As filed with the Securities and Exchange Commission on May 1, 2000
Registration No. 33-6793
811-4721
===============================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
POST EFFECTIVE AMENDMENT NUMBER 17
TO
FORM S-6
FOR REGISTRATION UNDER THE SECURITIES ACT OF 1933 OF
SECURITIES UNIT INVESTMENT TRUSTS REGISTERED ON FORM
N-8B-2
----------------
PHOENIX HOME LIFE VARIABLE UNIVERSAL LIFE ACCOUNT
(EXACT NAME OF TRUST)
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
(NAME OF DEPOSITOR)
----------------
ONE AMERICAN ROW
HARTFORD, CONNECTICUT 06102-5056
(COMPLETE ADDRESS OF DEPOSITOR'S PRINCIPAL EXECUTIVE OFFICES)
DONA D. YOUNG
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
ONE AMERICAN ROW
PO BOX 5056
HARTFORD, CONNECTICUT 06102-5056
(NAME AND ADDRESS OF AGENT FOR SERVICE)
----------------
Copy to:
EDWIN L. KERR, ESQ.
Phoenix Home Life Mutual Insurance Company
One American Row
PO Box 5053
HARTFORD, CONNECTICUT 06102-5056
----------------
It is proposed that this filing will become effective:
|X| immediately upon filing pursuant to paragraph (b) of Rule 485
[ ] on _____ pursuant to paragraph (b)
[ ] 60 days after filing pursuant to paragraph (a) (1) or
[ ] on _____ pursuant to paragraph (a) (1) of Rule 485.
[ ] this Post-Effective Amendment designates a new effective date
for a previously filed post-effective amendment.
Title of securities being offered: Single Premium Variable Life Insurance
================================================================================
<PAGE>
VERSION A
This filing does not affect the Phoenix Edge.
<PAGE>
[VERSION B]
PHOENIX EDGE-SPVL
VARIABLE LIFE
INSURANCE POLICY
Issued by
PHOENIX HOME LIFE MUTUAL INSURANCE
COMPANY
FOR POLICYHOLDER SERVICE, PLEASE CONTACT US AT:
[envelope] PHOENIX VARIABLE PRODUCTS MAIL OPERATIONS
PO Box 8027
Boston, MA 02266-8027
[telephone] Tel. 800/541-0171
PROSPECTUS MAY 1, 2000
This prospectus describes a modified single premium variable 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. 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-Bankers Trust Dow 30 Series
[DIAMOND] Phoenix-Federated U.S. Government Bond Series
[DIAMOND] Phoenix-J.P. Morgan Research Enhanced Index 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
DEUTSCHE ASSET MANAGEMENT VIT FUNDS
- -----------------------------------
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
THE UNIVERSAL INSTITUTIONAL FUNDS, INC.
- ---------------------------------------
MANAGED BY MORGAN STANLEY ASSET MANAGEMENT INC.
[DIAMOND] Technology Portfolio
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST
- ----------------------------------------------------
MANAGED BY TEMPLETON GLOBAL ADVISORS LIMITED
[DIAMOND] Templeton Growth Securities Fund-- Class 2
MANAGED BY TEMPLETON INVESTMENT COUNSEL, INC.
[DIAMOND] Templeton Asset Strategy Fund-- Class 2
[DIAMOND] Templeton International Securities Fund-- Class 2
MANAGED BY TEMPLETON ASSET MANAGEMENT, LTD.
[DIAMOND] Templeton Developing Markets Securities Fund-- Class 2
MANAGED BY FRANKLIN MUTUAL ADVISERS, LLC
[DIAMOND] Mutual Shares Securities 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>
This policy will usually be a modified endowment contract. Any loan,
surrender or withdrawal may be subject to income tax and a 10% penalty.
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
may result in any income 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.
2
<PAGE>
Head Page
- ----------------------------------------------------------------
PART I--GENERAL POLICY PROVISIONS........................ 5
SUMMARY .......................................... 5
Overview........................................ 5
Underwriting.................................... 5
Charges Under the Policy........................ 5
Policy Value Charges............................ 6
Administrative Charge....................... 6
Cost of Insurance Charge.................... 6
Tax Charge.................................. 6
Mortality and Expense Risk Charge........... 6
Rider Charge................................ 6
Surrender Charges........................... 6
Other Charges................................... 6
Loan Interest Rate Charged.................. 6
Charges for Federal Income Taxes............ 6
Fund Charges................................ 6
Reduction in Charges........................ 9
PHOENIX LIFE AND MUTUAL INSURANCE COMPANY
AND THE VUL ACCOUNT................................. 9
Phoenix........................................... 9
The VUL Account................................... 9
PERFORMANCE HISTORY................................... 9
INVESTMENTS OF THE VUL ACCOUNT........................ 10
Participating Investment Funds.................... 10
Investment Advisors............................... 12
Services of the Advisors.......................... 13
Reinvestment and Redemption....................... 13
Substitution of Investments....................... 13
The Guaranteed Interest Account................... 13
PREMIUMS.............................................. 14
Minimum Premiums.................................. 14
Allocation of Issue Premium....................... 14
Free Look Period.................................. 14
Transfers......................................... 14
Optional Programs and Additional Benefits......... 15
Dollar Cost Averaging Program................. 15
Automatic Asset Rebalancing....................... 15
Additional Rider Benefits..................... 16
Living Benefits............................... 16
VUL Account Valuation Procedures.................. 16
Valuation Date................................ 16
Valuation Period.............................. 16
Determination of Unit Values.................. 16
Net Investment Factor......................... 16
Death Benefit..................................... 16
General....................................... 16
Surrenders........................................ 16
General....................................... 16
Free Withdrawals.............................. 17
Full Surrenders............................... 17
Partial Surrenders............................ 17
Partial Surrender: Effect on Death Benefit.... 17
Policy Loans...................................... 17
Source of Loan................................ 17
Interest Charged on Loans..................... 17
Interest Credited to the Loan Account
and Preferred Loans.......................... 18
Repayment..................................... 18
Effect of Loan................................ 18
Lapse............................................. 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........................ 19
Surplus........................................... 19
PAYMENT OF PROCEEDS................................... 19
Surrender and Death Benefit Proceeds.............. 19
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....................... 20
PART III--OTHER IMPORTANT INFORMATION......................21
FEDERAL INCOME TAX CONSIDERATIONS..................... 21
Introduction...................................... 21
Phoenix's Income Tax Status....................... 21
Policy Benefits................................... 21
Death Benefit Proceeds........................ 21
Full Surrender................................ 21
Partial Surrender............................. 21
Loans......................................... 21
Business-Owned Policies........................... 22
Modified Endowment Contracts...................... 22
General....................................... 22
Reduction in Benefits During the
First 7 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...... 23
Other Taxes....................................... 23
VOTING RIGHTS ........................................ 24
Phoenix........................................... 24
3
<PAGE>
THE DIRECTORS AND EXECUTIVE OFFICERS
OF PHOENIX........................................ 24
SAFEKEEPING OF THE VUL ACCOUNT'S ASSETS .............. 25
SALES OF POLICIES .................................... 25
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
<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, PHL, 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 PAYMENT DATE
BENEFICIARY POLICY ANNIVERSARY
CASH SURRENDER VALUE POLICY DATE
DEBT POLICY VALUE
FUNDS POLICY YEAR
GENERAL ACCOUNT SERIES
ISSUE PREMIUM SUBACCOUNTS
LOAN ACCOUNT VALUATION DATE
MONTHLY CALCULATION DAY VALUATION PERIOD
NET ASSET VALUE 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 prevail.
OVERVIEW
The policy is available on an individual basis and provides a death benefit
that is generally free of federal income tax. Also, any growth in your policy
value is tax deferred.
Purchase of a policy may be appropriate if you want to provide for a death
benefit or to help meet long term financial needs. If you plan to withdraw money
from the policy on a short term basis it may not be a suitable purchase for you.
As a modified single premium variable life insurance policy, you will have
limited ability to make additional premium payments beyond the initial payment.
Also, most modified single premium life insurance policies are considered
modified endowment contracts meaning that any surrender, withdrawal, loan,
pledge or assignment are classified as a distribution, and may be subject to
income tax and a 10% penalty.
As a variable contract, your policy value is contingent upon the performance
of the investment options you select and as life insurance, offers a death
benefit to the beneficiary you select.
Policies are issued as either Standard (smoker) or Advantage (nonsmoker)
classification. The age of the insured at the time of issue generally must be
between the ages of 18 to 85 as of his or her last birthday.
The minimum premium is $10,000.
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
Underwriting is generally on a simplified basis, meaning that if you answer
a series of questions favorably, and if your age and single premium fall within
limits, then the policy will be issued. No additional medical information or
tests will be necessary.
In some instances, depending on how you answer these questions, you may be
subject to additional underwriting.
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 in Chart 1.
5
<PAGE>
POLICY VALUE CHARGES
On each monthly calculation day, we deduct the following charges from your
policy value:
1. administrative charge
2. cost of insurance charge
3. tax charge
4. mortality and expense risk charge
5. a charge for the cost of riders if applicable
Unless otherwise noted, the amount deducted is allocated among the
Subaccounts, the Guaranteed Interest Account and the Loan Account, based on an
allocation schedule specified by you. You initially select 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 of
services such as billing and collections, monthly processing, updating daily
values and communicating with policyholders.
This charge is not assessed against assets held in the Loan Account.
2. COST OF INSURANCE CHARGE
We deduct a charge to cover the cost of insurance coverage on each monthly
calculation day. The maximum 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.
To determine the maximum monthly cost of insurance, we multiply the
appropriate cost of insurance rate as shown in your policy, 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,
ranging from 0% to 3.5%.
3. TAX CHARGE
States assess premium taxes at various rates, ranging from 0% to 3.5%.The
DAC tax is associated with our federal tax liability under Internal Revenue Code
Section 848. We pay the cost up front and recoup the cost over the first 10
policy years.
4. MORTALITY AND EXPENSE RISK CHARGE
We charge the Subaccounts and the GIA 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.
This charge is not assessed against assets held in the Loan Account.
5. RIDER CHARGE
We will deduct any applicable monthly rider charges for any additional
benefit provided to you by rider.
SURRENDER CHARGES
A deduction for surrender charges for this policy may be taken from proceeds
of partial withdrawals from, or complete surrender of the policy. The amount (if
any) of a surrender charge depends on whether your payment held under the policy
for a certain period of time. The surrender charge schedule is shown in the
chart below.
Once each policy year, you may withdraw an amount equal to the greater of
your penalty free earnings on the policy and 10% of the single premium without
the imposition of a surrender charge.(See "Surrenders--Free Withdrawals" for
more detail.) The deduction for surrender charges is expressed as a percentage
of the single premium in excess of the free allowable amount, is as follows:
- --------------------------------------------------------------
Percentage 9% 8% 7% 6% 5% 4% 3% 2% 1% 0%
- --------------------------------------------------------------
Policy Year 1 2 3 4 5 6 7 8 9 10+
- --------------------------------------------------------------
If surrender charges received by Phoenix do not fully reimburse the Company
for distribution expenses, profit from other sources, including the mortality
and expense risk charge, may be used to cover the short-fall.
OTHER CHARGES
LOAN INTEREST RATE CHARGED
This charge reimburses us for expenses we incur in administering your loan.
This rate varies by policy year.
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 taxes or any
other tax liability of the VUL Account.
FUND CHARGES
As compensation for investment management services, the Advisors are
entitled to a fee, payable monthly and based on an annual percentage of the
average daily net asset values of each fund Series. Please refer to Chart 2 for
a listing of fund charges including the investment management fee.
6
<PAGE>
<TABLE>
<CAPTION>
CHART 1 CHARGES UNDER THE POLICY
- -----------------------------------------------------------------------------------------------------
CHARGES CURRENT AMOUNT OF DEDUCTION WHEN CHARGE IS DEDUCTED
DEDUCTIONS NONE NOT APPLICABLE
FROM
PREMIUMS
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
POLICY VALUE ADMINISTRATIVE Policies with policy value of Monthly
CHARGES CHARGE* Monthly $100,000 or less:
Greater of $60 or 0.30% of
loaned policy value annually
Policies with unloaned policy
value exceeding $100,000: 0.15%
of unloaned olicy value
-----------------------------------------------------------------------------------
MAXIMUM COST OF A per thousand rate multiplied Monthly
INSURANCE CHARGE by the amount at risk each month.
This charge varies by the
Insured's issue age, policy
duration, gender and
underwriting class.
-----------------------------------------------------------------------------------
TAX CHARGE 0.40% of policy value annually Monthly
in policy years 1-10
0.00% of policy value annually
in policy years 11+
----------------------------------------------------------------------------------
SURRENDER CHARGES The surrender charge is equal to Upon full or partial surrender
the following percentages of the of the policy.
single premium paid:
Year 1 2 3 4 5 6 7 8 9 10+
% 9 8 7 6 5 4 3 2 1 0
-----------------------------------------------------------------------------------
MORTALITY AND 0.80% of policy value annually in Monthly
EXPENSE RISK unloaned policy years 1-10
CHARGE*
0.50% of policy value annually in
unloaned policy years 11+
- -----------------------------------------------------------------------------------------------------
OTHER CHARGES FUND CHARGES SEE FUND CHARGE TABLE SEE FUND PROSPECTUS
-----------------------------------------------------------------------------------
TRANSFERS BETWEEN None In the future, we may charge
SUBACCOUNTS $10 per transfer for more
than 2 transfers per policy
year.
-----------------------------------------------------------------------------------
LOAN INTEREST RATE 6.00% annually in policy year 1 On policy anniversary date or
CHARGED on surrender of the policy.
8.00% annually in policy years
2+
- -----------------------------------------------------------------------------------------------------
</TABLE>
- -----------------------------
* Charge applies to all accounts (subaccounts and GIA) with the exception of the
Loan Account.
7
<PAGE>
<TABLE>
<CAPTION>
CHART 2
FUND ANNUAL EXPENSES (AS A PERCENTAGE OF FUND AVERAGE NET ASSETS)
- ------------------------------------------------------------------------------------------------------------------------------------
SERIES MANAGEMENT RULE 12B-1 OTHER EXPENSES TOTAL EXPENSES TOTAL EXPENSES
FEES FEES BEFORE BEFORE AFTER
REIMBURSEMENT(1) REIMBURSEMENT REIMBURSEMENT(2)
- ------------------------------------------------------------------------------------------------------------------------------------
THE PHOENIX EDGE SERIES FUND
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
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 1.40%(4) 1.75%(4) .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 1.70%(4) 2.30%(4) .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-J.P. Morgan Research Enhanced Index .45% N/A .30% .75% .55%
Phoenix-Janus Equity Income .85% N/A 1.40%(4) 2.25%(4) 1.00%
Phoenix-Janus Flexible Income .80% N/A 1.65%(4) 2.45%(4) .95%
Phoenix-Janus Growth .85% N/A 1.05%(4) 1.90%(4) 1.00%
Phoenix-Morgan Stanley Focus Equity .85% N/A 1.30%(4) 2.15%(4) 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%
DEUTSCHE ASSET MANAGEMENT VIT FUNDS
- ------------------------------------------------------------------------------------------------------------------------------------
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 .24% .84% .84%
Federated High Income Bond Fund II .60% N/A .19% .79% .79%
THE UNIVERSAL INSTITUTIONAL FUNDS, INC.
- ------------------------------------------------------------------------------------------------------------------------------------
Technology Portfolio .80% N/A 1.85%(4) 2.65%(4) 1.15%
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST
- ------------------------------------------------------------------------------------------------------------------------------------
Mutual Shares Securities Fund--Class 2(6) .60% .25%(3) .19% 1.04% 1.04%
Templeton Asset Strategy Fund--Class 2(5,6) .60% .25%(3) .18% 1.03% 1.03%
Templeton Developing Markets Securities Fund--Class 2(5,6) 1.25% .25%(3) .31% 1.81% 1.81%
Templeton Growth Securities Fund--Class 2(6) .83% .25%(3) .05% 1.13% 1.13%
Templeton International Securities Fund--Class 2(5,6) .69% .25%(3) .19% 1.13% 1.13%
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-J.P. Morgan 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, Phoenix-Schafer Mid-Cap
Value, Phoenix-Bankers Trust Dow 30, Phoenix-Federated U.S. Government,
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.
4 These figures are estimates; these series have been available for less than
six months as of the date of this prospectus.
5 On 2/8/00, shareholders approved a merger and reorganization that combined
the fund with a similar fund of the Franklin Templeton Variable Insurance
Products Trust, effective 5/1/00.
6 The table shows total expenses based on the new fees and assets as of 12/31/99
and not the assets of the combined funds. The following table estimates what
the total expenses would be based on the assets of the combined funds as of
5/1/00:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
ESTIMATED ANNUAL EXPENSES FROM 5/1/00 MANAGEMENT FEES RULE 12B-1 FEES OTHER EXPENSES TOTAL OPERATING EXPENSES
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Mutual Shares Securities Fund - Class 2 .60% .25% .19% 1.04%
Templeton Asset Strategy Fund - Class 2 .60% .25% .14% .99%
Templeton Developing Markets Securities Fund - Class 2 1.25% .25% .29% 1.79%
Templeton Growth Securities Fund - Class 2 .80% .25% .05% 1.10%
Templeton International Securities Fund - Class 2 .65% .25% .20% 1.10%
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
8
<PAGE>
REDUCTION IN CHARGES
The policy is available for purchase by individuals, and groups. We may
reduce or eliminate the mortality and expense risk charge, monthly
administrative charge, monthly cost of insurance charges, surrender charges or
other charges normally assessed where it is expected that the size or nature of
such policy or policies 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:
[DIAMOND] the number of insureds;
[DIAMOND] the total premium expected to be paid;
[DIAMOND] the total assets under management for the policyowner;
[DIAMOND] the nature of the relationship among individual insureds;
[DIAMOND] the purpose for which the policies are being purchased;
[DIAMOND] whether there is a preexisting relationship with us, such as being an
employee of the PHL or ts affiliates and their spouses; or to
employees or agents who retire from PHL or its affiliates or Phoenix
Equity Planning Corporation ("PEPCO"), or its affiliates or to
registered representatives of the principal underwriter and registered
representatives of broker dealers with whom PEPCO has selling
agreements;
[DIAMOND] internal transfers from other policies or contracts issued by the
Company or an affiliate, or making transfers of amounts held under
qualified plans sponsored by the Company or an affiliate; and
[DIAMOND] 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
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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.
On April 17, 2000, the Board of Directors of Phoenix Home Life Mutual
Insurance company authorized management to develop a plan for conversion from a
mutual to a publicly traded stock company. If such a plan is developed and
adopted by the Board, it would be subject to the approval of the New York
Insurance Department and other regulators and submitted to policyholders for
approval. The plan would go into effect only after all these requirements had
been met. There is no assurance that any such plan will be adopted, and if
adopted, there is no guarantee as to the amount or nature of consideration to
eligible policyholders.
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.
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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-ABERDEEN INTERNATIONAL SERIES: The investment objective of the
series is a high total return consistent with reasonable risk. The
Phoenix-Aberdeen International 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 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
long-term capital appreciation. The Phoenix-Aberdeen New Asia 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 capital appreciation and income with approximately
equal emphasis. Under normal circumstances, the Phoenix-Duff & Phelps Real
Estate Securities Series 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 long-term capital appreciation. The Phoenix-Engemann Nifty Fifty Series
invests in approximately 50 different securities which offer the best potential
for long-term growth of capital. At least 75% of the series' assets are invested
in common stocks of high quality growth companies. The remaining portion is
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 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 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-J.P. MORGAN RESEARCH ENHANCED INDEX SERIES: The investment objective
of the series is high total return. The Phoenix-J.P. Morgan Research Enhanced
Index Series invests in a broadly diversified portfolio of equity securities of
large and medium capitalization companies within market sectors reflected in the
S&P 500. It 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-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 dividend growth, current income and capital appreciation by investing
in
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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 long-term capital appreciation, with current income as the
secondary investment objective. The Phoenix-Schafer Mid-Cap Value Series invests
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 capital appreciation primarily through investments in equity securities of
companies that have the potential for above average market appreciation. The
Phoenix-Seneca Mid-Cap Growth 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.
DEUTSCHE ASSET MANAGEMENT VIT FUNDS
A certain subaccount invests in a corresponding series of the Deutsche
Management VIT Funds. 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 stock market 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 current income. The Federated Fund for U.S. Government
Securities II invests 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 high current income. The Federated High Income Bond Fund II invests primarily
in a diversified portfolio of high-yield, lower-rated corporate bonds.
THE UNIVERSAL INSTITUTIONAL FUNDS, INC.
A certain subaccount invests in a corresponding series of The Universal
Institutional 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.
