance policies through the corporate alternative
minimum tax.
MODIFIED ENDOWMENT CONTRACTS
GENERAL
Pursuant to Code Section 72(e), loans and other amounts received under
modified endowment contracts will, in general, be taxed to the extent of
accumulated income (generally, the excess of cash value over premiums paid).
Life insurance policies can be modified endowment contracts if they fail to meet
what is known as "the 7-pay test." The measuring stick for this test is a
hypothetical life insurance policy of equal face amount which requires 7 equal
annual premiums but which, after the 7th year is "fully paid-up," continuing to
provide a level death benefit without the need for any further premiums. A
policy becomes a modified endowment contract, if, at any time during the first 7
years, the cumulative premium paid on the policy exceeds the cumulative premium
that would have been paid under the hypothetical policy. Premiums paid during a
policy year but which are returned by us with interest within 60 days after the
end of the policy year will be excluded from the 7-pay test. A life insurance
policy received in exchange for a modified endowment contract will be treated as
a modified endowment contract.
REDUCTION IN BENEFITS DURING THE FIRST SEVEN YEARS
If there is a reduction in death benefits during the first 7 policy years,
the premiums are redetermined for purposes of the 7-pay test as if the policy
originally had been issued at the reduced death benefit level and the new
limitation is applied to the cumulative amount paid for each of the first 7
policy years.
DISTRIBUTIONS AFFECTED
If a policy fails to meet the 7-pay test, it is considered a modified
endowment contract only as to distributions in the year in which the test is
failed and all subsequent policy years. However, distributions made in
anticipation of such failure (there is a presumption that distributions made
within 2 years prior to such failure were "made in anticipation") also are
considered distributions under a modified endowment contract. If the policy
satisfies the 7-pay test for 7 years, distributions and loans generally will not
be subject to the modified endowment contract rules.
PENALTY TAX
Any amounts taxable under the modified endowment contract rule will be
subject to an additional 10% excise tax, with certain exceptions. This
additional tax will not apply in the case of distributions that are:
[diamond] made on or after the taxpayer attains age 59 1/2;
[diamond] attributable to the taxpayer's disability (within the meaning of
Code Section 72(m)(7)); or
[diamond] part of a series of substantially equal periodic payments (not less
often than annually) made for the life (or life expectancy) of the
taxpayer or the joint lives (or life expectancies) of the taxpayer
and his Beneficiary.
MATERIAL CHANGE RULES
Any determination of whether the policy meets the 7-pay test will begin
again any time the policy undergoes
a "material change," which includes any increase in death benefits or any
increase in or addition of a qualified additional benefit, with the following 2
exceptions.
[diamond] First, if an increase is attributable to premiums paid "necessary to
fund" the lowest death benefit and qualified additional benefits
payable in the first 7 policy years or to the crediting of interest
or dividends with respect to these premiums, the "increase" does not
constitute a material change.
[diamond] Second, to the extent provided in regulations, if the death benefit
or qualified additional benefit increases as a result of a
cost-of-living adjustment based on an established broad-based index
specified in the policy, this does not constitute a material change
if:
o the cost-of-living determination period does not exceed the
remaining premium payment period under the policy; and
o the cost-of-living increase is funded ratably over the remaining
premium payment period of the policy.
A reduction in death benefits is not considered a material change unless
accompanied by a reduction in premium payments.
A material change may occur at any time during the life of the policy
(within the first 7 years or thereafter), and future taxation of distributions
or loans would depend upon whether the policy satisfied the applicable 7-pay
test from the time of the material change. An exchange of policies is considered
to be a material change for all purposes.
23
<PAGE>
SERIAL PURCHASE OF MODIFIED ENDOWMENT CONTRACTS
All modified endowment contracts issued by the same insurer (or affiliated
companies of the insurer) to the same policyowner within the same calendar year
will be treated as one modified endowment contract in determining the taxable
portion of any loans or distributions made to the policyowner. The Treasury has
been given specific legislative authority to issue regulations to prevent the
avoidance of the new distribution rules for modified endowment contracts. A
qualified tax advisor should be consulted about the tax consequences of the
purchase of more than one modified endowment contract within any calendar year.
LIMITATIONS ON UNREASONABLE MORTALITY AND EXPENSE CHARGES
The Code imposes limitations on unreasonable mortality and expense charges
for purposes of ensuring that a policy qualifies as a life insurance contract
for federal income tax purposes. The mortality charges taken into account to
compute permissible premium levels may not exceed those charges required to be
used in determining the federal income tax reserve for the policy, unless
Treasury regulations prescribe a higher level of charge. In addition, the
expense charges taken into account under the guideline premium test are required
to be reasonable, as defined by the Treasury regulations. We will comply with
the limitations for calculating the premium we are permitted to receive from
you.
DIVERSIFICATION STANDARDS
To comply with the Diversification Regulations under Code Section 817(h),
("Diversification Regulations") each series of the fund is required to diversify
its investments. The Diversification Regulations generally require that on the
last day of each calendar quarter the series assets be invested in no more than:
[diamond] 55% in any 1 investment
[diamond] 70% in any 2 investments
[diamond] 80% in any 3 investments
[diamond] 90% in any 4 investments
A "look-through" rule applies to treat a pro rata portion of each asset of a
series as an asset of the VUL Account; therefore, each series of the fund 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 United States 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 that 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 you may direct your investments to particular divisions of a
separate account. It is possible that a revenue ruling or other form of
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
would provide. It is possible that the policy may need to be modified to comply
with such future Treasury announcements. For these reasons, we reserve the right
to modify the policy, 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
Policies continue to qualify as a life insurance contract for federal income tax
purposes.
CHANGE OF OWNERSHIP OR INSURED OR ASSIGNMENT
Changing the policyowner or the Insured or an exchange or assignment of the
policy may have tax consequences depending on the circumstances. Code Section
1035 provides that a life insurance contract can be exchanged for another life
insurance contract, without recognition of gain or loss, assuming that no money
or other property is received in the exchange, and that the policies relate to
the same Insured. If the surrendered policy is subject to a policy loan, this
may be treated as the receipt of money on the exchange. We recommend that any
person contemplating such actions seek the advice of a qualified tax consultant.
OTHER TAXES
Federal estate tax, state and local estate, inheritance and other tax
consequences of ownership or receipt of policy proceeds depend on the
circumstances of each policyowner or Beneficiary. We do not make any
representations or guarantees regarding the tax consequences of any policy with
respect to these types of taxes.
VOTING RIGHTS
- -------------------------------------------------------------------------------
We will vote the funds' shares held by the subaccounts at any regular and
special meetings of shareholders of the funds. To the extent required by law,
such voting will be pursuant to instructions received from you. However, if the
1940 Act or any regulation thereunder should be amended
24
<PAGE>
or if the present interpretation thereof should change, and as a result, we
decide that we are permitted to vote the funds' shares at our 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.
Funds' shares held in a subaccount for which no timely instructions are
received, and funds' shares which are not otherwise attributable to
policyowners, will be voted by Phoenix in proportion to the voting instructions
that are received with respect to all policies participating in that subaccount.
Instructions to abstain on any item to be voted upon will be applied to reduce
the votes eligible to be cast by Phoenix.
You will receive proxy materials, reports and other materials related 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 portfolios of the funds or to approve or disapprove an investment
advisory contract for the funds. In addition, Phoenix itself may disregard
voting instructions in favor of changes initiated by a policyowner in the
investment policies or the Investment Advisor of the funds if Phoenix reasonably
disapproves of 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 decide that the change would have an adverse effect on the General Account
because the proposed investment policy for a series may result in overly
speculative or unsound investments. In the event Phoenix does disregard voting
instructions, a summary of that action and the reasons for such action will be
included in the next periodic report to policyowners.
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 the Phoenix policyholders, you (or payee) may cast only one vote
as the holder of a policy, irrespective of policy value or the number of the
policies you hold.
THE DIRECTORS AND
EXECUTIVE OFFICERS OF PHOENIX
- ------------------------------------------------------------------------------
Phoenix is managed by its Board of Directors. 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
John C. Bacot Chairman and Chief Executive
Officer, The Bank of New York
New York, New York
Arthur P. Byrne Chairman, President and Chief
Executive Officer, The Wiremold
Company
West Hartford, Connecticut
Richard N. Cooper Professor, Center for
International Affairs, Harvard
University, Cambridge,
Massachusetts; 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
and Chief Executive Officer,
Phoenix Home Life Mutual
Insurance Company
Hartford, Connecticut
John E. Haire President,
The Fortune Group
New York, New York
Jerry J. Jasinowski President, National Association
of Manufacturers
Washington, D.C.
John W. Johnstone Chairman, Governance & Nominating
Committees, Arch Chemicals, Inc.,
Westport, Connecticut; formerly
Chairman, President and
Chief Executive Officer,
Olin Corporation
Norwalk, Connecticut
Marilyn E. LaMarche Limited Managing Director, Lazard
Freres & Company, L.L.C.
New York, New York
Philip R. McLoughlin Executive Vice President and
Chief Investment Officer, Phoenix
Home Life Mutual Insurance
Company
Hartford, Connecticut
25
<PAGE>
DIRECTORS PRINCIPAL OCCUPATION
Indra K. Nooyi Senior Vice President,
PepsiCo, Inc.
Purchase, New York
Robert F. Vizza President and Chief Executive
Officer, The DeMatteis Center of
St. Francis Hospital
Roslyn, New York
Robert G. Wilson Retired, formerly Chairman
and Chief Executive Officer,
Ecologic Waste Services, Inc.
Miami, Florida
Dona D. Young President, Phoenix Home Life
Mutual Insurance Company
Hartford, Connecticut
EXECUTIVE OFFICERS PRINCIPAL OCCUPATION
Robert W. Fiondella Chairman of the Board
and Chief Executive Officer
Philip R. McLoughlin Executive Vice President,
Investments
Carl T. Chadburn Executive Vice President
David W. Searfoss Executive Vice President,
Chief Financial Officer
Dona D. Young President
Nathaniel C. Brinn Senior Vice President,
Strategic Development
Martin J. Gavin Senior Vice President,
Trust Operations
Randall C. Giangiulio Senior Vice President,
Group Life and Health
Michael J. Gilotti Senior Vice President
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
Charles L. Olson Senior Vice President,
Trust Sales and Marketing
David R. Pepin Senior Vice President
Robert E. Primmer Senior Vice President,
Individual Distribution
Tracy L. Rich Senior Vice President and General
Counsel
Joel D. Sanders Senior Vice President,
Group Sales and Marketing
Frederick W. Sawyer, III Senior Vice President
John F. Solan, Jr. Senior Vice President,
Strategic Development
Simon Y. Tan Senior Vice President,
Individual 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 Phoenix during the
last 5 years.
SAFEKEEPING OF THE VUL ACCOUNT'S ASSETS
- -------------------------------------------------------------------------------
We hold the assets of the VUL Account. The assets of the VUL Account are
kept physically segregated and held separate and apart from our General Account.
We maintain records of all purchases and redemptions of shares of the funds.
SALES OF POLICIES
- -------------------------------------------------------------------------------
Policies may be purchased from registered representatives of W.S. Griffith &
Co., Inc. ("WSG"), a New York corporation incorporated on August 7, 1970,
licensed to sell Phoenix insurance policies as well as policies, annuity
contracts and funds of companies affiliated with Phoenix. WSG, an indirect,
wholly-owned 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. Phoenix Equity Planning
Corporation ("PEPCO") serves as national distributor of the Policies. PEPCO is
an indirect, wholly-owned subsidiary of Phoenix Investment Partners, Ltd.
("PXP"), in which Phoenix owns a majority interest.
Policies also may be purchased from other broker-dealers registered under
the 1934 Act whose representatives are authorized by applicable law to sell
policies under terms of agreements provided by PEPCO. Sales commissions will be
paid to registered representatives on purchase payments we receive under these
policies.
26
<PAGE>
Phoenix will pay a maximum total sales commission of 15% of premiums to PEPCO.
Additionally, agents or selling brokers may receive asset-based compensation.
The maximum asset-based compensation is 0.90% of the policy value. To the extent
that the sales charge under the policies is less than the sales commissions paid
with respect to the policies, we will pay the shortfall from our General Account
assets, which will include any profits we may derive under the policies.
STATE REGULATION
- -------------------------------------------------------------------------------
We are subject to the provisions of the New York insurance laws applicable
to stock 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 the other states and jurisdictions in which we do
insurance business.
State regulation of Phoenix includes certain limitations on the investments
which we may make, including investments for the VUL Account and the GIA. This
regulation does not include, however, any supervision over the investment
policies of the VUL Account.
REPORTS
- -------------------------------------------------------------------------------
All policyowners will be furnished with those reports required by the 1940
Act and related regulations or by any other applicable law or regulation.
LEGAL PROCEEDINGS
- -------------------------------------------------------------------------------
The VUL Account is not engaged in any litigation. Phoenix is not involved in
any litigation that would have a material adverse effect on our ability to meet
our obligations under the policies.
LEGAL MATTERS
- -------------------------------------------------------------------------------
Edwin L. Kerr, Counsel of Phoenix Home Life Mutual Insurance Company, has
passed upon the organization of Phoenix, its authority to issue variable life
insurance Policies and the validity of the policy, and upon legal matters
relating to the federal securities and income tax laws for Phoenix.
REGISTRATION STATEMENT
- -------------------------------------------------------------------------------
A Registration Statement has been filed with the SEC, under the Securities
Act of 1933 ("1933 Act") with respect to the securities offered. This prospectus
is a summary of the contents of the policy and other legal documents and does
not contain all the information set forth in the Registration Statement and its
exhibits.
FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
The financial statements of Phoenix contained herein should be considered
only as bearing upon Phoenix's ability to meet its obligations under the policy,
and they should not be considered as bearing on the investment performance of
the VUL Account. The financial statements of Phoenix Home Life Mutual Insurance
Company are available for the period ended December 31, 1999.
There are no financial statements of the VUL Account subaccounts for the
period ended December 31, 1999 and no sales occurred during this period.
27
<PAGE>
PHOENIX HOME LIFE
MUTUAL INSURANCE COMPANY
CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999
28
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
Report of Independent Accountants............................................ 30
Consolidated Balance Sheet at December 31, 1999 and 1998..................... 31
Consolidated Statement of Income, Comprehensive Income and Equity
for the Years Ended December 31, 1999, 1998 and 1997 ....................... 32
Consolidated Statement of Cash Flows for the Years Ended
December 31, 1999, 1998 and 1997 ........................................... 33
Notes to Consolidated Financial Statements ............................... 34-70
29
<PAGE>
[LOGO] PRICEWATERHOUSECOOPERS
- --------------------------------------------------------------------------------
PRICEWATERHOUSECOOPERS LLP
100 Pearl Street
Hartford CT 06103-4508
Telephone (860) 241 7000
Facsimile (860) 241 7590
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors
and Policyholders of
Phoenix Home Life Mutual Insurance Company
In our opinion, the accompanying consolidated balance sheet and the related
consolidated statements of income, comprehensive 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,
1999 and 1998, and the results of their operations and their cash flows for each
of the three years in the period ended December 31, 1999, in conformity with
accounting principles generally accepted in the United States. These financial
statements are the responsibility of the Company's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these statements in accordance with
auditing standards generally accepted in the United States, which require that
we plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for the opinion expressed above.
As indicated in Note 20, the Company has revised its accounting for venture
capital partnerships.
/s/ PriceWaterhouseCoopers LLP
February 15, 2000
30
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
CONSOLIDATED BALANCE SHEET
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
DECEMBER 31,
1999 1998
(IN THOUSANDS)
<S> <C> <C>
ASSETS
Investments:
Held-to-maturity debt securities, at amortized cost $ 1,990,169 $ 1,725,439
Available-for-sale debt securities, at fair value 5,506,779 5,987,426
Equity securities, at fair value 461,613 301,649
Mortgage loans 716,831 797,343
Real estate 92,027 91,975
Policy loans 2,042,557 2,008,259
Venture capital partnerships 338,122 191,162
Other invested assets 300,474 232,131
Short-term investments 133,367 185,983
------------------ -----------------
Total investments 11,581,939 11,521,367
Cash and cash equivalents 187,610 115,187
Accrued investment income 174,894 164,812
Deferred policy acquisition costs 1,306,728 1,049,934
Premiums, accounts and notes receivable 119,231 61,489
Reinsurance recoverables 18,772 18,908
Property and equipment, net 137,758 142,153
Goodwill and other intangible assets, net 593,267 477,895
Net assets of discontinued operations (Note 11) 187,595 283,793
Other assets 51,434 36,940
Separate account assets 5,923,888 4,798,949
------------------ -----------------
Total assets $ 20,283,116 $ 18,671,427
================== =================
LIABILITIES
Policy liabilities and accruals $ 11,438,032 $ 11,110,280
Notes payable 499,392 386,575
Deferred income taxes 86,262 116,104
Other liabilities 474,179 430,956
Separate account liabilities 5,923,888 4,798,949
------------------ -----------------
Total liabilities 18,421,753 16,842,864
------------------ -----------------
Contingent liabilities (Note 18)
MINORITY INTEREST IN NET ASSETS
OF CONSOLIDATED SUBSIDIARIES 100,112 92,008
------------------ -----------------
EQUITY
Retained earnings 1,731,146 1,642,264
Accumulated other comprehensive income 30,105 94,291
------------------ -----------------
Total equity 1,761,251 1,736,555
------------------ -----------------
Total liabilities and equity $ 20,283,116 $ 18,671,427
================== =================
</TABLE>
The accompanying notes are an integral part of these statements.
31
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
CONSOLIDATED STATEMENT OF INCOME, COMPREHENSIVE INCOME AND EQUITY
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
1999 1998 1997
(IN THOUSANDS)
<S> <C> <C> <C>
REVENUES
Premiums $ 1,134,207 $ 1,154,730 $ 1,076,157
Insurance and investment product fees 591,786 493,415 367,540
Net investment income 950,344 851,603 714,367
Net realized investment gains 35,675 58,202 111,043
------------- -------------- -------------
Total revenues 2,712,012 2,557,950 2,269,107
------------- -------------- -------------
BENEFITS AND EXPENSES
Policy benefits and increase in policy liabilities 1,352,419 1,403,166 1,201,929
Policyholder dividends 360,509 351,653 343,611
Amortization of deferred policy acquisition costs 146,603 137,663 102,617
Amortization of goodwill and other intangible assets 37,963 23,126 9,366
Interest expense 32,659 25,911 24,300
Other operating expenses 520,603 428,756 367,016
------------- -------------- -------------
Total benefits and expenses 2,450,756 2,370,275 2,048,839
------------- -------------- -------------
INCOME FROM CONTINUING OPERATIONS
BEFORE INCOME TAXES AND MINORITY INTEREST 261,256 187,675 220,268
Income taxes 107,881 65,046 47,241
------------- -------------- -------------
INCOME FROM CONTINUING OPERATIONS
BEFORE MINORITY INTEREST 153,375 122,629 173,027
Minority interest in net income of consolidated subsidiaries 10,064 10,512 10,623
------------- -------------- -------------
NET INCOME FROM CONTINUING OPERATIONS 143,311 112,117 162,404
DISCONTINUED OPERATIONS (NOTE 11)
Gain from operations, net of income taxes 17,555 25,012 7,248
Loss on disposal, net of income taxes (71,984)
------------- -------------- -------------
NET INCOME 88,882 137,129 169,652
------------- -------------- -------------
OTHER COMPREHENSIVE (LOSS) INCOME, NET OF INCOME TAXES
Unrealized (losses) gains on securities (61,246) (46,967) 98,287
Reclassification adjustment for net realized gains
included in net income (1,452) (12,980) (30,213)
Minimum pension liability adjustment (1,488) (1,526) (2,101)
------------- -------------- -------------
Total other comprehensive (loss) income (64,186) (61,473) 65,973
------------- -------------- -------------
COMPREHENSIVE INCOME 24,696 75,656 235,625
------------- -------------- -------------
EQUITY, BEGINNING OF YEAR - RESTATED (NOTE 20) 1,736,555 1,660,899 1,425,274
------------- -------------- -------------
EQUITY, END OF YEAR $ 1,761,251 $ 1,736,555 $ 1,660,899
============= ============== =============
</TABLE>
The accompanying notes are an integral part of these statements.
