As filed with the Securities and Exchange Commission on October 13, 2000
REGISTRATION NO. 333-23171
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
--------------------
Post-Effective Amendment No. 6
to
FORM S-6
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FOR REGISTRATION UNDER THE SECURITIES ACT
OF 1933 OF SECURITIES OF UNIT INVESTMENT TRUSTS
REGISTERED ON FORM N-8B-2
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Phoenix Home Life Variable Universal Life Account
(Exact Name of Trust)
Phoenix Home Life Mutual Insurance Company
(Name of Depositor)
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One American Row
Hartford, Connecticut 06102-5056
(Complete address of Depositor's principal executive offices)
Dona D. Young, Esquire
President
Phoenix Home Life Mutual Insurance Company
One American Row
Hartford, Connecticut 06102-5056
(Name and complete address of agent for service)
--------------------
Copies to:
Michael Berenson, Esq. Edwin L. Kerr, Esq.
Jorden Burt Boros Cicchetti Berenson Counsel
& Johnson LLP Phoenix Home Life Mutual
1025 Thomas Jefferson St. N.W. Insurance Company
Suite 400 East One American Row
Washington, D.C. 20007-0805 Hartford, Connecticut 06102-5056
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It is proposed that this filing will become
effective:
[ ] immediately upon filing pursuant to paragraph (b);
[ ] on __________, 2000 pursuant to paragraph (b);
|X| 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.
--------------------
================================================================================
<PAGE>
VERSION A PROSPECTUS
is not affected by this filing.
<PAGE>
SURVIVORSHIP VARIABLE
UNIVERSAL LIFE INSURANCE
POLICY
Developed for The Partners Group
Issued by
PHOENIX HOME LIFE MUTUAL
INSURANCE COMPANY
IF YOU HAVE ANY QUESTIONS, PLEASE CONTACT US AT:
[envelope] PHOENIX VARIABLE PRODUCTS MAIL OPERATIONS
PO Box 8027
Boston, MA 02266-8027
[telephone] Tel. 800/541-0171
PROSPECTUS DECEMBER 15, 2000
This prospectus describes a survivorship variable universal life insurance
policy. The policy provides lifetime insurance protection on the lives of two
Insureds. We pay the death benefit when the last insured dies.
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-Engemann Small & Mid-Cap Growth 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-Bankers Trust Nasdaq 100 Index 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-Sanford Bernstein Global Value Series
[diamond] Phoenix-Sanford Bernstein Mid-Cap Value Series
[diamond] Phoenix-Sanford Bernstein Small-Cap Value Series
THE ALGER AMERICAN FUND
-----------------------
MANAGED BY FRED ALGER MANAGEMENT, INC.
[diamond] Alger American Leveraged AllCap Portfolio
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
FIDELITY(R) VARIABLE INSURANCE PRODUCTS
---------------------------------------
MANAGED BY FIDELITY MANAGEMENT AND RESEARCH COMPANY
[diamond] VIP Contrafund Portfolio
[diamond] VIP Growth Opportunities Portfolio
[diamond] VIP Growth Portfolio
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
1
<PAGE>
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
It may not be in your best interest to purchase a policy to replace an existing
life insurance policy or annuity contract. You must understand the basic
features of the proposed policy and your existing coverage before you decide to
replace your present coverage. You must also know if the replacement will result
in any 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>
TABLE OF CONTENTS
Heading Page
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THE SURVIVORSHIP VARIABLE UNIVERSAL LIFE INSURANCE P0LICY. 1
TABLE OF CONTENTS ........................................ 3
SPECIAL TERMS ............................................ 4
SUMMARY................................................... 5
PERFORMANCE HISTORY....................................... 6
REDUCTION IN CHARGES...................................... 6
PHOENIX AND THE ACCOUNT .................................. 7
Phoenix ............................................... 7
The Account ........................................... 7
The GIA................................................ 7
THE POLICY ............................................... 7
Introduction .......................................... 7
Eligible Purchasers ................................... 8
Flexible Premiums ..................................... 8
Allocation of Premium and Policy Value ................ 8
Free Look Period ...................................... 9
Temporary Insurance Coverage .......................... 9
Transfer of Policy Value .............................. 9
Systematic Transfer Program ........................ 9
Nonsystematic Transfers ............................ 9
Determination of Subaccount Values .................... 10
Death Benefits ........................................ 11
Surrenders ............................................ 11
Policy Loans .......................................... 12
Lapse ................................................. 13
Additional Insurance Options .......................... 13
Additional Rider Benefits ............................. 13
INVESTMENTS OF THE ACCOUNT ............................... 14
Participating Investment Funds ........................ 14
Investment Advisors.................................... 17
Services of the Advisors............................... 17
Reinvestment and Redemption ........................... 17
Substitution of Investments ........................... 17
CHARGES AND DEDUCTIONS ................................... 18
General................................................ 18
Charges Deducted Once.................................. 18
State Premium Taxes ................................ 18
Federal Tax Charge.................................. 18
Periodic Charges....................................... 18
Conditional Charges ................................... 19
Investment Management Charge........................... 20
GENERAL PROVISIONS ....................................... 20
Postponement of Payments .............................. 20
Payment by Check ...................................... 20
The Contract .......................................... 20
Suicide ............................................... 20
Incontestability ...................................... 20
Change of Owner or Beneficiary ........................ 20
Assignment ............................................ 21
Misstatement of Age or Sex ............................ 21
Surplus ............................................... 21
PAYMENT OF PROCEEDS ...................................... 21
Surrender and Death Benefit Proceeds .................. 21
Payment Options ....................................... 21
FEDERAL INCOME TAX CONSIDERATIONS ........................ 22
Introduction .......................................... 22
Phoenix's Income Tax Status ........................... 22
Policy Benefits ....................................... 22
Business-Owned Policies................................ 23
Modified Endowment Contracts .......................... 23
Limitations on Unreasonable Mortality
and Expense Charges ................................ 24
Qualified Plans ....................................... 24
Diversification Standards ............................. 24
Change of Ownership or Insured or Assignment .......... 25
Other Taxes ........................................... 25
VOTING RIGHTS ............................................ 25
Phoenix ............................................... 25
THE DIRECTORS AND EXECUTIVE OFFICERS OF PHOENIX .......... 25
SAFEKEEPING OF THE ACCOUNT'S ASSETS ...................... 26
SALES OF POLICIES ........................................ 26
STATE REGULATION ......................................... 27
REPORTS .................................................. 27
LEGAL PROCEEDINGS ........................................ 27
LEGAL MATTERS ............................................ 27
REGISTRATION STATEMENT ................................... 27
FINANCIAL STATEMENTS ..................................... 27
APPENDIX A ............................................... 90
APPENDIX B ............................................... 94
APPENDIX C................................................ 95
WE ARE OFFERING THIS PRODUCT ONLY WHERE WE MAY LAWFULLY DO SO. YOU SHOULD RELY
ONLY ON THE INFORMATION CONTAINED IN THIS DOCUMENT OR IN ONE THAT WE HAVE
REFERRED YOU TO. WE HAVE NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH INFORMATION
THAT IS DIFFERENT.
3
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SPECIAL TERMS
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The following is a list of terms and their meanings when used in this
prospectus.
ACCOUNT: Phoenix Home Life Variable Universal Life Account, a separate account
of the Company.
ATTAINED AGE: The age of the insured on the birthday nearest the most recent
policy anniversary.