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST
Certain subaccounts invest in Class 2 shares of a corresponding fund of the
Franklin Templeton Variable Insurance Products Trust. The following funds are
currently available:
MUTUAL SHARES SECURITIES FUND: The primary investment objective of the fund
is capital appreciation with income as a secondary objective. The Mutual Shares
Securities Fund invests in domestic equity securities that the manager believes
are significantly undervalued.
TEMPLETON ASSET STRATEGY FUND: The investment objective of the fund is a
high level of total return. The Templeton Asset Strategy 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, including emerging market countries.
TEMPLETON DEVELOPING MARKETS SECURITIES FUND: The investment objective of
the fund is long-term capital growth. The Templeton Developing Markets
Securities Fund invests primarily in emerging market equity securities.
TEMPLETON GROWTH SECURITIES FUND: The investment objective of the fund is
long-term capital growth. The Templeton Growth Securities Fund invests primarily
in common stocks issued by companies in various nations throughout the world,
including the U.S. and emerging markets.
TEMPLETON INTERNATIONAL SECURITIES FUND: The investment objective of the
fund is long-term capital growth. The Templeton International Securities Fund
invests primarily in stocks of companies located outside the United States,
including emerging markets.
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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 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
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 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.
WANGER U.S. SMALL CAP: The investment objective of the series is 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. 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 may be
sold to other separate accounts of PHL or its affiliates. Shares of certain
funds may also be sold to the separate accounts of other insurance companies.
It is possible that in the future there may be no advantage for variable
life insurance separate accounts and variable annuity separate accounts to
invest in the funds simultaneously. Although neither PHL nor the funds' 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 remedy such material conflicts at our expense 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 an investment advisor to the
following series in The Phoenix Edge Series Fund:
[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
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
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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 Securities Fund
[DIAMOND] Morgan Stanley Asset Management Inc.
o Technology Portfolio
[DIAMOND] Templeton Asset Management, Ltd.
o Templeton Developing Markets Securities Fund
[DIAMOND] Templeton Global Advisors Limited
o Templeton Growth Securities Fund
[DIAMOND] Templeton Investment Counsel, Inc.
o Templeton Asset Strategy Fund
o Templeton International Securities 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 no longer be 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 Guaranteed Interest Account. Amounts you allocate or transfer to
the Guaranteed Interest Account become part of Phoenix Home Life'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. Although we
are not obligated to credit interest at a higher rate than the minimum, we will
credit any excess interest as determined by us based on expected investment
yield information.
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
regarding accuracy and completeness of statements made in this prospectus.
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We reserve the right to limit total deposits to the Guaranteed Interest
Account, including transfers, 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 Guaranteed
Interest Account. The amount that can be transferred out is limited to the
greater of $1,000 or 25% of the policy value in the Guaranteed Interest Account
as of the date of the transfer. If you elect the Systematic Transfer Program for
Dollar Cost Averaging, approximately equal amounts may be transferred out of the
Guaranteed Interest Account. Also, the total policy value allocated to the
Guaranteed Interest Account may be transferred out 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 remaining value
[DIAMOND] Year Three: 50% of remaining value
[DIAMOND] Year Four: 100% of remaining value
Transfers into the Guaranteed Interest Account and among the Subaccounts may
be made at any time. Transfers from the Guaranteed Interest Account are subject
to the rules discussed above and in "Transfer of Policy Value" and "Systematic
Transfer for Dollar Cost Averaging."
PREMIUMS
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MINIMUM PREMIUMS
The minimum premium is $10,000. The issue premium is due on the policy date.
The Insured must be alive when the issue premium is paid. After that, you have
limited ability to make additional premium payments and each additional premium
payment must be at least $100. Additional payments should be sent to the:
PHOENIX VARIABLE PRODUCTS MAIL OPERATIONS
P O BOX 8027
BOSTON, MA 02266-8027
The number of units credited to a Subaccount will be determined by dividing
the portion of the premium applied to that Subaccount by the unit value of the
Subaccount on the payment date. The payment date is the day we recieve the
premium payment, provided that the New York Stock Exchange is open, otherwise it
will be the next Business Day.
ALLOCATION OF ISSUE PREMIUM
We will allocate the issue premium to the VUL Account and/or the Guaranteed
Interest Account in accordance with allocation instructions in the application
upon our receipt of the completed application .
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.
We treat a returned policy as if we never issued it and 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 debt; plus
(2) any monthly deductions, and other charges made under the policy.
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 the same amount to you as
would have been refunded under the policy had it been issued but returned for
refund during the Free Look Period.
TRANSFERS
Transfers among available Subaccounts or the GIA and changes in premium
payment allocations may be requested in writing or by calling 800/541-0171,
between the hours of 8:30 a.m. and 4:00 p.m. Eastern Time. Written requests for
transfers will be executed on the date we receive the request. Telephone
transfers will be effective on the date the request is made except as noted
below. Unless you elect in writing not to authorize telephone transfers or
premium allocation changes, telephone transfer orders and premium allocation
changes also will be accepted on your behalf from your registered
representative. Phoenix and Phoenix Equity Planning Corporation ("PEPCO"), the
national distributor for Phoenix, will employ reasonable procedures to confirm
that telephone instructions are genuine. They will require verification of
account information and will record telephone instructions on tape. All
telephone transfers will be confirmed in writing to you. To the extent that
Phoenix and PEPCO fail to follow procedures reasonably designed to prevent
unauthorized transfers, Phoenix and PEPCO may be liable for following telephone
instructions for transfers that prove to be fraudulent. However, you will bear
the risk of loss resulting from instructions entered by an unauthorized third
party that Phoenix and PEPCO reasonably believe to be genuine. The telephone
transfer and allocation change privileges may be modified or terminated at any
time. During times
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of extreme market volatility, these privileges may be difficult to exercise.
In such cases, you should submit a written request.
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.
You may make only one transfer per policy year from the Guaranteed Interest
Account 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 Guaranteed Interest Account at the time of the transfer. In
addition, you may transfer the total value allocated to the unloaned portion of
the Guaranteed Interest Account out 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 Guaranteed Interest Account 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 deteriorate 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 contact the policyholder prior to invoking any restriction to discuss the
situation.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 PHL have entered
into a third-party transfer service agreement.
OPTIONAL PROGRAMS AND ADDITIONAL BENEFITS
DOLLAR COST AVERAGING PROGRAM
You may elect to transfer funds automatically among the Subaccounts or the
Guaranteed Interest Account 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:
[DIAMOND] $25 monthly,
[DIAMOND] $75 quarterly,
[DIAMOND] $150 semiannually, or
[DIAMOND] $300 annually.
You must have an initial value of $2,000 in the Guaranteed Interest Account
or the Subaccount from which funds will be transferred ("Sending Subaccount").
If the value in that Subaccount or the Guaranteed Interest Account 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 Guaranteed Interest Account, but may be allocated to
more than one Subaccount ("Receiving Subaccounts").
Under the Dollar Cost Averaging Program, you may transfer approximately
equal amounts from the GIA over a period of 6 months or longer. Transfers under
the Dollar Cost Averaging Program are not subject to the general restrictions on
transfers from the GIA and do not count against any limit on transers per year.
There is no charge for this program.
Upon Completion of the Dollar Cost Averaging Program, you must notify VPO at
800/541-0171 or in writing to VPO to start another Dollar Cost Averaging
Program.
Only one Dollar Cost Averaging Program can be active at any time. All
transfers under this program will be made on the basis of the Guaranteed
Interest Account 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.
The Dollar Cost Averaging Program does not ensure a profit nor guarantee
against a loss in a declining market.
AUTOMATIC ASSET REBALANCING
Automated asset rebalancing permits you to maintain a specified whole number
percentage of your account value in any combination of Subaccounts and the
Guaranteed Interest Account. We must receive a written request in order to begin
your automated asset rebalancing program ("asset rebalancing"). Then, we will
make transfers annually on your policy anniversary 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. We will rebalance your policy value only on the policy anniversary.
Transfers under this program do not count against any limit on transfers per
year and there is no charge for this program.
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The effective date of the first asset rebalancing will be the first policy
anniversary after we receive your request at VPO.
You may not participate in both the Dollar Cost Averaging Program and asset
rebalancing at the same time.
ADDITIONAL RIDER BENEFITS
You may elect additional benefits under your policy. These benefits are
cancelable by you at any time. A charge may be deducted from your policy value
for each additional rider benefit chosen. More details will be included in the
form of a rider to your policy contract if any of these benefits is chosen. The
following benefits are currently available (if approved in your state).
Additional riders also may be available as described in your policy.
LIVING BENEFITS
In the event of terminal illness of the insured, an accelerated payment of
up to 75% of the policy's death benefit (up to a maximum of $250,000) is
available if a Living Benefits Option has been exercised. The minimum face
amount of the policy after such accelerated benefit payment is $10,000. There is
no charge for this additional benefit.
VUL ACCOUNT VALUATION PROCEDURES
VALUATION DATE
A Valuation Date is every day the NYSE is open for trading and we are open
for business. The NYSE is scheduled to be closed on the following days: New
Year's Day, Martin Luther King, Jr. Day, Presidents' Day, Good Friday, Memorial
Day, Independence Day, Labor Day, Thanksgiving Day and Christmas Day. The Board
of Directors of the NYSE reserves the right to change this schedule as
conditions warrant. On each Valuation Date, the value of the Account is
determined at the close of the NYSE (currently 4:00 p.m. Eastern Time).
VALUATION PERIOD
Valuation Period is that period of time from the beginning of the day
following a Valuation Date to the end of the next following Valuation Date.
DETERMINATION OF UNIT VALUES
We establish the unit value of each Subaccount on the first valuation date
of that Subaccount. The value of one unit was set at $1.0000 on the date that
assets were first allocated to 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. The unit value of each Subaccount on a valuation date is
determined at the end of that day.
NET INVESTMENT FACTOR
The Net Investment Factor for any Valuation Period is equal to 1.000000 plus
the applicable net investment rate for such Valuation Period. A Net Investment
Factor may be more or less than 1.000000 depending on whether the assets gained
or lost value that day. To determine the net investment rate for any Valuation
Period for the Funds allocated to each Subaccount, the following steps are
taken: (a) the aggregate accrued investment income and capital gains and losses,
whether realized or unrealized, excluding any transactions, of the Subaccount
for such Valuation Period is computed, (b) the amount in (a) is then adjusted by
the sum of the charges and credits for any applicable income taxes, and (c) the
results of (a) as adjusted by (b) are divided by the aggregate Unit Values in
the Subaccount at the beginning of the Valuation Period.
DEATH BENEFIT
GENERAL
The policy provides a level death benefit. The death benefit equals the
policy's face amount on the date of the death of the Insured or, if greater, the
minimum death benefit on the date of death.
The minimum death benefit is the policy value on the date of death of the
Insured multiplied by a percentage determined from a table contained in the
policy. This percentage will be based on the Insured's attained age at the
beginning of the policy year in which the death occurs.
We pay the death benefit to the designated beneficiary 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.
The policy is intended to qualify as a life insurance contract under the
Internal Revenue Code (IRC) for Federal tax purposes, and the death benefit to
qualify for exclusion under the IRC. To qualify as life insurance under current
federal tax laws, the policy has a minimum face amount of insurance (as shown on
the schedule page of the policy contract ).
The minimum face amount under this policy is determined using the Guideline
Premium Test.
Under the Guideline Premium Test, the minimum face amount of insurance is
determined by multiplying the policy value by a minimum face amount factor which
varies by the age of the insured.
Face amount increases or decreases are not allowed.
SURRENDERS
GENERAL
At any time during the lifetime of the Insured(s) and while the Policy is in
force, you may partially or fully
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surrender the Policy by sending to VPMO a written release and surrender in a
form satisfactory to us. 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 VPMO.
FREE WITHDRAWALS
Your policy allows for a free withdrawal once each year. The free withdrawal
amount is the amount of your policy value we permit you to withdraw each year
without being charged a surrender penalty.
Once each policy year, you may withdraw an amount equal to the greater of
your penalty free earnings on the policy and 10% of the single premium (free
allowable amount) without the imposition of a surrender charge.
The penalty free earnings portion of your policy is equal to your policy
value less the amount of the single premium.
The single premium amount will be reduced by portions of prior withdrawals
you have made.
The portion of previous partial surrenders that reduce the amount of your
single premium are withdrawals that you made that were in excess of your free
allowable amount, including surrender charges on those withdrawals.
The free allowable amount will automatically be calculated and processed
when full or partial surrenders are requested.
FULL SURRENDERS
If the Policy is being fully surrendered, the Policy itself must be returned
to VPMO, 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 "Conditional Charges--Surrender Charge" and "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 VPMO. 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 not to allow 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 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 "General Provisions--Postponement of Payments." For the federal tax effects
of partial and full surrenders, see "Federal Tax Considerations."
Cash payment will be made in a single sum, ordinarily within seven days
after receipt of such notice. However, redemption and payment may be delayed
under certain circumstances. See "Deferment of Payment." There may be adverse
tax consequences to certain surrenders and partial withdrawals.
Any request for a withdrawal from, or complete surrender of, a policy should
be mailed to:
PHOENIX VARIABLE PRODUCTS MAIL OPERATIONS
PO BOX 8027, BOSTON
MASSACHUSETTS 02266-8027
PARTIAL SURRENDER: EFFECT ON DEATH BENEFIT
A partial surrender will generally decrease the death benefit. Your death
benefit will be reduced on a pro rata basis. For example, a $10,000 partial
surrender from a policy with a $100,000 policy value will result in a 10%
reduction in the death benefit. A decrease in the death benefit may have certain
tax consequences. 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:
[DIAMOND] 90% of your policy value at the time the loan is
taken; less
[DIAMOND] any applicable surrender charges; less
[DIAMOND] any outstanding policy debt before the loan is taken;
Your policy must be assigned to us as collateral for the loan. At the time
you take a loan, we establish a Loan Account on your policy. The Loan Account is
an account that holds policy value which is used to secure your loan.
SOURCE OF LOAN
We deduct your requested loan amount from the Subaccounts and the Guaranteed
Interest Account, 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 Loan Account.
INTEREST CHARGED ON LOANS
You will pay interest on the loan at the following noted effective annual
rates, compounded daily and payable in arrears:
o 6% in policy year 1
o 8% in policy years 2+
Interest accrues daily and is due and payable on the policy anniversary. If
you do not pay the interest when due, it will be added to your outstanding debt.
We treat any
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interest which has been capitalized the same as if it were a new loan. We
deduct this capitalized interest from the Subaccounts and the Guaranteed
Interest Account in proportion to the account value in each.
INTEREST CREDITED TO THE LOAN ACCOUNT
AND PREFERRED LOANS
We will pay interest on the Loan Account at the annual rate of 6%.
The initial policy loan plus any additional loans which do not exceed the
penalty free earnings amount on the policy will be considered "preferred loans".
We will charge preferred loans interest at a rate of 6%.
Interest Charged Interest Credited Net
- ---------------- ----------------- ---
6%-policy year 1 6% 0%
8% - policy years 2+ 6% 2%
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, PHL may not allow policy loans of less than $500, unless such
loan is used to pay a premium on another policy issued by PHL or its affiliates.
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 Loan Account. The Subaccount's investment performance
does not affect this amount. Also, you may be subject to tax consequences if
your policy is considered a modified endowment contract and you take a loan
against the policy.
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 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 Guaranteed Interest Account according
to the current premium allocation schedule.
In determining the amount of "excess" premium to be applied to the
Subaccounts or the Guaranteed Interest Account, we will deduct 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.
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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 Guaranteed Interest Account;
[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 per the SEC, as a result of which
o disposal of securities is not reasonably practicable or
o it is not reasonably practicable to determine the value of the
VUL Account's net assets.
Transfers may also 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 PHL 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 as 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
You may share in the divisible surplus of Phoenix to the extent decided
annually by the Board of Directors. However, it is not currently expected that
the Board will authorize these payments since you will be participating directly
in investment results.
PAYMENT OF PROCEEDS
- --------------------------------------------------------------------------------
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.
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.
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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 is paid in one lump sum.
OPTION 2--LEFT TO EARN INTEREST
A payment of interest is paid 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] 20 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.
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PART III--OTHER IMPORTANT INFORMATION
- --------------------------------------------------------------------------------
FEDERAL INCOME 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 income tax
status and upon the tax status of the individual concerned. This discussion is
general in nature and is not intended as income tax advice. For complete
information on federal and state income tax considerations, a qualified income
tax advisor should be consulted. No attempt is made to consider any estate and
inheritance taxes, or any state, local or other income tax laws. Because this
discussion is based upon our understanding of federal income tax laws as they
are currently interpreted, we cannot guarantee the income tax status of any
policy.
The Internal Revenue Service ("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 INCOME 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 income 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 income tax
treatment is determined to be other than what we currently believe it to be, if
changes are made affecting the income tax treatment to our variable life
insurance contracts, or if changes occur in our income 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
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endowment contract, loans are fully taxable to the extent of income in the
policy and are possibly subject to an additional 10% tax. Please see the
discussion on modified endowment contract and note that it is more likely than
not that these policies will become 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 tax consequences. 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 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 7 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 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 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.
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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.
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),
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. 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.
23
<PAGE>
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 PHL 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 PHL.
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, PHL may disregard voting
instructions in favor of changes initiated by a policyowner in the investment
policies or the investment advisor of the Funds if the proposed change is
contrary to state law or prohibited by state regulatory authorities or the
change would have an adverse effect on the General Account or create liability
on the part of PHL because the proposed investment policy for a Series may
result in overly speculative or unsound investments contrary to state law. In
the event PHL does disregard voting instructions, a summary of that action and
the reasons for such action would be promptly reported to policyowners.
PHOENIX
You (or the payee entitled to payment under a payment option if a different
person) will have the right to vote at annual meetings of all Phoenix
policyholders for the election of members of the Board of Directors of Phoenix
and on other corporate matters, if any, where a policyholder's vote is taken. At
meetings of all 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 of International
Economics, 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 Director, Chairman of the Board,
and Chief Executive Officer,
Phoenix Home Life Mutual
Insurance Company
Hartford, Connecticut
John E. Haire President of
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
24
<PAGE>
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, 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
Dona D. Young President
Philip R. McLoughlin Executive Vice President and
Chief Investment Officer
Carl T. Chadburn Executive Vice President,
Assistant Secretary
David W. Searfoss Executive Vice President, Chief
Financial Officer and Assistant
Secretary
Nathaniel C Brinn Senior Vice President,
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. Olsen Senior Vice President
Robert E. Primmer Senior Vice President,
Individual Distribution
Tracy L. Rich Senior Vice President
Joel D. Sanders Senior Vice President
Frederick W. Sawyer, III Senior Vice President
Jack F. Solan, Jr. Senior Vice President,
Strategic Development
Simon Y. Tan Senior Vice President, Market and
Product Development
Anthony J. Zeppetella Senior Vice President, Corporate
Portfolio Management
Walter H. Zultowski Senior Vice President, Marketing
and Market Research; formerly
Senior Vice President,
LIMRA International,
Hartford, Connecticut
The above listing reflects positions held at in Phoenix during the last
five years
SAFEKEEPING OF THE VUL ACCOUNT'S ASSETS
- --------------------------------------------------------------------------------
We hold the assets of the VUL Account. They 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
- --------------------------------------------------------------------------------
The principal underwriter of the Contracts is PEPCO. Contracts may be
purchased through registered representatives of W.S. Griffith & Company, Inc.
("WSG") who are licensed to sell our life insurance policies. WSG is an indirect
wholly-owned subsidiary of Phoenix. PEPCO is an indirect, majority owned
subsidiary of Phoenix. Contracts also may be purchased through other
broker-dealers or entities registered under or exempt under the Securities
Exchange Act of 1934, whose representatives are authorized by applicable law to
sell Contracts under terms of agreement provided by PEPCO and terms of agreement
provided by Phoenix.
In addition to reimbursing PEPCO for its expenses, we pay PEPCO an amount
equal to up to 7.25% of the payments made under the Contract. PEPCO pays any
qualified distribution organization an amount which may not exceed 7.25% of the
payments under the Contract. Any such amount paid with respect to Contracts sold
through other broker-dealers will be paid by us to or through PEPCO. The amounts
paid are not deducted from the payments. Deductions for surrender charges (as
described under "Surrender Charges") may be used as reimbursement for commission
payments.
25
<PAGE>
Although the Glass-Steagall Act prohibits banks and bank affiliates from
engaging in the business of underwriting securities, banking regulators have not
indicated that such institutions are prohibited from purchasing variable life
insurance contracts upon the order and for the account of their customers.
STATE REGULATION
- --------------------------------------------------------------------------------
We are subject to the provisions of the New York insurance laws applicable
to mutual life insurance companies and to regulation and supervision by the New
York Superintendent of Insurance. We also are subject to the applicable
insurance laws of all 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 PHL, 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 PHL.
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, PHL 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. The financial statements of Phoenix Home Life Mutual Insurance
Company are available for the period ended December 31, 1999.