32
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
CONSOLIDATED STATEMENT OF CASH FLOWS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
1999 1998 1997
(IN THOUSANDS)
<S> <C> <C> <C>
CASH FLOW FROM CONTINUING OPERATIONS ACTIVITIES
Net income from continuing operations $ 143,311 $ 112,117 $ 162,404
Net (loss) income from discontinued operations (54,429) 25,012 7,248
ADJUSTMENTS TO RECONCILE NET INCOME TO NET CASH
PROVIDED BY CONTINUING OPERATIONS:
Net realized investment gains (35,675) (58,202) (111,465)
Amortization and depreciation 69,367 51,076 61,876
Equity in undistributed earnings of affiliates and partnerships (138,215) (44,119) (38,588)
Deferred income taxes (benefit) (14,102) 398 25,298
(Increase) in receivables (67,688) (23,846) (46,178)
Increase (decrease) in deferred policy acquisition costs 3,493 (26,945) (44,406)
Increase in policy liabilities and accruals 329,660 368,528 494,462
Increase in other assets/other liabilities, net 53,901 58,795 54,230
Other, net 2,752 1,660 7,752
------------ ------------- -------------
Net cash provided by operating activities of continuing operations 346,804 439,462 565,385
Net cash (used for) provided by operating activities of
discontinued operations (105,537) 104,512 88,907
------------ ------------- -------------
CASH FLOW FROM INVESTING ACTIVITIES OF CONTINUING OPERATIONS
Proceeds from sales, maturities or repayments
of available-for-sale debt securities 1,702,889 1,322,381 1,082,132
Proceeds from maturities or repayments of held-to-maturity debt
securities 186,710 267,746 200,946
Proceeds from disposals of equity securities 163,530 45,204 51,373
Proceeds from mortgage loan maturities or repayments 124,864 200,419 164,213
Proceeds from sale of real estate and other invested assets 37,952 439,917 213,224
Proceeds from distributions of venture capital partnerships 26,730 18,550 5,650
Proceeds from sale of subsidiaries and affiliates 15,000 16,300
Purchase of available-for-sale debt securities (1,672,705) (2,400,058) (1,547,855)
Purchase of held-to-maturity debt securities (427,472) (585,370) (183,371)
Purchase of equity securities (162,391) (85,002) (88,573)
Purchase of subsidiaries (187,621) (6,647) (246,400)
Purchase of mortgage loans (25,268) (75,974) (140,831)
Purchase of real estate and other invested assets (71,407) (134,224) (50,599)
Purchase of venture capital partnerships (108,461) (67,200) (39,994)
Change in short term investments, net 52,616 855,117 23,135
Increase in policy loans (34,298) (21,532) (59,699)
Capital expenditures (20,505) (25,052) (44,380)
Other investing activities, net 1,697 (6,540) (1,750)
------------ ------------- -------------
Net cash used for investing activities of continuing operations (398,140) (241,965) (662,779)
Net cash provided by (used for) investing activities of
discontinued operations 157,267 (101,532) (93,239)
------------ ------------- -------------
CASH FLOW FROM FINANCING ACTIVITIES OF CONTINUING OPERATIONS
Withdrawals of contractholder deposit funds,
net of deposits and interest credited (1,908) (11,124) (17,902)
Proceeds from repayment of securities sold
subject to repurchase agreements 28,398 (137,473) 137,473
Proceeds from borrowings 124,500 136 215,359
Repayment of borrowings (11,683) (55,589) (243,293)
Dividends paid to minority shareholders in consolidated
subsidiaries (4,240) (4,938) (6,895)
Other financing activities (361) (5,664) (1,250)
------------ ------------- -------------
Net cash provided by (used for) financing activities of
continuing operations 134,706 (214,652) 83,492
Net cash (used for) provided by financing activities of
discontinued operations (62,677) (7,739) 4,489
------------ ------------- -------------
NET CHANGE IN CASH AND CASH EQUIVALENTS OF CONTINUING OPERATIONS 83,370 (17,155) (13,902)
NET CHANGE IN CASH AND CASH EQUIVALENTS OF DISCONTINUED OPERATIONS (10,947) (4,759) 157
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR 115,187 137,101 150,846
------------ ------------- -------------
CASH AND CASH EQUIVALENTS, END OF YEAR $ 187,610 $ 115,187 $ 137,101
============ ============= =============
SUPPLEMENTAL CASH FLOW INFORMATION
Income taxes paid, net $ 106,372 $ 44,508 $ 76,167
Interest paid on indebtedness $ 34,791 $ 32,834 $ 32,300
</TABLE>
The accompanying notes are an integral part of these statements.
33
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
1. DESCRIPTION OF BUSINESS
Phoenix Home Life Mutual Insurance Company and its subsidiaries (Phoenix)
market a wide range of insurance and investment products and services
including individual participating life insurance, term, universal and
variable life insurance, annuities, and investment advisory and mutual fund
distribution services. These products and services are distributed among
three reportable segments: Individual, Investment Management and Corporate &
Other. See Note 10 - "Segment Information."
Additionally, in 1999, Phoenix discontinued the operations of four of its
business units: the Reinsurance Operations, the Property and Casualty
Brokerage Operations, the Real Estate Management Operations and the Group
Insurance Operations. See Note 11 - "Discontinued Operations."
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 significant influence over operating and financial policies, and
generally at least a 20% ownership interest, are reported on the equity
basis.
These consolidated financial statements have been prepared in accordance
with accounting principles generally accepted in the United States (GAAP).
The preparation of financial statements in conformity with GAAP requires
management to make estimates and assumptions that affect the reported
amounts of assets and liabilities at the date of the financial statements
and the reported amounts of revenues and expenses during the reporting
period. Actual results could differ from those estimates. Significant
estimates used in determining insurance and contractholder liabilities,
related reinsurance recoverables, income taxes, contingencies and valuation
allowances for investment assets are discussed throughout the Notes to
Consolidated Financial Statements. Significant inter-company accounts and
transactions have been eliminated. Amounts for 1998 and 1997 have been
retroactively restated to account for income from venture capital
partnership investments and leveraged lease investments. See Note 20 -
"Prior Period Adjustments" for venture capital investment and leveraged
lease investment information. Certain reclassifications have been made to
the 1998 and 1997 amounts to conform with the 1999 presentation.
VALUATION OF INVESTMENTS
Investments in debt securities include bonds, mortgage-backed and
asset-backed securities. 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 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.
34
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
For the mortgage-backed and asset-backed bond portion of the debt security
portfolio, Phoenix recognizes income using a constant effective yield based
on anticipated prepayments and the estimated economic life of the
securities. When actual prepayments differ significantly from anticipated
prepayments, the effective yield is recalculated to reflect actual payments
to date, and anticipated future payments and any resulting adjustment is
included in net investment income.
Equity securities are classified as available-for-sale and are reported at
fair value, based principally on their quoted market prices, with unrealized
gains or losses included in 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.
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.
Venture capital partnership and other 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.
These earnings or losses are included in investment income. Venture capital
partnerships generally account for the underlying investments held in the
partnerships at fair value. These investments can include public and private
common and preferred stock, notes, warrants and other investments.
Investments that are publicly traded are generally valued at closing market
prices. Investments that are not publicly traded, which are usually subject
to restrictions on resale, are generally valued at cost or at estimated fair
value, as determined in good faith by the general partner after giving
consideration to operating results, financial conditions, recent sales
prices of issuers' securities and other pertinent information. Some general
partners will discount the fair value of private investments held to reflect
these restrictions. These valuations subject the earnings to volatility.
Beginning in 1999, Phoenix includes equity in undistributed unrealized
capital gains and losses on investments held in the venture capital
partnerships in net investment income. Prior to 1999, these amounts were not
recorded. Prior years have been restated to reflect this change. See Note 20
- "Prior Period Adjustments" for additional information on venture capital
partnership investments.
35
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
Other invested assets include leveraged lease investments. These investments
represent the net of the estimated residual value of the lease assets,
rental receivables, and unearned and deferred income to be allocated over
the lease term. Investment income is calculated using the interest method
and is recognized only in periods in which the net investment is positive.
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 component of 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, off-balance sheet
financial instruments such as investment and loan commitments, financial
guarantees, interest rate swaps, interest rate caps, interest rate floors
and swaptions. These instruments have credit risk and also may be subject to
risk of loss due to interest rate and market fluctuations.
Phoenix enters into interest rate swap agreements to reduce market risks
from changes in interest rates. Phoenix does not enter into interest rate
swap agreements for trading purposes. Under interest rate swap agreements,
Phoenix exchanges cashflows with another party, at specified intervals, for
a set length of time based on a specified notional principal amount.
Typically, one of the cash flow streams is based on a fixed interest rate
set at the inception of the contract, and the other is a variable rate that
periodically resets. Generally, no premium is paid to enter into the
contract and no payment of principal is made by either party. The amounts to
be received or paid on these swap agreements are accrued and recognized in
net investment income.
Phoenix enters into interest rate floor, interest rate cap and swaption
contracts as a hedge for its assets and liabilities against substantial
changes in interest rates. Phoenix does not enter into interest rate floor,
interest rate cap and swaption contracts for trading purposes. Interest rate
floor and interest rate cap agreements are contracts with a counterparty
which require the payment of a premium and give Phoenix the right to receive
over the maturity of the contract, the difference between the floor or cap
interest rate and a market interest rate on specified future dates based on
an underlying notional principal. Swaption contracts are options to enter
into an interest rate swap transaction on a specified future date and at a
specified price. Upon the exercise of a swaption, Phoenix would either
receive a swap agreement at the pre-specified terms or cash for the market
value of the swap. Phoenix pays the premium for these instruments on a
quarterly basis over the maturity of the contract, and recognizes these
payments in net investment income.
Phoenix enters into foreign currency swap agreements to hedge against
fluctuations in foreign currency exposure. Under these agreements, Phoenix
agrees to exchange with another party, principal and periodic interest
payments denominated in foreign currency for payments denominated in U.S.
dollars. The amounts to be received or paid on these foreign currency swap
agreements is recognized in net investment income. To reduce counterparty
credit risks and
36
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
diversify counterparty exposure, Phoenix only enters into derivative
contracts with highly rated financial institutions.
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 new business, are deferred. Deferred
policy acquisition costs (DAC) 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 policies, 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 insurance policies, limited pay and investment type
contracts, deferred policy acquisition costs are amortized in proportion to
total estimated gross profits over the expected average life of the
contracts using estimated gross margins arising principally from investment,
mortality and expense margins and surrender charges based on historical and
anticipated experience, updated at the end of each accounting period.
GOODWILL 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 their estimated lives.
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
37
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
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.
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 date 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 1999 and prior
years. 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.
38
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
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.
RECENT ACCOUNTING PRONOUNCEMENTS
In June, 1999, The Financial Accounting Standards Board issued Statement of
Financial Accounting Standards (SFAS) No. 137, "Accounting for Derivative
Instruments and Hedging Activities - Deferral of the Effective Date of SFAS
No. 133". Because of the complexities associated with transactions involving
derivative instruments and their prevalent use as hedging instruments and,
because of the difficulties associated with the implementation of Statement
133, the effective date of SFAS No. 133 "Accounting for Derivative
Instruments and Hedging Activities" was delayed until fiscal years beginning
after June 15, 2000. SFAS No. 133, initially issued on June 15, 1998,
requires that all derivative instruments be recorded on the balance sheet at
their fair value. Changes in the fair value of derivatives are recorded each
period in current earnings or other comprehensive income, depending on
whether a derivative is designated as part of a hedge transaction and, if it
is, the type of hedge transaction. For fair-value hedge transactions in
which Phoenix is hedging changes in an asset's, liability's or firm
commitment's fair value, changes in the fair value of the derivative
instrument will generally be offset in the income statement by changes in
the hedged item's fair value. For cash-flow hedge transactions, in which
Phoenix is hedging the variability of cashflows related to a variable-rate
asset, liability, or a forecasted transaction, changes in the fair value of
the derivative instrument will be reported in other comprehensive income.
The gains and losses on the derivative instrument that are reported in other
comprehensive income will be reclassified as earnings in the period in which
earnings are impacted by the variability of the cash flows of the hedged
item. The ineffective portion of all hedges will be recognized in current
period earnings.
Phoenix has not yet determined the impact that the adoption of SFAS 133 will
have on its earnings or statement of financial position.
Phoenix adopted SFAS No. 130, "Reporting Comprehensive Income," as of
January 1, 1998. This statement establishes standards for the reporting and
display of comprehensive income and its components in a full set of
financial statements. This statement defines the components of comprehensive
income as those items that were previously reported only as components of
equity and were excluded from net income.
In 1998, Phoenix adopted SFAS No. 131, "Disclosures about Segments of an
Enterprise and Related Information." This statement supersedes SFAS No. 14,
"Financial Reporting for Segments of a Business Enterprise," replacing the "
industry segment" approach with the "management" approach. The management
approach designates the internal organization that is used by management for
making operating decisions and assessing performance as the source of
Phoenix's reportable segments. The adoption of this statement did not affect
the results of operations or financial position but did affect the
disclosure of segment information.
In 1998, Phoenix adopted SFAS No. 132, "Employers' Disclosures about
Pensions and Other Postretirement Benefits," which amends SFAS No. 87, "
Employers' Accounting for Pensions," SFAS No. 88, "Employers' Accounting for
Settlements and Curtailments of Defined Benefit Pension Plans and for
Termination Benefits," and SFAS No. 106, "Employers' Accounting for
Postretirement Benefits Other than Pensions". The new statement revises and
standardizes
39
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
employers' disclosures about pension and other postretirement benefit plans.
Adoption of this statement did not affect the results of operations or
financial position of Phoenix.
On January 1, 1999, Phoenix adopted Statement of Position (SOP) 97-3,
"Accounting by Insurance and Other Enterprises for Insurance-Related
Assessments." SOP 97-3 provides guidance for assessments related to
insurance activities. The adoption of SOP 97-3 did not have a material
impact on Phoenix's results from operations or financial position.
On January 1, 1999, Phoenix adopted SOP 98-1, "Accounting for the Costs of
Computer Software Developed or Obtained for Internal Use." SOP 98-1 provides
guidance for determining when an entity should capitalize or expense
external and internal costs of computer software developed or obtained for
internal use. The adoption of SOP 98-1 did not have a material impact on
Phoenix's results from operations or financial position.
On January 1, 1999, Phoenix adopted SOP 98-5, "Reporting on the Costs of
Start-Up Activities." SOP 98-5 requires that start-up costs capitalized
prior to January 1, 1999 should be written off and any future start-up costs
be expenses as incurred. The adoption of SOP 98-5 did not have a material
impact on Phoenix's results from operations or financial position.
3. SIGNIFICANT TRANSACTIONS
DISCONTINUED OPERATIONS
During 1999, Phoenix discontinued the operations of four of its business
units; the Reinsurance Operations, the Property and Casualty Brokerage
Operations, the Real Estate Management Operation and the Group Insurance
Operations. Disclosures concerning the financial impact of these
transactions are contained in Note 11 - "Discontinued Operations."
PFG HOLDINGS, INC.
On October 29, 1999, PM Holdings, a wholly-owned subsidiary of Phoenix,
purchased 100% of PFG Holdings, Inc. 8% cumulative preferred stock
convertible into a 67% interest in common stock for $5 million in cash. In
addition Phoenix has an option to purchase all the outstanding common stock
during year six at a value to 80% of the appraised value of the common stock
at that time. As of the statement date this option had not been executed.
Since the investment represents a majority interest Phoenix has consolidated
this entity for GAAP as if the preferred stock had been converted and
established a minority interest for outside shareholders. The transaction
resulted in goodwill of $3.8 million to be amortized over 10 years.
PFG Holdings was formed to purchase three of The Guarantee Life Companies'
operating subsidiaries: AGL Life Assurance Company, PFG Distribution Company
and Philadelphia Financial Group. These subsidiaries develop, market and
underwrite specialized private placement variable life and annuity products.
AGL Life Assurance Company must maintain at least $10 million of capital and
surplus to satisfy certain regulatory minimum capital requirements. PM
Holdings provided financing at the purchase date of $11 million to PFG
Holdings in order for AGL Life Assurance to meet this minimum requirement.
The debt is an 8.34% senior secured note maturing in 2009.
40
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
EMPRENDIMIENTO COMPARTIDO, S.A., (EMCO)
At January 1, 1999 PM Holdings held 9.1 million shares of EMCO, representing
a 35% ownership interest the Argentine financial services company that
provides pension management, annuities and life insurance products. On June
23, 1999, PM Holdings became the majority owner of EMCO when it purchased
13.9 million shares of common stock from the Banco del Suquia, S.A. for
$29.5 million, plus $10.0 million for a five year covenant not-to-compete.
Payment for the stock will be made in three installments: $10.0 million, 180
days from closing; $10.0 million, 360 days from closing; and $9.5 million,
540 days from closing, all subject to interest of 7.06%. The covenant was
paid at the time of closing.
In addition, EMCO purchased, for its treasury, 3.0 million shares of its
outstanding common stock held by two banks. This, in combination with the
purchase described above, increased PM Holdings ownership interest from 35%
to 100% of the then outstanding stock.
On November 12, 1999, PM Holdings sold 11.5 million shares (50% interest) of
EMCO common stock for $40.0 million generating a pre-tax gain of $11.3
million. PM Holdings received $15.0 million in cash plus a $9.0 million
two-year 8% interest bearing note, and a $16.0 million five-year 8% interest
bearing note. PM Holdings uses the equity method of accounting to account
for its remaining 50% interest in EMCO.
After the sale, the remaining excess of the purchase price over the fair
value of the acquired net tangible assets totaled $17.0 million. That
consisted of a covenant not-to-compete of $5.0 million which is being
amortized over five years and goodwill of $12.0 million which is being
amortized over ten years.
PHOENIX NEW ENGLAND TRUST
On October 29, 1999, PM Holdings indirectly acquired 100% of the common
stock of New London Trust, a banking subsidiary of Sun Life of Canada, for
$30.0 million in cash. New London Trust, renamed Phoenix New England Trust,
is a New Hampshire based federal savings bank that operates a trust division
with assets under management of approximately $1 billion. Immediately
following this acquisition, on November 1, 1999, PM Holdings sold the New
London Trust's New Hampshire retail banking operations to Lake Sunapee Bank
and Mascoma Savings Bank in New Hampshire and the Connecticut branches to
Westbank Corporation, for a total of $25.2 million in cash. No gain or loss
was recognized on this sale. PM Holdings retained the trust business and
four trust offices of New London Trust, located in New Hampshire and
Vermont.
LOMBARD INTERNATIONAL ASSURANCE, S.A.
On November 5, 1999, PM Holdings purchased 12% of the common stock of
Lombard International Assurance, S.A., a Pan-European financial services
company, for $29.1 million in cash. Lombard provides investment-linked
insurance products to high-net-worth individuals in eight European
countries. This investment is classified as equity securities in the
Consolidated Balance Sheet.
41
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
PHOENIX INVESTMENT PARTNERS, LTD.
On March 1, 1999, Phoenix Investment Partners completed its acquisition of
the retail mutual fund and closed-end fund business of the New York City
based Zweig Group. Under the terms of the agreement, Phoenix Investment
Partners paid $135.0 million at closing and will pay up to an additional
$29.0 million over the next three years based on revenue growth of the Zweig
funds. The Zweig Group managed approximately $3.3 billion of assets as of
December 31,1999.
On December 3, 1998, Phoenix Investment Partners completed the sale of its
49% interest in Canadian investment firm Beutel, Goodman & Company, Ltd. for
$47.0 million. Phoenix Investment Partners received $37.0 million in cash
and a $10.0 million three-year interest bearing note. The transaction
resulted in a before-tax gain of approximately $17.5 million. Phoenix's
interest represents an after-tax realized gain of approximately $6.8
million.
Phoenix owns approximately 60% of the outstanding Phoenix Investment
Partners' common stock. In addition, Phoenix owns 45% of Phoenix Investment
Partners' convertible subordinated debentures.
ABERDEEN ASSET MANAGEMENT PLC
On February 18, 1999, PM Holdings purchased an additional 15.1 million
shares of the common stock of Aberdeen Asset Management for $29.4 million.
As of December 31, 1999, PM Holdings owned 21% of the outstanding common
stock of Aberdeen Asset Management, a Scottish asset management firm. The
investment is reported on the equity basis and classified as other invested
assets in the Consolidated Balance Sheet.
DIVIDEND SCALE REDUCTION
In consideration of the decline of interest rates in the financial markets,
Phoenix's Board of Directors voted in October of 1998 to adopt a reduced
dividend scale, effective for dividends payable on or after January 1, 1999.
Dividends for individual participating policies were reduced 60 basis points
in most cases, an average reduction of approximately 8%. The effect was a
decrease of approximately $15.7 million in the policyholder dividends
expense in 1998. In October 1999, Phoenix's Board of Directors voted to
maintain the dividend scale for dividends payable on or after January 1,
2000.
REAL ESTATE SALES
On December 15, 1998, Phoenix sold 47 commercial real estate properties with
a carrying value of $269.8 million, and 4 joint venture real estate
partnerships with a carrying value of $10.5 million, for approximately $309
million in cash. This transaction, along with the sale of 18 other
properties and partnerships during 1998, which had a carrying value of $36.7
million, resulted in pre-tax gains of approximately $67.5 million. As of
December 31, 1999, Phoenix had 3 commercial real estate properties remaining
with a carrying value of $42.9 million and 5 joint venture real estate
partnerships with a carrying value of $49.1 million.