BENEFICIARY: The person or persons specified by the policyowner as entitled to
receive the death benefits under a policy.
CASH SURRENDER VALUE: The policy value less any surrender charge that would
apply on the date of surrender and less any debt.
DEATH BENEFIT GUARANTEE: An additional benefit rider available with the policy
that guarantees a death benefit equal to the initial face amount or the face
amount as later increased or decreased, if you pay the minimum required
premiums. See "Additional Rider Benefits."
DEBT: Outstanding loans against a policy plus accrued interest on any
outstanding loans.
FACE AMOUNT: The initial amount of insurance coverage.
FUNDS: The Phoenix Edge Series Fund, The Alger American Fund, Deutsche Asset
Management VIT Funds, Federated Insurance Series, Fidelity Variable Insurance
Products, Franklin Templeton Variable Insurance Products Trust, The Universal
Institutional Funds, Inc. and Wanger Advisors Trust.
GENERAL ACCOUNT: The general asset account of Phoenix.
GIA (GUARANTEED INTEREST ACCOUNT): An investment option under which amounts
deposited are guaranteed to earn a fixed rate of interest. Excess interest also
may be credited, in the sole discretion of Phoenix.
IN FORCE: Conditions under which the coverage under a Policy is in effect and
the Insureds' lives remain insured.
INSUREDS: The two persons on whose lives we issue the Policy.
IN WRITING (WRITTEN REQUEST): In a written form satisfactory to Phoenix and
delivered to VPMO.
ISSUE PREMIUM: The premium payment made in connection with issuing the Policy.
MONTHLY CALCULATION DAY: The first Monthly Calculation Day is the same day as
the Policy Date. Subsequent Monthly Calculation Days are the same day of each
month. 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 all a
Series' holdings plus other assets, minus liabilities and then dividing the
result by the number of shares outstanding.
NON-TRANSFERABLE GENERAL ACCOUNT ("NTGA"): A part of the General Account. The
cash value in the NTGA cannot decrease due to investment performance, but may
decrease due to deductions for policy charges. Interest is credited to the NTGA
at rates declared by Phoenix, but not less than 4%.
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.
PHOENIX (WE, OUR, US, COMPANY): Phoenix Home Life Mutual Insurance Company,
Hartford, Connecticut.
PLANNED ANNUAL PREMIUM: The premium amount that the policyowner agrees to pay
each policy year. It must be at least equal to the minimum premium required for
the Face Amount of insurance selected but may be no greater than the maximum
premium allowed for the Face Amount selected.
POLICY ANNIVERSARY: Each anniversary of the policy date.
POLICY DATE: The policy date as shown on the schedule page of the policy. It is
the date from which we measure policy years and policy anniversaries.
POLICY MONTH: The period from one monthly calculation day up to, but not
including, the next monthly calculation day.
POLICY VALUE: The sum of a policy's share in the values of each subaccount of
the Account plus the policy's share in the values of the GIA.
POLICY YEAR: The first policy year is the one-year period from the policy date
up to, but not including, the first policy anniversary. Each succeeding policy
Year is the one-year period from the Policy Anniversary up to, but not
including, the next Policy Anniversary.
POLICYOWNER (OWNER, YOU, YOUR): The person(s) who purchase(s) a policy.
PROPORTIONATE (PRO RATA): Amounts allocated to Subaccounts on a pro rata basis
are allocated by increasing (or decreasing) a policy's share in the value of the
affected Subaccounts and GIA so that such shares maintain the same ratio to each
other before and after the allocation.
SERIES: A separate investment portfolio of a Fund.
SUBACCOUNTS: Accounts within the Account to which non-loaned assets under a
policy are allocated.
UNIT: A standard of measurement used to set the value of a Policy. The value of
a unit for each subaccount will reflect the investment performance of that
subaccount and will vary in dollar amounts.
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.
VPMO: The Variable Products Mail Operations division of Phoenix that receives
and processes incoming mail for Variable Products Operations.
VPO: Variable Products Operations.
4
<PAGE>
SUMMARY
--------------------------------------------------------------------------------
This is a summary of the policy and does not contain all of the detailed
information that may be important to you. You should read the entire prospectus
carefully before making any decision.
INVESTMENT FEATURES
FLEXIBLE PREMIUMS
The premiums you have to pay are the Issue Premium and any payments required to
prevent the policy from lapse. See "Flexible Premiums" and "Lapse."
ALLOCATION OF PREMIUMS AND POLICY VALUE
After we deduct certain charges from your premium payment, we will invest the
balance in one or more of the subaccounts of the Account and/or the GIA as you
will have instructed us.
You may make transfers into the GIA and among the subaccounts at anytime.
Transfers from the GIA are subject to the rules discussed in "Appendix B" and
under "Transfer of Policy Value."
The Policy Value varies with the investment performance of the Funds and is not
guaranteed.
The Policy Value allocated to the GIA will depend on deductions taken from the
GIA to pay expenses and will accumulate interest at rates we periodically
establish, but never less than 4%.
LOANS AND SURRENDERS
[diamond] Generally, you may take loans against 90% of the Policy's Cash
Surrender Value subject to certain conditions. See "Policy Loans."
[diamond] You may partially surrender any part of the policy anytime. A partial
surrender fee of the lesser of $25 or 2% of the partial surrender
amount will apply. A separate surrender charge also may be imposed.
See "Conditional Charges."
[diamond] You may fully surrender this Policy anytime for its Cash Surrender
Value. A surrender charge may be imposed. See "Conditional
Charges--Surrender Charge."
INSURANCE PROTECTION FEATURES
DEATH BENEFITS
[diamond] Both a fixed and variable benefit is available under the Policy.
o The fixed benefit is equal to the Policy's Face Amount (Option 1)
o The variable benefit equals the Face Amount plus the Policy Value
(Option 2)
[diamond] After the first year, you may reduce the Face Amount. Certain
restrictions apply, and generally, the minimum Face Amount is
$250,000.
[diamond] The death benefit is payable when the last insured dies. See "Death
Benefits."
DEATH BENEFIT GUARANTEE
You may elect a guaranteed death benefit. The amount of the guaranteed death
benefit is equal to the initial Face Amount. The Death Benefit Guarantee may not
be available in some states.
DEATH BENEFIT AT ENDOWMENT
After age 100 of the younger Insured, the death benefit equals the Policy Value,
and no more monthly deductions will be made. This allows you to keep the Policy
in force until the second death.
ADDITIONAL BENEFITS
The following additional benefits are available by rider:
[diamond] Disability Benefit
[diamond] Four Year Survivorship Term
[diamond] Conditional Exchange Option
[diamond] Policy Split Option
[diamond] Guaranteed Death Benefit
[diamond] Conversion to Universal Life.
Availability of these Riders depends upon state approval and may involve an
extra cost.
DEDUCTIONS AND CHARGES
FROM PREMIUM PAYMENTS
[diamond] Taxes
o State Premium Tax Charge--2.25%
o Federal Tax Charge--1.50%
[diamond] Sales Charge
o Policy Year 1 = 30% of premiums paid up to one target annual
premium ("TAP") and 4% of premiums paid in excess of the TAP.
o Policy Year 2 through 5 = 16% of premiums paid up to one target
annual premium ("TAP") and 4% of premiums paid in excess of the
TAP.
o Policy Year 1 = 12% of premiums paid up to one target annual
premium ("TAP") and 4% of premiums paid in excess of the TAP.
o Policy Years 11 through 20 = 3% of premiums
o Policy Years 21 and after = 0%
See "Deductions and Charges" for a detailed discussion, including an explanation
of TAP.