26
<PAGE>
PHOENIX HOME LIFE
MUTUAL INSURANCE COMPANY
VARIABLE UNIVERSAL LIFE ACCOUNT
There have been no deposits made to Phoenix Life and Annuity Variable Universal
Life Account as of the date of this prospectus; therefore, no financial
statements are available for the VUL Account.
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 the 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)
ASSETS
Investments:
<S> <C> <C>
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)
REVENUES
<S> <C> <C> <C>
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)
CASH FLOW FROM CONTINUING OPERATIONS ACTIVITIES
<S> <C> <C> <C>
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 (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)
DEBT SECURITIES
HELD-TO-MATURITY:
<S> <C> <C> <C> <C>
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)
DEBT SECURITIES
HELD-TO-MATURITY:
<S> <C> <C> <C> <C>
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 $ 1,990,169 $ 1,893,288 $ 5,658,712 $ 5,506,779
operations =============== =============== ================ ==============
</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)
PROPERTY TYPE:
<S> <C> <C> <C> <C>
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, based 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)
1999
<S> <C> <C> <C> <C>
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)
Swaptions:
<S> <C> <C>
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)
Phoenix Investment Partners gross amounts:
<S> <C> <C>
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)
Income taxes
<S> <C> <C> <C>
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
% % %
Income tax expense at statutory
<S> <C> <C> <C> <C> <C> <C>
rate $ 91,440 35 $ 65,685 35 $ 77,095 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)
Components of net periodic benefit cost
<S> <C> <C> <C>
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)
Change in projected benefit obligation
<S> <C> <C>
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>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
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)
Components of net periodic benefit cost
<S> <C> <C> <C>
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)
Change in projected postretirement benefit obligation
<S> <C> <C>
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)
UNREALIZED (LOSSES) GAINS ON SECURITIES
AVAILABLE-FOR-SALE:
<S> <C> <C> <C>
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)
NET UNREALIZED (LOSSES) GAINS ON SECURITIES
AVAILABLE-FOR-SALE:
<S> <C> <C> <C>
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)
TOTAL ASSETS
<S> <C> <C> <C>
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)
PREMIUMS, INSURANCE AND INVESTMENT PRODUCT FEES
<S> <C> <C> <C>
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: inter-segment 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: inter-segment 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 & inter-segment 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)
Revenues:
<S> <C> <C> <C>
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 discountinued 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
- --------------------------------------------------------------------------------
YEAR ENDED
LOSS ON DISPOSAL OF DISCONTINUED OPERATIONS DECEMBER 31, 1999
(IN THOUSANDS)
(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)
--------------
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 $ 131,052,050 $ 121,442,041 $ 120,394,664
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 96,256,165 130,436,610
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 $ 116,625,202
=============== ================ ===============
</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)
Financial assets:
<S> <C> <C> <C> <C>
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>
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 his or her last birthday.
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, Deutsche Asset Management VIT Funds,
Federated Insurance Series, The Universal Institutional Funds, Inc., Franklin
Templeton Variable Insurance Products Trust and Wanger Advisors Trust.
GENERAL ACCOUNT: The general asset account of PHL.
ISSUE PREMIUM: The premium payment made in connection with issuing the policy.
LOAN ACCOUNT: An account that holds policy value to secure policy loans.
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.
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 Guaranteed Interest
Account plus the Loan Account.
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.
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 Mutual Insurance Company's 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
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.
72
<PAGE>
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.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURN FOR THE PERIOD ENDED DECEMBER 31, 1999(1)
- -----------------------------------------------------------------------------------------------------------------------------------
SERIES INCEPTION DATE 1 YEAR 5 YEARS 10 YEARS SINCE INCEPTION
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Phoenix-Aberdeen International Series...................... 5/1/90 27.76% 17.81% N/A 11.39%
- -----------------------------------------------------------------------------------------------------------------------------------
Phoenix-Aberdeen New Asia Series........................... 9/17/96 49.05% N/A N/A -2.30%
- -----------------------------------------------------------------------------------------------------------------------------------
Phoenix-Bankers Trust Dow 30 Series........................ 12/15/99 N/A N/A N/A 2.43%
- -----------------------------------------------------------------------------------------------------------------------------------
Phoenix-Duff & Phelps Real Estate Securities Series........ 5/1/95 3.33% N/A N/A 8.95%
- -----------------------------------------------------------------------------------------------------------------------------------
Phoenix-Engemann Capital Growth Series..................... 12/31/82 27.93% 23.17% 18.21% 18.63%
- -----------------------------------------------------------------------------------------------------------------------------------
Phoenix-Engemann Nifty Fifty Series........................ 3/2/98 30.41% N/A N/A 30.54%
- -----------------------------------------------------------------------------------------------------------------------------------
Phoenix-Federated U.S. Government Bond Series.............. 12/15/99 N/A N/A N/A -1.55%
- -----------------------------------------------------------------------------------------------------------------------------------
Phoenix-Goodwin Money Market Series........................ 10/8/82 3.38% 3.76% 3.67% 5.13%
- -----------------------------------------------------------------------------------------------------------------------------------
Phoenix-Goodwin Multi-Sector Fixed Income Series........... 12/31/82 4.00% 7.93% 7.70% 8.61%
- -----------------------------------------------------------------------------------------------------------------------------------
Phoenix-Hollister Value Equity Series...................... 3/2/98 22.64% N/A N/A 17.49%
- -----------------------------------------------------------------------------------------------------------------------------------
Phoenix-J.P. Morgan Research Enhanced Index Series......... 7/14/92 17.23% N/A N/A 21.13%
- -----------------------------------------------------------------------------------------------------------------------------------
Phoenix-Janus Equity Income Series......................... 12/15/99 N/A N/A N/A 5.77%
- -----------------------------------------------------------------------------------------------------------------------------------
Phoenix-Janus Flexible Income Series....................... 12/15/99 N/A N/A N/A -0.06%
- -----------------------------------------------------------------------------------------------------------------------------------
Phoenix-Janus Growth Series................................ 12/15/99 N/A N/A N/A 5.91%
- -----------------------------------------------------------------------------------------------------------------------------------
Phoenix-Morgan Stanley Focus Equity Series................. 12/15/99 N/A N/A N/A 6.22%
- -----------------------------------------------------------------------------------------------------------------------------------
Phoenix-Oakhurst Balanced Series........................... 5/1/92 10.04% 14.98% N/A 11.14%
- -----------------------------------------------------------------------------------------------------------------------------------
Phoenix-Oakhurst Growth and Income Series.................. 3/2/98 15.43% N/A N/A 19.03%
- -----------------------------------------------------------------------------------------------------------------------------------
Phoenix-Oakhurst Strategic Allocation Series............... 9/17/84 9.73% 14.49% 11.90% 12.37%
- -----------------------------------------------------------------------------------------------------------------------------------
Phoenix-Schafer Mid-Cap Value Series....................... 3/2/98 -11.59% N/A N/A -13.10%
- -----------------------------------------------------------------------------------------------------------------------------------
Phoenix-Seneca Mid-Cap Growth Series....................... 3/2/98 43.65% N/A N/A 34.89%
- -----------------------------------------------------------------------------------------------------------------------------------
Phoenix-Seneca Strategic Theme Series...................... 1/29/96 52.99% N/A N/A 29.54%
- -----------------------------------------------------------------------------------------------------------------------------------
EAFE(R)Equity Index Fund.................................... 8/22/97 25.90% N/A N/A 15.45%
- -----------------------------------------------------------------------------------------------------------------------------------
Federated Fund for U.S. Government Securities II........... 3/28/94 -1.98% 4.27% N/A 3.96%
- -----------------------------------------------------------------------------------------------------------------------------------
Federated High Income Bond Fund II......................... 3/1/94 0.90% 9.11% N/A 6.84%
- -----------------------------------------------------------------------------------------------------------------------------------
Technology Portfolio....................................... 11/30/99 N/A N/A N/A 23.60%
- -----------------------------------------------------------------------------------------------------------------------------------
Mutual Shares Securities Fund-- Class (2) ................. 11/2/98 7.82% N/A N/A 8.85%
- -----------------------------------------------------------------------------------------------------------------------------------
Templeton Asset Strategy Fund-- Class 2(2)................. 11/28/88 20.90% 15.39% 11.45% 11.43%
- -----------------------------------------------------------------------------------------------------------------------------------
Templeton Developing Markets Securities Fund-- Class 2(2).. 9/27/96 51.33% N/A N/A -5.91%
- -----------------------------------------------------------------------------------------------------------------------------------
Templeton Growth Securities Fund-- Class 2(2).............. 11/3/88 27.08% 15.85% 11.93% 11.79%
- -----------------------------------------------------------------------------------------------------------------------------------
Templeton International Securities Fund-- Class 2(2)....... 5/11/92 21.58% 15.48% N/A 13.72%
- -----------------------------------------------------------------------------------------------------------------------------------
Wanger Foreign Forty....................................... 2/1/99 N/A N/A N/A 81.77%
- -----------------------------------------------------------------------------------------------------------------------------------
Wanger International Small Cap............................. 5/1/95 123.66% N/A N/A 37.14%
- -----------------------------------------------------------------------------------------------------------------------------------
Wanger Twenty.............................................. 2/1/99 N/A N/A N/A 32.73%
- -----------------------------------------------------------------------------------------------------------------------------------
Wanger U.S. Small Cap...................................... 5/1/95 23.38% N/A N/A 25.12%
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
1 Standardized returns are the compounded returns that result from holding an
initial investment of $10,000 for the time period indicated. Returns for
periods greater than 1 year are annualized. Returns are net of investment
management fees and the mortality and expense risk charges. A monthly
administrative fee of $5 or .30% of annual account value divided by 12 has
been applied, whichever is greater. Subaccounts are assumed to have started on
the inception date of the appropriate series.
2 Standardized performance for Class 2 shares reflects a "blended" figure,
combining: (a) for periods prior to Class 2's inception on May 1, 1997
(November 16, 1998 for Mutual Shares Securities Fund), historical results of
Class 1 shares; and (b) for periods after May 1, 1997 (November 16, 1998),
Class 2's results reflecting an additional 12b-1 fee expense which also
affects all future performance. Maximum annual plan expenses are 0.25%.
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 AverageSM, 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 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 AverageSM
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>
<TABLE>
<CAPTION>
ANNUAL TOTAL RETURN(1,2)
- -------------------------------------------------------------------------------------------------------------------
Series
1983 1984 1985 1986 1987 1988 1989 1990
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Phoenix-Aberdeen International Series N/A N/A N/A N/A N/A N/A N/A N/A
- -------------------------------------------------------------------------------------------------------------------
Phoenix-Aberdeen New Asia Series N/A N/A N/A N/A N/A N/A N/A N/A
- -------------------------------------------------------------------------------------------------------------------
Phoenix-Bankers Trust Dow 30 Series N/A N/A N/A N/A N/A N/A N/A N/A
- -------------------------------------------------------------------------------------------------------------------
Phoenix-Duff & Phelps Real Estate Securities Series N/A N/A N/A N/A N/A N/A N/A N/A
- -------------------------------------------------------------------------------------------------------------------
Phoenix-Engemann Capital Growth Series 32.89% 10.67% 34.92% 20.47% 6.91% 3.92% 36.20% 4.05%
- -------------------------------------------------------------------------------------------------------------------
Phoenix-Engemann Nifty Fifty Series N/A N/A N/A N/A N/A N/A N/A N/A
- -------------------------------------------------------------------------------------------------------------------
Phoenix-Federated U.S. Government Bond Series N/A N/A N/A N/A N/A N/A N/A N/A
- -------------------------------------------------------------------------------------------------------------------
Phoenix-Goodwin Money Market Series 8.37% 10.23% 8.03% 6.51% 6.46% 7.46% 9.21% 8.24%
- -------------------------------------------------------------------------------------------------------------------
Phoenix-Goodwin Multi-Sector Fixed Income Series 6.00% 11.35% 20.61% 19.29% 1.08% 10.50% 8.24% 5.23%
- -------------------------------------------------------------------------------------------------------------------
Phoenix-Hollister Value Equity Series N/A N/A N/A N/A N/A N/A N/A N/A
- -------------------------------------------------------------------------------------------------------------------
Phoenix-J.P. Morgan Research Enhanced Index Series N/A N/A N/A N/A N/A N/A N/A N/A
- -------------------------------------------------------------------------------------------------------------------
Phoenix-Janus Equity Income Series N/A N/A N/A N/A N/A N/A N/A N/A
- -------------------------------------------------------------------------------------------------------------------
Phoenix-Janus Flexible Income Series N/A N/A N/A N/A N/A N/A N/A N/A
- -------------------------------------------------------------------------------------------------------------------
Phoenix-Janus Growth Series N/A N/A N/A N/A N/A N/A N/A N/A
- -------------------------------------------------------------------------------------------------------------------
Phoenix-Morgan Stanley Focus Equity Series N/A N/A N/A N/A N/A N/A N/A N/A
- -------------------------------------------------------------------------------------------------------------------
Phoenix-Oakhurst Balanced Series N/A N/A N/A N/A N/A N/A N/A N/A
- -------------------------------------------------------------------------------------------------------------------
Phoenix-Oakhurst Growth and Income Series N/A N/A N/A N/A N/A N/A N/A N/A
- -------------------------------------------------------------------------------------------------------------------
Phoenix-Oakhurst Strategic Allocation Series N/A N/A 27.34% 15.69% 12.53% 2.35% 19.90% 5.77%
- -------------------------------------------------------------------------------------------------------------------
Phoenix-Schafer Mid-Cap Value Series N/A N/A N/A N/A N/A N/A N/A N/A
- -------------------------------------------------------------------------------------------------------------------
Phoenix-Seneca Mid-Cap Growth Series N/A N/A N/A N/A N/A N/A N/A N/A
- -------------------------------------------------------------------------------------------------------------------
Phoenix-Seneca Strategic Theme Series 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
- -------------------------------------------------------------------------------------------------------------------
Federated Fund for U.S. GovernmentSecuritiesII N/A N/A N/A N/A N/A N/A N/A N/A
- -------------------------------------------------------------------------------------------------------------------
Federated High Income Bond Fund II 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
- -------------------------------------------------------------------------------------------------------------------
Mutual Shares Securities Fund-- Class 2(2) N/A N/A N/A N/A N/A N/A N/A N/A
- -------------------------------------------------------------------------------------------------------------------
Templeton Asset Strategy Fund-- Class 2(2) N/A N/A N/A N/A N/A N/A 13.03% -8.21%
- -------------------------------------------------------------------------------------------------------------------
Templeton Developing Markets Securities Fund--Class 2(2) N/A N/A N/A N/A N/A N/A N/A N/A
- -------------------------------------------------------------------------------------------------------------------
Templeton Growth Securities Fund-- Class 2(2) N/A N/A N/A N/A N/A N/A 14.39% -11.28%
- -------------------------------------------------------------------------------------------------------------------
Templeton International Securities Fund-- Class 2(2) N/A N/A N/A N/A N/A N/A N/A N/A
- -------------------------------------------------------------------------------------------------------------------
Wanger Foreign Forty 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
- -------------------------------------------------------------------------------------------------------------------
Wanger Twenty N/A N/A N/A N/A N/A N/A N/A N/A
- -------------------------------------------------------------------------------------------------------------------
Wanger U.S. Small Cap N/A N/A N/A N/A N/A N/A N/A N/A
- -------------------------------------------------------------------------------------------------------------------
ANNUAL TOTAL RETURN(1,2) (continued)
- ---------------------------------------------------------------------------------------------------------------------------
Series 1991 1992 1993 1994 1995 1996 1997 1998 1999
- ---------------------------------------------------------------------------------------------------------------------------
Phoenix-Aberdeen International Series 19.73%-12.83% 38.47% 0.05% 9.60% 18.67% 12.05% 27.94% 29.51%
- ---------------------------------------------------------------------------------------------------------------------------
Phoenix-Aberdeen New Asia Series N/A N/A N/A N/A N/A N/A -32.40% -4.45% 50.99%
- ---------------------------------------------------------------------------------------------------------------------------
Phoenix-Bankers Trust Dow 30 Series N/A N/A N/A N/A N/A N/A N/A N/A N/A
- ---------------------------------------------------------------------------------------------------------------------------
Phoenix-Duff & Phelps Real Estate Securities Series N/A N/A N/A N/A N/A 33.13% 22.07% -21.21% 4.78%
- ---------------------------------------------------------------------------------------------------------------------------
Phoenix-Engemann Capital Growth Series 42.77% 10.30% 19.72% 1.47% 30.89% 12.59% 21.09% 30.02% 29.69%
- ---------------------------------------------------------------------------------------------------------------------------
Phoenix-Engemann Nifty Fifty Series N/A N/A N/A N/A N/A N/A N/A N/A 32.17%
- ---------------------------------------------------------------------------------------------------------------------------
Phoenix-Federated U.S. Government Bond Series N/A N/A N/A N/A N/A N/A N/A N/A N/A
- ---------------------------------------------------------------------------------------------------------------------------
Phoenix-Goodwin Money Market Series 5.99% 3.58% 2.88% 3.84% 5.70% 5.04% 5.19% 5.10% 4.83%
- ---------------------------------------------------------------------------------------------------------------------------
Phoenix-Goodwin Multi-Sector Fixed Income Series 19.60% 10.09% 15.92% -5.47% 23.54% 12.43% 11.09% -4.15% 5.46%
- ---------------------------------------------------------------------------------------------------------------------------
Phoenix-Hollister Value Equity Series N/A N/A N/A N/A N/A N/A N/A N/A 24.34%
- ---------------------------------------------------------------------------------------------------------------------------
Phoenix-J.P. Morgan Research Enhanced Index Series N/A N/A N/A N/A N/A N/A N/A 31.68% 18.83%
- ---------------------------------------------------------------------------------------------------------------------------
Phoenix-Janus Equity Income Series N/A N/A N/A N/A N/A N/A N/A N/A N/A
- ---------------------------------------------------------------------------------------------------------------------------
Phoenix-Janus Flexible Income Series N/A N/A N/A N/A N/A N/A N/A N/A N/A
- ---------------------------------------------------------------------------------------------------------------------------
Phoenix-Janus Growth Series N/A N/A N/A N/A N/A N/A N/A N/A N/A
- ---------------------------------------------------------------------------------------------------------------------------
Phoenix-Morgan Stanley Focus Equity Series N/A N/A N/A N/A N/A N/A N/A N/A N/A
- ---------------------------------------------------------------------------------------------------------------------------
Phoenix-Oakhurst Balanced Series N/A N/A 8.61% -2.84% 23.35% 10.57% 17.95% 19.02% 11.58%
- ---------------------------------------------------------------------------------------------------------------------------
Phoenix-Oakhurst Growth and Income Series N/A N/A N/A N/A N/A N/A N/A N/A 17.02%
- ---------------------------------------------------------------------------------------------------------------------------
Phoenix-Oakhurst Strategic Allocation Series 29.33% 10.66% 11.02% -1.44% 18.24% 9.06% 20.75% 20.80% 11.27%
- ---------------------------------------------------------------------------------------------------------------------------
Phoenix-Schafer Mid-Cap Value Series N/A N/A N/A N/A N/A N/A N/A N/A -10.29%
- ---------------------------------------------------------------------------------------------------------------------------
Phoenix-Seneca Mid-Cap Growth Series N/A N/A N/A N/A N/A N/A N/A N/A 45.65%
- ---------------------------------------------------------------------------------------------------------------------------
Phoenix-Seneca Strategic Theme Series N/A N/A N/A N/A N/A N/A 17.19% 44.71% 55.01%
- ---------------------------------------------------------------------------------------------------------------------------
EAFE(R)Equity Index Fund N/A N/A N/A N/A N/A N/A N/A 21.60% 27.63%
- ---------------------------------------------------------------------------------------------------------------------------
Federated Fund for U.S. Government Securities II N/A N/A N/A N/A 8.77% 4.20% 8.58% 7.66% -0.59%
- ---------------------------------------------------------------------------------------------------------------------------
Federated High Income Bond Fund II N/A N/A N/A 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 N/A N/A N/A
- ---------------------------------------------------------------------------------------------------------------------------
Mutual Shares Securities Fund--Class 2(2) N/A N/A N/A N/A N/A N/A N/A N/A 9.30%
- ---------------------------------------------------------------------------------------------------------------------------
Templeton Asset Strategy Fund--Class 2(2) 27.44% 7.83% 25.87% -3.23% 22.26% 18.59% 15.29% 6.10% 22.55%
- ---------------------------------------------------------------------------------------------------------------------------
Templeton Developing Markets Securities Fund--Class 2(2) N/A N/A N/A N/A N/A N/A -29.38% -21.05% 53.31%
- ---------------------------------------------------------------------------------------------------------------------------
Templeton Growth Securities Fund-- Class 2(2) 27.23% 6.87% 33.74% -2.47% 24.96% 22.15% 11.63% 0.99% 28.80%
- ---------------------------------------------------------------------------------------------------------------------------
Templeton International Securities Fund--Class 2(2) N/A N/A 47.02% -2.50% 15.48% 23.76% 13.66% 9.04% 23.25%
- ---------------------------------------------------------------------------------------------------------------------------
Wanger Foreign Forty 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 32.04% -1.46% 16.34% 126.52%
- ---------------------------------------------------------------------------------------------------------------------------
Wanger Twenty N/A N/A N/A N/A N/A N/A N/A N/A N/A
- ---------------------------------------------------------------------------------------------------------------------------
Wanger U.S. Small Cap N/A N/A N/A N/A N/A 46.64% 29.44% 8.69% 25.08%
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
1 Non-standardized returns are net of the investment management fees of the
Phoenix Edge SPVL subaccounts. Percent change does not include the effect
of the monthly administrative fees, or mortality and expense risk charges.