42
<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, 1999 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 $ 27,595 $ 416 $ (1,033) $ 26,978
Foreign government bonds 3,032 (796) 2,236
Corporate securities 1,776,174 12,945 (95,707) 1,693,412
Mortgage-backed and asset-backed
securities 285,387 1,361 (19,166) 267,582
-------------- ------------- ------------- -------------
Total held-to-maturity securities 2,092,188 14,722 (116,702) 1,990,208
Less: held-to-maturity securities of
discontinued operations 102,019 736 (5,835) 96,920
-------------- ------------- ------------- -------------
Total held-to-maturity securities of
continuing operations 1,990,169 13,986 (110,867) 1,893,288
-------------- ------------- ------------- -------------
AVAILABLE-FOR-SALE:
U.S. government and agency bonds 283,697 1,955 (6,537) 279,115
State and political subdivision bonds 495,860 4,765 (21,751) 478,874
Foreign government bonds 273,868 23,700 (3,990) 293,578
Corporate securities 2,353,228 18,578 (102,773) 2,269,033
Mortgage-backed and asset-backed
securities 2,977,136 17,916 (103,264) 2,891,788
-------------- ------------- ------------- -------------
Total available-for-sale securities 6,383,789 66,914 (238,315) 6,212,388
Less: available-for-sale securities of
discontinued operations 725,077 7,600 (27,068) 705,609
-------------- ------------- ------------- -------------
Total available-for-sale securities of
continuing operations 5,658,712 59,314 (211,247) 5,506,779
-------------- ------------- ------------- -------------
TOTAL DEBT SECURITIES OF CONTINUING
OPERATIONS $ 7,648,881 $ 73,300 $ (322,114) $ 7,400,067
============== ============== ============= =============
EQUITY SECURITIES $ 311,100 $ 176,593 $ (24,211) $ 463,482
Less: equity securities of discontinued
operations 1,869 1,869
-------------- ------------- ------------- -------------
TOTAL EQUITY SECURITIES OF CONTINUING
OPERATIONS $ 309,231 $ 176,593 $ (24,211) $ 461,613
============== ============ ============= =============
</TABLE>
43
<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, 1998 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 $ 10,562 $ 643 $ (78) $ 11,127
Foreign government bonds 3,036 (743) 2,293
Corporate securities 1,695,789 98,896 (13,823) 1,780,862
Mortgage-backed and asset-backed
securities 172,300 6,201 (12) 178,489
-------------- ------------- ------------- -------------
Total held-to-maturity securities 1,881,687 105,740 (14,656) 1,972,771
Less: held-to-maturity securities of
discontinued operations 156,248 8,776 (1,216) 163,808
-------------- ------------- ------------- -------------
Total held-to-maturity securities of
continuing operations 1,725,439 96,964 (13,440) 1,808,963
-------------- ------------- ------------- -------------
AVAILABLE-FOR-SALE:
U.S. government and agency bonds 497,089 34,454 (422) 531,121
State and political subdivision bonds 529,977 43,622 (104) 573,495
Foreign government bonds 293,968 28,814 (18,691) 304,091
Corporate securities 1,993,720 110,525 (36,656) 2,067,589
Mortgage-backed and asset-backed
securities 3,121,690 110,172 (14,618) 3,217,244
-------------- ------------- ------------- -------------
Total available-for-sale securities 6,436,444 327,587 (70,491) 6,693,540
Less: available-for-sale securities of
discontinued operations 678,992 34,558 (7,436) 706,114
-------------- ------------- ------------- -------------
Total available-for-sale securities of
continuing operations 5,757,452 293,029 (63,055) 5,987,426
-------------- ------------- ------------- -------------
TOTAL DEBT SECURITIES OF CONTINUING
OPERATIONS $ 7,482,891 $ 389,993 $ (76,495) $ 7,796,389
============== ============= ============= =============
EQUITY SECURITIES $ 223,915 $ 102,018 $ (21,388) $ 304,545
Less: equity securities of discontinued
operations 2,896 2,896
-------------- ------------- ------------- -------------
TOTAL EQUITY SECURITIES OF CONTINUING
OPERATIONS $ 221,019 $ 102,018 $ (21,388) $ 301,649
============== ============ ============= =============
</TABLE>
44
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
The sale of fixed maturities held-to-maturity relate to certain securities,
with amortized cost of $3.9 million, $19.6 million and $59.1 million, for
the years ended December 31, 1999, 1998 and 1997, respectively, which were
sold specifically due to a significant decline in the issuers' credit
quality. The related realized losses, net of the sales, were $0.2 million,
$0.8 million and $10.1 million in 1999, 1998 and 1997, respectively.
The amortized cost and fair value of debt securities, by contractual sinking
fund payment and maturity, as of December 31, 1999 are shown below. Actual
maturity may differ from contractual maturity 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 $ 118,171 $ 116,992 $ 43,180 $ 43,483
Due after one year through five years 583,115 564,215 534,417 532,676
Due after five years through ten years 587,568 566,505 1,146,805 1,104,661
Due after ten years 517,946 474,913 1,682,250 1,639,771
Mortgage-backed and
asset-backed securities 285,388 267,583 2,977,137 2,891,797
-------------- -------------- --------------- -------------
Total $ 2,092,188 $ 1,990,208 $ 6,383,789 $ 6,212,388
Less: securities of discontinued
operations 102,019 96,920 725,077 705,609
-------------- -------------- --------------- -------------
Total securities of continuing
operations $ 1,990,169 $ 1,893,288 $ 5,658,712 $ 5,506,779
============== ============== =============== =============
</TABLE>
Carrying values for investments in mortgage-backed and asset-backed
securities, excluding U.S. government guaranteed investments, were as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
1999 1998
(IN THOUSANDS)
<S> <C> <C>
Planned amortization class $ 168,027 $ 433,668
Asset-backed 956,892 910,594
Mezzanine 194,849 280,162
Commercial 735,238 641,485
Sequential pay 1,039,001 982,576
Pass through 77,154 119,065
Other 6,014 21,994
-------------- --------------------
Total mortgage-backed and asset-backed securities $ 3,177,175 $ 3,389,544
============== ====================
</TABLE>
45
<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,
1999 1998 1999 1998
(IN THOUSANDS) (IN THOUSANDS)
<S> <C> <C> <C> <C>
PROPERTY TYPE:
Office buildings $ 183,912 $ 221,244 $ 30,545 $ 38,343
Retail 208,606 203,927 14,111 36,858
Apartment buildings 252,947 261,894 41,744 21,553
Industrial buildings 82,699 121,789 1,600
Other 2,950 19,089 8,859 32
Valuation allowances (14,283) (30,600) (3,232) (6,411)
----------------- ----------------- ----------------- ----------------
Total $ 716,831 $ 797,343 $ 92,027 $ 91,975
================= ================= = ================ ================
GEOGRAPHIC REGION:
Northeast $ 149,336 $ 169,368 $ 59,582 $ 47,709
Southeast 198,604 213,916 32 32
North central 164,150 176,683 744 11,453
South central 105,062 98,956 21,232 22,649
West 113,962 169,020 13,669 16,543
Valuation allowances (14,283) (30,600) (3,232) (6,411)
----------------- ------------------ ---------------- ----------------
Total $ 716,831 $ 797,343 $ 92,027 $ 91,975
================= ================== ================ ================
</TABLE>
At December 31, 1999, scheduled mortgage loan maturities were as follows:
2000 - $92 million; 2001 - $87 million; 2002 - $32 million; 2003 - $109
million; 2004 - $38 million; 2005 - $35 million, and $338 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 $6.7
million and $2.3 million of its mortgage loans during 1999 and 1998,
respectively, on terms which differed from those granted to new borrowers.
The carrying value of delinquent and in process of foreclosure mortgage
loans at December 31, 1999 and 1998 is $6.0 million and $17.2 million,
respectively. There are valuation allowances of $5.4 million and $14.7
million, respectively, on these mortgages.
46
<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>
1999
Mortgage loans $ 30,600 $ 9,697 $ (26,014) $ 14,283
Real estate 6,411 183 (3,362) 3,232
----------------- ----------------- ------------------ ------------------
Total $ 37,011 $ 9,880 $ (29,376) $ 17,515
================= ================= ================== ==================
1998
Mortgage loans $ 35,800 $ 50,603 $ (55,803) $ 30,600
Real estate 28,501 5,108 (27,198) 6,411
----------------- ----------------- ------------------ ------------------
Total $ 64,301 $ 55,711 $ (83,001) $ 37,011
================= ================= ================== ==================
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
================= ================= ================== ==================
</TABLE>
NON-INCOME PRODUCING MORTGAGE LOANS AND BONDS
The net carrying values of non-income producing mortgage loans were $0.0
million and $15.6 million at December 31, 1999 and 1998, respectively. The
net carrying value of non-income producing bonds were $0.0 million and $22.3
at December 31, 1999 and 1998, respectively.
47
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
DERIVATIVE INSTRUMENTS
Derivative instruments at December 31, are summarized below:
<TABLE>
<CAPTION>
1999 1998
($ IN THOUSANDS)
<S> <C> <C>
Swaptions:
Notional amount $ 1,600,000
Weighted average strike rate 5.02%
Index rate (1) 10 Yr. CMS
Fair value $ (8,200)
Interest rate floors:
Notional amount $ 1,210,000 $ 570,000
Weighted average strike rate 4.57% 4.59%
Index rate (1) 2-10 Yr. CMT/CMS 5-10 Yr. CMT
Fair value $ (7,542) $ 1,423
Interest rate swaps:
Notional amount $ 474,037 $ 424,573
Weighted average received rate 6.33% 6.27%
Weighted average paid rate 6.09% 5.82%
Fair value $ 1,476 $ 10,989
Foreign currency swaps:
Notional amount $ 8,074
Weighted average received rate 12.04%
Weighted average paid rate 10.00%
Fair value $ 213
Interest rate caps:
Notional amount $ 50,000 $ 50,000
Weighted average strike rate 7.95% 7.95%
Index rate (1) 10 Yr. CMT 10 Yr. CMT
Fair value $ 842 $ (96)
</TABLE>
(1) Constant maturity treasury yields (CMT) and constant maturity swap
yields (CMS).
The increase in net investment income related to interest rate swap
contracts was $1.0 million and $2.1 million for the years ended December 31,
1999 and 1998, respectively. The decrease in net investment income related
to interest rate floor, interest rate cap and swaption contracts was $2.3
million and $0.2 million for the years ended December 31, 1999 and 1998,
respectively, representing quarterly premium payments on these instruments
which are being paid over the life of the contracts. The estimated fair
value of these instruments represent what Phoenix would have to pay or
receive if the contracts were terminated.
48
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
Phoenix is exposed to credit risk in the event of nonperformance by
counterparties to these financial instruments, but management of the Phoenix
does not expect counterparties to fail to meet their financial obligations,
given their high credit ratings. The credit exposure of these instruments is
the positive fair value at the reporting date.
Management of Phoenix considers the likelihood of any material loss on these
instruments to be remote.
VENTURE CAPITAL PARTNERSHIPS
Phoenix invests in venture capital limited partnerships. These partnerships
focus on early-stage ventures, primarily in the information technology and
life science industries, as well as direct equity investments in leveraged
buyouts and corporate acquisitions.
Phoenix records its equity in the earnings of the partnerships in net
investment income.
The components of net investment income due to venture capital partnerships
for the year ended December 31, were as follows:
<TABLE>
<CAPTION>
1999 1998 1997
(IN THOUSANDS)
<S> <C> <C> <C>
Operating losses $ (8,921) $ (2,746) $ (2,131)
Realized gains on cash and stock distributions 84,725 23,360 31,336
Unrealized gains on investments held in the partnerships 64,091 19,009 4,531
---------- ----------- ----------
Total venture capital partnership net investment income $ 139,895 $ 39,623 $ 33,736
========== =========== ==========
</TABLE>
OTHER INVESTED ASSETS
Other invested assets, consisting primarily of partnership interests and
equity in unconsolidated affiliates, were as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
1999 1998
(IN THOUSANDS)
<S> <C> <C>
Transportation and equipment leases $ 82,063 $ 80,953
Affordable housing partnerships 22,247 10,854
Investment in Aberdeen Asset Management 99,074 72,257
Investment in EMCO of Argentina 13,423 10,681
Investment in other affiliates 12,389 12,706
Seed money in separate accounts 33,279 26,587
Other partnership interests 41,953 22,697
------------------ ------------------
Total other invested assets $ 304,428 $ 236,735
Less: other invested assets of discontinued operations 3,954 4,604
------------------ ------------------
Total other invested assets of continuing operations $ 300,474 $ 232,131
================== =================
</TABLE>
49
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NET INVESTMENT INCOME
The components of net investment income for the year ended December 31,
were as follows:
<TABLE>
<CAPTION>
1999 1998 1997
(IN THOUSANDS)
<S> <C> <C> <C>
Debt securities $ 641,076 $ 598,892 $ 509,702
Equity securities 8,272 6,469 4,277
Mortgage loans 66,285 83,101 85,662
Policy loans 148,998 146,477 122,562
Real estate 9,716 38,338 18,939
Leveraged leases 2,202 2,746 2,692
Venture capital partnerships 139,895 39,623 33,736
Other invested assets 2,544 1,750 2,160
Short-term investments 22,543 23,825 18,768
------------ ----------- ------------
Sub-total 1,041,531 941,221 798,498
Less investment expenses 23,505 23,328 22,621
------------ ----------- ------------
Net investment income $ 1,018,026 $ 917,893 $ 775,877
Less: net investment income of discontinued operations 67,682 66,290 61,510
------------ ----------- ------------
Total net investment income of continuing operations $ 950,344 $ 851,603 $ 714,367
============ =========== ============
</TABLE>
Investment income of $2.7 million was not accrued on certain delinquent
mortgage loans and defaulted bonds at December 31, 1999. 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 $36.5 million and $40.8 million at December 31,
1999 and 1998, respectively. Interest income on restructured mortgage loans
that would have been recorded in accordance with the original terms of such
loans amounted to $4.1 million, $4.9 million and $5.3 million in 1999, 1998
and 1997, respectively. Actual interest income on these loans included in
net investment income was $3.5 million, $4.0 million and $3.8 million in
1999, 1998 and 1997, respectively.
50
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
INVESTMENT GAINS AND LOSSES
Net unrealized gains and (losses) on securities available-for-sale and
carried at fair value for the year ended December 31, were as follows:
<TABLE>
<CAPTION>
1999 1998 1997
(IN THOUSANDS)
<S> <C> <C> <C>
Debt securities $ (428,497) $ (7,040) $ 112,194
Equity securities 71,752 (91,880) 74,547
Deferred policy acquisition costs 260,287 6,694 (80,603)
Deferred income taxes (33,760) (32,279) 38,064
----------------- ---------------- ----------------
Net unrealized investment (losses) gains
on securities available-for-sale $ (62,698) $ (59,947) $ 68,074
================= ================ ================
</TABLE>
Realized investment gains and losses for the year ended December 31, were
as follows:
<TABLE>
<CAPTION>
1999 1998 1997
(IN THOUSANDS)
<S> <C> <C> <C>
Debt securities $ (20,416 ) $ (4,295) $ 19,315
Equity securities 16,648 11,939 26,290
Mortgage loans 18,534 (6,895) 3,805
Real estate 2,915 67,522 44,668
Other invested assets 18,432 (4,709) 17,387
----------- ----------- -----------
Net realized investment gains 36,113 63,562 111,465
Less realized from discontinued operations 438 5,360 422
----------- ----------- -----------
Net realized investment gains from continuing
operations $ 35,675 $ 58,202 $ 111,043
============ ============ ===========
</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>
1999 1998 1997
(IN THOUSANDS)
<S> <C> <C> <C>
Proceeds from disposals $ 1,106,929 $ 912,696 $ 821,339
Gross gains on sales $ 21,808 $ 17,442 $ 27,954
Gross losses on sales $ 39,122 $ 33,641 $ 5,309
</TABLE>
51
<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:
<TABLE>
<CAPTION>
DECEMBER 31,
1999 1998
(IN THOUSANDS)
<S> <C> <C>
Phoenix Investment Partners gross amounts:
Goodwill $ 384,576 $ 321,793
Investment management contracts 235,976 169,006
Non-compete covenant 5,000 5,000
Other 10,894 472
------------- -------------
Totals 636,446 496,271
------------- -------------
Other gross amounts:
Goodwill 32,554 16,631
Intangible asset related to pension plan benefits 11,739 16,229
Other 1,206 693
------------- -------------
Totals 45,499 33,553
------------- -------------
Total gross goodwill and other intangible assets 681,945 529,824
Accumulated amortization - Phoenix Investment Partners (79,912) (49,615)
Accumulated amortization - other (8,766) (2,314)
------------- -------------
Total net goodwill and other intangible assets $ 593,267 $ 477,895
============= =============
</TABLE>
6. NOTES PAYABLE
<TABLE>
<CAPTION>
DECEMBER 31,
1999 1998
(IN THOUSANDS)
<S> <C> <C>
Short-term debt $ 21,598 $ 1,938
Bank borrowings 260,284 168,278
Notes payable 1,146
Subordinated debentures 41,364 41,359
Surplus notes 175,000 175,000
---------------- ----------------
Total notes payable $ 499,392 $ 386,575
================ ================
</TABLE>
Phoenix has various lines of credit established with major commercial banks.
As of December 31, 1999, Phoenix had outstanding balances totaling $436.7
million. The total unused credit was $369.0 million. Interest rates ranged
from 5.26% to 7.48% in 1999.
Maturities of other indebtedness are as follows: 2000 - $21.6 million; 2001
- $26.0 million; 2002 $200.0 million; 2003 - $0.0 million; 2004 - $35.0
million; 2005 and thereafter - $216.8 million. Interest expense was $32.7
million, $25.9 million and $24.3 million for the years ended December 31,
1999, 1998 and 1997, respectively.
52
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
7. INCOME TAXES
A summary of income taxes (benefits) applicable to income before income
taxes and minority interest for the year ended December 31, was as follows:
<TABLE>
<CAPTION>
1999 1998 1997
(IN THOUSANDS)
<S> <C> <C> <C>
Income taxes
Current $ 121,448 $ 61,889 $ 39,583
Deferred (13,567) 3,157 7,658
----------------- ---------------- ----------------
Total $ 107,881 $ 65,046 $ 47,241
================= ================ ================
</TABLE>
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>
1999 1998 1997
% % %
<S> <C> <C> <C>
Income tax expense at statutory 91,440 65,685 77,095
rate $ 35 $ 35 $ 35
Dividend received deduction and
tax-exempt interest (3,034) (1) (3,273) (2) (1,684) (1)
Other, net 7,922 3 2,634 2 (15,059) (7)
------------ ------- ------------ ------- ------------ -------
96,328 37 65,046 35 60,352 27
Differential earnings (equity tax) 11,553 4 (13,111) (6)
------------ ------- ------------ ------- ------------ -------
Income taxes $ 107,881 41 $ 65,046 35 $ 47,241 21
============ ======= ============ ======= ============ =======
</TABLE>
53
<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,
1999 1998
(IN THOUSANDS)
<S> <C> <C>
Deferred policy acquisition costs $ 282,725 $ 294,917
Unearned premium/deferred revenue (135,124) (139,346)
Impairment reserves (15,556) (23,111)
Pension and other postretirement benefits (68,902) (57,720)
Investments 177,204 122,032
Future policyholder benefits (181,205) (151,168)
Other 4,683 31,595
-------------- ------------
63,825 77,199
Net unrealized investment gains 26,587 42,254
Minimum pension liability (4,150) (3,349)
-------------- ------------
Deferred income tax liability, net $ 86,262 $ 116,104
============== ============
</TABLE>
Gross deferred income tax assets totaled $405 million and $375 million at
December 31, 1999 and 1998, respectively. Gross deferred income tax
liabilities totaled $491 million and $491 million at December 31, 1999 and
1998, 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, 1999 and 1998 will be
realized.
8. 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 the 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 years ended December 31,
were as follows:
<TABLE>
<CAPTION>
1999 1998 1997
(IN THOUSANDS)
<S> <C> <C> <C>
Components of net periodic benefit cost
Service cost $ 11,887 $ 11,046 $ 10,278
Interest cost 24,716 22,958 22,650
Curtailments 21,604
Expected return on plan assets (28,544) (25,083) (22,055)
Amortization of net transition asset (2,369) (2,369) (2,369)
Amortization of prior service cost 1,795 1,795 1,795
Amortization of net (gain) loss (2,709) (1,247) 25
--------------- -------------- --------------
Net periodic benefit cost $ 26,380 $ 7,100 $ 10,324
=============== ============== ==============
</TABLE>
54
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
In 1999, Phoenix offered a special retirement program under which qualified
participants' benefits under the employee pension plan were enhanced by
adding five years to age and five years to pension plan service. Of the 320
eligible employees, 146 accepted the special retirement program. As a result
of the special retirement program, Phoenix recorded an additional pension
expense of $21.6 million for the year ended December 31, 1999.
The aggregate change in projected benefit obligation, change in plan assets,
and funded status of the plan were as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
1999 1998
(IN THOUSANDS)
<S> <C> <C>
Change in projected benefit obligation
Projected benefit obligation at beginning of year $ 353,462 $ 335,436
Service cost 11,887 11,046
Interest cost 24,716 22,958
Plan amendments 23,871
Curtailments (6,380)
Actuarial loss (4,887) 1,958
Benefit payments (19,841) (17,936)
-------------- ---------------
Benefit obligation at end of year $ 382,828 $ 353,462
-------------- ---------------
Change in plan assets
Fair value of plan assets at beginning of year $ 364,819 $ 321,555
Actual return on plan assets 78,951 58,225
Employer contributions 3,883 2,975
Benefit payments (19,841) (17,936)
-------------- ---------------
Fair value of plan assets at end of year $ 427,812 $ 364,819
-------------- ---------------
Funded status of the plan $ 44,984 $ 11,357
Unrecognized net transition asset (11,847) (14,217)
Unrecognized prior service cost 11,705 16,185
Unrecognized net gain (129,936) (75,921)
-------------- ---------------
Net amount recognized $ (85,094) $ (62,596)
============== ===============
Amounts recognized in the Consolidated Balance
Sheet consist of:
Accrued benefit liability $ (108,690) $ (88,391)
Intangible asset 11,739 16,229
Accumulated other comprehensive income 11,857 9,566
-------------- ---------------
$ (85,094) $ (62,596)
============== ===============
</TABLE>
At December 31, 1999 and 1998, the non-qualified plan was not funded and had
projected benefit obligations of $72.3 million and $57.2 million,
respectively. The accumulated benefit obligations as of December 31, 1999
and 1998 related to this plan were $60.1 million and $48.4 million,
respectively, and are included in other liabilities.
Phoenix recorded, as a reduction of equity, an additional minimum pension
liability of $7.7 million and $6.2 million, net of income taxes, at December
31, 1999 and 1998, 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 $11.7 million and $16.2 million as of December 31, 1999
and 1998 related to the non-qualified plan.