FROM POLICY VALUE
[diamond] Issue Expense Charge--$50 per month for the first five policy years.
[diamond] Administrative Charge--Deducted monthly. Amount deducted varies by
face amount.
[diamond] Cost of Insurance--Amount deducted monthly. Cost of insurance rates
apply to the policy and certain riders. The
5
<PAGE>
rates vary and are based on certain personal factors such as sex,
attained age and risk class of the insureds.
[diamond] Surrender Charge--Deducted if the policy is surrendered during the
first 5 policy years. See "Surrender Charge."
[diamond] Partial Surrender Charge--Deducted to recover costs of processing
request.
[diamond] Transfer Charge--Maximum of $10. See "Non-Systematic Transfers and
Charges in Payment Allocations."
FROM THE VUL ACCOUNT
Mortality and Expense Risk Charge
[diamond] Policy Years 1 through 15--.40% annually, with a guaranteed limit of
.60%.
FROM THE FUND
The assets of the Account are used to purchase, at net asset value, shares of
your selected underlying Funds. The net asset value reflects investment
management fees and other direct expenses of the Fund. See "Investment
Management Charge."
See "Charges and Deductions" for a more detailed description of how each is
applied.
ADDITIONAL INFORMATION
CANCELLATION RIGHT
You have the right to review the policy. If you are not satisfied with it, you
may cancel the policy until the later of:
[diamond] 10 days after you receive the policy, or
[diamond] 10 days after we mail or deliver a written notice telling you about
your right to cancel, or
[diamond] 45 days of completing the application;
For more information see "Free Look Period."
RISK OF LAPSE
The policy will remain in force as long as the cash surrender value is enough to
pay the necessary monthly charges incurred under the policy. When the cash
surrender value is no longer enough, the policy lapses, or ends. We will let you
know of an impending lapse situation. We will give you the opportunity to keep
the policy in force by paying a specified amount. See "Lapse" for more detail.
INCOME TAX EFFECTS
Generally, under current federal income tax law, death benefits are not subject
to income tax. Earnings on the premiums invested in the Account or the GIA are
not subject to income tax until there is a distribution from the policy. loans,
partial surrenders or policy termination may result in recognition of income for
tax purposes.
VARIATIONS
The policy is subject to laws and regulations in every state where the policy is
sold. Therefore, the terms of the policy may vary from state to state.
PERFORMANCE HISTORY
--------------------------------------------------------------------------------
We may include performance history of the subaccounts in advertisements, sales
literature or reports. Performance information about each subaccount is based on
past performance and is not an indication of future performance. See "Appendix
A" for more information.
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 we expect 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] total premiums expected to be paid,
[diamond] 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 PHL or its affiliates and their spouses; or employees or
agents who retire from PHL or its affiliates or Phoenix Equity
Planning Corporation ("PEPCO"), or its affiliates or registered
representatives of the principal underwriter and registered
representatives of broken-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 AND THE ACCOUNT
--------------------------------------------------------------------------------
PHOENIX
We are a mutual life insurance company originally chartered in Connecticut in
1851. We were redomiciled to
6
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New York in 1992. Our executive office is located at One American Row, Hartford,
Connecticut 06102, and the main administrative office is located at 100 Bright
Meadow Boulevard, Enfield, Connecticut 06083. Our New York principal office is
located 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 ACCOUNT
The 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 ("1940 Act") as amended, and it meets
the definition of a "separate account" under the 1940 Act. Such registration
does not involve supervision of the management of the VUL Account or Phoenix by
the SEC.
The 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 Account--Participating
Investment Funds."
We do not guarantee the investment performance of the Account or any of its
subaccounts. Contributions to the overall policy value allocated to the Account
depend on the chosen fund's investment performance. Thus, you bear the full
investment risk for all monies you invest in the Account.
The Account is part of the general business of Phoenix, but the gains or losses
of the Account belong solely to the Account. The gains or losses of any other
business we may conduct does not affect the. Under New York law, the assets of
the 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.
THE GIA
The GIA is not part of the Account. It is accounted for as part of the Company's
General Account. We reserve the right to limit total deposits, including
transfers, to the GIA to no more than $250,000 during any one-week period. We
will credit interest daily on the amounts you allocate to the GIA. The credited
rate will be the same for all monies deposited at the same time. The loaned
portion of the GIA will be credited interest at an effective annual fixed rate
of 2% (4% in New York). Interest on the unloaned portion of the GIA will be
credited at an effective annual rate of not less than 4%.
On the last business day of each calendar week, Phoenix sets the interest rate
that will apply to any net premiums or transferred amounts deposited to the
unloaned portion of the GIA. That rate will remain in effect for such deposits
for an initial guarantee period of one full year from the date of deposit. Upon
the end of the initial 1-year guarantee period (and each subsequent 1-year
guarantee period thereafter), the rate to be applied to any deposits whose
guarantee period has just ended will be the same rate then being applied to new
deposits to the GIA. This rate will then remain in effect for a guaranteed
period of one full year from the date the new rate is applied.
In general, you can make only one transfer per year from the GIA. The amount
that can be transferred out is limited to the greater of $1,000 or 25% of the
policy value in the GIA as of the date of the transfer. If you elect the
Systematic Transfer Program, approximately equal amounts may be transferred out
of the GIA. Also, the total policy value allocated to the GIA may be transferred
out of the GIA to one or more of the Subaccounts of the VUL Account over a
consecutive 4-year period according to the following schedule:
[diamond] Year One: 25% of the total value
[diamond] Year Two: 33% of remaining value
[diamond] Year Three: 50% of remaining value
[diamond] Year Four: 100% of remaining value
Transfers into the GIA and among the subaccounts of the VUL Account may be made
at any time. Transfers from the GIA are subject to the rules discussed in
"Appendix B" and "Transfer of Policy Value--Systematic Transfer Program."
THE POLICY
--------------------------------------------------------------------------------
INTRODUCTION
The Policy is a flexible premium variable universal life insurance policy issued
on the lives of two Insureds. The Policy has a death benefit, Cash Surrender
Value and loan privilege as does a traditional fixed benefit whole life policy.
The Policy differs from a fixed benefit whole life policy, however, because you
can allocate your premium into one or more of several Subaccounts of the VUL
Account or the GIA. Each Subaccount of the VUL Account, in turn, invests its
assets exclusively in a portfolio of the Funds. The Policy Value varies
according to the investment performance of the Series to which premiums have
been allocated.
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<PAGE>
ELIGIBLE PURCHASERS
Any person between the ages of 18 and 85 is eligible to be insured under a newly
purchased policy after providing suitable evidence of insurability. You can
purchase a policy to insure the lives of 2 other individuals, provided that you
have the insureds' consents and a legally recognized interest for insuring their
lives. A policy could, for example, be purchased on the lives of spouses, family
members, business partners.
FLEXIBLE PREMIUMS
The issue premium required depends on a number of factors, such as:
[diamond] age;
[diamond] sex;
[diamond] rate class of proposed insured;
[diamond] desired face amount;
[diamond] supplemental benefit; and
[diamond] planned premiums.