Subaccounts are assumed to have started on the inception date of the
appropriate series.
2 Standardized performance for Class 2 shares reflect a "blended" figure,
combining: (a) for periods prior to Class 2's inception on May 1, 1997
(November 16, 1998 for Mutual Shares Securities Fund), historical results
of Class 1 shares; and (b) for periods after May 1, 1997 (November 16,
1998), Class 2's results reflecting an additional 12b-1 fee expense which
also affects all future performance. Maximum annual plan expenses are
0.25%.
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% to 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% to 12% but
went above or below those figures for the individual Subaccounts. The tables are
for standard risk males and females who are non-smokers. Account values and Cash
Surrender Values may be lower for smokers. The single premium is assumed to be
paid at the beginning of the first Policy Year. The difference between the
Policy Value and the Cash Surrender Value in the first 9 years is the surrender
charge.
The death benefit, account value and Cash Surrender Value amounts reflect
the following monthly charges:
1. Monthly administrative charge is the greater of $5 per month or 0.25% of
unloaned policy value (based on 0.30% annually) for policies with policy
value of $100,000 or less. The charge is reduced to 0.0125% of unloaned
policy value (based on 0.15% annually) for policies with policy value
exceeding $100,000.
2. Tax charge of .033% of policy value (based on 0.40% annually).
3. Cost of insurance charge of .058% of policy value (based on .70% annually)
for assumed current charges. See "Policy Value Charges--Cost of Insurance
Charge."
4. Mortality and expense risk charge of .0667% of unloaned policy value which
is based on .80% annually (.50% on an annual basis after the 10th Policy
Year). See "Policy Value Charges--Mortality and Expense Risk Charge."
These illustrations also assume an average investment advisory fee of .75%
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 .22%. Management may decide to limit the amount of expense
reimbursement in the future. If this 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. See
"Charges and Deductions--Fund Charges."
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 Fund's assets are equivalent to net annual investment return
rates of approximately -.97%, 4.03% and 11.03%, respectively. For individual
illustrations, interest rates ranging between 0% and 12% may be selected in
place of the 6% rate.
The hypothetical returns shown in the tables are without any tax charges
that may be attributable to the VUL Account in the future. If such tax charges
are imposed in the future, then in order to produce after tax returns equal to
those illustrated for 0%, 6% and 12%, a sufficiently higher amount in excess of
the hypothetical interest rates would have to be earned. See "Policy Value
Charges--Tax Charge."
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>
PAGE 1 OF 2
PREMIUM: $25,000
FACE AMOUNT: $62,848
MALE 55 ADVANTAGE
THE PHOENIX EDGE-SPVL -- A VARIABLE UNIVERSAL LIFE POLICY
ASSUMING CURRENT CHARGES
CASH CASH CASH
PREMIUM ACCOUNT SURRENDER DEATH ACCOUNT SURRENDER DEATH ACCOUNT SURRENDER DEATH
ACCUM. VALUE VALUE BENEFIT VALUE VALUE BENEFIT VALUE VALUE BENEFIT
YEAR @ 5% @ 0% @ 0% @ 0% @ 6% @ 6% @ 6% @ 12% @ 12% @ 12%
-------- ---------- ---------- ----------- ---------- ----------- --------------------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 26,250 24,218 22,264 62,848 25,686 23,599 62,848 27,153 24,934 62,848
2 27,563 23,461 21,784 62,848 26,390 24,479 62,848 29,491 27,491 62,848
3 28,941 22,727 21,312 62,848 27,114 25,391 62,848 32,031 30,281 62,848
4 30,388 22,017 20,846 62,848 27,857 26,357 62,848 34,790 33,290 62,848
5 31,907 21,328 20,387 62,848 28,621 27,371 62,848 37,786 36,536 62,848
6 33,502 20,661 19,935 62,848 29,406 28,406 62,848 41,040 40,040 62,848
7 35,178 20,015 19,490 62,848 30,213 29,463 62,848 44,574 43,824 62,848
8 36,936 19,389 19,051 62,848 31,041 30,541 62,848 48,412 47,912 62,848
9 38,783 18,780 18,617 62,848 31,893 31,643 62,848 52,591 52,341 65,213
10 40,722 18,188 18,188 62,848 32,767 32,767 62,848 57,139 57,139 69,710
11 42,758 17,737 17,737 62,848 33,903 33,903 62,848 62,519 62,519 75,023
12 44,896 17,296 17,296 62,848 35,078 35,078 62,848 68,386 68,386 81,380
13 47,141 16,865 16,865 62,848 36,293 36,293 62,848 74,798 74,798 88,263
14 49,498 16,443 16,443 62,848 37,551 37,551 62,848 81,811 81,811 95,720
15 51,973 16,029 16,029 62,848 38,852 38,852 62,848 89,482 89,482 103,800
16 54,572 15,625 15,625 62,848 40,199 40,199 62,848 97,872 97,872 112,553
17 57,300 15,230 15,230 62,848 41,592 41,592 62,848 107,169 107,169 121,101
18 60,165 14,843 14,843 62,848 43,033 43,033 62,848 117,407 117,407 130,323
19 63,174 14,464 14,464 62,848 44,524 44,524 62,848 128,709 128,709 140,293
20 66,332 14,093 14,093 62,848 46,067 46,067 62,848 141,223 141,223 151,109
@ 65 40,722 18,188 18,188 62,848 32,767 32,767 62,848 57,139 57,139 69,710
</TABLE>
Death benefit, accumulation value and Cash Value are based on the hypothetical
gross percentage rates shown, assume current and guaranteed mortality charges,
no policy loans or withdrawals have been made, and are calculated at the end of
the Policy Year. Values shown reflect an effective annual asset charge of 1.77%
(includes average fund operating expenses of .97% and mortality and expense risk
charge of 0.8%). Hypothetical gross percentage rates are illustrative only 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 rates illustrated.
Assumes tax of .033%.
77
<PAGE>
<TABLE>
<CAPTION>
PAGE 2 OF 2
PREMIUM: $25,000
FACE AMOUNT: $62,848
MALE 55 ADVANTAGE
THE PHOENIX EDGE-SPVL -- A VARIABLE UNIVERSAL LIFE POLICY
ASSUMING GUARANTEED CHARGES
CASH CASH CASH
PREMIUM ACCOUNT URRENDER EATH CCOUNT URRENDER EATH CCOUNT URRENDER DEATH
ACCUM. VALUE VALUE BENEFIT VALUE VALUE BENEFIT VALUE VALUE BENEFIT
YEAR @ 5% @ 0% @ 0% @ 0% @ 6% @ 6% @ 6% @ 12% @ 12% @ 12%
-------- ---------- ---------- ----------- ---------- ----------- --------------------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 26,250 23,868 21,945 62,848 25,339 23,283 62,848 26,809 24,621 62,848
2 27,563 22,699 21,083 62,848 25,645 23,794 62,848 28,768 26,768 62,848
3 28,941 21,487 20,158 62,848 25,916 24,277 62,848 30,896 29,146 62,848
4 30,388 20,226 19,162 62,848 26,147 24,728 62,848 33,215 31,715 62,848
5 31,907 18,905 18,085 62,848 26,331 25,139 62,848 35,750 34,500 62,848
6 33,502 17,511 16,910 62,848 26,461 25,502 62,848 38,528 37,528 62,848
7 35,178 16,027 15,621 62,848 26,524 25,803 62,848 41,584 40,834 62,848
8 36,936 14,437 14,198 62,848 26,508 26,028 62,848 44,958 44,458 62,848
9 38,783 12,719 12,617 62,848 26,399 26,160 62,848 48,699 48,449 62,848
10 40,722 10,851 10,851 62,848 26,179 26,179 62,848 52,864 52,864 64,495
11 42,758 8,881 8,881 62,848 26,021 26,021 62,848 57,841 57,841 69,410
12 44,896 6,699 6,699 62,848 25,731 25,731 62,848 63,270 63,270 75,292
13 47,141 4,275 4,275 62,848 25,286 25,286 62,848 69,192 69,192 81,647
14 49,498 1,572 1,572 62,848 24,663 24,663 62,848 75,653 75,653 88,514
15 51,973 0 0 0 23,824 23,824 62,848 82,700 82,700 95,933
16 54,572 0 0 0 22,722 22,722 62,848 90,386 90,386 103,945
17 57,300 0 0 0 21,294 21,294 62,848 98,824 98,824 111,672
18 60,165 0 0 0 19,457 19,457 62,848 108,238 108,238 120,145
19 63,174 0 0 0 17,103 17,103 62,848 118,657 118,657 129,337
20 66,332 0 0 0 14,103 14,103 62,848 130,194 130,194 139,308
@ 65 40,722 10,851 10,851 62,848 26,179 26,179 62,848 52,864 52,864 64,495
</TABLE>
Death benefit, accumulation value and Cash Value are based on the hypothetical
gross percentage rates shown, assume current and guaranteed mortality charges,
no policy loans or withdrawals have been made, and are calculated at the end of
the Policy Year. Values shown reflect an effective annual asset charge of 1.77%
(includes average fund operating expenses of .97% and mortality and expense risk
charge of 0.8%). Hypothetical gross percentage rates are illustrative only 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 rates illustrated.
Assumes tax of .033%.
78
<PAGE>
<TABLE>
<CAPTION>
PAGE 1 OF 2
PREMIUM: $25,000
FACE AMOUNT: $76,043
FEMALE 55 ADVANTAGE
THE PHOENIX EDGE-SPVL -- A VARIABLE UNIVERSAL LIFE POLICY
ASSUMING CURRENT CHARGES
CASH CASH CASH
PREMIUM ACCOUNT SURRENDER DEATH ACCOUNT SURRENDER DEATH ACCOUNT SURRENDER DEATH
ACCUM. VALUE VALUE BENEFIT VALUE VALUE BENEFIT VALUE VALUE BENEFIT
YEAR @ 5% @ 0% @ 0% @ 0% @ 6% @ 6% @ 6% @ 12% @ 12% 12%
-------- ---------- ---------- ----------- ---------- ----------- --------------------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 26,250 24,218 22,264 76,043 25,686 23,599 76,043 27,153 24,934 76,043
2 27,563 23,461 21,784 76,043 26,390 24,479 76,043 29,491 27,491 76,043
3 28,941 22,727 21,312 76,043 27,114 25,391 76,043 32,031 30,281 76,043
4 30,388 22,017 20,846 76,043 27,857 26,357 76,043 34,790 33,290 76,043
5 31,907 21,328 20,387 76,043 28,621 27,371 76,043 37,786 36,536 76,043
6 33,502 20,661 19,935 76,043 29,406 28,406 76,043 41,040 40,040 76,043
7 35,178 20,015 19,490 76,043 30,213 29,463 76,043 44,574 43,824 76,043
8 36,936 19,389 19,051 76,043 31,041 30,541 76,043 48,412 47,912 76,043
9 38,783 18,780 18,617 76,043 31,893 31,643 76,043 52,582 52,332 76,043
10 40,722 18,188 18,188 76,043 32,767 32,767 76,043 57,128 57,128 76,043
11 42,758 17,737 17,737 76,043 33,903 33,903 76,043 62,590 62,590 76,043
12 44,896 17,296 17,296 76,043 35,078 35,078 76,043 68,661 68,661 81,707
13 47,141 16,865 16,865 76,043 36,293 36,293 76,043 75,318 75,318 88,876
14 49,498 16,443 16,443 76,043 37,551 37,551 76,043 82,615 82,615 96,660
15 51,973 16,029 16,029 76,043 38,852 38,852 76,043 90,611 90,611 105,109
16 54,572 15,625 15,625 76,043 40,199 40,199 76,043 99,371 99,371 114,277
17 57,300 15,230 15,230 76,043 41,592 41,592 76,043 109,149 109,149 123,339
18 60,165 14,843 14,843 76,043 43,033 43,033 76,043 119,932 119,932 133,125
19 63,174 14,464 14,646 76,043 44,524 44,524 76,043 131,823 131,823 143,687
20 66,332 14,093 14,093 76,043 46,067 46,067 76,043 144,956 144,956 155,104
@ 65 40,722 18,188 18,188 76,043 32,767 32,767 76,043 57,128 57,128 76,043
</TABLE>
Death benefit, accumulation value and Cash Value are based on the hypothetical
gross percentage rates shown, assume current and guaranteed mortality charges,
no policy loans or withdrawals have been made, and are calculated at the end of
the Policy Year. Values shown reflect an effective annual asset charge of 1.77%
(includes average fund operating expenses of .97% and mortality and expense risk
charge of 0.8%). Hypothetical gross percentage rates are illustrative only 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 rates illustrated.
Assumes tax of .033%.
79
<PAGE>
<TABLE>
<CAPTION>
PAGE 1 OF 2
PREMIUM: $25,000
FACE AMOUNT: $26,043
FEMALE 55 ADVANTAGE
THE PHOENIX EDGE-SPVL -- A VARIABLE UNIVERSAL LIFE POLICY
ASSUMING GUARANTEED CHARGES
CASH CASH CASH
PREMIUM ACCOUNT SURRENDER DEATH ACCOUNT SURRENDER DEATH ACCOUNT SURRENDER DEATH
ACCUM. VALUE VALUE BENEFIT VALUE VALUE BENEFIT VALUE VALUE BENEFIT
YEAR @ 5% @ 0% @ 0% @ 0% @ 6% @ 6% @ 6% @ 12% @ 12% @ 12%
-------- ---------- ---------- ----------- ---------- ----------- --------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 26,250 23,921 21,994 76,043 25,390 23,330 76,043 26,860 24,667 76,043
2 27,563 22,829 21,203 76,043 25,767 23,906 76,043 28,882 26,882 76,043
3 28,941 21,723 20,377 76,043 26,133 24,478 76,043 31,088 29,338 76,043
4 30,388 20,601 19,515 76,043 26,485 25,046 76,043 33,501 32,001 76,043
5 31,907 19,461 18,613 76,043 26,823 25,607 76,043 36,140 34,890 76,043
6 33,502 18,289 17,658 76,043 27,138 26,153 76,043 39,030 38,030 76,043
7 35,178 17,075 16,638 76,043 27,422 26,674 76,043 42,195 41,445 76,043
8 36,936 15,801 15,535 76,043 27,660 27,160 76,043 45,662 45,162 76,043
9 38,783 14,449 14,330 76,043 27,839 27,589 76,043 49,465 49,215 76,043
10 40,722 13,005 13,005 76,043 27,947 27,947 76,043 53,649 53,649 76,043
11 42,758 11,545 11,545 76,043 28,179 28,179 76,043 58,683 58,683 76,043
12 44,896 9,962 9,962 76,043 28,337 28,337 76,043 64,308 64,308 76,526
13 47,141 8,249 8,249 76,043 28,417 28,417 76,043 70,543 70,543 83,241
14 49,498 6,397 6,397 76,043 28,412 28,412 76,043 77,377 77,377 90,531
15 51,973 4,381 4,381 76,043 28,305 28,305 76,043 84,865 84,865 98,444
16 54,572 2,164 2,164 76,043 28,071 28,071 76,043 93,070 93,070 107,031
17 57,300 0 0 0 27,670 27,670 76,043 102,113 102,113 115,388
18 60,165 0 0 0 27,053 27,053 76,043 112,201 112,201 124,544
19 63,174 0 0 0 26,159 26,159 76,043 123,325 123,325 134,425
20 66,332 0 0 0 24,920 24,920 76,043 135,612 135,612 145,106
@ 65 40,722 13,005 13,005 76,043 27,947 27,947 76,043 53,649 53,649 76,043
</TABLE>
Death benefit, accumulation value and Cash Value are based on the hypothetical
gross percentage rates shown, assume current and guaranteed mortality charges,
no policy loans or withdrawals have been made, and are calculated at the end of
the Policy Year. Values shown reflect an effective annual asset charge of 1.77%
(includes average fund operating expenses of .97% and mortality and expense risk
charge of 0.8%). Hypothetical gross percentage rates are illustrative only 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 rates illustrated.
Assumes tax of .033%.
80
<PAGE>
PART II. OTHER INFORMATION
UNDERTAKING TO FILE REPORTS
Subject to the terms and conditions of Section 15(d) of the Securities
Exchange Act of 1934, the undersigned registrant hereby undertakes to file with
the Securities and Exchange Commission such supplementary and periodic
information, documents, and reports as may be prescribed by any rule or
regulation of the Commission heretofore or hereafter duly adopted pursuant to
authority conferred in that Section.
RULE 484 UNDERTAKING
Section 723 of the New York Business Corporation Law, as made applicable to
insurance companies by Section 108 of the New York Insurance Law, provides that
a corporation may indemnify any director or officer of the corporation made, or
threatened to be made, a party to an action or proceeding other than one by or
in the right of the corporation to procure a judgment in its favor, whether
civil or criminal, including an action by or in the right of any other
corporation of any type or kind, by reason of the fact that he, his testator or
intestate, served such other corporation in any capacity at the request of the
indemnifying corporation.
Article VI Section 6.1 of the By-laws of Phoenix Home Life provides that "To
the full extent permitted by the laws of the State of New York, the Company
shall indemnify any person made or threatened to be made a party to any action,
proceeding or investigation, whether civil or criminal, by reason of the fact
that such person . . . is or was a Director or Officer of the Company; or . . .
serves or served another corporation, partnership, joint venture, trust,
employee benefit plan or other enterprise in any capacity at the request of the
Company, and also is or was a Director, or Officer of the Company . . . The
Company shall also indemnify any [such] person . . . by reason of the fact that
such person or such person's testator or intestate is or was an employee or
agent of the Company . . . ."
Insofar as indemnification for liability arising under the Securities Act of
1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the registrant of expenses incurred
or paid by a director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
REPRESENTATION PURSUANT TO SECTION 26(E)(2)(A) OF THE INVESTMENT COMPANY
ACT OF 1940.
Pursuant to Section 26(e)(2)(A) of the Investment Company Act of 1940, as
amended, Phoenix Home Life Mutual Insurance Company represents that the fees and
charges deducted under the Policies, in the aggregate, are reasonable in
relation to the services rendered, the expenses expected to be incurred and the
risks to be assumed thereunder by Phoenix Home Life Mutual Insurance Company.
II-1
<PAGE>
CONTENTS OF REGISTRATION STATEMENT
This registration statement comprises the following papers and documents:
Facing sheet.
Prospectus, consisting of 80 pages.
The undertaking to file reports.
The Rule 484 undertaking.
Representation pursuant to Section 26(e)(2)(A) under the Investment Company
Act of 1940.
Signatures.
The Powers of Attorney.
Written consent of the following persons:
(a) Edwin L. Kerr, Esq.
(b) PricewaterhouseCoopers LLP
(c) Paul M. Fischer, FSA, CLU, ChFC
The following exhibits:
1. The following exhibits correspond to those required by paragraph A to
the instructions as to exhibits in Form N-8B-2:
A. (1) Resolution of the Board of Directors of Phoenix Mutual establishing
the VUL Account filed with registrant's Registration Statement on
June 26, 1986 and is filed via Edgar with Post-Effective Amendment
No. 14 on April 29, 1998, incorporated by reference.
(2) Not Applicable.
(3) Distribution of Policies:
(a) Master Service and Distribution Compliance Agreement between
Depositor and Phoenix Equity Planning Corporation dated
December 31, 1996 filed via Edgar with Post-Effective
Amendment No. 14 on April 29, 1998, incorporated by reference.
(b) Form of Agreement between Phoenix Equity Planning Corporation
and Independent Brokers with respect to the sale of Policies
filed via Edgar with Post-Effective Amendment No. 14 on April
29, 1998, incorporated by reference.
(c) Not Applicable.
(4) Not Applicable.
(5) Specimen policies with optional riders:
(a) The Phoenix Edge - Variable Life Insurance Policy Form Number
5000 (Phoenix Edge) with optional rider (VR101) filed via
Edgar on April 30, 1999, incorporated by reference.