55
<PAGE>
The discount rate used in determining the actuarial present value of the
projected benefit obligation was 7.5% and 7.0% for 1999 and 1998,
respectively. The discount rate assumption for 1999 was determined based on
a study that matched available high quality investment securities with the
expected timing of pension liability payments. The rate of increase in
future compensation levels used in determining the actuarial present value
of the projected benefit obligation was 4.5% and 4.0% for 1999 and 1998,
respectively. The expected long-term rate of return on retirement plan
assets was 8.0% in 1999 and 1998.
The assets within the pension plan include corporate and government debt
securities, equity securities, real estate, venture capital partnerships,
and shares of mutual funds.
Phoenix also sponsors savings plans for its employees and agents that are
qualified under Internal Revenue Code Section 401(k). Employees and agents
may contribute a portion of their annual salary, subject to certain
limitations, 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, 1999, 1998 and 1997 were $4.0 million, $4.1
million and $3.8 million, respectively.
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 components of net periodic postretirement benefit cost for the year
ended December 31, were as follows:
<TABLE>
<CAPTION>
1999 1998 1997
(IN THOUSANDS)
<S> <C> <C> <C>
Components of net periodic benefit cost
Service cost $ 3,313 $ 3,436 $ 3,136
Interest cost 4,559 4,572 4,441
Curtailments 5,456
Amortization of net gain (1,493) (1,232) (1,527)
------------- ------------ ------------
Net periodic benefit cost $ 11,835 $ 6,776 $ 6,050
============= ============ ============
</TABLE>
As a result of the special retirement program, Phoenix recorded an
additional postretirement benefit expense of $5.5 million for the year ended
December 31, 1999.
56
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
The plan's change in projected benefit obligation, change in plan assets,
and funded status were as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
1999 1998
(IN THOUSANDS)
<S> <C> <C>
Change in projected postretirement benefit obligation
Projected benefit obligation at beginning of year $ 70,943 $ 66,618
Service cost 3,313 3,436
Interest cost 4,559 4,572
Plan Amendments 5,785
Curtailments (328)
Actuarial (gain) loss (8,622) 397
Benefit payments (4,459) (4,080)
--------------- ---------------
Projected benefit obligation at end of year 71,191 70,943
--------------- ---------------
Change in plan assets
Employer contributions 4,459 4,080
Benefit payments (4,459) (4,080)
--------------- ---------------
Fair value of plan assets at end of year
--------------- ---------------
Funded status of the plan (71,191) (70,943)
Unrecognized net gain (33,538) (26,408)
--------------- ---------------
Accrued benefit liability $ (104,729) $ (97,351)
=============== ===============
</TABLE>
The discount rate used in determining the accumulated postretirement benefit
obligation was 7.5% and 7.0% at December 31, 1999 and 1998, respectively.
For purposes of measuring the accumulated postretirement benefit obligation
the health care costs were assumed to increase 7.5% and 8.5% in 1999 and
1998, respectively, declining thereafter until the ultimate rate of 5.5% is
reached in 2002 and remains 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 $4.3 million and the annual service and
interest cost by $0.6 million, before income taxes. Decreasing the assumed
health care cost trend rates by one percentage point in each year would
decrease the accumulated postretirement benefit obligation by $4.1 million
and the annual service and interest cost by $0.5 million, before income
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. Other
postemployment benefit expenses were $0.5 million for 1999, ($0.5) million
for 1998 and $0.4 million for 1997.
57
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
9. COMPREHENSIVE INCOME
The components of, and related income tax effects for, other comprehensive
income for the years ended December 31, were as follows:
<TABLE>
<CAPTION>
1999 1998 1997
(IN THOUSANDS)
<S> <C> <C> <C>
UNREALIZED (LOSSES) GAINS ON SECURITIES
AVAILABLE-FOR-SALE:
Before-tax amount $ (94,224) $ (72,255) $ 151,210
Income tax (benefit) expense (32,978) (25,288) 52,923
-------------- -------------- --------------
Totals (61,246) (46,967) 98,287
-------------- -------------- --------------
RECLASSIFICATION ADJUSTMENT FOR NET GAINS
REALIZED IN NET INCOME:
Before-tax amount (2,234) (19,970) (46,481)
Income tax (benefit) (782) (6,990) (16,268)
-------------- -------------- --------------
Totals (1,452) (12,980) (30,213)
-------------- -------------- --------------
NET UNREALIZED (LOSSES) GAINS ON SECURITIES
AVAILABLE-FOR-SALE:
Before-tax amount (96,458) (92,225) 104,729
Income tax (benefit) expense (33,760) (32,278) 36,655
-------------- -------------- --------------
Totals $ (62,698) $ (59,947) $ 68,074
============== ============== ==============
MINIMUM PENSION LIABILITY ADJUSTMENT:
Before-tax amount $ (2,289) $ (2,347) $ (3,232)
Income tax (benefit) (801) (821) (1,131)
-------------- -------------- --------------
Totals $ (1,488) $ (1,526) $ (2,101)
============== ============== ==============
</TABLE>
The following table summarizes accumulated other comprehensive income for
the years ended December 31:
<TABLE>
<CAPTION>
1999 1998 1997
(IN THOUSANDS)
<S> <C> <C> <C>
NET UNREALIZED (LOSSES) GAINS ON SECURITIES
AVAILABLE-FOR-SALE:
Balance, beginning of year $ 100,510 $ 160,457 $ 92,383
Change during period (62,698) (59,947) 68,074
-------------- -------------- --------------
Balance, end of year 37,812 100,510 160,457
-------------- -------------- --------------
MINIMUM PENSION LIABILITY ADJUSTMENT:
Balance, beginning of year (6,219) (4,693) (2,592)
Change during period (1,488) (1,526) (2,101)
-------------- -------------- --------------
Balance, end of year (7,707) (6,219) (4,693)
-------------- -------------- --------------
ACCUMULATED OTHER COMPREHENSIVE INCOME:
Balance, beginning of year 94,291 155,764 89,791
Change during period (64,186) (61,473) 65,973
-------------- -------------- --------------
Balance, end of year $ 30,105 $ 94,291 $ 155,764
============== ============== ==============
</TABLE>
58
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
10. SEGMENT INFORMATION
Phoenix offers a wide range of financial products and services. These
businesses have been grouped into three reportable segments.
The Individual segment includes the individual life insurance and annuity
products including participating whole life, universal life, variable life,
term life and variable annuities.
The Investment Management segment includes retail and institutional mutual
fund management and distribution including open-end funds, closed-end funds
and wrap accounts.
Corporate and Other contains several smaller subsidiaries and investment
activities which do not meet the thresholds of reportable segments as
defined in SFAS No. 131. They include venture capital investments,
international operations, trust operations and other investments.
The majority of Phoenix's revenue is derived in the United States. Revenue
derived from outside the United States is not material and revenue derived
from any single customer does not exceed ten percent of total consolidated
revenues.
The accounting policies of the segments are the same as those described in
Note 2 - "Summary of Significant Accounting Policies." Phoenix evaluates the
performance of each operating segment based on profit or loss from
operations before income taxes and nonrecurring items. Phoenix does not
include certain nonrecurring items to the segments. They are reported as
unallocated items and include expenses associated with various lawsuits and
legal disputes, postretirement medical expenses associated with an early
retirement program and realized gains associated with the sales of
subsidiaries. See Note 8 - " Pension and Other Postretirement and
Postemployment Benefit Plans."
Included in the following tables is certain information with respect to
Phoenix's operating segments as of and for each of the years ended December
31, 1999, 1998 and 1997, as well as amounts not allocated to the segments
which was described previously.
<TABLE>
<CAPTION>
DECEMBER 31,
1999 1998 1997
(IN MILLIONS)
<S> <C> <C> <C>
TOTAL ASSETS
Individual $ 17,990.3 $ 16,919.5 $ 15,709.8
Investment Management 747.4 591.9 647.9
Corporate & Other 1,357.8 876.2 1,124.4
Discontinued operations 187.6 283.8 250.9
-------------- -------------- -------------
Total 20,283.1 18,671.4 17,733.0
============== ============== =============
DEFERRED POLICY ACQUISITION COSTS
Individual $ 1,306.7 $ 1,049.9 $ 1,016.3
============== ============== =============
</TABLE>
59
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1999 1998 1997
(IN MILLIONS)
<S> <C> <C> <C>
PREMIUMS, INSURANCE AND INVESTMENT PRODUCT FEES
Individual $ 1,361.4 $ 1,416.7 $ 1,259.2
Investment Management 293.9 231.0 140.7
Corporate & Other 115.2 41.1 84.1
Less: intersegment revenues (44.5) (40.7) (40.3)
--------------- --------------- --------------
Total 1,726.0 1,648.1 1,443.7
--------------- --------------- --------------
INVESTMENT INCOME
Individual 768.2 768.5 640.3
Investment Management 6.0 2.7 3.0
Corporate & Other 176.1 80.4 71.1
--------------- --------------- --------------
Total 950.3 851.6 714.4
--------------- --------------- --------------
NET REALIZED INVESTMENT GAINS
Individual 15.9 (17.8) 65.7
Corporate & Other 3.9 10.5 45.3
Gains on sale of subsidiaries 16.0 65.5
--------------- --------------- --------------
Total 35.8 58.2 111.0
--------------- --------------- --------------
POLICY BENEFITS AND DIVIDENDS
Individual 1,611.3 1,718.2 1,499.7
Corporate & Other 101.6 36.6 45.8
--------------- --------------- --------------
Total 1,712.9 1,754.8 1,545.5
--------------- --------------- --------------
AMORTIZATION OF DEFERRED POLICY ACQUISITION COSTS
Individual 146.6 137.7 102.6
--------------- --------------- --------------
Total 146.6 137.7 102.6
--------------- --------------- --------------
AMORTIZATION OF GOODWILL AND INTANGIBLES
Individual 4.2 0.3 0.5
Investment Management 30.3 22.0 9.1
Corporate & Other 3.5 0.8 (0.2)
--------------- --------------- --------------
Total 38.0 23.1 9.4
--------------- --------------- --------------
INTEREST EXPENSE
Investment Management 18.9 14.7 3.6
Corporate & Other 13.8 11.2 20.7
--------------- --------------- --------------
Total 32.7 25.9 24.3
--------------- --------------- --------------
OTHER OPERATING EXPENSES
Individual 289.4 268.1 234.6
Investment Management 203.5 156.1 101.9
Corporate & Other 65.0 40.7 69.2
Unallocated amounts 7.2 4.5 1.7
Less: intersegment expenses (44.5) (40.7) (40.4)
--------------- --------------- --------------
Total 520.6 428.7 367.0
--------------- --------------- --------------
INCOME (LOSS) FROM CONTINUING OPERATIONS
BEFORE INCOME TAXES AND MINORITY INTEREST
Individual 94.0 43.2 127.9
Investment Management 47.2 40.8 29.2
Corporate & Other 111.3 42.7 64.9
Unallocated amounts & intersegment eliminations 8.8 61.0 (1.7)
--------------- --------------- --------------
Total $ 261.3 $ 187.7 $ 220.3
=============== =============== ==============
</TABLE>
60
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
11. DISCONTINUED OPERATIONS
During 1999, Phoenix discontinued the operations of four of its business
units which in prior years had been reflected as reportable business
segments: the Reinsurance Operations, the Property and Casualty Brokerage
Operations, the Real Estate Management Operation and the Group Insurance
Operations. The discontinuation of these business units resulted from the
sale of several operations, a signed agreement to sell one of the operations
and the implementation of plans to withdraw from the remaining businesses.
REINSURANCE OPERATIONS
During 1999, Phoenix completed a comprehensive strategic review of its life
reinsurance segment and decided to exit these operations through a
combination of sale, reinsurance and placement of certain components into
run-off. Accordingly, Phoenix estimated sales proceeds, reinsurance premiums
and net claims run-off, resulting in the recognition of a $173 million
pre-tax loss ($113 million after-tax loss) on the disposal of life
reinsurance discontinued operations. The life reinsurance segment consisted
primarily of individual life reinsurance operations as well as group
personal accident and group health reinsurance business. The significant
components of the loss on the disposal of life reinsurance discontinued
operations in 1999 were as follows:
On August 1, 1999, Phoenix sold its individual life reinsurance operations
and certain group health reinsurance business to Employers Reinsurance
Corporation for $130 million. The transaction was structured as a
reinsurance and asset sale transaction, resulting in a pre-tax gain of $113
million. The pre-tax income from operations for the seven months prior to
disposal was $19 million.
On June 30, 1999, PM Holdings sold 100% of the common stock of Financial
Administrative Services, Inc. (FAS), its third-party administration
subsidiary, to CYBERTEK, a wholly-owned subsidiary of Policy Management
Systems Corporation. Proceeds from the sale were $8.0 million for the common
stock plus $1.0 million for a covenant not-to-compete, resulting in an
after-tax gain of $2.0 million.
Phoenix retained ownership of the preferred stock of FAS, which under the
terms of the agreement, CYBERTEK will purchase in six equal annual
installments commencing March 31, 2001 through March 31, 2006. The purchase
price will be determined annually based upon earnings, but in total, will
range from a minimum of $4.0 million to a maximum of $16.0 million.
During 1999, Phoenix placed the remaining group personal accident and group
health reinsurance operations into run-off. Management has adopted a formal
plan to terminate the related treaties as early as contractually permitted
and is not entering into any new contracts. Based upon the most recent
information available, Phoenix reviewed the run-off block and estimated the
amount and timing of future net premiums, claims and expenses. Consequently,
Phoenix increased reserve estimates on the run-off block by $180 million. In
addition, as part of the exit strategy, Phoenix purchased finite aggregate
excess of loss reinsurance to further protect Phoenix from unfavorable
results in the run-off block. The finite reinsurance is subject to an
aggregate retention of $100 million on the run-off block. Phoenix may
commute the agreement at any time after September 30, 2004, subject to
automatic commutation effective September 30, 2019. Phoenix paid an initial
premium of $130 million.
The additional estimated reserves and finite reinsurance coverage are
expected to cover the run-off of the business; however, the nature of the
underlying risks is such that the claims may take years to reach the
reinsurers involved. Therefore, Phoenix expects to pay claims out of
existing estimated reserves over a number of years as the level of business
diminishes.
61
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
Additionally, certain group personal accident reinsurance business has
become the subject of disputes concerning the placement of the business with
reinsurers and the recovery of the reinsurance. This business primarily
concerns certain occupational accident reinsurance "facilities" and a
reinsurance pool (the Unicover Pool) underwritten and managed by Unicover
Managers, Inc. (Unicover). Phoenix participated as a reinsurer in the
Unicover Pool. The Unicover Pool and "facilities" were reinsured in large
part by a reinsurance facility underwritten and managed by Centaur
Underwriting Limited (Centaur) in which Phoenix also participated. Phoenix
terminated its participation in the Centaur facility effective October 1,
1998 and in the Unicover Pool effective March 1, 1999. However, claims
arising from business underwritten while Phoenix was a participant continue
to run off. On September 21, 1999, Phoenix initiated arbitration proceedings
seeking to rescind certain contracts arising from its participation in the
Centaur facility with respect to reinsurance of the Unicover business. In
January 2000, Phoenix settled two Unicover-related matters (see Note 21 -
"Subsequent Events"). A substantial portion of the risk associated with the
Unicover Pool and "facilities" and the Centaur program was further
retroceded by Phoenix to other unaffiliated insurance entities, providing
Phoenix with significant security. Certain of these retrocessionaires have
given notice that they challenge their obligations under their contracts and
are in arbitration or litigation with Phoenix.
Additionally, certain group personal accident excess of loss reinsurance
contracts created in the London market during 1994 - 1997 have become the
subject of disputes concerning the placement of the business with reinsurers
and the recovery of reinsurance. Several arbitration proceedings are
currently pending.
Given the uncertainty associated with litigation and other dispute
resolution proceedings, and the expected long term development of net claims
payments, the estimated amount of the loss on disposal of life reinsurance
discontinued operations may differ from actual results. However, it is
management's opinion, after consideration of the provisions made in these
financial statements, as described above, that future developments will not
have a material effect on Phoenix's consolidated financial position.
PROPERTY AND CASUALTY BROKERAGE OPERATIONS
On July 1, 1999, PM Holdings sold its property and casualty brokerage
business to Hilb, Rogal and Hamilton Company (HRH) for $48.1 million
including $0.2 million for a covenant not-to-compete. Total proceeds
consisted of $32.0 million in convertible debentures, $15.9 million for
865,042 shares of HRH common stock, valued at $18.38 per share on the sale
date, and $0.2 million in cash. The pre-tax gain realized on the sale was
$40.1 million. The HRH common stock is classified as common stock and the
convertible debentures are classified as bonds in the Consolidated Balance
Sheet. As of December 31, 1999 Phoenix owns 7% of the outstanding HRH common
stock, 15% on a diluted basis.
REAL ESTATE MANAGEMENT OPERATIONS
On March 31, 1999, Phoenix sold its real estate management subsidiary,
Phoenix Realty Advisors, to Henderson Investors International Holdings, B.V.
for $7.9 million in cash. The pre-tax gain realized on this transaction was
$7.1 million.
62
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
GROUP INSURANCE OPERATIONS
On December 9, 1999, Phoenix signed a definitive agreement to sell its Group
Life and Health business, including five companies, Phoenix American Life,
Phoenix Dental Services, Phoenix Group Services, California Benefits and
Clinical Disability Management, to GE Financial Assurance Holdings, Inc.
Proceeds from the sale are estimated to be $285 million, including cash of
$240 million and 3.1% of the common stock of GE Life and Annuity Assurance
Company. Phoenix expects the transaction to be completed in the second
quarter of 2000, subject to regulatory approval.
The assets and liabilities of the discontinued operations have been excluded
from the assets and liabilities of continuing operations and separately
identified on the Consolidated Balance Sheet. Net assets of the discontinued
operations totaled $187.6 million and $283.8 million as of December 31, 1999
and 1998, respectively. Asset and liability balances of the continuing
operation as of December 31, 1998, have been restated to conform with the
current year presentation. Likewise, the Consolidated Statement of Income,
Comprehensive Income and Equity has been restated for 1998 and 1997 to
exclude the operating results of discontinued operations from continuing
operations. The operating results of discontinued operations and the gain or
loss on disposal are presented below.
<TABLE>
<CAPTION>
GAIN (LOSS) FROM OPERATIONS OF YEAR ENDED DECEMBER 31,
DISCONTINUED OPERATIONS 1999 1998 1997
(IN THOUSANDS)
<S> <C> <C> <C>
Revenues:
Reinsurance Operations $ 306,671 $ 163,503
Group Insurance Operations $ 453,813 503,825 483,956
Property and Casualty Brokerage Operations 25,968 72,579 64,093
Real Estate Management 1,189 12,707 15,319
-------------- ------------- --------------
Total revenues 480,970 895,782 726,871
-------------- ------------- --------------
Gain (loss) from operations:
Reinsurance Operations 14,081 10,611
Group Insurance Operations 28,672 29,212 31,686
Property and Casualty Brokerage Operations 1,534 2,515 (19,911)
Real Estate Management (2,645) (4,037) (2,616)
-------------- ------------- --------------
Gain from discontinued operations before income
taxes 27,561 41,771 19,770
Income taxes 10,006 16,759 12,522
-------------- ------------- --------------
Gain from discontinued operations, net of taxes $ 17,555 $ 25,012 $ 7,248
-------------- ------------- --------------
</TABLE>
63
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED
LOSS ON DISPOSAL OF DISCONTINUED OPERATIONS DECEMBER 31, 1999
(IN THOUSANDS)
<S> <C>
(Loss) gain on disposal:
Reinsurance Operations $ (173,061)
Property and Casualty Brokerage Operations 40,131
Real Estate Management 5,870
-------------
Loss on disposal of discontinued operations before
income taxes (127,060)
Income taxes (55,076)
-------------
Loss on disposal of discontinued operations, net of
income taxes $ (71,984)
-------------
</TABLE>
12. PROPERTY, EQUIPMENT AND LEASEHOLD IMPROVEMENTS
Property, equipment and leasehold improvements, consisting primarily of
office buildings occupied by Phoenix, are stated at depreciated cost. Real
estate occupied by Phoenix was $101.7 million and $106.7 million at December
31, 1999 and 1998, respectively. 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 $182.3 million and $161.2 million at
December 31, 1999 and 1998, respectively.
Rental expenses for operating leases, principally with respect to buildings,
amounted to $16.3 million, $16.9 million and $16.9 million in 1999, 1998,
and 1997, respectively, for continuing operations. Future minimum rental
payments under non-cancelable operating leases for continuing operations
were approximately $40.2 million as of December 31, 1999, payable as
follows: 2000 - $13.5 million; 2001 - $10.5 million; 2002 - $7.3 million;
2003 - $5.1 million; 2004 - $2.8 million; and $1.0 million thereafter.
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. For direct
issues, the maximum of individual life insurance retained by Phoenix on any
one life is $8 million for single life and joint first-to-die policies and
to $10 million for joint last-to-die policies, with excess amounts ceded to
reinsurers. Phoenix reinsures 80% of the mortality risk on the inforce block
of the Confederation Life business acquired on December 31, 1997, and 90% of
the mortality risk on certain new issues of term and universal life
products. In addition, Phoenix entered into a separate reinsurance agreement
on October 1, 1998 to reinsure 80% of the mortality risk on a substantial
portion of its otherwise retained individual life insurance business. In
1999, Phoenix reinsured the mortality risk on the remaining 20% of this
business. Amounts recoverable from reinsurers are estimated in a manner
consistent with the claim liability associated with the reinsured policy.