The minimum issue premium for a policy is generally 1/6 of the planned annual
premium and is due on the policy date. Both insureds must be alive when the
issue premium is paid, and it is due on the policy date. After the issue premium
is paid, although premiums are flexible, the amount and frequency of Planned
Annual Premiums are as shown on the Schedule Page of the Policy. You decide the
amount of Planned Annual Premium (within limits set by us) when you apply for
the Policy. The Issue Premium payment should be delivered to your registered
representative for forwarding to our Underwriting Department. Additional
payments should be sent to VPMO.
Premium payments received by us will be reduced by a 2.25% charge for state
premium tax and also reduced by a federal tax charge of 1.50%. The Issue Premium
also will be reduced by the issue expense charge deducted in equal monthly
installments over a 12-month period. Each installment will be taken from the
subaccounts on a pro rata basis. Any unpaid balance of the issue expense charge
will be paid to us upon Policy Lapse or termination.
Premium payments received during a grace period will, after deduction of state
and federal tax charges and any sales charge, be first used to fund any monthly
deductions during the grace period. Any balance will be applied on the Payment
Date to the various Subaccounts of the VUL Account or to the GIA, based on the
premium allocation schedule elected in the application for the Policy or by your
most recent instructions. See "Transfer of Policy Value--Non-Systematic
Transfers and Changes in Payment Allocations."
The number of units credited to a Subaccount of the VUL Account will be
determined by dividing the amount of the net premium applied to that Subaccount
by the unit value of the Subaccount on the Payment Date.
You may increase or decrease the Planned Annual Premium amount (within limits)
or payment frequency at any time by written notice to VPMO. We reserve the right
to limit increases to such maximums as we may establish and change from time to
time. Additional premium payments may be made at any time. Each premium payment
must at least equal $25 or, if made during a grace period, the payment must
equal the amount needed to prevent lapse of the Policy.
The Policy contains a total premium limit as shown on the Schedule Page. This
limit is applied to the sum of all premiums paid under the Policy. If the total
premium limit is exceeded, you will receive the excess, with interest at an
annual rate of not less than 4%, not later than 60 days after the end of the
Policy Year in which the limit was exceeded. The Policy Value then will be
adjusted to reflect the refund. To pay such refund, amounts taken from each
Subaccount or the GIA will be done in the same manner as for monthly deductions.
You may write to us and give us different instructions. The total premium limit
may be exceeded if additional premium is needed to prevent lapse or if we
subsequently determine that additional premium would be permitted by federal
laws or regulations.
You may authorize your bank to draw $25 or more monthly from your personal
checking account to be allocated among the available Subaccounts or the GIA.
Your monthly payment will be invested according to your most recent instructions
on file at VPO.
Policies sold to officers, directors and employees of Phoenix (and their spouses
and children) will be credited with an amount equal to the first-year commission
that would apply on the amount of premium contributed. This option also is
available to career agents of Phoenix (and their spouses and children).
ALLOCATION OF ISSUE PREMIUM AND POLICY VALUE
We will generally allocate the issue premium (less applicable charges) to the
Account or to the GIA upon receipt of a completed application, pursuant to the
allocation instructions in the application for the policy. However, Policies
issued in certain states, and policies issued in certain states pursuant to
applications which state the policy is intended to replace existing insurance,
are issued with a Temporary Money Market Allocation Amendment. Under this
Amendment, we temporarily allocate the entire Issue Premium paid less applicable
charges (along with any other premiums paid during the Free Look Period) to the
Phoenix-Goodwin Money Market subaccount; and, at expiration of the Free Look
Period, the policy value of the Phoenix-Goodwin Money Market Subaccount is
allocated among the Subaccounts of the Account or to the GIA pursuant to the
allocation instructions you made in the application for insurance.
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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); or
[diamond] within 10 days after we mail or deliver a written notice telling you
about your right to cancel; or
[diamond] within 45 days after completing the application, whichever occurs
latest (see "Free Look Period").
We treat a returned policy as if we never issued it and, except for policies
issued with a Temporary Money Market Allocation Amendment, we will return the
sum of the following as of the date we receive the returned Policy: (1) the then
current Policy value less any unpaid loans and loan interest; plus (2) any
monthly deductions, partial surrender fees and other charges made under the
Policy. For Policies issued with the Temporary Money Market Amendment the amount
returned will equal any premiums paid less any unrepaid loans and loan interest,
and less any partial surrender amounts paid.
We retain the right to decline to process an application within seven days of
our receipt of the completed application for insurance. If we decline to process
the application, we will return the premium paid. Even if we have approved the
application for processing, we retain the right to decline to issue the Policy.
If we decline to issue the Policy, we will refund to you the same amount as
would have been refunded under the Policy had it been issued but returned for
refund during the Free Look Period.
TEMPORARY INSURANCE COVERAGE
On the date the application for a Policy is signed and submitted with the
Issue Premium, we issue a Temporary Insurance Receipt to you. Under the
Temporary Insurance Receipt, the insurance protection applied for (subject to
the limits of liability and subject to the terms set forth in the Policy and in
the Receipt) takes effect on the date of the application.
TRANSFER OF POLICY VALUE
SYSTEMATIC TRANSFER PROGRAM
You may elect to transfer funds automatically among the Subaccounts or the
unloaned portion of the GIA on a monthly, quarterly, semiannual or annual basis
under the Systematic Transfer Program for Dollar Cost Averaging ("Systematic
Transfer Program"). Under this Systematic Transfer 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 $1,000 in the GIA or the Subaccount from which
funds will be transferred ("Sending Subaccount") and if the value in that
Subaccount or the GIA drops below the amount to be transferred, the entire
remaining balance will be transferred and all systematic transfers will stop.
Funds may be transferred from only one Sending Subaccount or the GIA, but may be
allocated to more than one Subaccount ("Receiving Subaccounts"). Under the
Systematic Transfer Program, you may make more than one transfer per Policy Year
from the GIA. These transfers must be in approximately equal amounts and made
over a minimum 18-month period.
Only one Systematic Transfer Program can be active at any time. After the
completion of the Systematic Transfer Program, you can call VPO at 800/541-0171
to begin a new Systematic Transfer Program.
All transfers under the Systematic Transfer Program will be made on the basis of
the GIA and Subaccount values 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.
NONSYSTEMATIC 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 the request is received at VPMO. 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 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. Transfers under the
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Systematic Transfer Program do not count against these limitations.
We reserve the right to refuse to transfer amounts less than $500 unless
[diamond] the entire balance in the Subaccount or the GIA is being transferred
or
[diamond] the transfer is part of the Systematic Transfer Program.
We also reserve the right to prohibit a transfer to any subaccount if the value
of your investment in that subaccount immediately after the transfer would be
less than $500. We further reserve the right to require that the entire balance
of a subaccount or the GIA be transferred if the value of your investment in
that Subaccount would, immediately after the transfer, be less than $500.
You may make only one transfer per policy year from the unloaned portion of the
GIA unless (1) the transfer(s) are made as part of a Systematic Transfer
Program, or (2) we agree to make an exception to this rule. The amount you may
transfer cannot exceed the greater of $1,000 or 25% of the value of the unloaned
portion of the GIA at the time of the transfer. In addition, you may transfer
the total value allocated to the unloaned portion of the GIA out of the GIA to
one or more of the Subaccounts over a consecutive four-year period according to
the following schedule:
[diamond] Year One: 25% of the total value
[diamond] Year Two: 33% of the remaining value
[diamond] Year Three: 50% of the remaining value
[diamond] Year Four: 100% of the remaining value
A nonsystematic transfer from the unloaned portion of the GIA will be processed
on the day such request is received by VPMO.