(b) Phoenix Edge SPVL - Specimen Variable Life Insurance Policy
Form filed via Edgar with Post Effective Amendment No. 17.*
(6) (a) Charter of Phoenix Home Life filed with registrant's Post-
Effective Amendment No. 7 on June 22, 1992 and filed via
Edgar with Post-Effective Amendment No. 14 on April 29, 1998,
is incorporated by reference.
(b) By-laws of Phoenix Home Life filed with registrant's Post-
Effective Amendment No. 7 on June 22, 1992 and filed via
Edgar with Post-Effective Amendment No. 14 on April 29, 1998,
is incorporated by reference.
(7) Not Applicable.
(8) Not Applicable.
II-2
<PAGE>
(9) Form of Application for a Variable Life Insurance Policy
(a) The Phoenix Edge - Form filed via Edgar with Post-Effective
Amendment No. 14 on April 29, 1998, incorporated by reference.
(b) Phoenix Edge SPVL - Form filed via Edgar with Post Effective
Amendment No. 17.*
(10) Memorandum describing transfer and redemption procedures and method
of computing adjustments in payments and cash values upon
conversion to herein fixed benefit policies filed via Edgar with
Post-Effective Amendment No. 14 on April 29, 1998, and incorporated
herein by reference.
2. See Exhibit 1.A.(5).
3. Opinion of Counsel as to the legality of the securities being
registered. (See number 7 below.)
4. No financial statement will be omitted from the Prospectus pursuant to
Instruction 1(b) or (c) of Part I.
5. Not Applicable.
6. Consent of PricewaterhouseCoopers LLP.*
7. Consent of Edwin L. Kerr, Esq.*
8. Opinion of Paul M. Fischer, FSA, CLU, ChFC.*
-----------------
* Filed herewith.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant,
Phoenix Home Life Variable Universal Life Account, certifies that it meets all
of the requirements for effectiveness of this Registration Statement pursuant to
Rule 485(b) under the Securities Act of 1933 and has duly caused this
Post-Effective Amendment to the Registration Statement to be signed on its
behalf by the undersigned thereunto duly authorized, in the City of Hartford,
State of Connecticut on the 1st day of May, 2000.
PHOENIX HOME LIFE VARIABLE UNIVERSAL LIFE ACCOUNT
-------------------------------------------------
(Registrant)
By: PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
--------------------------------------------
(Depositor)
By: /s/ Dona D. Young
--------------------------------------------
Dona D. Young, President
ATTEST: /s/John H. Beers
--------------------------------
John H. Beers, Secretary
Pursuant to the requirements of the Securities Act of 1933, this Registration
Statement has been signed below by the following persons in the capacities on
this 1st day of May, 2000.
<TABLE>
<CAPTION>
SIGNATURE TITLE
- --------- -----
<S> <C>
Director
- ---------------------------------------------------
*Sal H. Alfiero
Director
- ---------------------------------------------------
*J. Carter Bacot
Director
- ---------------------------------------------------
*Arthur P. Byrne
Director
- ---------------------------------------------------
*Richard N. Cooper
Director
- ---------------------------------------------------
*Gordon J. Davis, Esq.
Chairman of the Board and
- --------------------------------------------------- Chief Executive Officer
*Robert W. Fiondella (Principal Executive Officer)
Director
- ---------------------------------------------------
*John E. Haire
Director
- ---------------------------------------------------
*Jerry J. Jasinowski
</TABLE>
S-1
<PAGE>
<TABLE>
<S> <C>
Director
- ---------------------------------------------------
*John W. Johnstone
Director
- ---------------------------------------------------
*Marilyn E. LaMarche
Director
- ---------------------------------------------------
*Philip R. McLoughlin
Director
- ---------------------------------------------------
*Indra K. Nooyi
Director
- ---------------------------------------------------
*Robert F. Vizza
Director
- ---------------------------------------------------
*Robert G. Wilson
</TABLE>
By: /s/ Dona D. Young
------------------------------
*Dona D. Young as Attorney in Fact pursuant to Powers of Attorney, copies of
which were filed previously.
S-2
EXHIBIT 1A(5)(b)
SPECIMEN POLICY
<PAGE>
[logo] PHOENIX Executive Offices: Statutory Home Office:
One American Row 10 Krey Boulevard
Hartford, CT 06102-5056 East Greenbush, NY 12144
- -------------------------------------------------------------------------------
INSURED : John Doe 35 - Male : ISSUE AGE AND SEX
POLICY NUMBER : 2 000 000 June 1, 2000 : POLICY DATE
FACE AMOUNT : $136,113
Dear Policyowner:
We agree to pay the benefits of this policy in accordance with
its provisions. For service or information on this policy,
contact the agent who sold the policy, any of Our agency offices,
or at the following address:
Phoenix Home Life Mutual Insurance Company
Variable Products Mail Operations
P.O. Box 8027
Boston, MA 02266-8027
Telephone (800) 447-4312
RIGHT TO CANCEL. You have the right to cancel this policy within
a limited time after the policy is delivered to You. The policy
may be cancelled by returning the policy to Us at the above
address before the later of:
1. 10 days after the policy is delivered to You; or
2. 10 days after a Notice of Right to Cancel is delivered to
You; or
3. 45 days after of the application is signed;
for a refund of:
1. the Policy Value less debt, if any; plus
2. any monthly deductions, partial surrender fees and other
charges made under the policy.
The Policy Value and debt will be determined as of the nearest
Valuation Date coincident with or following the date We receive
the returned policy at the above address.
Signed for Phoenix Home Life Mutual Insurance Company at its
Executive Offices in Hartford, Connecticut.
Sincerely yours,
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
/S/ John H. Beers /S/ Robert W. Fiondella
Secretary Chief Executive Officer
Registrar
Modified Single Premium Variable Life Insurance Policy
The death benefit and other values provided under this policy are
based on the rates of interest credited on any amounts allocated
to the Guaranteed Interest Account and the investment experience
of the Subaccounts within Our Separate Account to which Your
premiums are allocated. Thus, the death benefit and other values
may increase or decrease in amount or duration. See Part 7 for a
description of how the death benefit is determined.
V610
<PAGE>
SCHEDULE PAGE
INSURED: John Doe Policy Number: 2 000 000
Eligible for Annual Dividends
V610
<PAGE>
SCHEDULE PAGE
INSURED: John Doe Policy Number: 2 000 000
BASIC INFORMATION
INSURED : [John Doe] [35 - MALE] : ISSUE AGE AND SEX
POLICY NUMBER : [2 000 000] [June 1, 2000] : POLICY DATE
FACE AMOUNT : [$136,113]
OWNER AS STATED IN THE APPLICATION UNLESS LATER CHANGED.
BENEFICIARY AS STATED IN THE APPLICATION UNLESS LATER CHANGED.
PREMIUMS
SINGLE PREMIUM:[$25,000.00]
SUBACCOUNT AND GUARANTEED INTEREST ACCOUNT
ALLOCATION SCHEDULE ON THE POLICY DATE
SUBACCOUNT PREMIUMS DEDUCTIONS*
---------- -------- ----------
Money Market [50%] Proportionate
Strategic Theme [50%] Proportionate
* See Part 1 for definition of Proportionate. Subaccounts and the
Guaranteed Interest Account not marked "Proportionate" will be charged
with a portion of the monthly deduction only if the Subaccounts and
Guaranteed Interest Account marked `Proportionate" are not sufficient to
make the full monthly deduction.
V610 Page 1 of 5
<PAGE>
SCHEDULE PAGE
INSURED: John Doe Policy Number: 2 000 000
SUBACCOUNT FEES
MAXIMUM DAILY TAX FEE: [0] or such greater amount as may be assessed
as a result of a change in tax laws.
POLICY CHARGES
MAXIMUM MONTHLY MORTALITY AND 0.0667% of unloaned Policy Value (Annual
EXPENSE RISK FEE: Rate of 0.80%) for Policy Years 1-10.
0.0417% (Annual Rate of 0.50%) thereafter
MAXIMUM MONTHLY TAX CHARGE: 0.0333% of Policy Value (Annual Rate of
0.40%) for Policy Years 1-10.
0.00% 0.00% thereafter
MAXIMUM MONTHLY 0.025% of unloaned Policy Value (Annual Rate
ADMINISTRATIVE CHARGE: 0.30%), or if greater $5.
This rate will reduce to 0.0125%
(Annual Rate of 0.15%) if the
unloaned Policy Value is greater than
$100,000.
MAXIMUM MONTHLY COST OF This charge will not exceed the rate
INSURANCE CHARGE: for the Insured's attained age as
given in the Table of Guaranteed
Maximum Cost of Insurance Rates in
these Schedule Pages multiplied by
the excess of death benefit over the
Policy Value (See the Monthly
Deduction section in Part 4)
MAXIMUM TRANSFER CHARGE: $10. Currently, there is no charge
for transfers. However, we reserve
the right to impose a Transfer Charge
after the first two transfers made in
each Policy Year, upon prior Written
Notice to the Owner. In no event,
however, will such Transfer Charge
exceed $10 per transaction.
OTHER RATES
GUARANTEED INTEREST ACCOUNT Minimum Rate 3.00%
(GIA):
LOAN ACCOUNT CREDITED RATE : [6.00%]
MAXIMUM LOAN INTEREST RATE: [6.00%] for the first Policy Year,
[8.00%] for all policy years
thereafter
MAXIMUM LOAN INTEREST RATE [6.00%]
FOR PREFERRED LOANS:
V610 Page 2 of 5
<PAGE>
SURRENDER CHARGE TABLE
INSURED: John Doe Policy Number 2 000 000
The surrender charge is determined by multiplying the amount withdrawn in excess
of the Free Withdrawal Amount by the applicable surrender charge percentage in
the Table below. (See Part 6 for a description of the Free Withdrawal Amount.)
POLICY YEAR SURRENDER CHARGE PERCENTAGE
1 9%
2 8%
3 7%
4 6%
5 5%
6 4%
7 3%
8 2%
9 1%
10% 0%
The surrender charges will be limited to the maximum prescribed by state
nonforfeiture laws for life insurance, if less.
V610 Page 3 of 5
<PAGE>
SCHEDULE PAGE
INSURED: John Doe Policy Number: 2 000 000
TABLE OF GUARANTEED MAXIMUM MONTHLY COST OF INSURANCE RATES
PER $1,000 OF NET AMOUNT AT RISK
Attained Monthly Attained Monthly Attained Monthly
Age Rate Age Rate Age Rate
-------- ------- --------- ------- --------- -------
35 0.2260 57 1.3583 79 9.8708
36 0.2417 58 1.4771 81 10.7229
37 0.2594 59 1.6063 82 11.6760
38 0.2792 60 1.7500 83 12.7510
39 0.3021 61 1.9125 84 13.9417
40 0.3281 62 2.0958 95 15.2208
41 0.3563 63 2.3010 96 16.5604
42 0.3865 64 2.5281 97 17,9385
43 0.4198 65 2.7729 98 19.3469
44 0.4552 66 3.0344 99 20.7844
45 0.4927 67 3.3115 90 22.2594
46 0.5333 68 3.6094 91 23.7948
47 0.5760 69 3.9385 97 25.4281
48 0.6219 70 4.3094 93 27.2323
49 0.6729 71 4.7323 94 29.3885
50 0.7292 72 5.2167 95 32.2885
51 0.7948 73 5.7646 96 36.6521
52 0.8677 74 6.3646 97 43.8531
53 0.9510 75 7.0052 98 56.3542
54 1.0427 76 7.6771 99 77.6198
55 1.1417 77 8.3719 100 83.3333
56 1.2469 78 9.0958
DO NOT EXCEED:
Cost of Insurance Rates are based on 125% of 1980 Commissioner's
Standard Ordinary Table, Age Last Birthday (Male).
V610 Page 4 of 5
<PAGE>
SCHEDULE PAGE
INSURED: John Doe Policy Number 2 000 000
ISSUE DATE FACE AMOUNT RISK CLASSIFICATION
- ---------- ----------- -------------------
[June 1, 2000] [$136,113] [Male Advantage]
RIDERS AND RIDER BENEFITS
-------------------------
Rider Face Expiry Monthly
Rider Description Date Amount Age Charge
- ----------------- ----- ------ ------ -------
VR38 --
Guaranteed Death Benefit Rider June 1, 2000 $136,113 80 0
V610 Page 5 of 5
<PAGE>
TABLE OF CONTENTS
Part Page
- -----------------------------------------------------------------
Schedule Pages
Table of Contents
1. Definitions...............................................1
2. About the Policy..........................................3
Effective Date of Insurance............................3
Entire Contract........................................3
Dividends..............................................3
Contestability.........................................3
Suicide................................................3
Misstatement of Age or Sex.............................4
Assignments............................................4
Annual Reports.........................................4
Transaction Rules......................................4
3. Rights of Owner...........................................5
Who Is the Owner.......................................5
What Are the Rights of the Owner.......................5
How to Change the Owner................................5
4. Premiums..................................................6
Single Premium.........................................6
Premium Flexibility....................................6
Total Premium Limit....................................6
Premium Allocation.....................................7
Grace Period and Lapse.................................7
Policy Value...........................................7
Monthly Deduction......................................7
5. The Accounts..............................................9
Guaranteed Interest Account (GIA)......................9
Loan Account...........................................9
Separate Account.......................................9
Additional Subaccounts................................10
Substitution of Subaccounts...........................10
Voting Rights.........................................10
Share of Separate Account
Subaccount Values...................................10
Unit Value............................................11
Net Investment Factor.................................11
6. Lifetime Benefits........................................12
Transfers.............................................12
Loans.................................................12
Preferred Loans.......................................13
Debt and Repayment of Debt............................13
Loan Interest.........................................13
Surrender Charge......................................14
Full Surrender........................................14
Partial Surrender.....................................14
Free Withdrawal Amount................................15
7. Death Benefits...........................................16
Death Benefit.........................................16
Minimum Death Benefit.................................16
Death Benefit Following Insured's Age 100.............16
Death Proceeds........................................17
Interest on Death Proceeds............................17
The Beneficiary.......................................17
How to Change the Beneficiary.........................17
8. Payment Options..........................................18
Who May Elect Payment Options.........................18
How to Elect a Payment Option.........................18
Calculation of Fixed Annuity Payments.................18
Annuity Unit..........................................19
Calculation of Variable Annuity Payments..............19
FIXED ANNUITY PAYMENT OPTIONS.........................19
OPTION A--Life Annuity with Specified
Period Certain......................................19
OPTION B--Non-Refund Life Annuity.....................19
OPTION C--Left To Earn Interest.......................19
OPTION D--Joint and Survivorship
Life Annuity........................................19
OPTION E--Installment Refund Life Annuity.............20
OPTION F--Joint and Survivorship Life
Annuity with 10-Year Period Certain.................20
OPTION G--Payments for a Specified
Period..............................................20
OPTION H--Payments of a Specified
Amount..............................................20
VARIABLE ANNUITY PAYMENT OPTIONS......................20
OPTION I--Variable Life Annuity with 10-Year
Period Certain......................................20
OPTION J--Joint Survivorship Variable Life
Annuity with 10-Year Period Certain.................20
OPTION K--Variable Annuity for
Specified Period....................................20
OPTION L--Variable Life Expectancy
Annuity.............................................21
OPTION M--Unit Refund Variable Life
Annuity.............................................21
OPTION N--Variable Non-Refund Life
Annuity.............................................21
Other Options.........................................21
9. TABLES OF PAYMENT OPTION AMOUNTS......................22-25
V610
<PAGE>
PART 1: DEFINITIONS
ATTAINED AGE Age of the insured on the birthday prior to the last
Policy Anniversary.
CASH SURRENDER VALUE The policy value less any applicable surrender charges
and outstanding debt.
DEBT Unpaid loans against this policy plus accrued interest.
GENERAL ACCOUNT The general asset account of Phoenix.
GIA The Guaranteed Interest Account to which payment
amounts are allocated and guaranteed to earn a fixed
rate of interest.
IN FORCE Benefits under the policy have not yet ended.
IN WRITING In a written form satisfactory to Us and filed at
(WRITTEN REQUEST) Phoenix VPMO.
LOAN ACCOUNT An account within Our General Account to which policy
loan amounts are allocated to provide collateral for
such loans. (See Part 5.)
MONTHLY CALCULATION The first Monthly Calculation Day of a policy is the
DAY same day as its Policy Date as shown on the Schedule
Page. Subsequent Monthly Calculation Days are the same
day for 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.
PAYMENT DATE The Valuation Date on which a premium payment or loan
repayment is received at VPMO unless it is received
after the close of the New York Stock Exchange in which
case it will be the next Valuation Date.
PENALTY FREE EARNINGS The Penalty Free Earnings portion of the Policy Value
that exceeds the Single Premium paid less the sum of all
prior withdrawals of the Single Premium (including any
surrender charges thereon) that have been subject to the
surrender charge.
POLICY ANNIVERSARY The anniversary of the Policy Date.
POLICY DATE The Policy Date as shown on the Schedule Page. It is the
date from which Policy Years and Policy Anniversaries
are measured.
POLICY MONTH The period from one Monthly Calculation Day up to, but
not including, the next Monthly Calculation Day.
POLICY VALUE The Policy Value as defined in Part 4.
V610 1
<PAGE>
POLICY YEAR The first Policy Year is the one-year period from the
Policy Date to, but not including, the first Policy
Anniversary. Each succeeding Policy Year is the one-year
period from the period from the Policy Anniversary to,
but not including, the next Policy Anniversary.
PROPORTIONATE Amounts are allocated to the VUL Account Subaccounts and
to the GIA on a proportionate basis such that the ratios
of this policy's Subaccount and GIA values to each other
are the same before and after the allocation.
SUBACCOUNTS The accounts within the VUL Account to which non-loaned
assets under the policy are allocated as described in
Part 5.
UNIT A standard of measurement, as described in Part 4, used
to determine the share of this policy in the value of
each Subaccount of the Separate Account.
VALUATION DATE Every day the New York Stock Exchange is open for
trading.
VALUATION PERIOD The period in days from the end of one Valuation Date
through the next Valuation Date.
VPMO Variable Products Mail Operations division. The address
is shown on the cover page of this policy.
VUL ACCOUNT Phoenix Home Life Mutual Variable Universal Life
Account, a separate account of the Phoenix.
WE (OUR,US) Phoenix Home Life Mutual Insurance Company (Phoenix).
YOU (YOUR) The owner of this policy.
V610 2
<PAGE>
PART 2: ABOUT THE POLICY
EFFECTIVE DATE OF This policy will begin In Force on the Policy Date,
INSURANCE provided the issue premium is paid while the insured is
alive.
ENTIRE CONTRACT This policy and the written application of the
policyholder, a copy of which is attached to and made a
part of the policy, are the entire contract between You
and Us. Any change in the provisions of the contract, to
be in effect, must be signed by one of Our executive
officers and countersigned by Our registrar or one of
Our executive officers. This policy is issued by Us at
Our Home Office in Hartford, Connecticut. Any benefits
payable under this policy are payable at Our VPMO.
DIVIDENDS While this policy is In Force it will share in our
divisible surplus to the extent that we may provide. We
will annually determine the share to be apportioned to
this policy, if any, and will credit it no later than
the end of the Policy Year for which it was determined.
You may elect that the dividend be paid to you in cash
or applied under any other method mutually agreed to by
You and Us. We do not expect any dividends to be
apportioned to this policy.
CONTESTABILITY We rely on all statements made by or for the insured in
the written application. These statements are considered
to be representations and not warranties. We can contest
the validity of this policy and any coverage under it
for any material misrepresentation of fact. To do so,
however, the misrepresentation must be contained in an
application and the application, must be attached to
this policy when issued or made a part of this policy
when a change is made.
We cannot contest the validity of the face amount of
this policy after it has been In Force during the
insured's lifetime for two years from its Policy Date.
If We contest the policy, it will be based on the
application for this policy.
If We contest the validity of this policy, the amount of
death benefit will be limited to the return of any paid
premium for this policy, or, if higher the Policy Value
plus the sum of any monthly deductions made under this
policy minus and Debt owed Us under this policy.
SUICIDE If within two years from the Policy Date the insured
dies by suicide, while sane or insane, and while this
policy is In Force, the amount of death benefit will be
limited to the Policy Value adjusted as follows:
a. We will add any monthly deductions made under this
policy;
b. We will subtract any Debt owed Us under this policy.
V610 3
<PAGE>
MISSTATEMENT OF If the age or sex of the insured has been misstated, the
AGE OR SEX Face Amount will equal the amount the single premium
would have purchased at the correct age and sex.
ASSIGNMENTS Except as otherwise provided herein, any or all of the
rights in this policy may be assigned. We will not be
considered to have notice of any assignment until We
receive the original or copy of the assignment In
Writing. We are not responsible for the validity of any
assignment.