64
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
Additional information on direct business written and reinsurance assumed
and ceded for the years ended December 31, was as follows:
<TABLE>
<CAPTION>
1999 1998 1997
(IN THOUSANDS)
<S> <C> <C> <C>
Direct premiums $ 1,762,359 $ 1,719,393 $ 1,592,800
Reinsurance assumed 416,194 505,262 329,927
Reinsurance ceded (537,847) (371,854) (282,121)
-------------- --------------- --------------
Net premiums 1,640,706 1,852,801 1,640,606
Less net premiums of discontinued operations (506,499) (698,071) (564,449)
-------------- --------------- --------------
Net premiums of continuing operations $ 1,134,207 $ 1,154,730 $ 1,076,157
============== =============== ==============
Direct policy and contract claims incurred $ 707,105 $ 728,062 $ 629,112
Reinsurance assumed 563,807 433,242 410,704
Reinsurance ceded (500,282) (407,780) (373,127)
-------------- --------------- --------------
Net policy and contract claims incurred 770,630 753,524 666,689
Less net incurred claims of discontinued operations (552,423) (471,688) (422,373)
-------------- --------------- --------------
Net policy and contract claims incurred
of continuing operations $ 218,207 $ 281,836 $ 244,316
============== =============== ==============
Direct life insurance in force $ 31,052,050 $ 121,442,041 $ 20,394,664
Reinsurance assumed 139,649,850 110,632,110 84,806,585
Reinsurance ceded (207,192,046) (135,817,986) (74,764,639)
-------------- --------------- --------------
Net insurance in force 63,509,854 96,256,165 30,436,610
Less insurance in force of discontinued operations (1,619,452) (24,330,166) (13,811,408)
-------------- --------------- --------------
Net insurance in force of continuing operations $ 61,890,402 $ 71,925,999 $ 16,625,202
============== =============== ==============
</TABLE>
Irrevocable letters of credit aggregating $36.2 million at December 31, 1999
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 66.9% and 72.3% of the face value
of total individual life insurance in force at December 31, 1999 and 1998,
respectively. The premiums on participating life insurance policies were
76.8%, 79.4% and 83.5% of total individual life insurance premiums in 1999,
1998, and 1997, respectively.
65
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
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>
1999 1998 1997
(IN THOUSANDS)
<S> <C> <C> <C>
Balance at beginning of year $ 1,049,934 $ 1,016,295 $ 908,616
Acquisition cost deferred 143,110 164,608 288,281
Amortized to expense during the year (146,603) (137,663) (102,617)
Adjustment to net unrealized investment
gains (losses) included in other
comprehensive income 260,287 6,694 (77,985)
----------------- ---------------- -----------------
Balance at end of year $ 1,306,728 $ 1,049,934 $ 1,016,295
================= ================ =================
</TABLE>
Amortized to expense during the year for 1999 includes a $6.3 million
adjustment due to worse than expected persistency in one of the variable
annuity product lines and a $6.9 million adjustment to traditional life due
to an adjustment to death claims used in determining DAC amortization.
16. MINORITY INTEREST
Phoenix's interests in Phoenix Investment Partners and PFG Holdings, through
its wholly-owned subsidiary PM Holdings, are represented by ownership of
approximately 60% and 67%, respectively, of the outstanding shares of common
stock at December 31, 1999. Earnings and equity attributable to minority
shareholders are included in minority interest in the consolidated financial
statements.
17. 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 consolidated 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 analysis 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.
66
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
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.
DERIVATIVE INSTRUMENTS
Phoenix's derivative instruments include interest rate swap, cap and floor
agreements, swaptions and foreign currency swap agreements. Fair values for
these contracts are based on current settlement values. These values are
based on brokerage quotes that utilize pricing models or formulas based upon
current assumptions for the respective agreements.
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 130 and 800 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.
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.
67
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTES PAYABLE
The fair value of notes payable is determined based on contractual cash
flows discounted at market rates.
FAIR VALUE SUMMARY
The estimated fair values of the financial instruments as of December 31,
were as follows:
<TABLE>
<CAPTION>
1999 1998
CARRYING FAIR CARRYING FAIR
VALUE VALUE VALUE VALUE
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Financial assets:
Cash and cash equivalents $ 187,610 $ 187,610 $ 115,187 $ 115,187
Short-term investments 133,367 133,367 185,983 185,983
Debt securities 7,496,948 7,400,067 7,712,865 7,796,389
Equity securities 461,613 461,613 301,649 301,649
Mortgage loans 716,831 680,569 797,343 831,919
Derivative instruments (13,211) 12,316
Policy loans 2,042,558 2,040,497 2,008,260 2,122,389
---------------- --------------- --------------- ----------------
Total financial assets $ 11,038,927 $ 10,890,512 $ 11,121,287 $ 11,365,832
================ =============== =============== ================
Financial liabilities:
Policy liabilities $ 709,696 $ 709,357 $ 783,400 $ 783,400
Notes payable 499,392 490,831 386,575 395,744
---------------- ---------------- ---------------- ----------------
Total financial liabilities $ 1,209,088 $ 1,200,188 $ 1,169,975 $ 1,179,144
================ =============== =============== ===============
</TABLE>
18. CONTINGENCIES
LITIGATION
Certain group personal accident reinsurance business has become the subject
of disputes concerning the placement of the business with reinsurers and the
recovery of the reinsurance (see Note 11 - "Discontinued Operations" and
Note 21 - "Subsequent Events")
19. 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. Except for the accounting policy involving
federal income taxes described next, there were no material practices not
prescribed by the State of New York Insurance Department (the Insurance
Department), as of December 31, 1999, 1998 and 1997. Phoenix's statutory
federal income tax liability is principally based on estimates of federal
income tax due. A deferred income tax liability has also been established
for estimated taxes on unrealized gains for common stock and venture capital
equity partnerships. Current New York law does not allow the recording of
deferred income taxes. Phoenix has received approval from the Insurance
Department for this practice.
68
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
Statutory surplus differs from equity reported in accordance with GAAP for
life insurance companies primarily because policy acquisition costs are
expensed when incurred, investment reserves are based on different
assumptions, surplus notes are not included in 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>
1999 1998 1997
(IN THOUSANDS)
<S> <C> <C> <C>
Statutory net income $ 131,286 $ 108,652 $ 66,599
Deferred policy acquisition costs, net (28,099) 18,538 48,821
Future policy benefits (23,686) (53,847) (9,145)
Pension and postretirement expenses (8,638) (17,334) (7,955)
Investment valuation allowances 15,141 107,229 87,920
Interest maintenance reserve (7,232) 1,415 17,544
Deferred income taxes 3,919 (39,983) (36,250)
Other, net 6,191 12,459 2,118
-------------- -------------- --------------
Net income, as reported $ 88,882 $ 137,129 $ 169,652
============== ============== ==============
</TABLE>
The following reconciles the statutory surplus and asset valuation reserve
(AVR) of Phoenix as reported to regulatory authorities to equity as reported
in these financial statements:
<TABLE>
<CAPTION>
DECEMBER 31,
1999 1998
(IN THOUSANDS)
<S> <C> <C>
Statutory surplus, surplus notes and AVR $ 1,427,333 $ 1,205,635
Deferred policy acquisition costs, net 1,231,217 1,259,316
Future policy benefits (478,184) (465,268)
Pension and postretirement expenses (193,007) (174,273)
Investment valuation allowances (206,531) 34,873
Interest maintenance reserve 24,767 35,303
Deferred income taxes 65,595 (25,593)
Surplus notes (159,444) (157,500)
Other, net 49,505 24,062
------------------ ------------------
Equity, as reported $ 1,761,251 $ 1,736,555
================== ==================
</TABLE>
The 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 Insurance Department to financial statements prepared in accordance with
generally accepted accounting principles in making such determinations.
69
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
20. PRIOR PERIOD ADJUSTMENTS
In 1999, Phoenix revised the accounting for venture capital partnerships to
include unrealized capital gains and losses on investments held in the
partnerships. These gains and losses are recorded in investment income.
Opening retained earnings at December 31, 1996 has been increased by $17.6
million. The consolidated balance sheet as of December 31, 1998 was revised
by increasing the following balances: other invested assets by $50.6
million, deferred income taxes by $17.7 million and retained earnings by
$32.9 million. The effect on the Consolidated Statement of Income,
Comprehensive Income and Equity was an increase in net income of $12.4
million and $2.9 million for the years ended 1998 and 1997, respectively.
In 1998, Phoenix revised the accounting for partnerships involved in
leveraged lease arrangements for 1997 and 1996. Opening retained earnings at
December 31, 1995 has been increased by $7.7 million. The Consolidated
Balance Sheet as of December 31, 1997 was revised by increasing the
following balances: other invested assets by $18.9 million, deferred income
taxes by $6.6 million and retained earnings by $12.3 million. The effect on
the Consolidated Statement of Income, Comprehensive Income and Equity was an
increase in net income of $2.1 million and $2.5 million for the years ended
1997 and 1996, respectively.
21. SUBSEQUENT EVENTS
OCCUPATIONAL ACCIDENT REINSURANCE
On January 21, 2000, Phoenix, in connection with its participation in the
Centaur facility, and two other companies completed a settlement agreement
with Reliance Insurance Company (Reliance) with respect to certain
reinsurance contracts covering occupational accident business reinsured by
Reliance as a Unicover-managed "facility." The Reliance business was the
largest portion of occupational accident reinsurance business underwritten
by Unicover. Under the terms of the settlement agreement, Phoenix ended the
contracts for a total payment of $115.0 million.
On January 13, 2000, Phoenix and four other companies, in connection with
their participation in the Unicover Pool, completed a settlement agreement
with EBI Indemnity Company and other affiliates of the Orion Group (EBI)
with respect to certain reinsurance contracts covering occupational accident
business which EBI ceded to the Unicover Pool. These contracts represented
the largest source of premium to the Unicover Pool. Under the terms of the
settlement agreement, the Unicover Pool members ended the contracts for a
total payment of $43.0 million, of which Phoenix's share was approximately
$10.0 million.
Phoenix included the cost of these settlements, net of reinsurance, in its
estimate of the loss on discontinued life reinsurance operations. See Note
11 - "Discontinued Operations."
70
<PAGE>
PHOENIX HOME LIFE
VARIABLE UNIVERSAL LIFE ACCOUNT
As of March 13, 2000, there had been no sales of the product described in this
prospectus and, therefore, no deposits were made to Phoenix Home Life Variable
Universal Life Account. Accordingly, no financial statements are available for
the VUL Account.
71
<PAGE>
APPENDIX A
GLOSSARY OF SPECIAL TERMS
- -------------------------------------------------------------------------------
The following is a list of terms and their meanings when used in this
prospectus.
ATTAINED AGE: The age of the insured on the birthday nearest the most recent
policy anniversary.
BENEFICIARY: The person or persons specified by the policyowner as entitled to
receive the death benefits under a policy.
DEBT: Outstanding loans against a policy, plus accrued interest.
FUNDS: The Phoenix Edge Series Fund, BT Insurance Funds Trust, Federated
Insurance Series, Morgan Stanley Dean Witter Universal Funds, Inc., Templeton
Variable Products Series Fund and Wanger Advisors Trust.
GENERAL ACCOUNT: The general asset account of Phoenix.
ISSUE PREMIUM: The premium payment made in connection with issuing the policy.
MONTHLY CALCULATION DAY: The first monthly calculation day is the same day as
the policy date. Subsequent monthly calculation days are the same day of each
month thereafter or, if such day does not fall within a given month, the last
day of that month will be the monthly calculation day.
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 a series'
holdings plus other assets, minus liabilities and then dividing the result by
the number of shares outstanding.
PAYMENT DATE: The valuation date on which we receive a premium payment or loan
repayment, unless it is received after the close of the New York Stock Exchange
("NYSE"), in which case it will be the next valuation date.
PLANNED ANNUAL PREMIUM: The premium amount that the policyowner agrees to pay
each policy year. It must be at least equal to the minimum required premium for
the face amount of insurance selected but may be no greater than the maximum
premium allowed for the face amount selected.
POLICY ANNIVERSARY: Each anniversary of the policy date.
POLICY DATE: The policy date as shown on the Schedule Page of the policy. It is
the date from which we measure policy years and policy anniversaries.
POLICY VALUE: The sum of a policy's share in the values of each subaccount of
the VUL Account plus the policy's share in the values of the GIA.
POLICY YEAR: The first policy year is the 1-year period from the policy date up
to, but not including, the first policy anniversary. Each succeeding policy year
is the 1-year period from the policy anniversary up to, but not including, the
next policy anniversary.
SERIES: A separate investment portfolio of the fund.
SUBACCOUNTS: Accounts within the VUL Account to which nonloaned assets under a
policy are allocated.
TARGET PREMIUM: The level annual premium at which the sales load is reduced on a
current basis.
VALUATION DATE: For any subaccount, each date on which we calculate the net
asset value of a fund.
VALUATION PERIOD: For any subaccount, the period in days from the end of one
valuation date through the next.
VUL ACCOUNT (ACCOUNT): Phoenix Home Life Variable Universal Life Account, a
separate account of the company.
72
<PAGE>
APPENDIX B
PERFORMANCE HISTORY
- -------------------------------------------------------------------------------
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, PREMIUM
TAX CHARGES, PREMIUM SALES CHARGES AND SURRENDER CHARGES, IF APPLICABLE. FOR
THIS INFORMATION SEE APPENDIX C "ILLUSTRATIONS OF DEATH BENEFITS, POLICY VALUES
("ACCOUNT VALUES") AND CASH SURRENDER VALUES." Performance information may be
expressed as yield and effective yield of the Phoenix-Goodwin Money Market
Subaccount, as yield of the Phoenix-Goodwin Multi-Sector Fixed Income Subaccount
and as total return of any subaccount. Current yield for the Phoenix-Goodwin
Money Market Subaccount will be based on the income earned by the subaccount
over a given 7-day period (less a hypothetical charge reflecting deductions for
expenses taken during the period) and then annualized, i.e., the income earned
in the period is assumed to be earned every 7 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 Phoenix-Goodwin 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
7-day period, which period will end on the date of the most recent financial
statements. The yield for the subaccount during this 7-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 Phoenix-Goodwin
Money Market Subaccount based on a 7-day period ending December 31, 1999.
Example:
Assumptions:
Value of hypothetical pre-existing account with exactly one
unit at the beginning of the period:................ 1.000000
Value of the same account (excluding capital changes) at the
end of the 7-day period:............................ 1.001003
Calculation:
Ending account value ............................... 1.001003
Less beginning account value ....................... 1.000000
Net change in account value ........................ 0.001003
Base period return:
(adjusted change/beginning account value) .......... 0.001003
Current yield = return x (365/7) = ................... 5.23%
Effective yield = [(1 + return)(365/7)] - 1 = ........ 5.37%
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 charges which
will be deducted on the VUL Account level.
For the Phoenix-Goodwin Multi-Sector Fixed Income 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 total return, it usually will be calculated
for one year, 5 years, and 10 years or since inception if the subaccount has not
been in existence for at least 10 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 Risk, Issue Expense and Monthly
Administrative Charges.
For those subaccounts within the VUL Account that have not been available
for one of the quoted periods, the average annual total return quotations will
show the investment performance such subaccount would have achieved (reduced by
the applicable charges) had it been available to invest in shares of the fund
for the period quoted.
The following performance tables display historical investment results of
the subaccounts of the VUL Account. This information may be useful in helping
potential investors in deciding which subaccounts to choose and in assessing the
competence of the investment advisors. The performance figures shown should be
considered in light of the investment objectives and policies, characteristics
and quality of the subaccounts and market conditions during the periods of time
quoted. The performance figures should not be considered as estimates or
predictions of future performance. Investment return of the subaccounts are not
guaranteed and will fluctuate. Below are quotations of average annual total
return calculated as described above for all subaccounts with at least one year
of results. POLICY CHARGES (INCLUDING COST OF INSURANCE, PREMIUM TAX CHARGES,
PREMIUM SALES CHARGES AND SURRENDER CHARGES) ARE NOT REFLECTED.
73
<PAGE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURN FOR THE PERIOD ENDED DECEMBER 31, 1999(1,3)
- -----------------------------------------------------------------------------------------------------------------------------------
SERIES INCEPTION DATE 1 YEAR 5 YEARS 10 YEARS SINCE INCEPTION
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Phoenix Research Enhanced Index Series..................... 7/15/97 17.71% N/A N/A 21.57%
- -----------------------------------------------------------------------------------------------------------------------------------
Phoenix-Aberdeen International Series...................... 5/1/90 28.27% 18.27% N/A 11.84%
- -----------------------------------------------------------------------------------------------------------------------------------
Phoenix-Aberdeen New Asia Series........................... 9/17/96 49.64% N/A N/A -1.91%
- -----------------------------------------------------------------------------------------------------------------------------------
Phoenix-Bankers Trust Dow 30 Series........................ 12/15/99 N/A N/A N/A 2.45%
- -----------------------------------------------------------------------------------------------------------------------------------
Phoenix-Duff & Phelps Real Estate Securities Series........ 5/1/95 3.74% N/A N/A 9.37%
- -----------------------------------------------------------------------------------------------------------------------------------
Phoenix-Engemann Capital Growth Series..................... 1/1/83 28.44% 23.58% 18.72% 19.29%
- -----------------------------------------------------------------------------------------------------------------------------------
Phoenix-Engemann Nifty Fifty Series........................ 3/2/98 30.93% N/A N/A 31.06%
- -----------------------------------------------------------------------------------------------------------------------------------
Phoenix-Federated U.S. Government Bond Series.............. 12/15/99 N/A N/A N/A -1.54%
- -----------------------------------------------------------------------------------------------------------------------------------
Phoenix-Goodwin Money Market Series........................ 10/10/82 3.79% 4.18% 4.09% 5.51%
- -----------------------------------------------------------------------------------------------------------------------------------
Phoenix-Goodwin Multi-Sector Fixed Income Series........... 1/1/83 4.42% 8.30% 8.11% 9.13%
- -----------------------------------------------------------------------------------------------------------------------------------
Phoenix-Hollister Value Equity Series...................... 3/2/98 23.13% N/A N/A 17.87%
- -----------------------------------------------------------------------------------------------------------------------------------
Phoenix-Janus Equity Income Series......................... 12/15/99 N/A N/A N/A 5.79%
- -----------------------------------------------------------------------------------------------------------------------------------
Phoenix-Janus Flexible Income Series....................... 12/15/99 N/A N/A N/A -0.04%
- -----------------------------------------------------------------------------------------------------------------------------------
Phoenix-Janus Growth Series................................ 12/15/99 N/A N/A N/A 5.93%
- -----------------------------------------------------------------------------------------------------------------------------------
Phoenix-Morgan Stanley Focus Equity Series................. 12/15/99 N/A N/A N/A 6.24%
- -----------------------------------------------------------------------------------------------------------------------------------
Phoenix-Oakhurst Balanced Series........................... 5/1/92 10.49% 15.42% N/A 11.58%
- -----------------------------------------------------------------------------------------------------------------------------------
Phoenix-Oakhurst Growth and Income Series.................. 3/2/98 15.89% N/A N/A 19.42%
- -----------------------------------------------------------------------------------------------------------------------------------
Phoenix-Oakhurst Strategic Allocation Series............... 9/17/84 10.18% 14.89% 12.36% 12.95%
- -----------------------------------------------------------------------------------------------------------------------------------
Phoenix-Schafer Mid-Cap Value Series....................... 3/2/98 -11.24% N/A N/A -12.82%
- -----------------------------------------------------------------------------------------------------------------------------------
Phoenix-Seneca Mid-Cap Growth Series....................... 3/2/98 44.23% N/A N/A 35.34%
- -----------------------------------------------------------------------------------------------------------------------------------
Phoenix-Seneca Strategic Theme Series...................... 1/29/96 53.61% N/A N/A 30.03%
- -----------------------------------------------------------------------------------------------------------------------------------
EAFE(R) Equity Index Fund.................................. 8/22/97 26.39% N/A N/A 15.91%
- -----------------------------------------------------------------------------------------------------------------------------------
Federated Fund for U.S. Government Securities II........... 3/28/94 -1.59% 4.69% N/A 4.39%
- -----------------------------------------------------------------------------------------------------------------------------------
Federated High Income Bond Fund II......................... 3/1/94 1.31% 9.56% N/A 7.27%
- -----------------------------------------------------------------------------------------------------------------------------------
Technology Portfolio....................................... 11/30/99 N/A N/A N/A 23.71%
- -----------------------------------------------------------------------------------------------------------------------------------
Mutual Shares Investments Fund-- Class 2(2)................ 5/1/98 8.25% N/A N/A 9.29%
- -----------------------------------------------------------------------------------------------------------------------------------
Templeton Asset Allocation Fund-- Class 2(2)............... 11/28/88 21.39% 15.85% 11.92% 12.04%
- -----------------------------------------------------------------------------------------------------------------------------------
Templeton Developing Markets Fund-- Class 2(2)............. 9/15/96 51.94% N/A N/A -5.53%
- -----------------------------------------------------------------------------------------------------------------------------------
Templeton International Fund-- Class 2(2).................. 5/1/92 22.07% 15.74% N/A 13.92%
- -----------------------------------------------------------------------------------------------------------------------------------
Templeton Stock Fund-- Class 2(2).......................... 11/4/88 27.58% 16.30% 12.41% 12.40%
- -----------------------------------------------------------------------------------------------------------------------------------
Wanger Foreign Forty....................................... 2/1/99 N/A N/A N/A 82.45%
- -----------------------------------------------------------------------------------------------------------------------------------
Wanger International Small Cap............................. 5/1/95 124.55% N/A N/A 37.64%
- -----------------------------------------------------------------------------------------------------------------------------------
Wanger Twenty.............................................. 2/1/99 N/A N/A N/A 33.04%
- -----------------------------------------------------------------------------------------------------------------------------------
Wanger U.S. Small Cap...................................... 5/1/95 23.88% N/A N/A 25.48%
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
1 Performance data quoted represents the investment return of the appropriate
series adjusted for Phoenix Executive Benefit charges had the subaccount
started on the inception date of the appropriate series.