Transfers into the GIA and among the Subaccounts may be made anytime. We reserve
the right to limit the number of Subaccounts you may invest in to a total of 18
at any one time or over the life of the policy. We may limit you to less than 18
if we are required to do so by any federal or state law.
Because excessive exchanges between subaccounts can adversely affect fund
performance, we reserve the right to temporarily or even permanently terminate
exchange privileges or reject any specific exchange order from anyone whose
transactions appear to us to follow a timing pattern, including those who
request more than one exchange out of a Subaccount within any 30-day period. We
will not accept batched transfer instructions from registered representatives
(acting under powers of attorney for multiple policyowners), unless the
registered representative's broker-dealer firm and Phoenix have entered into a
third-party transfer service agreement.
If a policy has been issued with a Temporary Money Market Allocation Amendment,
no transfers may be made until the end of the Free Look Period.
DETERMINATION OF SUBACCOUNT VALUES
We establish the unit value of each Subaccount on the first Valuation Date of
that Subaccount. The unit value of a Subaccount on any other Valuation Date is
determined by multiplying the unit value of that Subaccount on the just prior
Valuation Date by the Net Investment Factor for that Subaccount for the then
current Valuation Period. The unit value of each Subaccount on a day other than
a Valuation Date is the unit value on the next Valuation Date. Unit values are
carried to 6 decimal places. The unit value of each Subaccount on a Valuation
Date is determined at the end of that day.
The Net Investment Factor for each Subaccount is determined by the investment
performance of the assets held by the Subaccount during the Valuation Period.
Each valuation will follow applicable law and accepted procedures. The Net
Investment Factor is determined by the formula:
(A) + (B)
--------- - (D) where:
(C)
(A)= The value of the assets in the Subaccount on the current Valuation Date,
including accrued net investment income and realized and unrealized
capital gains and losses, but excluding the net value of any transactions
during the current Valuation Period.
(B)= The amount of any dividend (or, if applicable, any capital gain
distribution) received by the Subaccount if the "ex-dividend" date for
shares of the Fund occurs during the current Valuation Period.
(C)= The value of the assets in the Subaccount as of the just prior Valuation
Date, including accrued net investment income and realized and unrealized
capital gains and losses, and including the net amount of any deposits
and withdrawals made during the Valuation Period ending on that date.
(D)= The sum of the following daily charges multiplied by the number of days
in the current Valuation Period:
1. The mortality and expense risk charge; and
2. The charge, if any, for taxes and reserves for taxes on investment
income, and realized and unrealized capital gains.
DEATH BENEFITS
GENERAL
The death benefit under Option 1 equals the Policy's Face Amount on the date of
the death of the last surviving
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Insured or, if greater, the minimum death benefit on that date.
Under Option 2, the death benefit equals the Policy's Face Amount on the date of
the death of the last surviving Insured plus the Policy Value or, if greater,
the minimum death benefit on that date.
Under either Option, the minimum death benefit is the Policy Value on the date
of death of the last surviving Insured increased 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. If
no option is elected, Option 1 will apply.
GUARANTEED DEATH BENEFIT OPTION
A Guaranteed Death Benefit Rider is available. Under this Policy rider, if you
pay the required premium each year as specified in the rider, the death benefit
selected will be guaranteed for a certain specified number of years, regardless
of the investment performance of the Policy, and will equal either the initial
Face Amount or the Face Amount as later changed by decreases. To keep this
guaranteed death benefit in force; there may be limitations on the amount of
partial surrenders or decreases in Face Amount permitted.
After the first 10 Policy Years, there will be a monthly charge equal to $0.01
per $1,000 of Face Amount for policies issued with a Guaranteed Death Benefit
Rider.
PARTIAL SURRENDER AND DECREASES IN FACE AMOUNT: EFFECT ON DEATH BENEFIT
A partial surrender or a decrease in Face Amount generally decreases the death
benefit. Upon a decrease in Face Amount or partial surrender, a partial
surrender charge will be deducted from Policy value based on the amount of the
decrease or partial surrender. If the change is a decrease in Face Amount, the
death benefit under a Policy would be reduced on the next Monthly Calculation
Day. If the change is a partial surrender, the death benefit under a Policy
would be reduced immediately. A decrease in the death benefit may have certain
tax consequences. See "Federal Income Tax Considerations."
REQUESTS FOR DECREASE IN FACE AMOUNT
You may request a decrease in Face Amount at any time after the first Policy
Year. Unless we agree otherwise, the decrease must be at least $25,000 and the
Face Amount remaining after the decrease must be at least $250,000. All Face
Amount decrease requests must be in writing and will be effective on the first
Monthly Calculation Day following the date we approve the request. A partial
surrender charge will be deducted from the Policy Value based on the amount of
the decrease. The charge will equal the applicable surrender charge that would
apply to a full surrender multiplied by a fraction. The fraction is equal to the
decrease in Face Amount divided by the Face Amount of the Policy before the
decrease.
SURRENDERS
GENERAL
At any time during the lifetime of the Insureds and while the Policy is In
Force, you may partially or fully 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.
Upon partial or full surrender, we generally will pay to you the amount
surrendered within 7 days after we receive the written request for the
surrender. Under certain circumstances, the surrender payment may be postponed.
See "General Provisions--Postponement of Payments." For the federal tax effects
of partial and full surrenders, see "Federal Tax Considerations."
FULL SURRENDERS
If the Policy is being fully surrendered, the Policy itself must be returned to
us at 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 that part of the
Policy's Cash Surrender Value be paid. You may do this at any time during the
lifetime of the Insureds while the Policy is In Force with a written request to
VPMO. We may require that the Policy be returned 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 that
would be reduced as a result of a partial surrender and would be less than $500,
we may require the entire remaining balance in that Subaccount or the GIA be
surrendered.
Upon a partial surrender, the Policy Value will be reduced by the sum of the
following:
[diamond] THE PARTIAL SURRENDER AMOUNT PAID. This amount comes from a reduction
in the Policy's share in the value of each Subaccount or the GIA based
on the allocation requested at the time of the partial surrender. If
no allocation request is made, the withdrawals from each Subaccount
will be made in the same manner as that provided for monthly
deductions.
[diamond] THE PARTIAL SURRENDER FEE. This fee is the lesser of $25 or 2% of the
partial surrender amount paid. The assessment to each Subaccount or
the GIA will be made
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in the same manner as provided for the partial surrender amount paid.
[diamond] A PARTIAL SURRENDER CHARGE. This charge is equal to a pro rata portion
of the applicable surrender charge that would apply to a full
surrender, determined by multiplying the applicable surrender charge
by a fraction (equal to the partial surrender amount payable divided
by the result of subtracting the applicable surrender charge from the
policy value). This amount is assessed against the subaccount or the
GIA in the same manner as provided for the partial surrender amount
paid.
The cash surrender value will be reduced by the partial surrender amount paid
plus the partial surrender fee. The face amount of the policy will be reduced by
the same amount as the policy Value is reduced as described above.
POLICY LOANS
Generally, while the policy is in force, a loan may be taken against the policy
up to the available loan value. The loan value on any day is 90% of the policy
value reduced by an amount equal to the surrender charge. The available loan
value is the loan value on the current day less any outstanding debt.