ANNUAL REPORTS Each year We will send You a report for this policy
showing:
a. the then current Policy Value, cash surrender value,
death benefit and face amount;
b. the premiums paid, and deductions and partial
surrenders made since the last report;
c. any outstanding Debt;
d. an accounting of the change in Policy Value since the
last report; and
e. such additional information as required by applicable
law or regulation.
TRANSACTION RULES Requests for transactions involving Subaccounts will
usually be processed within 7 days after We receive the
Written Request. However, We may, at Our discretion,
postpone the payment of any death benefit in excess of
the initial face amount, any policy loans, partial
withdrawals, surrenders or transfers:
a. For up to six months from the date of request, for
any transactions dependent upon the value of the GIA;
or
b. Otherwise, for any period during which the New York
Stock Exchange is closed for trading (except for
normal holiday closing) or when the Securities and
Exchange Commission has determined that a state of
emergency exists which may make processing such
transactions impractical.
V610 4
<PAGE>
PART 3: RIGHTS OF OWNER
WHO IS THE OWNER The Owner has all the rights under this policy and is
named in the application unless later changed and
endorsed on this policy.
WHAT ARE THE RIGHTS You control this policy during the insured's lifetime
OF THE OWNER but not until this policy begins In Force. Unless You
and We agree otherwise, You may exercise all rights
provided under this policy without the consent of
anyone else. These rights include the right to:
a. Receive any amounts payable under this policy during
the insured's lifetime.
b. Change the owner or the interest of any owner.
c. Change the Subaccount and GIA allocation schedule for
premium payments and monthly deductions. See Part 4.
d. Transfer amounts between and among Subaccounts and
the GIA. See Part 6.
e. Obtain policy loans. See Part 6.
f. Obtain a partial surrender. See Part 6.
g. Surrender this policy for its Cash Surrender Value.
See Part 6.
h. Select a payment option for any Cash Surrender Value
that becomes payable. See Part 6.
i. Change the beneficiary of the death benefit. See
Part 7.
j. Assign, release or surrender any interest in the
policy.
You may exercise these rights only while the insured is
alive. Exercise of any of these rights will, to the
extent thereof, assign, release or surrender the
interest of the insured and all other beneficiaries and
owners under this policy.
HOW TO CHANGE You may change the owner by Written Request.
THE OWNER
V610 5
<PAGE>
PART 4: PREMIUMS
SINGLE PREMIUMS The insured must be alive when the issue premium is
paid. Premiums other than the issue single premium may
be paid at any time while this policy is In Force, but
will be limited by the limits described in the Total
Premium Limit section below.
PREMIUM FLEXIBILITY The single premium as shown on the Schedule Page is due
on the Policy Date. There is a limited ability to pay
additional premium payments. Additional premium payments
may be made as long as the total premium limit described
in the next section is not exceeded, or if needed to
prevent lapse of the policy. We reserve the right to
require satisfactory evidence of insurability before
accepting any additional premium payment which would
increase the death benefit more than it would increase
the Policy Value..
TOTAL PREMIUM LIMIT We will refund any portion of any premium payment which
We determine to be in excess of the total premium limit
established by law to qualify your Policy as a contract
for life insurance.
The total premium limit is applied to the sum of all
premiums received by Us for this policy to date, reduced
by the sum of all partial surrender amounts paid by Us
to date. If the total premium limit is exceeded, We will
pay You the excess, with interest at an annual rate of
not less than 3%, not later than 60 days after the end
of the Policy Year in which the limit was exceeded. The
Policy Value will be adjusted to reflect such refund.
The amount to be taken from the Subaccounts and GIA will
be allocated in the same manner as provided for monthly
deductions unless You request another allocation in
writing.
The total premium limit may be exceeded if additional
premium is needed to prevent lapse under the grace
period and lapse provision.
The total premium limit may change due to:
a. a partial surrender;
b. addition, cancellation or change of a rider; or
c. a change in federal tax laws or regulations.
All premiums are payable at VPMO, except that the issue
premium may be paid to an authorized agent of Ours for
forwarding to Us. No benefit associated with any premium
shall be provided until it is actually received by Us at
VPMO.
V610 6
<PAGE>
PREMIUM ALLOCATION The premiums will be applied on the Payment Date to the
various Subaccounts and the GIA based on the premium
allocation schedule elected in the application for this
policy or as later changed by You. You may change Your
allocation schedule for premium payments by Written
Request. Allocations to each Subaccount and to the GIA
must be expressed in whole percentages unless We agree
otherwise.
The number of units credited to each Subaccount of the
Separate Account will be determined by dividing the
premium applied to that Subaccount by the unit value of
that Subaccount on the Payment Date.
GRACE PERIOD AND LAPSE If, on any Monthly Calculation Day, the required monthly
deduction exceeds the Cash Surrender Value, a grace
period of 61 days will be allowed for the payment of an
amount equal to at least three times the required
monthly deduction. This policy will continue In Force
during any such grace period. We will mail a written
notice to You and any assigns at the post office
addresses last known to Us as to the amount of premium
required. If such premium is not paid to Us by the end
of the grace period this policy will lapse without
value, but not before 30 days have elapsed since We
mailed Our written notice to You. The "date of lapse"
will be the Monthly Calculation Day on which the
deduction was to be made, and any insurance and rider
benefits provided under this policy will terminate as of
that date.
POLICY VALUE The Policy Value is the sum of this policy's share in
the value of each Subaccount of the Separate Account,
plus the value of this policy's Guaranteed Interest and
Loan Accounts. See Part 5 for an explanation as to how
this policy's share in the value of each Subaccount of
the Separate Account is determined and for a description
of the GIA and Loan Account.
MONTHLY DEDUCTION A deduction is made each Monthly Calculation Day from
the Cash Surrender Value to pay:
a. the monthly administrative charge. This charge will
not exceed the Maximum Monthly Administrative Charge
shown in the Schedule Pages.
b. the monthly mortality and expense risk charge. This
charge will not exceed the Maximum Monthly Mortality
and Expense Risk Charge shown in the Schedule Pages.
c. the monthly tax charge. This charge will not exceed
the Maximum Monthly Tax Charge shown in the Schedule
pages.
d. the cost of any rider benefits provided.
e. the cost of insurance provided under this policy.
V610 7
<PAGE>
The cost of insurance charge on each Monthly Calculation
Day will pay the cost of insurance from the Monthly
Calculation Day on which the deduction is made up to,
but not including, the next Monthly Calculation Day. The
cost of insurance charge will never exceed the maximum
cost of insurance charge. The maximum cost of insurance
charge is equal to the maximum cost of insurance rate
for the current Policy Month multiplied by the result
of:
a. the death benefit on the Monthly Calculation Day;
minus
b. the Policy Value on the Monthly Calculation Day.
The maximum cost of insurance rate for the current
Policy Month is based on the insured's attained age and
risk classification. This rate is obtained from the
Table of Guaranteed Maximum Monthly Cost of Insurance
Rates on the Schedule Page for the risk classification
shown. Any change We may make in the current cost of
insurance charge will be uniform by class and based on
Our future mortality, expense, lapse and Separate
Account investment return expectations. The current cost
of insurance charge for an insured will not be affected
by a change in the insured's health or occupation.
If the Monthly Calculation Day is not a Valuation Date,
the monthly deduction for that Policy Month will be made
on the next Valuation Date.
You may request in the application for this policy that
monthly deductions not be taken from certain specified
Subaccounts. Such a request may later be changed by
notifying Us In Writing, but only with respect to future
monthly deductions. Monthly deductions will be taken
from this policy's share of the remaining Subaccounts
and GIA, on a proportionate basis. In the event this
policy's share in the value of such Subaccounts and GIA
is not sufficient to permit the withdrawal of the full
monthly deduction, the remainder will be taken on a
proportionate basis from this policy's share of each of
the other Subaccounts and GIA. The number of units
deducted from each Subaccount of the Separate Account
will be determined by dividing the portion of the
monthly deduction allocated to each such Subaccount by
the unit value of that Subaccount on the Monthly
Calculation Day.
V610 8
<PAGE>
PART 5: THE ACCOUNTS
Assets under this policy may be allocated either to the
GIA or to any of the Subaccounts of the Account.
GUARANTEED INTEREST The Guaranteed Interest Account (GIA) is not part of the
ACCOUNT (GIA) Separate Account. It is accounted for as part of Our
General Account. We reserve the right to limit
cumulative premium payments to the GIA during any
one-week period to not more than $250,000. We will
credit interest daily on any amounts held under the GIA
at such rates as We shall determine but in no event will
the effective annual rate of interest be less than 3%.
On the last working day of each calendar week, We will
set the interest rate that will apply to any premium
made to the GIA during the following calendar week. That
rate will remain in effect for such premiums for an
initial guaranteed period of one full year. Upon expiry
of the initial one-year guarantee period, and for any
premiums whose guarantee has just ended, the new rate
shall be the same rate that applies to new premiums made
during the calendar week in which the guarantee period
expired. Such rate shall likewise remain in effect for a
subsequent guarantee period of one full year.
All transfers, partial surrenders and deductions from
the GIA will be assessed on a Last-In, First-Out basis
based on the date the premium payment was initially made
to the GIA. We reserve the right to add other Guaranteed
Interest Accounts, subject where required, to approval
by the insurance supervisory official of the state where
this policy is delivered.
LOAN ACCOUNT The Loan Account is an account within Our General
Account which holds Policy Value used to secure loans.
Such amounts will be credited interest at an effective
annual fixed rate as shown on the Schedule Page. At the
end of each Policy Year and at the time of any Debt
repayment, interest credited to the Loan Account will be
transferred to the GIA.
SEPARATE ACCOUNT The VUL Account has been established by Us as a separate
account pursuant to New York law and is registered as a
unit investment trust under the Investment Company Act
of 1940 (1940 Act). Income and realized and unrealized
gains and losses from assets in the VUL Account are
credited to or charged against it without regard to Our
other income, gains or losses. We own the VUL Account
assets and they are kept separate from the assets of Our
General Account. VUL Account assets will be valued on
each Valuation Date. The portion of the VUL Account
equal to reserves and liabilities for policies supported
by the VUL Account will not be charged with any
liabilities arising out of Our other business.
V610 9
<PAGE>
The VUL Account has several Subaccounts available under
this policy. We use the assets of the VUL Account to buy
shares of the Fund identified according to Your
allocation instructions. The Fund is registered under
the 1940 Act as an open-end, diversified management
investment company. The Fund has separate Portfolios
that correspond to the Subaccounts of the VUL Account.
Assets of each such Subaccount are invested in shares of
the corresponding Fund Portfolio.
A Portfolio of the Fund might make a material change in
its investment policy. If that occurs, You will be
notified of the change. In addition, no change will be
made in the investment policy of any of the Subaccounts
of the VUL Account without approval of the appropriate
insurance supervisory official of Our domiciliary state
of New York. The approval process is on file with the
insurance supervisory official of the state where the
policy is delivered.
ADDITIONAL SUBACCOUNTS We have the right to add Subaccounts of the VUL Account
subject to approval by the Securities and Exchange
Commission and, where required, other regulatory
authority.
SUBSTITUTION OF If the shares of the Funds of this contract should no
SUBACCOUNTS longer be available for investment by the Separate
Account or if in Our judgment further investment in such
Funds becomes inappropriate for use with this policy, We
reserve the right to substitute Units of another
Subaccount for Units already purchased or to be
purchased in the future by premium payments under this
policy. Any such change will be subject to approval by
the Securities Exchange Commission and, where required,
by the insurance supervisory official of the state where
this policy is issued.
VOTING RIGHTS Although We are the legal owner of the Fund shares, We
will vote the shares at regular and special meetings of
the shareholders of the Fund in accordance with
instructions received from You and the other owners of
the policies. Any shares held by Us will be voted in the
same proportion as voted by You and the other owners of
the policies. However, We reserve the right to vote the
shares of the Fund without direction from You if there
is a change in the law which would permit this to be
done.
SHARE OF SEPARATE The share of this policy in the value of each Subaccount
ACCOUNT SUBACCOUNT of the Separate Account on a Valuation Date is the unit
VALUES value of that Subaccount on that date multiplied by the
number of this policy's units in that Subaccount after
all transactions for the Valuation Period ending on that
day have been processed. For any day which does not fall
on a Valuation Date, the share of this policy in the
value of each Subaccount of the Separate Account is
determined using the number of units on that day after
all transactions for that day have been processed and
the unit values on the next Valuation Date.
V610 10
<PAGE>
UNIT VALUE The unit value of each Subaccount of the Separate
Account was set by Us on the first Valuation Date of
each such Subaccount. The unit value of a Subaccount of
the Separate Account 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 of the Separate Account on a day other than a
Valuation Date is the unit value on the next Valuation
Date. The unit value of each Subaccount of the Separate
Account on a Valuation Date is determined at the end of
that day.
NET INVESTMENT FACTOR The Net Investment Factor for each Subaccount of the
Separate Account is determined by the investment
performance of the assets held by the Subaccount during
the Valuation Period. Each valuation will follow
applicable law and accepted procedures. The net
Investment Factor is equal to item (d) below subtracted
from the result of dividing the sum of items (a) and (b)
by item (c) as defined below.
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.
d. The daily charges, if any, for taxes and reserves for
taxes on investment income, and realized and
unrealized capital gains as shown on the Schedule
Page, multiplied by the number of days in the current
Valuation Period.
V610 11
<PAGE>
PART 6: LIFETIME BENEFITS
TRANSFERS You may transfer all or a portion of the Contract Value
of this contract among one or more the Subaccounts and
the GIA. Transfers may be made by telephone or Written
Request. You may make up to 12 transfers per Contract
Year from the Subaccounts and only one transfer per
Contract Year from the GIA unless the Systematic
Transfer Program is elected.
Under the Systematic Transfer Program, funds may be
transferred automatically among the Subaccounts on a
monthly, quarterly, semiannual or annual basis. Unless
We agree otherwise, the minimum initial and subsequent
transfer amounts are $25 monthly, $75 quarterly, $150
semiannually or $300 annually. Except as otherwise
provided under the Systematic Transfer Program, the
amount that may be transferred from the GIA at any one
time cannot exceed the higher of $1,000 or 25% of the
value of the GIA.
A Contract Owner must have an initial value of $2,000 in
the GIA or the Subaccount that funds will be transferred
from. Funds may be transferred from only one sending
Subaccount or the GIA but may be allocated to multiple
receiving Subaccounts. Under the Systematic Transfer
Program, Contract Owners may transfer approximately
equal amounts from the GIA over a minimum 18-month
period.
The transfer charge is as shown on the Schedule Page.
Any such charge will be deducted from the Subaccounts or
GIA from which the amounts are to be transferred with
each such Subaccount or GIA bearing a pro rata share of
the transfer charge. The value of each Subaccount will
be determined on the Valuation Date that coincides with
the date of transfer.
LOANS While this policy is In Force, a loan may be obtained
against this policy in any amount up to the available
loan value. To obtain a loan, this policy must be
properly assigned to Us as security. We need no other
collateral. We reserve the right not to allow loans of
less than $500.
The loan value is 90% of the Policy Value less any
applicable surrender charge less any outstanding Debt.
The amount of the loan will be added to the Loan Account
and subtracted from this policy's share of the
Subaccounts and GIA based on the allocation You request
at the time of the loan. The total reduction will equal
the amount added to the Loan Account. Unless We agree
otherwise, allocations to each Subaccount and to the GIA
must be expressed in whole percentages. If no allocation
request is made, the amount subtracted from the share of
each Subaccount and GIA will be determined in the same
manner as provided for monthly deductions.
V610 12
<PAGE>
PREFERRED LOANS A preferred loan is any loan that is carried over as
part of the single premium for this policy plus any
loan, or portion of any loan taken after the Policy Date
that does not exceed the Penalty Free Earnings of the
policy. We will determine the amount of a loan that is
Preferred on the date of any loan, and we will
redetermine the total amount of Preferred Loans on each
Policy Anniversary.
DEBT AND REPAYMENT Debt under this policy is equal to the sum of all
OF DEBT outstanding loan balances plus accrued interest. Debt
may be repaid at any time during the lifetime of the
insured while this policy is In Force. Such repayment,
in excess of any outstanding accrued loan interest, will
be applied to reduce the Loan Account and will be
transferred to the GIA to the extent that loaned amounts
taken from such account have not previously been repaid.
Otherwise, such balance will be transferred among the
Subaccounts You request upon repayment and, if no
allocation request is made, We will use Your most recent
premium allocation schedule on file with Us.
Any Debt repayment received by Us during a grace period
as described in Part 4 will be reduced to cover any
overdue monthly deductions and only the balance applied
to reduce the Debt. Such balance will also be applied as
described to reduce the Loan Account.
While there is any outstanding Debt against this policy,
any payments received by Us for this policy will be
applied directly to reduce the Debt unless specified as
a premium payment. Until the Debt is fully repaid,
additional Debt repayments may be made at any time
during the lifetime of the insured while this policy is
In Force.
Failure to repay a policy loan or to pay loan interest
will not terminate this policy, except as otherwise
provided under the Grace Period
and Lapse provision in Part 4. When the policy does not
have sufficient remaining Cash Surrender Value to pay
the monthly deduction the Grace Period and Lapse
provision will apply.
LOAN INTEREST Loans will bear interest at an effective annual rate
that does not exceed the Maximum Loan Interest Rate
shown on the Schedule Page and will be compounded daily.
Preferred loans will bear interest at an effective
annual rate that does not exceed the Maximum Loan
Interest Rate for Preferred Loans and will be compounded
daily. Interest will accrue on a daily basis from the
date of the loan and is included as
V610 13
<PAGE>
part of the Debt under this policy. Loan interest will
be due on each Policy Anniversary. If not paid when due,
the outstanding accrued interest on that date will be
added to the outstanding loan balance and to the Loan
Account and subtracted from the Subaccounts and the GIA
in accordance with Your most recent loan allocation
request.
A loan will affect the death benefit and Cash Surrender
Value of this policy.
SURRENDER CHARGE The surrender charge for a full surrender of the policy
is equal to the applicable Surrender Charge Percentage
as shown in the Surrender Charge Table of the Schedule
Pages multiplied by the Account Value less the Penalty
Free Earnings (see Part 1).
The surrender charge for a partial surrender
(withdrawal) of Cash Surrender Value is equal to the
applicable Surrender Charge Percentage as shown in the
Surrender Charge Table in the Schedule Pages multiplied
by the portion of the amount surrendered that exceeds
the Free Withdrawal Amount as described below.
The surrender charge will never exceed the maximum
allowed under applicable state law.
FULL SURRENDER You may fully surrender this policy for its Cash
Surrender Value by Written Request and returning this
policy to Us along with a written release and surrender
of all claims under this policy signed by You and any
assigns. You may do this at any time during the lifetime
of the insured while this policy is In Force. The
written surrender must be in a form satisfactory to Us
and must include such tax withholding information as We
may reasonably require. The surrender will be effective
on the "date of surrender" which is the later of the
dates on which We receive the returned policy and the
written surrender. Upon full surrender, all insurance
and any rider benefits provided under this policy will
terminate.
PARTIAL SURRENDER You may obtain a partial surrender or withdrawal by
requesting that a part of this policy's Cash Surrender
Value be paid to You. You may do this at any time during
the lifetime of the insured while this policy is In
Force with a Written Request signed by You and any
assigns. We reserve the right to require that this
policy first be returned to Us before payment is made. A
partial surrender will be effective on the date We
receive the Written Request or, if required, the date We
receive this policy if later. You may direct that We
apply the surrender proceeds under any of the Payment
Options described in Part 8.
V610 14
<PAGE>
A partial surrender will be denied if the resultant Cash
Surrender Value would be less than or equal to zero. We
reserve the right not to allow partial surrenders if the
resulting death benefit would be less than $25,000 or if
the amount of the partial surrender is less than $500.
We further reserve the right to require that the entire
balance of a Subaccount be surrendered and withdrawn if
the share of this policy in the value of that Subaccount
would, immediately after a partial surrender, be less
than $500.
Upon a partial surrender, the Policy Value will be
reduced by the sum of the following:
a. The partial surrender amount paid. This amount comes
from a reduction in this policy's share in the value
of each Subaccount and GIA based on the allocation
You request at the time of the partial surrender. If
no allocation request is made, the assessment to each
Subaccount and GIA will be made in the same manner as
provided for monthly deductions.
b. The surrender charge as described above. The
assessment to each Subaccount and GIA will be made in
the same manner as provided for the partial surrender
amount paid.
The face amount of this policy will be reduced by the
same ratio as the Policy Value is reduced. This ratio is
equal to the reduction in Policy Value divided by the
Policy Value just prior to the partial surrender.
FREE WITHDRAWAL AMOUNT During each of the first nine Policy years while there
is a surrender charge, you may withdraw a portion of
your Cash Surrender Value free of any surrender charge.