2 Because Class 2 shares were not offered until May 1, 1997 (November 10, 1998
for Mutual Shares Investments), performance shown for periods prior to that
date represent the historical results of Class 1 shares. Performance since
that date reflect Class 2's high annual fees and expenses resulting from its
Rule 12b-1 plan. Maximum annual plan expenses are 0.25%.
3 Average annual total return is the annualized compounded return that results
from holding an initial investment of $10,000 for the time period indicated.
Returns are net of investment management fees, monthly administrative fees,
and the mortality and expense risk fees. The investment return and principal
value of the variable contract will fluctuate so that the accumulated value,
when redeemed, may be worth more or less than the original cost.
74
<PAGE>
Advertisements, sales literature and other communications may contain
information about any series' or Advisor's current investment strategies and
management style. Current strategies and style may change to respond to a
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.
Occasionally, The VUL Account may include in advertisements containing total
return, the ranking of those performance figures relating to such figures for
groups of subaccounts having similar investment objectives as categorized by
ranking services such as:
Lipper Analytical Services, Inc. Morningstar, Inc.
CDA Investment Technologies, Inc. Weisenberger Financial Services, 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 Advisor 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 Personal Investor
The funds may occasionally 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:
S&P 500 Dow Jones Industrial Average
Europe Australia Far East Index (EAFE) Consumers Price Index
Shearson Lehman Corporate Index Shearson Lehman T-Bond Index
The S&P 500 is a commonly quoted market value-weighted and unmanaged index
showing the changes in the aggregate market value of 500 common stocks relative
to the base period 1940-43. The S&P 500 is composed almost entirely of common
stocks of companies listed on the NYSE, although the common stocks of a few
companies listed on the American Stock Exchange or traded over the counter are
included. The 500 companies represented include 400 industrial, 60
transportation and 40 financial services concerns. The S&P 500 represents about
70-80% of the market value of all issues traded on the NYSE.
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.
75
<PAGE>
<TABLE>
<CAPTION>
ANNUAL TOTAL RETURN(1,3)
- -------------------------------------------- ------- ------- ------ ------- ------- ------- ------ ------- ------- ------- ------
Series 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993
- -------------------------------------------- ------- ------- ------ ------- ------- ------- ------ ------- ------- ------- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Phoenix Research Enhanced Index N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A
- ---------------------------------------------------------------------------------------------------------------------------------
Phoenix-Aberdeen International N/A N/A N/A N/A N/A N/A N/A N/A 19.74% -12.83% 38.46%
- ---------------------------------------------------------------------------------------------------------------------------------
Phoenix-Aberdeen New Asia N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A
- ---------------------------------------------------------------------------------------------------------------------------------
Phoenix-Bankers Trust Dow 30 N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A
- ---------------------------------------------------------------------------------------------------------------------------------
Phoenix-Duff & Phelps Real Estate N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A
Securities
- ---------------------------------------------------------------------------------------------------------------------------------
Phoenix-Engemann Capital Growth 32.89% 10.67% 34.92% 20.47% 6.93% 3.92% 36.19% 4.05% 42.75% 10.30% 19.71%
- ---------------------------------------------------------------------------------------------------------------------------------
Phoenix-Engemann Nifty Fifty Series N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A
- ---------------------------------------------------------------------------------------------------------------------------------
Phoenix-Federated U.S. Government Bond N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A
- ---------------------------------------------------------------------------------------------------------------------------------
Phoenix-Goodwin Money Market 8.37% 10.23% 8.03% 6.51% 6.51% 7.45% 9.20% 8.22% 5.98% 3.58% 2.88%
- ---------------------------------------------------------------------------------------------------------------------------------
Phoenix-Goodwin Multi-Sector Fixed Income 6.00% 11.35% 20.61% 19.29% 1.08% 10.49% 8.24% 5.22% 19.59% 10.08% 15.92%
- ---------------------------------------------------------------------------------------------------------------------------------
Phoenix-Hollister Value Equity N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A
- ---------------------------------------------------------------------------------------------------------------------------------
Phoenix-Janus Equity Income N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A
- ---------------------------------------------------------------------------------------------------------------------------------
Phoenix-Janus Flexible Income N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A
- ---------------------------------------------------------------------------------------------------------------------------------
Phoenix-Janus Growth N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A
- ---------------------------------------------------------------------------------------------------------------------------------
Phoenix-Morgan Stanley Focus Equity N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A
- ---------------------------------------------------------------------------------------------------------------------------------
Phoenix-Oakhurst Balanced N/A N/A N/A N/A N/A N/A N/A N/A N/A 9.63% 8.61%
- ---------------------------------------------------------------------------------------------------------------------------------
Phoenix-Oakhurst Growth and Income N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A
- ---------------------------------------------------------------------------------------------------------------------------------
Phoenix-Oakhurst Strategic Allocation N/A N/A 27.34% 15.69% 12.56% 2.34% 19.90% 5.77% 29.32% 10.66% 11.01%
- ---------------------------------------------------------------------------------------------------------------------------------
Phoenix-Schafer Mid-Cap Value N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A
- ---------------------------------------------------------------------------------------------------------------------------------
Phoenix-Seneca Mid-Cap Growth N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A
- ---------------------------------------------------------------------------------------------------------------------------------
Phoenix-Seneca Strategic Theme N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A
- ---------------------------------------------------------------------------------------------------------------------------------
EAFE(R) Equity Index Fund N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A
- ---------------------------------------------------------------------------------------------------------------------------------
Federated Fund for U.S. Government N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A
Securities II
- ---------------------------------------------------------------------------------------------------------------------------------
Federated High Income Bond Fund II N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A
- ---------------------------------------------------------------------------------------------------------------------------------
Technology Portfolio N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A
- ---------------------------------------------------------------------------------------------------------------------------------
Mutual Shares Investments Fund-- Class 2(2) N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A
- ---------------------------------------------------------------------------------------------------------------------------------
Templeton Asset Allocation Fund-- Class 2(2) N/A N/A N/A N/A N/A N/A 13.03% -8.21% 27.44% 7.83% 25.87%
- ---------------------------------------------------------------------------------------------------------------------------------
Templeton Developing Markets Fund-- Class N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A
2(2)
- ---------------------------------------------------------------------------------------------------------------------------------
Templeton International Fund-- Class 2(2) N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A 46.47%
- ---------------------------------------------------------------------------------------------------------------------------------
Templeton Stock Fund-- Class 2(2) N/A N/A N/A N/A N/A N/A 14.39% -11.28% 27.23% 6.87% 33.74%
- ---------------------------------------------------------------------------------------------------------------------------------
Wanger Foreign Forty N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A
- ---------------------------------------------------------------------------------------------------------------------------------
Wanger International Small Cap N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A
- ---------------------------------------------------------------------------------------------------------------------------------
Wanger Twenty N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A
- ---------------------------------------------------------------------------------------------------------------------------------
Wanger US Small Cap N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
ANNUAL TOTAL RETURN(1,3)
- -------------------------------------------- - ------- ------- ------- ------ ------- -------
Series 1994 1995 1996 1997 1998 1999
- -------------------------------------------- - ------- ------- ------- ------ ------- -------
<S> <C> <C> <C> <C> <C> <C>
Phoenix Research Enhanced Index N/A N/A N/A N/A 31.69% 18.83%
- ---------------------------------------------------------------------------------------------
Phoenix-Aberdeen International 0.06% 9.59% 18.66% 12.05% 27.94% 29.51%
- ---------------------------------------------------------------------------------------------
Phoenix-Aberdeen New Asia N/A N/A N/A -32.41% -4.45% 50.98%
- ---------------------------------------------------------------------------------------------
Phoenix-Bankers Trust Dow 30 N/A N/A N/A N/A N/A N/A
- ---------------------------------------------------------------------------------------------
Phoenix-Duff & Phelps Real Estate N/A N/A 33.13% 22.07% -21.20% 4.78%
Securities
- ---------------------------------------------------------------------------------------------
Phoenix-Engemann Capital Growth 1.46% 30.89% 12.59% 21.09% 30.02% 29.68%
- ---------------------------------------------------------------------------------------------
Phoenix-Engemann Nifty Fifty Series N/A N/A N/A N/A N/A 32.16%
- ---------------------------------------------------------------------------------------------
Phoenix-Federated U.S. Government Bond N/A N/A N/A N/A N/A N/A
- ---------------------------------------------------------------------------------------------
Phoenix-Goodwin Money Market 3.84% 5.70% 5.03% 5.19% 5.10% 4.82%
- ---------------------------------------------------------------------------------------------
Phoenix-Goodwin Multi-Sector Fixed Income -5.49% 23.54% 12.43% 11.09% -4.15% 5.46%
- ---------------------------------------------------------------------------------------------
Phoenix-Hollister Value Equity N/A N/A N/A N/A N/A 24.34%
- ---------------------------------------------------------------------------------------------
Phoenix-Janus Equity Income N/A N/A N/A N/A N/A N/A
- ---------------------------------------------------------------------------------------------
Phoenix-Janus Flexible Income N/A N/A N/A N/A N/A N/A
- ---------------------------------------------------------------------------------------------
Phoenix-Janus Growth N/A N/A N/A N/A N/A N/A
- ---------------------------------------------------------------------------------------------
Phoenix-Morgan Stanley Focus Equity N/A N/A N/A N/A N/A N/A
- ---------------------------------------------------------------------------------------------
Phoenix-Oakhurst Balanced -2.84% 23.35% 10.57% 17.94% 19.02% 11.58%
- ---------------------------------------------------------------------------------------------
Phoenix-Oakhurst Growth and Income N/A N/A N/A N/A N/A 17.02%
- ---------------------------------------------------------------------------------------------
Phoenix-Oakhurst Strategic Allocation -1.41% 18.20% 9.06% 20.74% 20.80% 11.27%
- ---------------------------------------------------------------------------------------------
Phoenix-Schafer Mid-Cap Value N/A N/A N/A N/A N/A -10.29%
- ---------------------------------------------------------------------------------------------
Phoenix-Seneca Mid-Cap Growth N/A N/A N/A N/A N/A 45.65%
- ---------------------------------------------------------------------------------------------
Phoenix-Seneca Strategic Theme N/A N/A N/A 17.17% 44.72% 55.01%
- ---------------------------------------------------------------------------------------------
EAFE(R) Equity Index Fund N/A N/A N/A N/A 21.60% 27.61%
- ---------------------------------------------------------------------------------------------
Federated Fund for U.S. Government N/A 20.38% 14.31% 13.83% 2.70% 2.32%
Securities II
- ---------------------------------------------------------------------------------------------
Federated High Income Bond Fund II N/A 8.77% 4.20% 8.58% 7.66% -0.59%
- ---------------------------------------------------------------------------------------------
Technology Portfolio N/A N/A N/A N/A N/A N/A
- ---------------------------------------------------------------------------------------------
Mutual Shares Investments Fund-- Class 2(2) N/A N/A N/A N/A N/A 9.30%
- ---------------------------------------------------------------------------------------------
Templeton Asset Allocation Fund-- Class 2(2) -3.23% 22.26% 18.59% 15.27% 6.10% 22.55%
- ---------------------------------------------------------------------------------------------
Templeton Developing Markets Fund-- Class N/A N/A N/A -29.39%-21.04% 53.30%
2(2)
- ---------------------------------------------------------------------------------------------
Templeton International Fund-- Class 2(2) -2.86% 15.05% 23.30% 13.51% 9.08% 23.25%
- ---------------------------------------------------------------------------------------------
Templeton Stock Fund-- Class 2(2) -2.47% 24.96% 22.15% 11.60% 0.98% 28.80%
- ---------------------------------------------------------------------------------------------
Wanger Foreign Forty N/A N/A N/A N/A N/A N/A
- ---------------------------------------------------------------------------------------------
Wanger International Small Cap N/A N/A 32.04% -1.46% 16.34% 126.50%
- ---------------------------------------------------------------------------------------------
Wanger Twenty N/A N/A N/A N/A N/A N/A
- ---------------------------------------------------------------------------------------------
Wanger US Small Cap N/A N/A 46.63% 29.43% 8.69% 25.08%
- ---------------------------------------------------------------------------------------------
</TABLE>
1 Returns are net of the investment management fees of the Phoenix Executive
Benefit subaccounts. Percent change does not include the effect of the
monthly administrative fees, or mortality and expense risk fees.
2 Because Class 2 shares were not offered until May 1, 1997 (November 10, 1998
for Mutual Shares Investments), performance shown for periods prior to that
date represent the historical results of Class 1 shares. Performance since
that date reflect Class 2's high annual fees and expenses resulting from its
Rule 12b-1 plan. Maximum annual plan expenses are 0.25%.
3 Performance data quoted represents the investment return of the appropriate
series adjusted for Phoenix Executive Benefit charges had the subaccount
started on the inception date of the appropriate series.
THESE RATES OF RETURN ARE NOT AN ESTIMATE OR GUARANTEE OF FUTURE PERFORMANCE.
76
<PAGE>
APPENDIX C
ILLUSTRATIONS OF DEATH BENEFITS, POLICY VALUES ("ACCOUNT VALUES") AND
CASH SURRENDER VALUES
- -------------------------------------------------------------------------------
The tables on the following pages illustrate how a policy's death benefits,
account values and cash surrender value could vary over time assuming constant
hypothetical gross (after tax) annual investment returns of 0%, 6% and 12%. The
policy 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 policy benefits
also will differ, depending on your premium 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 are nonsmokers. 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 are nonsmokers. Account values
and cash surrender values may be lower for risk classes involving higher
mortality risk. Planned premium payments are assumed to be paid at the beginning
of each policy year.
The death benefit, account value and cash surrender value amounts reflect
the following current and guaranteed charges:
1. A current sales charge of 5.0% of premiums up to the target premium
and 0% on amounts in excess of the target premium in policy years 1-7
and 0% of all premiums in policy years 8+. A guaranteed sales charge
of 5.0% of premiums in policy years 1-7 and 2.0% of all premiums in
years 8+. See "Charges under the Policy" table.
2. Monthly administrative charge of $5 per month ($10 per month
guaranteed maximum in all states except New York. In New York
guaranteed maximum is $7.50 per month). See "Charges under the
Policy" table.
3. An average premium tax charge of 2.25%.
4. A federal tax charge of 1.5%.
5. 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 under the Policy" table.
6. Mortality and expense risk charge, which is a monthly charge
equivalent to .40% on an annual basis (or .25% on an annual basis
after the 10th policy year) of your policy value. Guaranteed maximum
mortality and expenses risk charge is .90% annually in all policy
years. See "Charges under the Policy" table.
These illustrations also assume an average investment advisory fee of .70%
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 .30%. All other fund expenses, except capital items such as
brokerage commissions, are paid by the Advisor 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, 1999,
average total operating expenses for the series would have been approximately
.97% of the average net assets.
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 -1.00%, 5.00% and 11.00%, 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.
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 cash surrender value, that cash surrender
value may be low in comparison to the amount of the premiums accumulated with
interest. Thus, the cost of owning a policy for a relatively short time may be
high.
On request, we will furnish the policyowner 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.
77
<PAGE>
<TABLE>
<CAPTION>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY PAGE 1 OF 2
FACE AMOUNT: $100,000
MALE 35 ADVANTAGE SELECT INITIAL ANNUAL PREMIUM: $1,000
PHOENIX EXECUTIVE BENEFIT--A FLEXIBLE PREMIUM VARIABLE UNIVERSAL LIFE INSURANCE POLICY OPTION 1
ASSUMING CURRENT CHARGES
CASH CASH CASH
ASSUMED PREMIUM ACCOUNT SURRENDER DEATH ACCOUNT SURRENDER DEATH ACCOUNT SURRENDER DEATH
PREMIUM ACCUM. VALUE VALUE BENEFIT VALUE VALUE BENEFIT VALUE VALUE BENEFIT
YEAR PAYMENTS @5.0% @0% @0% @0% @6% @6% @6% @12% @12% @12%
-------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 1,000 1,050 760 810 100,000 810 860 100,000 860 910 100,000
2 1,000 2,153 1,506 1,539 100,000 1,653 1,687 100,000 1,807 1,840 100,000
3 1,000 3,310 2,238 2,255 100,000 2,532 2,549 100,000 2,851 2,868 100,000
4 1,000 4,526 2,955 2,955 100,000 3,447 3,447 100,000 4,001 4,001 100,000
5 1,000 5,802 3,657 3,657 100,000 4,398 4,398 100,000 5,267 5,267 100,000
6 1,000 7,142 4,343 4,343 100,000 5,387 5,387 100,000 6,661 6,661 100,000
7 1,000 8,549 5,011 5,011 100,000 6,412 6,412 100,000 8,193 8,193 100,000
8 1,000 10,027 5,708 5,708 100,000 7,526 7,526 100,000 9,934 9,934 100,000
9 1,000 11,578 6,383 6,383 100,000 8,680 8,680 100,000 11,847 11,847 100,000
10 1,000 13,207 7,034 7,034 100,000 9,873 9,873 100,000 13,950 13,950 100,000
11 1,000 14,917 7,708 7,708 100,000 11,158 11,158 100,000 16,322 16,322 100,000
12 1,000 16,713 8,358 8,358 100,000 12,490 12,490 100,000 18,936 18,936 100,000
13 1,000 18,599 8,984 8,984 100,000 13,871 13,871 100,000 21,820 21,820 100,000
14 1,000 20,579 9,585 9,585 100,000 15,301 15,301 100,000 25,002 25,002 100,000
15 1,000 22,657 10,159 10,159 100,000 16,783 16,783 100,000 28,514 28,514 100,000
16 1,000 24,840 10,706 10,706 100,000 18,319 18,319 100,000 32,395 32,395 100,000
17 1,000 27,132 11,226 11,226 100,000 19,910 19,910 100,000 36,684 36,684 100,000
18 1,000 29,539 11,715 11,715 100,000 21,558 21,558 100,000 41,428 41,428 100,000
19 1,000 32,066 12,173 12,173 100,000 23,265 23,265 100,000 46,673 46,673 105,948
20 1,000 34,719 12,597 12,597 100,000 25,033 25,033 100,000 52,448 52,448 115,911
@ 65 1,000 69,761 14,074 14,074 100,000 49,047 49,047 100,000 169,394 169,394 281,194
</TABLE>
Based on 0% interest rate and guaranteed charges, the policy will lapse in year
29.
Death benefit, account value and cash surrender value are based on hypothetical
gross interest rates shown, assume current and guaranteed charges and no policy
loans or withdrawals, and are calculated at the end of the policy year. Assumed
Premium Payments shown are assumed paid in full at the beginning of the policy
year. Payment of premiums shown other than in full at the beginning of the
policy year would reduce values and benefits below the hypothetical illustrated
amounts shown. Values shown reflect an effective annual asset charge of 1.00%
(includes average fund operating expenses of 0.30% applicable to the investment
subaccounts of the VUL Account). Hypothetical gross interest rates are presented
for illustrative purposes only to illustrate funds allocated entirely to the
investment subaccounts of the VUL 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. A GIA providing interest at
a minimum guaranteed rate of 3% also is available under this product through the
General Account.
This illustration assumes a premium tax of 2.25%.
78
<PAGE>
<TABLE>
<CAPTION>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY PAGE 2 OF 2
FACE AMOUNT: $100,000
MALE 35 ADVANTAGE SELECT INITIAL ANNUAL PREMIUM: $1,000
PHOENIX EXECUTIVE BENEFIT--A FLEXIBLE PREMIUM VARIABLE UNIVERSAL LIFE INSURANCE POLICY OPTION 1
ASSUMING GUARANTEED CHARGES
CASH CASH CASH
ASSUMED PREMIUM ACCOUNT SURRENDER DEATH ACCOUNT SURRENDER DEATH ACCOUNT SURRENDER DEATH
PREMIUM ACCUM. VALUE VALUE BENEFIT VALUE VALUE BENEFIT VALUE VALUE BENEFIT
YEAR PAYMENTS @5.0% @0% @0% @0% @6% @6% @6% @12% @12% @12%
-------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 1,000 1,050 573 623 100,000 617 667 100,000 661 711 100,000
2 1,000 2,153 1,126 1,159 100,000 1,250 1,283 100,000 1,379 1,413 100,000
3 1,000 3,310 1,657 1,674 100,000 1,897 1,914 100,000 2,159 2,176 100,000
4 1,000 4,526 2,165 2,165 100,000 2,558 2,558 100,000 3,005 3,005 100,000
5 1,000 5,802 2,646 2,646 100,000 3,230 3,230 100,000 3,921 3,921 100,000
6 1,000 7,142 3,100 3,100 100,000 3,912 3,912 100,000 4,913 4,913 100,000
7 1,000 8,549 3,523 3,523 100,000 4,602 4,602 100,000 5,986 5,986 100,000
8 1,000 10,027 3,935 3,935 100,000 5,320 5,320 100,000 7,173 7,173 100,000
9 1,000 11,578 4,314 4,314 100,000 6,043 6,043 100,000 8,459 8,459 100,000
10 1,000 13,207 4,659 4,659 100,000 6,772 6,772 100,000 9,855 9,855 100,000
11 1,000 14,917 4,974 4,974 100,000 7,515 7,515 100,000 11,390 11,390 100,000
12 1,000 16,713 5,252 5,252 100,000 8,262 8,262 100,000 13,062 13,062 100,000
13 1,000 18,599 5,491 5,491 100,000 9,011 9,011 100,000 14,886 14,886 100,000
14 1,000 20,579 5,688 5,688 100,000 9,761 9,761 100,000 16,880 16,880 100,000
15 1,000 22,657 5,840 5,840 100,000 10,507 10,507 100,000 19,059 19,059 100,000
16 1,000 24,840 5,945 5,945 100,000 11,248 11,248 100,000 21,445 21,445 100,000
17 1,000 27,132 5,993 5,993 100,000 11,976 11,976 100,000 24,056 24,056 100,000
18 1,000 29,539 5,980 5,980 100,000 12,684 12,684 100,000 26,916 26,916 100,000
19 1,000 32,066 5,897 5,897 100,000 13,365 13,365 100,000 30,052 30,052 100,000
20 1,000 34,719 5,735 5,735 100,000 14,010 14,010 100,000 33,493 33,493 100,000
@ 65 1,000 69,761 -- -- -- 15,866 15,866 100,000 92,905 92,905 157,939
</TABLE>
Based on 0% interest rate and guaranteed charges, the policy will lapse in year
29.