The amount of any loan will be added to the loaned portion of the GIA and
subtracted from the policy's share of the Subaccounts or the unloaned portion of
the GIA, based on the allocation requested at the time of the loan. The total
reduction will equal the amount added to the loaned portion of the GIA.
Allocations generally must be expressed in terms of whole percentages. If no
allocation request is made, the amount subtracted from the share of each
Subaccount or the unloaned portion of the GIA will be determined in the same
manner as provided for monthly deductions. Interest will be credited and the
loaned portion of the GIA will increase at an effective annual rate of 2% (4% in
New York only), compounded daily and payable in arrears. At the end of each
Policy Year and at the time of any Debt repayment, interest credited to the
loaned portion of the GIA will be transferred to the unloaned portion of the
GIA.
Debt may be repaid at any time during the lifetime of the Insureds while the
Policy is in force. Any Debt repayment received by us during a grace period will
be reduced to pay any overdue monthly deductions and only the balance will be
applied to reduce the Debt. Such balance will first be used to pay any
outstanding accrued loan interest, and then will be applied to reduce the loaned
portion of the GIA. The unloaned portion of the GIA will be increased by the
same amount the loaned portion is decreased. If the amount of a loan repayment
exceeds the remaining loan balance and accrued interest, the excess will be
allocated among the Subaccounts as you may request at the time of the repayment
and, if no allocation request is made, according to the most recent premium
allocation schedule on file.
Payments received by us for the Policy will be applied directly to reduce
outstanding Debt, unless specified as a premium payment by you. Until the Debt
is fully repaid, additional Debt repayments may be made at any time during the
lifetime of the Insureds while the Policy is in force.
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.
The proceeds of Policy loans may be subject to federal income tax. See "Federal
Income Tax Considerations."
In the future, Phoenix may not allow Policy loans of less than $500, unless such
loan is used to pay a premium on another Phoenix policy.
You will pay interest on the loan at an effective annual rate, compounded daily
and payable in arrears. The loan interest rates in effect are as follows:
FOR POLICIES ISSUED IN MOST STATES EXCEPT NEW YORK
---------------------------------------------------
Policy Years 1-10: 4%
Policy Years 11-15: 3%
Policy Years 16 and thereafter: 2 1/2%
FOR POLICIES ISSUED IN NEW YORK ONLY
------------------------------------
Policy Years 1-10: 6%
Policy Years 11-15: 5%
Policy Years 16 and thereafter: 4 1/2%
At the end of each policy year, any interest due on the debt will be treated as
a new loan and will be offset by a transfer from your subaccounts and the
unloaned portion of the GIA to the loaned portion of the GIA.
A policy loan, whether or not repaid, has a permanent effect on the policy value
because the investment results of the Subaccounts or unloaned portion of the GIA
will apply only to the amount remaining in the subaccounts or the unloaned
portion of the GIA. The longer a loan is outstanding, the greater the effect is
likely to be. The effect could be favorable or unfavorable. If the subaccounts
or the unloaned portion of the GIA earn more than the annual interest rate for
funds held in the loaned portion of the GIA, the policy value does not increase
as rapidly as it would have had no loan been made. If the subaccounts or the GIA
earn less than the annual interest rate for funds held in the loaned portion of
the GIA, the policy value is greater than it would have been had no loan been
made. A policy loan, whether or not repaid, also has a similar effect on the
policy's death benefit due to any resulting differences in cash surrender value.
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.
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If on any Monthly Calculation Day during the first 3 Policy Years, the Policy
Value is insufficient to cover the monthly deduction, a grace period of 61 days
will be allowed for the payment of an amount equal to 3 times the required
monthly deduction. If on any Monthly Calculation Day during any subsequent
Policy Year, the Cash Surrender Value (which should have become positive) 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. However, during the first 5 Policy Years or until the Cash Surrender
Value becomes positive for the first time, the Policy will not lapse as long as
all premiums planned at issue have been paid.
During the grace period, the Policy will continue In Force but Subaccount
transfers, loans, partial or full surrenders will not be permitted. Failure to
pay the additional amount within the grace period will result in lapse of the
Policy, but not before 30 days after we have mailed written notice to you. If a
premium payment for the additional amount is received by us during the grace
period, any amount of premium over what is required to prevent lapse will be
allocated among the Subaccounts or to the GIA according to the then current
premium allocation schedule. In determining the amount of "excess" premium to be
applied to the Subaccounts or the GIA, we will deduct the premium tax and the
amount needed to cover any monthly deductions made during the grace period. If
the last surviving Insured dies during the grace period, the death benefit will
equal the amount of the death benefit immediately prior to the commencement of
the grace period.
ADDITIONAL INSURANCE OPTIONS
While the Policy is In Force, you will have the option to purchase additional
insurance on the same Insureds with the same guaranteed rates as the Policy
without being assessed an issue expense charge. We will require evidence of
insurability and charges will be adjusted for the Insured's new attained age and
any change in risk classification.
ADDITIONAL RIDER BENEFITS
You may elect additional benefits under a Policy. These benefits are cancelable
by you at any time. A charge may be deducted monthly from the Policy Value for
each additional rider benefit chosen. More details will be included in the form
of a rider to the Policy if any of these benefits is chosen. The following
benefits are currently available (if approved in your state). Additional riders
may be available as described in the Policy.
[diamond] Disability Benefit Rider. This rider is available for one or both
Insureds. On disability of a covered insured before age 65, monthly
deductions will be waived and an additional Specified Amount (if any)
will be credited, as long as he/she remains disabled (but not for more
than the longer of one year or to age 65, if disability commenced
after age 60).
The rider terminates at the Insured's attained age 65. However,
benefits will continue to be paid for the covered Insured's lifetime
if he or she has been continuously disabled under the terms of the
rider from attained age 60 to age 65.
[diamond] Four-Year Survivorship Term. This rider provides a level death benefit
on the second death if both Insureds die within four years of policy
issue. This rider is not convertible into any other policy or
coverage. The rider's face amount will be up to 125% of the Policy's
initial face amount.
[diamond] Policy Split Option Rider. This rider provides for the exchange of the
policy into two single life policies. At the time of the exchange, the
Policy can be split by any percentage subject to minimum requirements
of the single life policies. There is no charge for this rider, but
you must show satisfactory evidence of insurability.
[diamond] Conditional Exchange Option Rider. This rider provides for the
exchange of the Policy for two new single policies, without evidence
of insurability, for either of the following events:
1. the divorce of the Insureds, or
2. major change in the federal estate tax law.
Both Insureds must be alive on the date of exchange and there must
continue to be insurable interest.
[diamond] Guaranteed Death Benefit Rider. This rider guarantees the face amount
of coverage even if the Policy Value is insufficient to cover the
monthly deduction.
For the first 10 policy years, the monthly guarantee premium is 1/12
of the Target Annual Premium. For Policy year 11 and thereafter, the
monthly guarantee premium is 1/12 of the Guideline Level Premium (as
defined in Internal Revenue Code Section 7702).
The rider will remain in effect if one of three conditions is met
monthly. Otherwise, the rider will lapse and the underlying Policy
will continue without the rider benefits or charges. The three
conditions are:
1. Total Cumulative Premium Test - the total premium paid less the sum
of all surrender amounts is not less than the cumulative sum of all
monthly guarantee premiums since policy issue.