The Free Withdrawal Amount applicable to Your first
withdrawal in any Policy Year is equal to the greater
of:
a. the Penalty Free Earnings of Your policy on the date
of withdrawal;
b. 10% of the Single Premium paid (exclusive of any loan
portion of the Single Premium).
Any portion of Your first withdrawal in any Policy Year
that exceeds the Free Withdrawal Amount and subsequent
withdrawals in that Policy Year will be subject to the
Surrender Charge.
The total surrender charges that You pay in any Policy
Year will not exceed the surrender charge for a full
surrender of the policy in that Policy Year.
V610 15
<PAGE>
PART 7: DEATH BENEFITS
DEATH BENEFIT During all Policy Years until the Policy Anniversary
which follows the insured's 100th birthday, the death
benefit is equal to:
a. the policy's face amount on the date of death; or
b. the minimum death benefit on the date of death as
defined below.
MINIMUM DEATH BENEFIT The minimum death benefit is the Policy Value on the
date of death of the insured, multiplied by the
applicable percentage from the table below.
<TABLE>
<CAPTION>
Attained Attained Attained
Age Percent Age Percent Age Percent
- -------- ------- -------- ------- -------- -------
<S> <C> <C> <C> <C> <C> <C>
0-40 250% 54 157% 68 117%
41 243 55 150 69 116
42 236 56 146 70 115
43 229 57 142 71 113
44 222 58 138 72 111
45 215 59 134 73 109
46 209 60 130 74 107
47 203 61 128 75-90 105
48 197 62 126 91 104
49 191 63 124 92 103
50 185 64 122 93 102
51 178 65 120 94 101
52 171 66 119 95-100 100
53 164 67 118
</TABLE>
DEATH BENEFIT FOLLOWING After the Policy Anniversary which follows the insured's
INSURED'S AGE 100 100th birthday, the death benefit will equal the Policy
Value.
V610 16
<PAGE>
DEATH PROCEEDS Upon receipt In Writing of due proof that the insured
died while this policy is In Force, We will pay the
death proceeds of this policy. The death proceeds equal
the death benefit on the date of death, with the
following adjustments:
a. We will deduct any Debt outstanding against this
policy.
b. We will deduct any monthly deductions to and
including the Policy Month of death not already made.
c. We will add any premiums received by Us after the
Monthly Calculation Day just prior to the date of
death and on or before the date of death, if such
premiums do not increase the death benefit.
INTEREST ON DEATH We will pay interest on any death proceeds from the date
PROCEEDS of the insured's death to the date of payment. The
amount of interest will be the same as would be paid
were the death proceeds left for that period of time to
earn interest under Fixed Annuity Payment Option C.
THE BENEFICIARY Unless another payment option is elected as described in
Part 8, any death proceeds that become payable will be
paid in equal shares to such beneficiaries living at the
death of the insured as stated in the application for
this policy or as later changed. Payments will be made
successively in the following order:
a. Primary beneficiaries.
b. Contingent beneficiaries, if any, provided
beneficiary is living at the death of the insured.
c. You or Your executor or administrator, provided no
primary or contingent beneficiary is living at the
death of the insured.
Unless otherwise stated, the relationship of a
beneficiary is the relationship to the insured.
HOW TO CHANGE THE You may change the beneficiary under this policy by
BENEFICIARY Written Request. When We receive it, the change will
relate back and take effect as of the date it was
signed. However, the change will be subject to any
payments made or actions taken by Us before We received
the Written Request.
V610 17
<PAGE>
PART 8: PAYMENT OPTIONS
WHO MAY ELECT The death benefit of this policy will be paid in one sum
PAYMENT OPTIONS unless otherwise provided. As an alternative to payment
in one sum, any surrender or death benefit that becomes
payable under the policy may be applied under one or
more of the alternative income payment options as
described in this part or such other payment options as
may then be currently available for the policy.
Our consent is required for the election of an income
payment option by a fiduciary or any entity other than a
natural person. Our consent is also required for
elections by any assigns or an owner other than the
insured if the owner has been changed. You may designate
or change one or more beneficiaries who will be the
payee or payees under the option elected. You may only
do this during the lifetime of the insured. For death
proceeds, if no election is in effect when the death
benefit becomes payable, the beneficiary may elect a
payment option.
Unless We agree otherwise, all payments under any option
chosen will be made to the designated payee or to his
executor or administrator. We may require proof of age
of any payee or payees on whose life payments depend as
well as proof of the continued survival of any such
payee(s).
HOW TO ELECT A The election of an income payment option must be by
PAYMENT OPTION Written Request. Payments may be made on an annual,
semiannual, quarterly or monthly basis provided that
each installment will at least equal $25. We also
require that at least $1,000 be applied under any income
option chosen.
CALCULATION OF The guaranteed annuity payment rates under the following
FIXED ANNUITY options will be based on the payee's age and sex, and
PAYMENTS will be no less favorable than the following:
Under Options B, C, D, E and F rates are based on the
a-49 Annuity Table projected to 1985 with Projection
Scale B. We use an interest rate of 3-3/8% for 5- and
10-year certain periods under Option B, for the 10-year
certain period under Option F, and for Option E; an
interest rate of 3-1/4% for the 20-year certain period
under Options B and F; an interest rate of 3-1/2% under
Options C and D. Under Options G and H the guaranteed
interest rate is 3%.
If Our rates in effect when the first payment is due are
more favorable, We will use those rates.
V610 18
<PAGE>
ANNUITY UNIT A standard of measurement used to determine the amount
of each periodic payment made under the Variable Payment
Options I, J, K, M and N. The number of Annuity Units in
each Subaccount with assets under the chosen option is
equal to the portion of the first payment provided by
that Subaccount divided by the Annuity Unit Value for
that Subaccount on the first Payment Calculation Date.
CALCULATION OF Under the following options, all payments after the
VARIABLE ANNUITY first payment will vary with the investment experience
PAYMENTS of the Subaccounts. Payments may be either higher or
lower than the first payment.
Under Options I, J, K, M and N, We determine the first
payment by multiplying the amounts held under the
selected option in each Subaccount by the applicable
payment option rate. The first payment equals the total
of such amounts determined for each Subaccount. We
determine future payments under these options by
multiplying the number of Annuity Units in each
Subaccount by the Annuity Unit Value for each Subaccount
on the payment date. The payment will equal the sum of
the amounts provided by each Subaccount.
Under Options I, J, M and N, the applicable option rate
used to determine the first payment amount will not be
less favorable than the rate based on the 1983 Table A
(1983 IAM) projected with Projection Scale G to the year
2040, and with continued projection thereafter, and on
an interest rate of 4 1/2%. Under Option K, the rate
will be based on the number of payments to be made
during the specified period and on an interest rate of
4 1/2%.
FIXED ANNUITY
PAYMENT OPTIONS
OPTION A - A fixed payout annuity payable monthly while the payee
LIFE ANNUITY WITH is living or, if later, the end of the specified period
SPECIFIED PERIOD certain. The period certain may be specified as 10 or 20
CERTAIN years. The period certain must be elected at the time
this option is elected.
OPTION B - A fixed payout annuity payable monthly while the payee
NON-REFUND is living and ending with the last Life payment due
LIFE ANNUITY preceding the date of the payee's death.
OPTION C - We pay interest during the payee's lifetime on the
LEFT TO EARN INTEREST amount left with Us under this option as a principal
sum. We guarantee that at least one of the versions of
this option will provide interest at a rate of at least
3% per year.
OPTION D - A fixed payout annuity payable monthly while the payee
JOINT AND SURVIVORSHIP and the designated joint payee are living, and
LIFE ANNUITY continuing thereafter during the lifetime of the
survivor. The amount to be continued to the survivor is
V610 19
<PAGE>
100% of the joint annuity payment, as specified at the
time this option is elected. The designated joint payee
must be designated at the time this option is elected
and must have an adjusted age of at least 40.
OPTION E - A fixed payout annuity payable monthly while the payee
INSTALLMENT REFUND is living or, if later, the date the annuity payments
LIFE ANNUITY made under this option total an amount which refunds the
entire 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 entire
amount applied under this option
OPTION F - A fixed payout annuity payable monthly while either the
JOINT AND SURVIVORSHIP payee or designated joint payee is living, or if later,
LIFE ANNUITY WITH the end of 10 years. The designated joint payee must be
10-YEAR PERIOD CERTAIN designated at the time this option is elected and must
have an adjusted age of at least 40 years.
OPTION G - Equal income installments for a specified period of
PAYMENTS FOR A years are paid whether the payee lives or dies. The
SPECIFIED PERIOD period certain specified must be in whole numbers of
years from 5 to 30.
OPTION H - Equal income installments of a specified amount are paid
PAYMENTS OF A until the principal sum remaining under this option from
SPECIFIED AMOUNT the amount applied is less than the amount of the
installment. When that happens, the principal sum
remaining will be paid as a final payment. The amount
specified must provide for payments for a period of at
least 5 years.
VARIABLE ANNUITY
PAYMENT OPTIONS
OPTION I - This option provides variable monthly payments that will
VARIABLE LIFE ANNUITY continue during the lifetime of the payee or for ten
WITH 10-YEAR years, if longer. If the beneficiary of any death
PERIOD CERTAIN benefits payable under this contract elects this payment
option, the term payee shall refer to such beneficiary
and the period certain will equal 10 years, or the life
expectancy of such beneficiary, if shorter.
OPTION J - This option provides variable monthly payments while the
JOINT SURVIVORSHIP payee and the designated joint payee are living.
VARIABLE Payments will continue during the life of the survivor
LIFE ANNUITY WITH or until the end of 10 years if later. The designated
10-YEAR PERIOD CERTAIN joint payee must be designated at the time this
option is elected and must have an adjusted age of at
least 40 years.
OPTION K - This option provides variable monthly payments through
VARIABLE ANNUITY the release of a fixed number of Annuity Units over a
FOR SPECIFIED PERIOD specified period of time. Payment continues for the
specified period of time whether the payee lives or
dies. The specified period must Be in whole numbers of
years from 5 to 30.
V610 20
<PAGE>
OPTION L - This option provides variable payout monthly income
VARIABLE LIFE payable over the Annuitant's annually recalculated life
EXPECTANCY ANNUITY expectancy or the annually recalculated life expectancy
of the Annuitant and joint annuitant. A Contract Owner
may at any time request unscheduled withdrawals
representing part or all of the remaining Contract
Value. Upon the death of the Annuitant (and joint
annuitant, if there is a joint annuitant), the remaining
Contract Value will be paid in a lump sum to the
Annuitant's beneficiary.
OPTION M - This option provides variable monthly payments as long
UNIT REFUND as the payee lives. In the event of the death of the
VARIABLE LIFE ANNUITY payee, the income will stop and the payee's beneficiary
will receive in a lump sum the value of the remaining
Annuity Units. This value is equal to the sum of the
number of remaining Annuity Units for each Subaccount
multiplied by the current Annuity Unit Value for that
Subaccount. The number of remaining Annuity Units for
each Subaccount will be calculated as follows:
(1) the net amount in the Subaccount applied under this
option on the first Payment Calculation Date divided
by the corresponding Annuity Unit Value on that date
minus
(2) the sum of the Annuity Units released from the
Subaccount to make the payments under this option.
OPTION N - This option provides a variable monthly income for the
VARIABLE NON- lifetime of the payee. No income is payable after the
REFUND LIFE ANNUITY death of the payee.
OTHER OPTIONS We may offer other payment options or alternative
versions of the options listed above.
V610 21
<PAGE>
PART 9: TABLES OF PAYMENT OPTION AMOUNTS
The installment amounts shown in the tables that follow
are shown for each $1,000 applied. Amounts for payment
frequencies, periods or ages not shown will be furnished
upon request. Under Options 4 and 5, the installment
amount for younger ages than shown will be the same as
for the first age shown and for older ages than shown it
will be the same amount as for the last age shown.
The term "age" as used in the tables refers to the
adjusted age. The adjusted age is defined as follows:
a. For Surrender Values, the age of the payee on the
payee's birthday nearest to the Policy Anniversary
nearest the date of surrender.
b. For death proceeds, the age of the payee on the
payee's birthday nearest the effective date of the
Payment Option elected.
The following tables B-G show the minimum monthly income
for each $1,000 applied. The following tables I, J, K,
M, and N show the minimum initial monthly payment for
each $1,000 applied.
<TABLE>
<CAPTION>
OPTIONS A & E -- LIFE ANNUITY WITH SPECIFIED PERIOD CERTAIN; INSTALLMENT REFUND
LIFE ANNUITY
- ------------ --------------------------- -------------------------- -------------------------
INSTALLMENT REFUND 10 YEARS CERTAIN 20 YEARS CERTAIN
--------------------------- -------------------------- -------------------------
AGE OF PAYEE MALE FEMALE MALE FEMALE MALE FEMALE
- ------------ ------------- ------------- ------------ ------------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
40 $3.80 $3.64 $3.86 $3.60 $3.74 $3.54
- ------------ ------------- ------------- ------------ ------------- ------------ ------------
45 4.05 3.85 4.14 .82 3.99 3.74
- ------------ ------------- ------------- ------------ ------------- ------------ ------------
50 4.36 4.12 4.50 4.10 4.28 3.99
- ------------ ------------- ------------- ------------ ------------- ------------ ------------
55 4.76 4.47 4.95 4.47 4.61 4.31
- ------------ ------------- ------------- ------------ ------------- ------------ ------------
60 5.28 4.93 5.54 4.96 4.97 4.67
- ------------ ------------- ------------- ------------ ------------- ------------ ------------
65 5.97 5.54 6.30 5.63 5.29 5.06
- ------------ ------------- ------------- ------------ ------------- ------------ ------------
70 6.91 6.39 7.24 6.50 5.43 5.31
- ------------ ------------- ------------- ------------ ------------- ------------ ------------
75 8.21 7.57 8.26 7.56 5.44 5.40
- ------------ ------------- ------------- ------------ ------------- ------------ ------------
80 10.04 9.26 10.12 8.60 5.46 5.46
- ------------ ------------- ------------- ------------ ------------- ------------ ------------
85 12.61 11.68 12.60 9.31 5.46 5.46
- ------------ ------------- ------------- ------------ ------------- ------------ ------------
</TABLE>
<TABLE>
<CAPTION>
OPTION B -- NON-REFUND LIFE ANNUITY
- --------------- ------------ ------------
AGE OF MALE FEMALE
PAYEE
- --------------- ------------ ------------
<S> <C> <C> <C>
40 $ 3.95 $ 3.75
- --------------- ------------ ------------
45 4.24 3.98
- --------------- ------------ ------------
50 4.62 4.28
- --------------- ------------ ------------
55 5.12 4.68
- --------------- ------------ ------------
60 5.79 5.24
- --------------- ------------ ------------
65 6.75 6.04
- --------------- ------------ ------------
70 8.15 7.22
- --------------- ------------ ------------
75 10.26 9.03
- --------------- ------------ ------------
80 13.54 11.88
- --------------- ------------ ------------
85 18.72 16.54
- --------------- ------------ ------------
</TABLE>
V610 22
<PAGE>
<TABLE>
OPTION D -- JOINT AND SURVIVORSHIP LIFE ANNUITY
- -------------------------------------------------------------------------------------------------
<CAPTION>
FEMALE MALE
AGE
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
40 45 50 55 60 65 70 75
- -------------------------------------------------------------------------------------------------
40 $3.49 $3.55 $3.59 $3.62 $3.64 $3.65 $3.66 $3.67
- ---------------------------------------------------------------------------------------------------
45 3.58 3.67 3.74 3.80 3.83 3.86 3.88 3.89
- ---------------------------------------------------------------------------------------------------
50 3.65 3.79 3.90 4.00 4.07 4.12 4.16 4.18
- --------------------------------------------------------------------------------------------------
55 3.72 3.89 4.06 4.22 4.35 4.44 4.51 4.56
- --------------------------------------------------------------------------------------------------
60 3.77 3.97 4.20 4.43 4.65 4.83 4.96 5.05
- --------------------------------------------------------------------------------------------------
65 3.80 4.04 4.31 4.62 4.94 5.25 5.51 5.71
- --------------------------------------------------------------------------------------------------
70 3.83 4.08 4.34 4.77 5.20 5.67 6.13 6.52
- --------------------------------------------------------------------------------------------------
75 3.85 4.12 4.46 4.88 5.40 6.04 6.75 7.46
- --------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
OPTION F -- JOINT AND SURVIVORSHIP LIFE ANNUITY WITH 10-YEAR PERIOD CERTAIN
-------------------------------------------------------------------------------------------------
<CAPTION>
FEMALE
AGE MALE
-------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
40 45 50 55 60 65 70 75
-------------------------------------------------------------------------------------------------
40 $3.49 $3.55 $3.59 $3.62 $3.64 $3.65 $3.66 $3.67
------------------------------------------------------------------------------------------------
45 3.58 3.67 3.74 3.80 3.83 3.86 3.88 3.89
------------------------------------------------------------------------------------------------
50 3.65 3.78 3.90 4.00 4.07 4.12 4.15 4.17
------------------------------------------------------------------------------------------------
55 3.72 3.89 4.06 4.22 4.34 4.44 4.50 4.54
------------------------------------------------------------------------------------------------
60 3.77 3.97 4.19 4.43 4.64 4.82 4.95 5.03
------------------------------------------------------------------------------------------------
65 3.80 4.03 4.31 4.61 4.93 5.23 5.45 5.65
------------------------------------------------------------------------------------------------
70 3.83 4.08 4.39 4.75 5.18 5.63 6.07 6.41
------------------------------------------------------------------------------------------------
75 3.85 4.11 4.45 4.86 5.36 5.96 6.62 7.21
------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
OPTION G -- PAYMENTS FOR A SPECIFIED PERIOD
- -------------------- ----------------- ------------------
NUMBER OF ANNUAL MONTHLY
YEARS INSTALLMENT INSTALLMENT
- -------------------- ----------------- ------------------
<S> <C> <C>
5 $211.99 $17.91
- -------------------- ----------------- ------------------
6 179.22 15.14
- -------------------- ----------------- ------------------
7 155.83 13.16
- -------------------- ----------------- ------------------
8 138.31 11.68
- -------------------- ----------------- ------------------
9 124.69 10.53
- -------------------- ----------------- ------------------
10 113.82 9.61
- -------------------- ----------------- ------------------
11 104.93 8.86
- -------------------- ----------------- ------------------
12 97.54 8.24
- -------------------- ----------------- ------------------
13 91.29 7.71
- -------------------- ----------------- ------------------
14 85.95 7.26
- -------------------- ----------------- ------------------
15 81.33 6.87
- -------------------- ----------------- ------------------
16 77.29 6.53
- -------------------- ----------------- ------------------
17 73.74 6.23
- -------------------- ----------------- ------------------
18 70.59 5.96
- -------------------- ----------------- ------------------
19 67.78 5.73
- -------------------- ----------------- ------------------
20 65.26 5.51
- -------------------- ----------------- ------------------
25 55.76 4.71
- -------------------- ----------------- ------------------
30 49.53 4.18
- -------------------- ----------------- ------------------
</TABLE>
V610 23
<PAGE>
<TABLE>
<CAPTION>
OPTION I -- VARIABLE LIFE ANNUITY WITH 10-YEAR PERIOD CERTAIN
- --------------- ------------ ------------
AGE OF
PAYEE MALE FEMALE
- --------------- ------------ ------------
<S> <C> <C> <C>
40 $4.15 $4.02
- --------------- ------------ ------------
45 4.29 4.12
- --------------- ------------ ------------
50 4.40 4.27
- --------------- ------------ ------------
55 4.73 4.46
- --------------- ------------ ------------
60 5.06 4.71
- --------------- ------------ ------------
65 5.51 5.05
- --------------- ------------ ------------
70 6.08 5.52
- --------------- ------------ ------------
75 6.79 6.17
- --------------- ------------ ------------
80 7.65 6.99
- --------------- ------------ ------------
85 8.57 7.98
- --------------- ------------ ------------
</TABLE>
<TABLE>
<CAPTION>
OPTION J -- JOINT SURVIVORSHIP VARIABLE LIFE ANNUITY WITH 10-YEAR
PERIOD CERTAIN
-----------------------------------------------------------------------------------------------
FEMALE MALE
AGE
-----------------------------------------------------------------------------------------------
40 45 50 55 60 65 70 75
-----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
40 $3.92 $3.94 $3.96 $3.98 $3.99 $4.00 $4.00 $4.01
-----------------------------------------------------------------------------------------------
45 3.96 4.00 4.03 4.06 4.08 4.09 4.10 4.11
-----------------------------------------------------------------------------------------------
50 4.00 4.05 4.10 4.15 4.18 4.21 4.23 4.24
-----------------------------------------------------------------------------------------------
55 4.03 4.10 4.18 4.24 4.30 4.35 4.39 4.41
-----------------------------------------------------------------------------------------------
60 4.06 4.15 4.25 4.34 4.43 4.52 4.58 4.63
-----------------------------------------------------------------------------------------------
65 4.09 4.19 4.31 4.44 4.57 4.70 4.81 4.90
-----------------------------------------------------------------------------------------------
70 4.11 4.22 4.36 4.53 4.70 4.89 5.07 5.22
-----------------------------------------------------------------------------------------------
75 4.12 4.75 4.41 4.60 4.82 5.07 5.34 5.59
-----------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
OPTION K -- VARIABLE ANNUITY FOR SPECIFIED PERIOD
- -------------------- ----------------- ------------------
NUMBER OF ANNUAL MONTHLY
YEARS INSTALLMENT INSTALLMENT
- -------------------- ----------------- ------------------
<S> <C> <C> <C>
5 $217.98 $18.53
- -------------------- ----------------- ------------------
6 185.53 15.77
- -------------------- ----------------- ------------------
7 162.39 13.81
- -------------------- ----------------- ------------------
8 145.08 12.34
- -------------------- ----------------- ------------------
9 131.65 11.19
- -------------------- ----------------- ------------------
10 120.94 10.28
- -------------------- ----------------- ------------------
11 112.20 9.54
- -------------------- ----------------- ------------------
12 104.94 8.92
- -------------------- ----------------- ------------------
13 98.83 8.40
- -------------------- ----------------- ------------------
14 93.61 7.96
- -------------------- ----------------- ------------------
15 89.10 7.58
- -------------------- ----------------- ------------------
16 85.18 7.24
- -------------------- ----------------- ------------------
17 81.74 6.95
- -------------------- ----------------- ------------------
18 78.70 6.69
- -------------------- ----------------- ------------------
19 75.99 6.46
- -------------------- ----------------- ------------------
20 73.57 6.25
- -------------------- ----------------- ------------------
25 64.53 5.49
- -------------------- ----------------- ------------------
30 58.75 5.00
- -------------------- ----------------- ------------------
</TABLE>
V610 24
<PAGE>
<TABLE>
<CAPTION>
OPTION M -- UNIT REFUND VARIABLE LIFE ANNUITY
- --------------- ------------ ------------
AGE OF
PAYEE MALE FEMALE
- --------------- ------------ ------------
<S> <C> <C> <C>
40 $4.12 $4.01
- --------------- ------------ ------------
45 4.25 4.11
- --------------- ------------ ------------
50 4.42 4.24
- --------------- ------------ ------------
55 4.64 4.41
- --------------- ------------ ------------
60 4.92 4.64
- --------------- ------------ ------------
65 5.28 4.94
- --------------- ------------ ------------
70 5.74 5.33
- --------------- ------------ ------------
75 6.32 5.86
- --------------- ------------ ------------
80 7.07 6.55
- --------------- ------------ ------------
85 8.01 7.43
- --------------- ------------ ------------
</TABLE>
<TABLE>
<CAPTION>
OPTION N -- VARIABLE NON-REFUND LIFE ANNUITY
- --------------- ------------ ------------
AGE OF
PAYEE MALE FEMALE
- --------------- ------------ ------------
<S> <C> <C> <C>
40 $4.15 $4.02
- --------------- ------------ ------------
45 4.30 4.13
- --------------- ------------ ------------
50 4.50 4.27
- --------------- ------------ ------------
55 4.76 4.47
- --------------- ------------ ------------
60 5.11 4.73
- --------------- ------------ ------------
65 5.60 5.09
- --------------- ------------ ------------
70 6.29 5.60
- --------------- ------------ ------------
75 7.20 6.34
- --------------- ------------ ------------
80 8.49 7.41
- --------------- ------------ ------------
85 10.30 8.98
- --------------- ------------ ------------
</TABLE>
V610 25
<PAGE>
MODIFIED SINGLE PREMIUM VARIABLE LIFE INSURANCE POLICY
THE DEATH BENEFIT AND OTHER VALUES PROVIDED UNDER THIS POLICY ARE BASED ON THE
RATES OF INTEREST CREDITED ON ANY AMOUNTS ALLOCATED TO THE GUARANTEED INTEREST
ACCOUNT AND THE INVESTMENT EXPERIENCE OF THE SUBACCOUNTS WITHIN OUR SEPARATE
ACCOUNT TO WHICH YOUR PREMIUMS ARE ALLOCATED. THUS, THE DEATH BENEFIT AND
OTHER VALUES MAY INCREASE OR DECREASE IN AMOUNT OR DURATION. SEE PART 7 FOR A
DESCRIPTION OF HOW THE DEATH BENEFIT IS DETERMINED.