Death benefit, account value and cash surrender value are based on hypothetical
gross interest rates shown, assume current and guaranteed charges and no policy
loans or withdrawals, and are calculated at the end of the policy year. Assumed
Premium Payments shown are assumed paid in full at the beginning of the policy
year. Payment of premiums shown other than in full at the beginning of the
policy year would reduce values and benefits below the hypothetical illustrated
amounts shown. Values shown reflect an effective annual asset charge of 1.00%
(includes average fund operating expenses of 0.30% applicable to the investment
subaccounts of the VUL Account). Hypothetical gross interest rates are presented
for illustrative purposes only to illustrate funds allocated entirely to the
investment subaccounts of the VUL 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. A GIA providing interest at
a minimum guaranteed rate of 3% also is available under this product through the
General Account.
This illustration assumes a premium tax of 2.25%.
79
<PAGE>
<TABLE>
<CAPTION>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY PAGE 1 OF 2
FACE AMOUNT: $100,000
FEMALE 35 ADVANTAGE SELECT INITIAL ANNUAL PREMIUM: $1,000
PHOENIX EXECUTIVE BENEFIT--A FLEXIBLE PREMIUM VARIABLE UNIVERSAL LIFE INSURANCE POLICY OPTION 1
ASSUMING CURRENT CHARGES
CASH CASH CASH
ASSUMED PREMIUM ACCOUNT SURRENDER DEATH ACCOUNT SURRENDER DEATH ACCOUNT SURRENDER DEATH
PREMIUM ACCUM. VALUE VALUE BENEFIT VALUE VALUE BENEFIT VALUE VALUE BENEFIT
YEAR PAYMENTS @5.0% @0% @0% @0% @6% @6% @6% @12% @12% @12%
-------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 1,000 1,050 787 837 100,000 838 888 100,000 889 939 100,000
2 1,000 2,153 1,559 1,592 100,000 1,710 1,743 100,000 1,867 1,901 100,000
3 1,000 3,310 2,314 2,331 100,000 2,616 2,633 100,000 2,943 2,960 100,000
4 1,000 4,526 3,053 3,053 100,000 3,558 3,558 100,000 4,126 4,126 100,000
5 1,000 5,802 3,774 3,774 100,000 4,534 4,534 100,000 5,426 5,426 100,000
6 1,000 7,142 4,476 4,476 100,000 5,547 5,547 100,000 6,855 6,855 100,000
7 1,000 8,549 5,158 5,158 100,000 6,597 6,597 100,000 8,426 8,426 100,000
8 1,000 10,027 5,870 5,870 100,000 7,737 7,737 100,000 10,208 10,208 100,000
9 1,000 11,578 6,561 6,561 100,000 8,919 8,919 100,000 12,169 12,169 100,000
10 1,000 13,207 7,233 7,233 100,000 10,147 10,147 100,000 14,330 14,330 100,000
11 1,000 14,917 7,926 7,926 100,000 11,467 11,467 100,000 16,764 16,764 100,000
12 1,000 16,713 8,602 8,602 100,000 12,842 12,842 100,000 19,453 19,453 100,000
13 1,000 18,599 9,261 9,261 100,000 14,274 14,274 100,000 22,426 22,426 100,000
14 1,000 20,579 9,903 9,903 100,000 15,767 15,767 100,000 25,713 25,713 100,000
15 1,000 22,657 10,527 10,527 100,000 17,324 17,324 100,000 29,350 29,350 100,000
16 1,000 24,840 11,133 11,133 100,000 18,946 18,946 100,000 33,373 33,373 100,000
17 1,000 27,132 11,720 11,720 100,000 20,635 20,635 100,000 37,826 37,826 100,000
18 1,000 29,539 12,287 12,287 100,000 22,396 22,396 100,000 42,756 42,756 100,050
19 1,000 32,066 12,833 12,833 100,000 24,230 24,230 100,000 48,207 48,207 109,430
20 1,000 34,719 13,356 13,356 100,000 26,140 26,140 100,000 54,219 54,219 119,824
@ 65 1,000 69,761 17,232 17,232 100,000 53,230 53,230 100,000 178,723 178,723 296,681
</TABLE>
Based on 0% interest rate and guaranteed charges, the policy will lapse in year
36.
Death benefit, account value and cash surrender value are based on hypothetical
gross interest rates shown, assume current and guaranteed charges and no policy
loans or withdrawals, and are calculated at the end of the policy year. Assumed
Premium Payments shown are assumed paid in full at the beginning of the policy
year. Payment of premiums shown other than in full at the beginning of the
policy year would reduce values and benefits below the hypothetical illustrated
amounts shown. Values shown reflect an effective annual asset charge of 1.00%
(includes average fund operating expenses of 0.30% applicable to the investment
subaccounts of the VUL Account). Hypothetical gross interest rates are presented
for illustrative purposes only to illustrate funds allocated entirely to the
investment subaccounts of the VUL 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. A GIA providing interest at
a minimum guaranteed rate of 3% also is available under this product through the
General Account.
This illustration assumes a premium tax of 2.25%.
80
<PAGE>
<TABLE>
<CAPTION>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY PAGE 2 OF 2
FACE AMOUNT: $100,000
FEMALE 35 ADVANTAGE SELECT INITIAL ANNUAL PREMIUM: $1,000
PHOENIX EXECUTIVE BENEFIT--A FLEXIBLE PREMIUM VARIABLE UNIVERSAL LIFE INSURANCE POLICY OPTION 1
ASSUMING GUARANTEED CHARGES
CASH CASH CASH
ASSUMED PREMIUM ACCOUNT SURRENDER DEATH ACCOUNT SURRENDER DEATH ACCOUNT SURRENDER DEATH
PREMIUM ACCUM. VALUE VALUE BENEFIT VALUE VALUE BENEFIT VALUE VALUE BENEFIT
YEAR PAYMENTS @5.0% @0% @0% @0% @6% @6% @6% @12% @12% @12%
-------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 1,000 1,050 618 668 100,000 664 714 100,000 709 759 100,000
2 1,000 2,153 1,218 1,251 100,000 1,347 1,381 100,000 1,483 1,516 100,000
3 1,000 3,310 1,798 1,814 100,000 2,051 2,068 100,000 2,327 2,343 100,000
4 1,000 4,526 2,356 2,356 100,000 2,773 2,773 100,000 3,246 3,246 100,000
5 1,000 5,802 2,890 2,890 100,000 3,512 3,512 100,000 4,246 4,246 100,000
6 1,000 7,142 3,399 3,399 100,000 4,267 4,267 100,000 5,333 5,333 100,000
7 1,000 8,549 3,881 3,881 100,000 5,037 5,037 100,000 6,517 6,517 100,000
8 1,000 10,027 4,355 4,355 100,000 5,843 5,843 100,000 7,829 7,829 100,000
9 1,000 11,578 4,803 4,803 100,000 6,667 6,667 100,000 9,263 9,263 100,000
10 1,000 13,207 5,225 5,225 100,000 7,510 7,510 100,000 10,830 10,830 100,000
11 1,000 14,917 5,629 5,629 100,000 8,385 8,385 100,000 12,566 12,566 100,000
12 1,000 16,713 6,006 6,006 100,000 9,283 9,283 100,000 14,474 14,474 100,000
13 1,000 18,599 6,357 6,357 100,000 10,203 10,203 100,000 16,571 16,571 100,000
14 1,000 20,579 6,680 6,680 100,000 11,145 11,145 100,000 18,878 18,878 100,000
15 1,000 22,657 6,971 6,971 100,000 12,109 12,109 100,000 21,419 21,419 100,000
16 1,000 24,840 7,231 7,231 100,000 13,094 13,094 100,000 24,218 24,218 100,000
17 1,000 27,132 7,456 7,456 100,000 14,099 14,099 100,000 27,305 27,305 100,000
18 1,000 29,539 7,643 7,643 100,000 15,124 15,124 100,000 30,713 30,713 100,000
19 1,000 32,066 7,789 7,789 100,000 16,165 16,165 100,000 34,475 34,475 100,000
20 1,000 34,719 7,891 7,891 100,000 17,222 17,222 100,000 38,635 38,635 100,000
@ 65 1,000 69,761 5,543 5,543 100,000 30,019 30,019 100,000 123,983 123,983 205,663
</TABLE>
Based on 0% interest rate and guaranteed charges, the policy will lapse in year
36.
Death benefit, account value and cash surrender value are based on hypothetical
gross interest rates shown, assume current and guaranteed charges and no policy
loans or withdrawals, and are calculated at the end of the policy year. Assumed
Premium Payments shown are assumed paid in full at the beginning of the policy
year. Payment of premiums shown other than in full at the beginning of the
policy year would reduce values and benefits below the hypothetical illustrated
amounts shown. Values shown reflect an effective annual asset charge of 1.00%
(includes average fund operating expenses of 0.30% applicable to the investment
subaccounts of the VUL Account). Hypothetical gross interest rates are presented
for illustrative purposes only to illustrate funds allocated entirely to the
investment subaccounts of the VUL 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. A GIA providing interest at
a minimum guaranteed rate of 3% also is available under this product through the
General Account.
This illustration assumes a premium tax of 2.25%.
81
<PAGE>
<TABLE>
<CAPTION>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY PAGE 1 OF 2
FACE AMOUNT: $100,000
MALE 35 ADVANTAGE SELECT INITIAL ANNUAL PREMIUM: $1,000
PHOENIX EXECUTIVE BENEFIT--A FLEXIBLE PREMIUM VARIABLE UNIVERSAL LIFE INSURANCE POLICY OPTION 2
ASSUMING CURRENT CHARGES
CASH CASH CASH
ASSUMED PREMIUM ACCOUNT SURRENDER DEATH ACCOUNT SURRENDER DEATH ACCOUNT SURRENDER DEATH
PREMIUM ACCUM. VALUE VALUE BENEFIT VALUE VALUE BENEFIT VALUE VALUE BENEFIT
YEAR PAYMENTS @5.0% @0% @0% @0% @6% @6% @6% @12% @12% @12%
-------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 1,000 1,050 759 809 100,760 809 859 100,810 859 909 100,860
2 1,000 2,153 1,504 1,537 101,505 1,651 1,684 101,652 1,805 1,838 101,806
3 1,000 3,310 2,234 2,251 102,235 2,528 2,544 102,528 2,846 2,863 102,847
4 1,000 4,526 2,949 2,949 102,949 3,439 3,439 103,440 3,991 3,991 103,992
5 1,000 5,802 3,647 3,647 103,648 4,385 4,385 104,386 5,251 5,251 105,252
6 1,000 7,142 4,328 4,328 104,329 5,367 5,367 105,368 6,635 6,635 106,636
7 1,000 8,549 4,989 4,989 104,990 6,384 6,384 106,384 8,155 8,155 108,156
8 1,000 10,027 5,679 5,679 105,680 7,487 7,487 107,488 9,879 9,879 109,879
9 1,000 11,578 6,346 6,346 106,347 8,626 8,626 108,627 11,769 11,769 111,770
10 1,000 13,207 6,986 6,986 106,987 9,801 9,801 109,802 13,841 13,841 113,842
11 1,000 14,917 7,649 7,649 107,650 11,066 11,066 111,068 16,178 16,178 116,179
12 1,000 16,713 8,286 8,286 108,287 12,374 12,374 112,374 18,747 18,747 118,748
13 1,000 18,599 8,897 8,897 108,898 13,724 13,724 113,725 21,571 21,571 121,571
14 1,000 20,579 9,480 9,480 109,481 15,117 15,117 115,118 24,676 24,676 124,677
15 1,000 22,657 10,033 10,033 110,034 16,553 16,553 116,554 28,090 28,090 128,091
16 1,000 24,840 10,555 10,555 110,556 18,033 18,033 118,033 31,846 31,846 131,847
17 1,000 27,132 11,046 11,046 111,047 19,556 19,556 119,557 35,977 35,977 135,977
18 1,000 29,539 11,502 11,502 111,503 21,122 21,122 121,123 40,520 40,520 140,521
19 1,000 32,066 11,921 11,921 111,922 22,731 22,731 122,732 45,519 45,519 145,519
20 1,000 34,719 12,302 12,302 112,303 24,382 24,382 124,383 51,017 51,017 151,018
@ 65 1,000 69,761 12,779 12,779 112,780 44,393 44,393 144,394 163,040 163,040 270,647
</TABLE>
Based on 0% interest rate and guaranteed charges, the policy will lapse in year
28.
Death benefit, account value and cash surrender value are based on hypothetical
gross interest rates shown, assume current and guaranteed charges and no policy
loans or withdrawals, and are calculated at the end of the policy year. Assumed
Premium Payments shown are assumed paid in full at the beginning of the policy
year. Payment of premiums shown other than in full at the beginning of the
policy year would reduce values and benefits below the hypothetical illustrated
amounts shown. Values shown reflect an effective annual asset charge of 1.00%
(includes average fund operating expenses of 0.30% applicable to the investment
subaccounts of the VUL Account). Hypothetical gross interest rates are presented
for illustrative purposes only to illustrate funds allocated entirely to the
investment subaccounts of the VUL 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. A GIA providing interest at
a minimum guaranteed rate of 3% also is available under this product through the
General Account.
This illustration assumes a premium tax of 2.25%.
82
<PAGE>
<TABLE>
<CAPTION>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY PAGE 2 OF 2
FACE AMOUNT: $100,000
MALE 35 ADVANTAGE SELECT INITIAL ANNUAL PREMIUM: $1,000
PHOENIX EXECUTIVE BENEFIT--A FLEXIBLE PREMIUM VARIABLE UNIVERSAL LIFE INSURANCE POLICY OPTION 2
ASSUMING GUARANTEED CHARGES
CASH CASH CASH
ASSUMED PREMIUM ACCOUNT SURRENDER DEATH ACCOUNT SURRENDER DEATH ACCOUNT SURRENDER DEATH
PREMIUM ACCUM. VALUE VALUE BENEFIT VALUE VALUE BENEFIT VALUE VALUE BENEFIT
YEAR PAYMENTS @5.0% @0% @0% @0% @6% @6% @6% @12% @12% @12%
-------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 1,000 1,050 571 621 100,572 615 665 100,616 659 709 100,661
2 1,000 2,153 1,122 1,155 101,123 1,245 1,278 101,246 1,374 1,407 101,375
3 1,000 3,310 1,648 1,665 101,649 1,887 1,904 101,888 2,148 2,164 102,149
4 1,000 4,526 2,150 2,150 102,151 2,541 2,541 102,541 2,984 2,984 102,985
5 1,000 5,802 2,624 2,624 102,625 3,202 3,202 103,203 3,886 3,886 103,887
6 1,000 7,142 3,068 3,068 103,069 3,871 3,871 103,872 4,859 4,859 104,860
7 1,000 8,549 3,479 3,479 103,480 4,542 4,542 104,544 5,907 5,907 105,907
8 1,000 10,027 3,877 3,877 103,879 5,238 5,238 105,239 7,058 7,058 107,059
9 1,000 11,578 4,240 4,240 104,241 5,933 5,933 105,934 8,299 8,299 108,299
10 1,000 13,207 4,565 4,565 104,566 6,628 6,628 106,628 9,636 9,636 109,637
11 1,000 14,917 4,857 4,857 104,859 7,329 7,329 107,329 11,094 11,094 111,095
12 1,000 16,713 5,110 5,110 105,111 8,025 8,025 108,026 12,669 12,669 112,669
13 1,000 18,599 5,319 5,319 105,321 8,713 8,713 108,715 14,370 14,370 114,372
14 1,000 20,579 5,484 5,484 105,485 9,391 9,391 109,392 16,210 16,210 116,211
15 1,000 22,657 5,601 5,601 105,602 10,052 10,052 110,054 18,197 18,197 118,198
16 1,000 24,840 5,666 5,666 105,667 10,694 10,694 110,695 20,344 20,344 120,346
17 1,000 27,132 5,672 5,672 105,673 11,306 11,306 111,307 22,660 22,660 122,661
18 1,000 29,539 5,612 5,612 105,613 11,878 11,878 111,879 25,153 25,153 125,154
19 1,000 32,066 5,478 5,478 105,479 12,402 12,402 112,402 27,835 27,835 127,836
20 1,000 34,719 5,262 5,262 105,263 12,862 12,862 112,863 30,715 30,715 130,716
@ 65 1,000 69,761 -- -- -- 10,125 10,125 110,126 80,243 80,243 180,244
</TABLE>
Based on 0% interest rate and guaranteed charges, the policy will lapse in year
28.
Death benefit, account value and cash surrender value are based on hypothetical
gross interest rates shown, assume current and guaranteed charges and no policy
loans or withdrawals, and are calculated at the end of the policy year. Assumed
Premium Payments shown are assumed paid in full at the beginning of the policy
year. Payment of premiums shown other than in full at the beginning of the
policy year would reduce values and benefits below the hypothetical illustrated
amounts shown. Values shown reflect an effective annual asset charge of 1.00%
(includes average fund operating expenses of 0.30% applicable to the investment
subaccounts of the VUL Account). Hypothetical gross interest rates are presented
for illustrative purposes only to illustrate funds allocated entirely to the
investment subaccounts of the VUL 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. A GIA providing interest at
a minimum guaranteed rate of 3% also is available under this product through the
General Account.
This illustration assumes a premium tax of 2.25%.
83
<PAGE>
<TABLE>
<CAPTION>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY PAGE 1 OF 2
FACE AMOUNT: $100,000
FEMALE 35 ADVANTAGE SELECT INITIAL ANNUAL PREMIUM: $1,000
PHOENIX EXECUTIVE BENEFIT--A FLEXIBLE PREMIUM VARIABLE UNIVERSAL LIFE INSURANCE POLICY OPTION 2
ASSUMING CURRENT CHARGES
CASH CASH CASH
ASSUMED PREMIUM ACCOUNT SURRENDER DEATH ACCOUNT SURRENDER DEATH ACCOUNT SURRENDER DEATH
PREMIUM ACCUM. VALUE VALUE BENEFIT VALUE VALUE BENEFIT VALUE VALUE BENEFIT
YEAR PAYMENTS @5.0% @0% @0% @0% @6% @6% @6% @12% @12% @12%
-------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 1,000 1,050 787 837 100,787 838 888 100,838 889 939 100,890
2 1,000 2,153 1,558 1,591 101,558 1,709 1,742 101,710 1,866 1,899 101,867
3 1,000 3,310 2,311 2,328 102,312 2,613 2,629 102,614 2,939 2,956 102,941
4 1,000 4,526 3,048 3,048 103,049 3,551 3,551 103,553 4,119 4,119 104,120
5 1,000 5,802 3,766 3,766 103,767 4,524 4,524 104,525 5,414 5,414 105,415
6 1,000 7,142 4,464 4,464 104,464 5,532 5,532 105,532 6,835 6,835 106,836
7 1,000 8,549 5,141 5,141 105,142 6,574 6,574 106,575 8,395 8,395 108,396
8 1,000 10,027 5,846 5,846 105,847 7,704 7,704 107,705 10,162 10,162 110,163
9 1,000 11,578 6,530 6,530 106,531 8,874 8,874 108,875 12,103 12,103 112,105
10 1,000 13,207 7,192 7,192 107,193 10,085 10,085 110,086 14,237 14,237 114,238
11 1,000 14,917 7,876 7,876 107,877 11,388 11,388 111,389 16,641 16,641 116,643
12 1,000 16,713 8,541 8,541 108,543 12,743 12,743 112,744 19,293 19,293 119,294
13 1,000 18,599 9,188 9,188 109,189 14,151 14,151 114,152 22,217 22,217 122,218
14 1,000 20,579 9,816 9,816 109,817 15,615 15,615 115,615 25,443 25,443 125,444
15 1,000 22,657 10,424 10,424 110,425 17,136 17,136 117,137 29,003 29,003 129,004
16 1,000 24,840 11,012 11,012 111,013 18,715 18,715 118,716 32,931 32,931 132,932
17 1,000 27,132 11,578 11,578 111,579 20,355 20,355 120,356 37,265 37,265 137,266
18 1,000 29,539 12,122 12,122 112,122 22,057 22,057 122,058 42,048 42,048 142,049
19 1,000 32,066 12,641 12,641 112,641 23,820 23,820 123,822 47,324 47,324 147,325
20 1,000 34,719 13,134 13,134 113,134 25,647 25,647 125,648 53,145 53,145 153,146
@ 65 1,000 69,761 16,330 16,330 116,330 50,178 50,178 150,179 174,371 174,371 289,457
</TABLE>
Based on 0% interest rate and guaranteed charges, the policy will lapse in year
36.