2. Tabular Account Value Test - the Policy's Cash Surrender Value is
not less than the Policy's Tabular Account Value (as listed on
Policy's schedule pages) on the Policy Anniversary on or
immediately preceding the Monthly Calculation Day.
3. Annual Premium Test - the total premium paid during the Policy
Year, less surrenders, is not less than the sum of all monthly
guarantee premiums applicable each month since the Policy Year
began.
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[diamond] Conversion to Universal Life Rider. This rider permits you to convert
from a variable universal life policy to a fixed universal life policy
by transferring all cash value to the Non-Transferable General Account
("NTGA"). You may make this election on or after the 15th Policy
Anniversary. There is no charge for this rider.
[diamond] ESTATE TERM RIDER. This rider provides annually renewable term
insurance coverage to age 100 of the younger of the two Insureds. The
rider has a target face amount that can be increased under death
benefit Option 1. Four increase options are available:
1. Premiums Paid Increases - provides a monthly increase equal to the
premiums paid for the previous Policy Month.
2. Percentage Increase - allows the total death benefit to increase
each year by a whole percentage up to 5%.
3. Dollar Increase - allows the total death benefit to increase each
year by an annually fixed dollar amount.
4. Varying Schedule Increases - provides a schedule of varying amounts
to increase the total death benefit up to 10% each year.
Cost of insurance charges apply to the rider.
INVESTMENTS OF THE ACCOUNT
--------------------------------------------------------------------------------
Participating Investment Funds
The Phoenix Edge Series Fund
Certain Subaccounts invest in corresponding series of The Phoenix Edge
Series Fund. The following series are currently available:
Phoenix-Aberdeen International Series: The investment objective of the
series is to seek a high total return consistent with reasonable risk. The
series invests primarily in an internationally diversified portfolio of equity
securities. It intends to reduce its risk by engaging in hedging transactions
involving options, futures contracts and foreign currency transactions. The
Phoenix-Aberdeen International Series provides a means for investors to invest a
portion of their assets outside the United States.
PHOENIX-ABERDEEN NEW ASIA SERIES: The investment objective of the series is to
seek long-term capital appreciation. The series invests primarily in a
diversified portfolio of equity securities of issuers organized and principally
operating in Asia, excluding Japan.
PHOENIX-BANKERS TRUST DOW 30 SERIES: The series seeks to track the total return
of the Dow Jones Industrial Average[SM] (the "DJIA[SM]") before fund expenses.
PHOENIX-BANKERS TRUST NASDAQ-100 INDEX(R) SERIES: This non-diversified series
seeks to track the total return of the Nasdaq-100 Index(R) ( "Index") before
fund expenses. The series is "passively" managed (it invests in the same
companies in the same proportions as the Index). The series may invest in equity
equivalents in an attempt to improve cash flow and reduce transaction costs,
while replicating investments in the Index.
PHOENIX-DUFF & PHELPS REAL ESTATE SECURITIES SERIES: The investment objective of
the series is to seek capital appreciation and income with approximately equal
emphasis. Under normal circumstances, it invests in marketable securities of
publicly traded real estate investment trusts (REITs) and companies that
operate, develop, manage and/or invest in real estate located primarily in the
United States.
PHOENIX-ENGEMANN CAPITAL GROWTH SERIES: The investment objective of the series
is to achieve intermediate and long-term growth of capital, with income as a
secondary consideration. The Phoenix-Engemann Capital Growth Series invests
principally in common stocks of corporations believed by management to offer
growth potential.
PHOENIX-ENGEMANN NIFTY FIFTY SERIES: The investment objective of the series is
to seek long-term capital appreciation by investing in approximately 50
different securities which offer the best potential for long-term growth of
capital. At least 75% of the series' assets will be invested in common stocks of
high quality growth companies. The remaining portion will be invested in common
stocks of small corporations with rapidly growing earnings per share or common
stocks believed to be undervalued.
PHOENIX-ENGEMANN SMALL & MID-CAP GROWTH SERIES: The series seeks to achieve its
objective of long-term growth of capital by normally investing at least 65% of
assets in equities of "small-cap" and "mid-cap" companies (market capitalization
under $1.5 billion). Expected emphasis will be on investments in common stocks
of U.S. corporations that have rapidly growing earnings per share. Stocks are
generally sold when characteristics such as growth rate, competitive advantage,
or price, render the stock unattractive. The advisor may change the asset
allocation or temporarily take up a defensive investment strategy depending on
market conditions.
PHOENIX-FEDERATED U.S. GOVERNMENT BOND SERIES:
The investment objective of the series is to maximize total return by investing
primarily in debt obligations of the U.S. Government, its agencies and
instrumentalities.
PHOENIX-GOODWIN MONEY MARKET SERIES: The investment objective of the series is
to provide maximum current income consistent with capital preservation and
liquidity. The Phoenix-Goodwin Money Market Series invests exclusively in high
quality money market instruments.
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PHOENIX-GOODWIN MULTI-SECTOR FIXED INCOME SERIES: The investment objective of
the series is to seek long-term total return. The Phoenix-Goodwin Multi-Sector
Fixed Income Series seeks to achieve its investment objective by investing in a
diversified portfolio of high yield and high quality fixed income securities.
PHOENIX-HOLLISTER VALUE EQUITY SERIES: The primary investment objective of the
series is long-term capital appreciation, with a secondary investment objective
of current income. The Phoenix-Hollister Value Equity Series seeks to achieve
its objective by investing in a diversified portfolio of common stocks that meet
certain quantitative standards that indicate above average financial soundness
and intrinsic value relative to price.
PHOENIX-J.P. MORGAN RESEARCH ENHANCED INDEX SERIES: The investment objective of
the series is to seek high total return by investing in a broadly diversified
portfolio of equity securities of large and medium capitalization companies
within market sectors reflected in the S&P 500. The series invests in a
portfolio of undervalued common stocks and other equity securities which appear
to offer growth potential and an overall volatility of return similar to that of
the S&P 500.
PHOENIX-JANUS EQUITY INCOME SERIES: The investment objective of the series is to
seek current income and long-term growth of capital.
PHOENIX-JANUS FLEXIBLE INCOME SERIES: The investment objective of the series is
to seek to obtain maximum total return, consistent with preservation of capital.
PHOENIX-JANUS GROWTH SERIES: The investment objective of the series is to seek
long-term growth of capital, in a manner consistent with the preservation of
capital.
PHOENIX-MORGAN STANLEY FOCUS EQUITY SERIES: The investment objective of the
series is to seek capital appreciation by investing primarily in equity
securities.
PHOENIX-OAKHURST BALANCED SERIES: The investment objective of the series is to
seek reasonable income, long-term capital growth and conservation of capital.
The Phoenix-Oakhurst Balanced Series invests based on combined considerations of
risk, income, capital enhancement and protection of capital value.
PHOENIX-OAKHURST GROWTH AND INCOME SERIES: The investment objective of the
series is to seek dividend growth, current income and capital appreciation by
investing in common stocks. The Phoenix-Oakhurst Growth and Income Series seeks
to achieve its objective by selecting securities primarily from equity
securities of the 1,000 largest companies traded in the United States, ranked by
market capitalization.
PHOENIX-OAKHURST STRATEGIC ALLOCATION SERIES: The investment objective of the
series is to realize as high a level of total return over an extended period of
time as is considered consistent with prudent investment risk. The
Phoenix-Oakhurst Strategic Allocation Series invests in stocks, bonds and money
market instruments in accordance with the Investment Advisor's appraisal of
investments most likely to achieve the highest total return.