ELIGIBLE FOR ANNUAL DIVIDEND
V610
EXHIBIT 1A(9)(b)
FORM OF APPLICATION
<PAGE>
<TABLE>
<CAPTION>
[LOGO] PHOENIX PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY SINGLE PREMIUM VARIABLE
PO Box 8027 LIFE INSURANCE APPLICATION
Boston MA 02266-8027
ATTN Mail Operations POLICY NUMBER __________________________
====================================================================================================================================
<S> <C>
SECTION I - PROPOSED INSURED
- ------------------------------------------------------------------------------------------------------------------------------------
Print Name as it is to appear on policy (First, Middle, Last) Sex Birthdate(Month, Day, Year)
[ ] Male [ ] Female
- ------------------------------------------------------------------------------------------------------------------------------------
Birthplace(State or Country) United States Citizen Social Security Number
[ ] Yes [ ] No
- ------------------------------------------------------------------------------------------------------------------------------------
Home Address (Include Street, Apt. Number, City, State, ZIP Code, and Country) Home Telephone Number
( )
- ------------------------------------------------------------------------------------------------------------------------------------
Give Prior Address if at address less than 2 years (Include Street, Apt. Number, City, State, ZIP Code, and Country)
- ------------------------------------------------------------------------------------------------------------------------------------
Current Occupation and Duties Employer Length of Employment
- ------------------------------------------------------------------------------------------------------------------------------------
Business Address (Include Street, Apt. Number, City, State, ZIP Code, and Country) Bus. Phone No. (Include Ext.)
( ) X
- ------------------------------------------------------------------------------------------------------------------------------------
Email Address
====================================================================================================================================
SECTION II - OWNERSHIP (SELECT ONE, IF "B" IS ELECTED, COMPLETE THE FOLLOWING)
- ------------------------------------------------------------------------------------------------------------------------------------
[ ]A. Proposed Insured
- ------------------------------------------------------------------------------------------------------------------------------------
[ ]B. Other Relationship to Proposed Insured
- ------------------------------------------------------------------------------------------------------------------------------------
Name SS#/Tax ID Number
- ------------------------------------------------------------------------------------------------------------------------------------
Address
- ------------------------------------------------------------------------------------------------------------------------------------
Owner's Email Address
- ------------------------------------------------------------------------------------------------------------------------------------
Send statements and lapse notices to: (in addition to owner)
[ ] Proposed Insured: [ ] Home Address [ ] Business Address
[ ] Secondary Addressee (Name and Address) _________________________________________________________________________________________
====================================================================================================================================
SECTION III - BENEFICIARY DESIGNATION(S)
- ------------------------------------------------------------------------------------------------------------------------------------
Primary Beneficiary Relationship to Proposed Insured Date of Birth SS#/Tax ID Number
- ------------------------------------------------------------------------------------------------------------------------------------
Contingent Beneficiary Relationship to Proposed Insured Date of Birth SS#/Tax ID Number
====================================================================================================================================
SECTION IV - COVERAGE APPLIED FOR
- ------------------------------------------------------------------------------------------------------------------------------------
Plan of Insurance Face Amount Single Premium
$
- ------------------------------------------------------------------------------------------------------------------------------------
[ ] Living Benefit Rider [ ] Other ___________________________________________________________________________________________
====================================================================================================================================
SECTION V - SUITABILITY
- ------------------------------------------------------------------------------------------------------------------------------------
DO YOU UNDERSTAND THAT YOU HAVE PURCHASED A VARIABLE LIFE POLICY AND THE DEATH BENEFIT MAY BE VARIABLE OR FIXED UNDER CERTAIN
CONDITIONS AND THAT THE DEATH BENEFIT AND CASH VALUES UNDER ANY VARIABLE POLICY MAY INCREASE OR DECREASE IN AMOUNT OR DURATION BASED
ON THE INVESTMENT EXPERIENCE OF THE UNDERLYING SUB-ACCOUNTS? [ ] YES [ ] NO
I UNDERSTAND I HAVE PURCHASED A VARIABLE LIFE POLICY AND BELIEVE IT IS SUITABLE TO MEET MY FINANCIAL OBJECTIVES AND CONFIRM THAT I
HAVE RECEIVED THE PROSPECTUS FOR THIS POLICY AND ITS UNDERLYING FUNDS.
- ------------------------------------------------------------------------------------------------------------------------------------
IF A LIFE INSURANCE POLICY CANNOT BE ISSUED, DO YOU WISH TO APPLY FOR AN ANNUITY? [ ] YES [ ] NO
====================================================================================================================================
INCOME
- ------------------------------------------------------------------------------------------------------------------------------------
Earned Income Independent Income Net Worth
- ------------------------------------------------------------------------------------------------------------------------------------
ILLUSTRATIONS OF BENEFITS, INCLUDING DEATH BENEFITS, POLICY VALUES AND CASH SURRENDER VALUES ARE AVAILABLE ON REQUEST.
====================================================================================================================================
ADDITIONAL COMMENTS
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
OL2960 Page 1 4-00
<PAGE>
<TABLE>
<CAPTION>
====================================================================================================================================
SECTION VI - SUB-ACCOUNT ALLOCATION (Do Not Use Fractional Percentages, must total 100%)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
____% Phoenix-Aberdeen International ____% Phoenix-J.P. Morgan Research Enhanced Index ____% MSDW Technology Portfolio
____% Phoenix-Aberdeen New Asia ____% Phoenix-Morgan Stanley Focus Equity ____% Mutual Shares Securities Fund
- Class 2
____% Phoenix-Bankers Trust Dow 30 ____% Janus Equity Income ____% Templeton Asset Strategy Fund
- Class 2
____% Phoenix-Duff & Phelps Real ____% Phoenix-Oakhurst Balanced ____% Templeton Developing Markets
Estate Securities Securities Fund - Class 2
____% Phoenix-Engemann Capital Growth ____% Phoenix-Oakhurst Growth & Income ____% Templeton International
Securities Fund - Class 2
____% Phoenix-Engemann Nifty-Fifty ____% Phoenix-Oakhurst Strategic Allocation ____% Templeton Growth Securities
Fund - Class 2
____% Phoenix-Federated US Govt Bond ____% Phoenix-Schafer Mid-Cap Value ____% Wanger Foreign Forty
____% Phoenix-Goodwin Multi-Sector ____% Phoenix-Schafer Mid-Cap Growth ____% Wanger International Small Cap
Fixed Income
____% Phoenix-Goodwin Money Market ____% Phoenix-Seneca Strategic Theme ____% Wanger Twenty
____% Phoenix-Hollister Value Equity ____% Bankers Trust EAFE[registrated trademark] ____% Wanger US Small Cap
Equity Index
____% Phoenix-Janus Equity Income ____% Federated Fund for US Government ____% Other ________________________
Securities II
____% Phoenix-Janus Flexible Income ____% Federated High Income Bond II ____% Other ________________________
____% Phoenix-Janus Growth ____% Guaranteed Interest Account ____% Other ________________________
- ------------------------------------------------------------------------------------------------------------------------------------
Telephone Transfer and Changes in Payment Allocations
[ ] Yes [ ] No Telephone transfers and changes in payment allocation are subject to the terms of the prospectus. If you check the
"Yes" box, telephone orders will be accepted from you and your registered representative and you agree that, because
we cannot verify the authenticity of telephone instructions, we will not be liable for any loss caused by our acting
on telephone instructions, unless caused by our gross negligence.
====================================================================================================================================
Do you request and agree to receive prospectuses, annual and semi-annual reports, confirmations, statements of account, proxy
statements and privacy notices in an electronic format when available rather than in a paper version? [ ] Yes [ ] No
====================================================================================================================================
SECTION VII - MEDICAL HISTORY OF PROPOSED INSURED
- ------------------------------------------------------------------------------------------------------------------------------------
To the best of your knowledge have you:
YES NO
[ ] [ ] 1. Ever had or been treated for high blood pressure, chest pain, heart disease, stroke, lung disorder, cancer,
diabetes, kidney disease, liver disease, or mental or nervous disorder?
[ ] [ ] 2. In the last five years received counseling or treatment for alcohol or other drug use?
[ ] [ ] 3. Ever been diagnosed or treated by a medical profession for Acquired Immune Deficiency Syndrome (AIDS) or AIDS
Related Complex (ARC), or told that you are HIV Positive?
[ ] [ ] 4. Smoked any cigarettes in the last 12 months?
[ ] [ ] 5. Ever applied for life, accident, or health insurance and been postponed, or been offered a policy differing in
plan, amount or premium rate from that applied for? (If "Yes", give date, company and reason).
- ------------------------------------------------------------------------------------------------------------------------------------
Give full details for all "Yes" answers above.
- ------------------------------------------------------------------------------------------------------------------------------------
Name of Proposed Insured Question Number Details
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
====================================================================================================================================
SECTION VIII - REPLACEMENT
- ------------------------------------------------------------------------------------------------------------------------------------
[ ] Yes [ ] No With this policy, do you plan to replace (in whole or in part, now or in the future) any existing insurance or
annuity in force for this policy?
[ ] Yes [ ] No Do you plan to utilize values from any existing insurance policy (through loans, surrenders or otherwise) or
annuity, to pay any initial or subsequent premium(s) for this policy?
For all "Yes" answers above, please provide the following information.
- ------------------------------------------------------------------------------------------------------------------------------------
Company Issue Date Plan Amount Personal/Business
- ------------------------------------------------------------------------------------------------------------------------------------
$
- ------------------------------------------------------------------------------------------------------------------------------------
$
- ------------------------------------------------------------------------------------------------------------------------------------
$
====================================================================================================================================
Do you have any additional life insurance policy(ies) or annuity contract(s) in force [ ] Yes [ ] No
====================================================================================================================================
Total Life Insurance in force (if none, indicate) $__________ Total Accidental Death Benefit in force (if none, indicate) $_______
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
OL2960 Page 2 4-00
<PAGE>
<TABLE>
<CAPTION>
====================================================================================================================================
<S> <C>
MODIFIED ENDOWMENT CONTRACT
- ------------------------------------------------------------------------------------------------------------------------------------
In general, a single premium policy will usually be a Modified Endowment Contract for tax purposes. Therefore, policy loans and
other lifetime distributions will generally result in Federal Income Tax to the owner. Death benefits, however, will be exempt for
Federal Income Tax purposes. Please consult your tax advisor.
- ------------------------------------------------------------------------------------------------------------------------------------
Any person who, with intent to defraud or knowing that he/she is facilitating a fraud against an insurer, submits an application or
files a claim containing a false or deceptive statement may be guilty of insurance fraud as determined by a court of competent
jurisdiction.
AUTHORIZATION TO OBTAIN INFORMATION
I hereby authorize any licensed physician, medical practitioner, hospital, clinic or other medical or medically-related facility,
insurance company, the Medical Information Bureau (MIB), Motor Vehicle Registry or other organization, institution or person, having
any records or knowledge of me or my health, to give to Phoenix Home Life Mutual Insurance Company and its subsidiaries or
reinsurers, any such information. To facilitate rapid submission of such information, I authorize all said sources, except MIB, to
give such records or knowledge of any agency employed by the company to collect and transmit such information.
The information requested by Phoenix Home Life Mutual Insurance Company and its subsidiaries or reinsurers, may include information
regarding diagnosis and treatment of physical or mental conditions, including consultations occurring after the date this
authorization is signed. Medical information will be used only for the purpose of risk evaluation, determining eligibility for
benefits under any policies issued, and for insurance statistical studies. If a medical record contains information relating to
alcohol or drug abuse or mental health care, adequate information is to be released to serve these purposes.
I acknowledge that I have received a copy of the Notice of Information Practices, including information about Investigative Consumer
Reports and the Medical Information Bureau and the Underwriting Process.
I also authorize the preparation of an investigative consumer report. [ ] I do [ ] I do not (check one only) require that I be
interviewed in connection with any investigative consumer report that may be prepared.
This authorization shall continue to be valid for thirty months from the date it is signed unless otherwise required by law. A
photocopy of this signed authorization shall be as valid as the original. It may be revoked in writing to the Company at any time
until the insurance coverage has been placed in force. I understand I may, or an individual authorized to act on my behalf, may
receive a copy of this authorization on request.
====================================================================================================================================
I have reviewed this application, and I hereby verify that all information given on this application is true and complete to the
best of my knowledge and belief, and has been fully correctly recorded.
I certify that (a) the Social Security or Tax Identification Number shown above is correct, and (b) that I am not subject to back-up
withholding.
If I have applied for the Living Benefit Rider, I confirm that I have received a copy of the disclosure form (Summary of Coverage
for Accelerated Benefit Rider).
====================================================================================================================================
Proposed Insured State Signed In Witness Date
X
- ------------------------------------------------------------------------------------------------------------------------------------
Owner(if other than Proposed Insured) State Signed In Witness Date
X
- ------------------------------------------------------------------------------------------------------------------------------------
The Producer hereby certifies he/she has truly and accurately recorded on the application the information supplied by the Proposed
Insured; and that he/she is qualified and authorized to discuss the contract herein applied for.
WILL THE PROPOSED INSURED REPLACE (IN WHOLE OR IN PART) ANY EXISTING INSURANCE OR ANNUITY IN FORCE WITH THE POLICY APPLIED FOR?
[ ] YES [ ] NO
WILL THE PROPOSED INSURED UTILIZE VALUES FROM ANY EXISTING INSURANCE POLICY (THROUGH LOANS, SURRENDERS OR OTHERWISE) OR ANNUITY, TO
PAY FOR THE INITIAL OR SUBSEQUENT PREMIUM(S) FOR THE POLICY APPLIED FOR? [ ] YES [ ] NO
- ------------------------------------------------------------------------------------------------------------------------------------
Lic. Agt./Rep.'s Name (Print) Lic. Agt./Rep. Rep.'s Email Address
- ------------------------------------------------------------------------------------------------------------------------------------
Lic. Agt./Rep. Rep.'s Signature Date Lic. Agt./Rep. Rep.'s I.D.No. Lic. Agt./Rep. Rep.'s Telephone No.
X
- ------------------------------------------------------------------------------------------------------------------------------------
Broker/Dealer Name and Address Broker/Dealer No.
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
OL2960 Page 3 4-00
EXHIBIT 6
CONSENT OF PRICEWATERHOUSECOOPERS LLP
<PAGE>
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in this Post-Effective Amendment No. 17 to the
registration statement on Form S-6 ("Registration Statement") of our report
dated March 10, 2000 and February 15, 2000, relating to the financial statements
of Phoenix Home Life Variable Universal Life Account and the consolidated
financial statements of Phoenix Home Life Mutual Insurance Company,
respectively, which appears in such Registration Statement.
/s/ PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
Hartford, Connecticut
April 21, 2000
EXHIBIT 7
CONSENT OF EDWIN L. KERR, ESQ.
<PAGE>
To Whom It May Concern:
I hereby consent to the reference to my name under the caption "Legal
Matters" in the Prospectus contained in Post-Effective Amendment No. 17 to the
Registration Statement on Form S-6 (File No. 33-6793) filed by Phoenix Home Life
Variable Universal Life Account with the Securities and Exchange Commission
under the Securities Act of 1933.
Very truly yours,
Dated : May 1, 2000 /s/ Edwin L. Kerr
-----------------
Edwin L. Kerr, Counsel
Phoenix Home Life Mutual Insurance Company
EXHIBIT 8
CONSENT OF PAUL M. FISCHER, FSA, CLU, CHFC
<PAGE>
May 1, 2000
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
Gentlemen:
This opinion is furnished in connection with the registration of
flexible premium variable life insurance policies ("Policies") under the
Securities Act of 1933. The prospectuses included in the Registration Statement
on Form S-6 (SEC File No. 33-6793) describes the Policies. The forms of Policies
were prepared under my direction, and I am familiar with the Registration
Statement and Exhibits thereto.
In my opinion, the illustrations of death benefits and cash values
included in the section entitled "Illustrations of Death Benefits, Policy Values
("Account Values"), and Cash Surrender Values" in Appendix B of the
prospectuses, based on the assumptions stated in the illustrations, are
consistent with the provisions of the respective forms of the Policies.
I hereby consent to the use of this opinion as an exhibit to the
Registration Statement.
Very truly yours,
/s/ Paul M. Fischer
-------------------------------
Paul M. Fischer, FSA, CLU, ChFC
Vice President