Death benefit, account value and cash surrender value are based on hypothetical
gross interest rates shown, assume current and guaranteed charges and no policy
loans or withdrawals, and are calculated at the end of the policy year. Assumed
Premium Payments shown are assumed paid in full at the beginning of the policy
year. Payment of premiums shown other than in full at the beginning of the
policy year would reduce values and benefits below the hypothetical illustrated
amounts shown. Values shown reflect an effective annual asset charge of 1.00%
(includes average fund operating expenses of 0.30% applicable to the investment
subaccounts of the VUL Account). Hypothetical gross interest rates are presented
for illustrative purposes only to illustrate funds allocated entirely to the
investment subaccounts of the VUL 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. A GIA providing interest at
a minimum guaranteed rate of 3% also is available under this product through the
General Account.
This illustration assumes a premium tax of 2.25%.
84
<PAGE>
<TABLE>
<CAPTION>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY PAGE 2 OF 2
FACE AMOUNT: $100,000
FEMALE 35 ADVANTAGE SELECT INITIAL ANNUAL PREMIUM: $1,000
PHOENIX EXECUTIVE BENEFIT--A FLEXIBLE PREMIUM VARIABLE UNIVERSAL LIFE INSURANCE POLICY OPTION 2
ASSUMING GUARANTEED CHARGES
CASH CASH CASH
ASSUMED PREMIUM ACCOUNT SURRENDER DEATH ACCOUNT SURRENDER DEATH ACCOUNT SURRENDER DEATH
PREMIUM ACCUM. VALUE VALUE BENEFIT VALUE VALUE BENEFIT VALUE VALUE BENEFIT
YEAR PAYMENTS @5.0% @0% @0% @0% @6% @6% @6% @12% @12% @12%
-------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 1,000 1,050 617 667 100,618 662 712 100,663 708 758 100,709
2 1,000 2,153 1,214 1,248 101,215 1,343 1,377 101,344 1,478 1,512 101,480
3 1,000 3,310 1,790 1,807 101,791 2,043 2,059 102,044 2,317 2,334 102,318
4 1,000 4,526 2,343 2,343 102,345 2,758 2,758 102,760 3,228 3,228 103,229
5 1,000 5,802 2,871 2,871 102,872 3,489 3,489 103,489 4,216 4,216 104,218
6 1,000 7,142 3,371 3,371 103,373 4,232 4,232 104,232 5,288 5,288 105,289
7 1,000 8,549 3,843 3,843 103,844 4,986 4,986 104,988 6,449 6,449 106,450
8 1,000 10,027 4,305 4,305 104,306 5,773 5,773 105,774 7,731 7,731 107,732
9 1,000 11,578 4,738 4,738 104,740 6,573 6,573 106,573 9,125 9,125 109,126
10 1,000 13,207 5,143 5,143 105,144 7,386 7,386 107,387 10,641 10,641 110,642
11 1,000 14,917 5,527 5,527 105,528 8,224 8,224 108,225 12,311 12,311 112,312
12 1,000 16,713 5,882 5,882 105,883 9,077 9,077 109,079 14,135 14,135 114,136
13 1,000 18,599 6,208 6,208 106,209 9,946 9,946 109,947 16,128 16,128 116,129
14 1,000 20,579 6,502 6,502 106,503 10,827 10,827 110,827 18,306 18,306 118,307
15 1,000 22,657 6,763 6,763 106,764 11,718 11,718 111,719 20,685 20,685 120,686
16 1,000 24,840 6,987 6,987 106,988 12,618 12,618 112,619 23,284 23,284 123,285
17 1,000 27,132 7,175 7,175 107,175 13,525 13,525 113,526 26,125 26,125 126,125
18 1,000 29,539 7,320 7,320 107,322 14,435 14,435 114,436 29,229 29,229 129,230
19 1,000 32,066 7,420 7,420 107,421 15,342 15,342 115,342 32,618 32,618 132,620
20 1,000 34,719 7,472 7,472 107,473 16,244 16,244 116,245 36,323 36,323 136,324
@ 65 1,000 69,761 4,385 4,385 104,386 25,015 25,015 125,016 109,760 109,760 209,761
</TABLE>
Based on 0% interest rate and guaranteed charges, the policy will lapse in year
36.
Death benefit, account value and cash surrender value are based on hypothetical
gross interest rates shown, assume current and guaranteed charges and no policy
loans or withdrawals, and are calculated at the end of the policy year. Assumed
Premium Payments shown are assumed paid in full at the beginning of the policy
year. Payment of premiums shown other than in full at the beginning of the
policy year would reduce values and benefits below the hypothetical illustrated
amounts shown. Values shown reflect an effective annual asset charge of 1.00%
(includes average fund operating expenses of 0.30% applicable to the investment
subaccounts of the VUL Account). Hypothetical gross interest rates are presented
for illustrative purposes only to illustrate funds allocated entirely to the
investment subaccounts of the VUL 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. A GIA providing interest at
a minimum guaranteed rate of 3% also is available under this product through the
General Account.
This illustration assumes a premium tax of 2.25%.
85
<PAGE>
<TABLE>
<CAPTION>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY PAGE 1 OF 2
FACE AMOUNT: $100,000
MALE 35 ADVANTAGE SELECT INITIAL ANNUAL PREMIUM: $1,000
PHOENIX EXECUTIVE BENEFIT--A FLEXIBLE PREMIUM VARIABLE UNIVERSAL LIFE INSURANCE POLICY OPTION 3
ASSUMING CURRENT CHARGES
CASH CASH CASH
ASSUMED PREMIUM ACCOUNT SURRENDER DEATH ACCOUNT SURRENDER DEATH ACCOUNT SURRENDER DEATH
PREMIUM ACCUM. VALUE VALUE BENEFIT VALUE VALUE BENEFIT VALUE VALUE BENEFIT
YEAR PAYMENTS @5.0% @0% @0% @0% @6% @6% @6% @12% @12% @12%
-------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 1,000 1,050 759 809 101,000 809 859 101,000 859 909 101,000
2 1,000 2,153 1,503 1,537 102,000 1,651 1,684 102,000 1,804 1,838 102,000
3 1,000 3,310 2,233 2,250 103,000 2,527 2,544 103,000 2,846 2,862 103,000
4 1,000 4,526 2,947 2,947 104,000 3,438 3,438 104,000 3,991 3,991 104,000
5 1,000 5,802 3,644 3,644 105,000 4,383 4,383 105,000 5,250 5,250 105,000
6 1,000 7,142 4,323 4,323 106,000 5,364 5,364 106,000 6,635 6,635 106,000
7 1,000 8,549 4,983 4,983 107,000 6,380 6,380 107,000 8,157 8,157 107,000
8 1,000 10,027 5,670 5,670 108,000 7,483 7,483 108,000 9,882 9,882 108,000
9 1,000 11,578 6,333 6,333 109,000 8,622 8,622 109,000 11,777 11,777 109,000
10 1,000 13,207 6,969 6,969 110,000 9,795 9,795 110,000 13,855 13,855 110,000
11 1,000 14,917 7,628 7,628 111,000 11,060 11,060 111,000 16,200 16,200 111,000
12 1,000 16,713 8,260 8,260 112,000 12,368 12,368 112,000 18,781 18,781 112,000
13 1,000 18,599 8,864 8,864 113,000 13,719 13,719 113,000 21,623 21,623 113,000
14 1,000 20,579 9,439 9,439 114,000 15,114 15,114 114,000 24,754 24,754 114,000
15 1,000 22,657 9,982 9,982 115,000 16,553 16,553 115,000 28,205 28,205 115,000
16 1,000 24,840 10,493 10,493 116,000 18,037 18,037 116,000 32,010 32,010 116,000
17 1,000 27,132 10,968 10,968 117,000 19,567 19,567 117,000 36,209 36,209 117,000
18 1,000 29,539 11,407 11,407 118,000 21,143 21,143 118,000 40,844 40,844 118,000
19 1,000 32,066 11,805 11,805 119,000 22,764 22,764 119,000 45,963 45,963 119,000
20 1,000 34,719 12,161 12,161 120,000 24,432 24,432 120,000 51,621 51,621 120,000
@ 65 1,000 69,761 11,670 11,670 131,000 45,378 45,378 131,000 166,984 166,984 277,195
</TABLE>
Based on 0% interest rate and guaranteed charges, the policy will lapse in year
26.
Death benefit, account value and cash surrender value are based on hypothetical
gross interest rates shown, assume current and guaranteed charges and no policy
loans or withdrawals, and are calculated at the end of the policy year. Assumed
Premium Payments shown are assumed paid in full at the beginning of the policy
year. Payment of premiums shown other than in full at the beginning of the
policy year would reduce values and benefits below the hypothetical illustrated
amounts shown. Values shown reflect an effective annual asset charge of 1.00%
(includes average fund operating expenses of 0.30% applicable to the investment
subaccounts of the VUL Account). Hypothetical gross interest rates are presented
for illustrative purposes only to illustrate funds allocated entirely to the
investment subaccounts of the VUL 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. A GIA providing interest at
a minimum guaranteed rate of 3% also is available under this product through the
General Account.
This illustration assumes a premium tax of 2.25%.
86
<PAGE>
<TABLE>
<CAPTION>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY PAGE 2 OF 2
FACE AMOUNT: $100,000
MALE 35 ADVANTAGE SELECT INITIAL ANNUAL PREMIUM: $1,000
PHOENIX EXECUTIVE BENEFIT--A FLEXIBLE PREMIUM VARIABLE UNIVERSAL LIFE INSURANCE POLICY OPTION 3
ASSUMING GUARANTEED CHARGES
CASH CASH CASH
ASSUMED PREMIUM ACCOUNT SURRENDER DEATH ACCOUNT SURRENDER DEATH ACCOUNT SURRENDER DEATH
PREMIUM ACCUM. VALUE VALUE BENEFIT VALUE VALUE BENEFIT VALUE VALUE BENEFIT
YEAR PAYMENTS @5.0% @0% @0% @0% @6% @6% @6% @12% @12% @12%
-------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 1,000 1,050 571 621 101,000 615 665 101,000 659 709 101,000
2 1,000 2,153 1,120 1,153 102,000 1,243 1,277 102,000 1,373 1,406 102,000
3 1,000 3,310 1,644 1,661 103,000 1,884 1,900 103,000 2,144 2,161 103,000
4 1,000 4,526 2,142 2,142 104,000 2,533 2,533 104,000 2,978 2,978 104,000
5 1,000 5,802 2,610 2,610 105,000 3,190 3,190 105,000 3,876 3,876 105,000
6 1,000 7,142 3,046 3,046 106,000 3,852 3,852 106,000 4,845 4,845 106,000
7 1,000 8,549 3,447 3,447 107,000 4,515 4,515 107,000 5,887 5,887 107,000
8 1,000 10,027 3,833 3,833 108,000 5,200 5,200 108,000 7,033 7,033 108,000
9 1,000 11,578 4,179 4,179 109,000 5,882 5,882 109,000 8,267 8,267 109,000
10 1,000 13,207 4,483 4,483 110,000 6,561 6,561 110,000 9,599 9,599 110,000
11 1,000 14,917 4,751 4,751 111,000 7,242 7,242 111,000 11,052 11,052 111,000
12 1,000 16,713 4,972 4,972 112,000 7,914 7,914 112,000 12,624 12,624 112,000
13 1,000 18,599 5,145 5,145 113,000 8,574 8,574 113,000 14,326 14,326 113,000
14 1,000 20,579 5,265 5,265 114,000 9,219 9,219 114,000 16,172 16,172 114,000
15 1,000 22,657 5,328 5,328 115,000 9,841 9,841 115,000 18,172 18,172 115,000
16 1,000 24,840 5,329 5,329 116,000 10,436 10,436 116,000 20,343 20,343 116,000
17 1,000 27,132 5,258 5,258 117,000 10,992 10,992 117,000 22,697 22,697 117,000
18 1,000 29,539 5,107 5,107 118,000 11,500 11,500 118,000 25,249 25,249 118,000
19 1,000 32,066 4,864 4,864 119,000 11,945 11,945 119,000 28,015 28,015 119,000
20 1,000 34,719 4,515 4,515 120,000 12,312 12,312 120,000 31,014 31,014 120,000
@ 65 1,000 69,761 -- -- -- 5,772 5,772 131,000 89,942 89,942 149,304
</TABLE>
Based on 0% interest rate and guaranteed charges, the policy will lapse in year
26.
Death benefit, account value and cash surrender value are based on hypothetical
gross interest rates shown, assume current and guaranteed charges and no policy
loans or withdrawals, and are calculated at the end of the policy year. Assumed
Premium Payments shown are assumed paid in full at the beginning of the policy
year. Payment of premiums shown other than in full at the beginning of the
policy year would reduce values and benefits below the hypothetical illustrated
amounts shown. Values shown reflect an effective annual asset charge of 1.00%
(includes average fund operating expenses of 0.30% applicable to the investment
subaccounts of the VUL Account). Hypothetical gross interest rates are presented
for illustrative purposes only to illustrate funds allocated entirely to the
investment subaccounts of the VUL 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. A GIA providing interest at
a minimum guaranteed rate of 3% also is available under this product through the
General Account.
This illustration assumes a premium tax of 2.25%.
87
<PAGE>
<TABLE>
<CAPTION>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY PAGE 1 OF 2
FACE AMOUNT: $100,000
FEMALE 35 ADVANTAGE SELECT INITIAL ANNUAL PREMIUM: $1,000
PHOENIX EXECUTIVE BENEFIT--A FLEXIBLE PREMIUM VARIABLE UNIVERSAL LIFE INSURANCE POLICY OPTION 3
ASSUMING CURRENT CHARGES
CASH CASH CASH
ASSUMED PREMIUM ACCOUNT SURRENDER DEATH ACCOUNT SURRENDER DEATH ACCOUNT SURRENDER DEATH
PREMIUM ACCUM. VALUE VALUE BENEFIT VALUE VALUE BENEFIT VALUE VALUE BENEFIT
YEAR PAYMENTS @5.0% @0% @0% @0% @6% @6% @6% @12% @12% @12%
-------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 1,000 1,050 787 837 101,000 838 888 101,000 889 939 101,000
2 1,000 2,153 1,557 1,591 102,000 1,708 1,742 102,000 1,866 1,899 102,000
3 1,000 3,310 2,311 2,328 103,000 2,613 2,629 103,000 2,939 2,956 103,000
4 1,000 4,526 3,047 3,047 104,000 3,551 3,551 104,000 4,119 4,119 104,000
5 1,000 5,802 3,764 3,764 105,000 4,523 4,523 105,000 5,414 5,414 105,000
6 1,000 7,142 4,460 4,460 106,000 5,530 5,530 106,000 6,836 6,836 106,000
7 1,000 8,549 5,136 5,136 107,000 6,572 6,572 107,000 8,397 8,397 107,000
8 1,000 10,027 5,839 5,839 108,000 7,702 7,702 108,000 10,167 10,167 108,000
9 1,000 11,578 6,520 6,520 109,000 8,871 8,871 109,000 12,112 12,112 109,000
10 1,000 13,207 7,179 7,179 110,000 10,082 10,082 110,000 14,252 14,252 110,000
11 1,000 14,917 7,860 7,860 111,000 11,386 11,386 111,000 16,664 16,664 111,000
12 1,000 16,713 8,521 8,521 112,000 12,741 12,741 112,000 19,326 19,326 112,000
13 1,000 18,599 9,163 9,163 113,000 14,150 14,150 113,000 22,266 22,266 113,000
14 1,000 20,579 9,785 9,785 114,000 15,616 15,616 114,000 25,514 25,514 114,000
15 1,000 22,657 10,387 10,387 115,000 17,140 17,140 115,000 29,103 29,103 115,000
16 1,000 24,840 10,967 10,967 116,000 18,725 18,725 116,000 33,071 33,071 116,000
17 1,000 27,132 11,524 11,524 117,000 20,371 20,371 117,000 37,457 37,457 117,000
18 1,000 29,539 12,057 12,057 118,000 22,081 22,081 118,000 42,308 42,308 118,000
19 1,000 32,066 12,563 12,563 119,000 23,856 23,856 119,000 47,673 47,673 119,000
20 1,000 34,719 13,041 13,041 120,000 25,698 25,698 120,000 53,611 53,611 120,000
@ 65 1,000 69,761 15,762 15,762 131,000 50,981 50,981 131,000 176,926 176,926 293,698
</TABLE>
Based on 0% interest rate and guaranteed charges, the policy will lapse in year
33.
Death benefit, account value and cash surrender value are based on hypothetical
gross interest rates shown, assume current and guaranteed charges and no policy
loans or withdrawals, and are calculated at the end of the policy year. Assumed
Premium Payments shown are assumed paid in full at the beginning of the policy
year. Payment of premiums shown other than in full at the beginning of the
policy year would reduce values and benefits below the hypothetical illustrated
amounts shown. Values shown reflect an effective annual asset charge of 1.00%
(includes average fund operating expenses of 0.30% applicable to the investment
subaccounts of the VUL Account). Hypothetical gross interest rates are presented
for illustrative purposes only to illustrate funds allocated entirely to the
investment subaccounts of the VUL 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. A GIA providing interest at
a minimum guaranteed rate of 3% also is available under this product through the
General Account.
This illustration assumes a premium tax of 2.25%.
88
<PAGE>
<TABLE>
<CAPTION>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY PAGE 2 OF 2
FACE AMOUNT: $100,000
FEMALE 35 ADVANTAGE SELECT INITIAL ANNUAL PREMIUM: $1,000
PHOENIX EXECUTIVE BENEFIT--A FLEXIBLE PREMIUM VARIABLE UNIVERSAL LIFE INSURANCE POLICY OPTION 3
ASSUMING GUARANTEED CHARGES
CASH CASH CASH
ASSUMED PREMIUM ACCOUNT SURRENDER DEATH ACCOUNT SURRENDER DEATH ACCOUNT SURRENDER DEATH
PREMIUM ACCUM. VALUE VALUE BENEFIT VALUE VALUE BENEFIT VALUE VALUE BENEFIT
YEAR PAYMENTS @5.0% @0% @0% @0% @6% @6% @6% @12% @12% @12%
-------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 1,000 1,050 617 667 101,000 662 712 101,000 708 758 101,000
2 1,000 2,153 1,213 1,246 102,000 1,342 1,376 102,000 1,478 1,511 102,000
3 1,000 3,310 1,787 1,804 103,000 2,040 2,057 103,000 2,315 2,332 103,000
4 1,000 4,526 2,338 2,338 104,000 2,754 2,754 104,000 3,224 3,224 104,000
5 1,000 5,802 2,861 2,861 105,000 3,480 3,480 105,000 4,210 4,210 105,000
6 1,000 7,142 3,356 3,356 106,000 4,219 4,219 106,000 5,279 5,279 106,000
7 1,000 8,549 3,820 3,820 107,000 4,968 4,968 107,000 6,438 6,438 107,000
8 1,000 10,027 4,273 4,273 108,000 5,748 5,748 108,000 7,717 7,717 108,000
9 1,000 11,578 4,695 4,695 109,000 6,539 6,539 109,000 9,110 9,110 109,000
10 1,000 13,207 5,085 5,085 110,000 7,342 7,342 110,000 10,626 10,626 110,000
11 1,000 14,917 5,451 5,451 111,000 8,169 8,169 111,000 12,298 12,298 111,000
12 1,000 16,713 5,786 5,786 112,000 9,008 9,008 112,000 14,128 14,128 112,000
13 1,000 18,599 6,087 6,087 113,000 9,861 9,861 113,000 16,131 16,131 113,000
14 1,000 20,579 6,351 6,351 114,000 10,723 10,723 114,000 18,326 18,326 114,000
15 1,000 22,657 6,577 6,577 115,000 11,595 11,595 115,000 20,731 20,731 115,000
16 1,000 24,840 6,761 6,761 116,000 12,471 12,471 116,000 23,369 23,369 116,000
17 1,000 27,132 6,900 6,900 117,000 13,352 13,352 117,000 26,265 26,265 117,000
18 1,000 29,539 6,990 6,990 118,000 14,232 14,232 118,000 29,447 29,447 118,000
19 1,000 32,066 7,024 7,024 119,000 15,105 15,105 119,000 32,941 32,941 119,000
20 1,000 34,719 7,000 7,000 120,000 15,970 15,970 120,000 36,786 36,786 120,000
@ 65 1,000 69,761 1,756 1,756 131,000 23,835 23,835 131,000 116,859 116,859 193,986
</TABLE>
Based on 0% interest rate and guaranteed charges, the policy will lapse in year
33.
Death benefit, account value and cash surrender value are based on hypothetical
gross interest rates shown, assume current and guaranteed charges and no policy
loans or withdrawals, and are calculated at the end of the policy year. Assumed
Premium Payments shown are assumed paid in full at the beginning of the policy
year. Payment of premiums shown other than in full at the beginning of the
policy year would reduce values and benefits below the hypothetical illustrated
amounts shown. Values shown reflect an effective annual asset charge of 1.00%
(includes average fund operating expenses of 0.30% applicable to the investment
subaccounts of the VUL Account). Hypothetical gross interest rates are presented
for illustrative purposes only to illustrate funds allocated entirely to the
investment subaccounts of the VUL 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. A GIA providing interest at
a minimum guaranteed rate of 3% also is available under this product through the
General Account.
This illustration assumes a premium tax of 2.25%.
89