PHOENIX-SANFORD BERNSTEIN GLOBAL VALUE SERIES seeks long-term capital
appreciation through investing in foreign and domestic equity securities. The
advisor uses a value-oriented approach with a focus on non-U.S. companies in
developed countries in Europe and the Far East, Australia and Canada. The
advisor may invest a portion of the series' assets in developing market
companies.
PHOENIX-SANFORD BERNSTEIN MID-CAP VALUE SERIES: The primary investment objective
of the series is to seek long-term capital appreciation, with current income as
the secondary investment objective. The Phoenix-Sanford Bernstein Mid-Cap Value
Series will invest in common stocks of established companies having a strong
financial position and a low stock market valuation at the time of purchase
which are believed to offer the possibility of increase in value.
PHOENIX-SANFORD BERNSTEIN SMALL-CAP VALUE SERIES seeks long-term capital
appreciation by investing primarily in small-capitalization stocks the advisor
believes are under-valued. The series will seek to outperform the Frank Russell
200, Frank Russell 2500 and Wilshire Next 1750 indices.
PHOENIX-SENECA MID-CAP GROWTH SERIES: The investment objective of the series is
to seek capital appreciation primarily through investments in equity securities
of companies that have the potential for above average market appreciation. The
series seeks to outperform the Standard & Poor's Mid-Cap 400 Index.
PHOENIX-SENECA STRATEGIC THEME SERIES: The investment objective of the series is
to seek long-term appreciation of capital by identifying securities benefiting
from long-term trends present in the United States and abroad. The
Phoenix-Seneca Strategic Theme Series invests primarily in common stocks
believed to have substantial potential for capital growth.
DEUTSCHE ASSET MANAGEMENT VIT FUNDS
A certain Subaccount invests in a corresponding series of the Deutsche Asset
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 market stock performance of companies in Europe, Australia and
the Far East. The series invests in a
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statistically selected sample of the securities found in the EAFE(R) Index.
FEDERATED INSURANCE SERIES
Certain Subaccounts invest in corresponding series of the Federated Insurance
Series. The following series are currently available:
FEDERATED FUND FOR U.S. GOVERNMENT SECURITIES II: The investment objective of
the series is to seek current income by investing primarily in U.S. government
securities, including mortgage-backed securities issued by U.S. government
agencies.
FEDERATED HIGH INCOME BOND FUND II: The investment objective of the series is to
seek high current income by investing primarily in a diversified portfolio of
high-yield, lower-rated corporate bonds.
THE UNIVERSAL INSTITUTIONAL FUNDS, INC.
A certain subaccount invests in a corresponding series of the 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 the 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 appreciation. 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.
WANGER ADVISORS TRUST
Certain Subaccounts of the Account invest in corresponding series of the Wanger
Advisors Trust. The following series are currently available:
WANGER FOREIGN FORTY: The investment objective of the series is to seek
long-term capital growth. The Wanger Foreign Forty Series invests primarily in
equity securities of foreign companies with market capitalization of $1 billion
to $10 billion and focuses its investments in 40 to 60 companies in the
developed markets.
WANGER INTERNATIONAL SMALL CAP: The investment objective of the series is to
seek long-term capital growth. The Wanger International Small Cap Series invests
primarily in securities of non-U.S. companies with total common stock market
capitalization of less than $1 billion.
WANGER TWENTY: The investment objective of the series is to seek long-term
capital growth. The Wanger Twenty Series invests primarily in the stocks of U.S.
companies with market capitalization of $1 billion to $10 billion and ordinarily
focuses its investments in 20 to 25 U.S. companies.
WANGER U.S. SMALL CAP: The investment objective of the series is to seek
long-term capital growth. The Wanger U.S. Small Cap Series invests primarily in
securities of U.S. companies with total common stock market capitalization of
less than $1 billion.
Each series will be subject to market fluctuations and the risks that come with
the ownership of any security, and there can be no assurance that any series
will achieve its stated investment objective.
In addition to being sold to the Account, shares of the funds also are sold to
other separate accounts of Phoenix or its affiliates or to the separate accounts
of other insurance companies.
It is possible that in the future it may be disadvantageous for variable life
insurance separate accounts and variable annuity separate accounts to invest in
the fund(s) simultaneously. Although neither Phoenix nor the funds' trustees
currently foresees any such disadvantages either to variable life insurance
Policyowners or to variable annuity Contract Owners, the funds' trustees intend
to monitor events in order to identify any material conflicts between variable
life insurance Policyowners and variable annuity Contract Owners and to
determine what action, if any, should be taken in response to such conflicts.
Material
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conflicts could, for example, result from (1) changes in state insurance laws,
(2) changes in federal income tax laws, (3) changes in the investment management
of any portfolio of the Fund(s) or (4) differences in voting instructions
between those given by variable life insurance Policyowners and those given by
variable annuity Contract Owners. Phoenix will, at its own expense, remedy such
material conflicts including, if necessary, segregating the assets underlying
the variable life insurance policies and the variable annuity contracts and
establishing a new registered investment company.
INVESTMENT ADVISORS
Phoenix Investment Counsel, Inc. ("PIC") is an investment advisor to the
following series in The Phoenix Edge Series Fund:
o Phoenix-Goodwin Money Market Series
o Phoenix-Goodwin Multi-Sector Fixed Income Series
o Phoenix-Hollister Value Equity Series
o Phoenix-Oakhurst Balanced Series
o Phoenix-Oakhurst Growth and Income Series
o Phoenix-Oakhurst Strategic Allocation Series
Based on subadvisory agreements with the fund, PIC as an investment advisor
delegates certain investment decisions and research functions to subadvisors for
the following series:
[diamond] Phoenix-Aberdeen International Advisors, LLC ("PAIA")
o Phoenix-Aberdeen International Series
[diamond] Roger Engemann & Associates, Inc. ("Engemann")
o Phoenix-Engemann Capital Growth Series
o Phoenix-Engemann Nifty Fifty Series
[diamond] Seneca Capital Management, LLC ("Seneca")
o Phoenix-Seneca Mid-Cap Growth Series
o Phoenix-Seneca Strategic Theme Series
Phoenix Variable Advisors, Inc. ("PVA") is also an investment advisor to The
Phoenix Edge Series Fund. Based on subadvisory agreements with the fund, PVA
delegates certain investment decisions and research functions to the following
subadvisors for the series listed:
[diamond] Bankers Trust Company
o Phoenix-Bankers Trust Dow 30 Series
[diamond] Federated Investment Management Company
o Phoenix-Federated U.S. Government Bond Series
[diamond] J.P. Morgan Investment Management, Inc.
o Phoenix-J.P. Morgan 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] Sanford C. Bernstein & Co., Inc.
o Phoenix-Sanford Bernstein Global Value Series
o Phoenix-Sanford Bernstein Mid-Cap Value Series
o Phoenix-Sanford Bernstein Small-Cap Value Series
The investment advisor to the Phoenix-Duff & Phelps Real Estate Securities
Series is Duff & Phelps Investment Management Co. ("DPIM").
The investment advisor to the Phoenix-Aberdeen New Asia Series is PAIA. Pursuant
to subadvisory agreements with the fund, PAIA delegates certain investment
decisions and research functions with respect to the Phoenix-Aberdeen New Asia
Series to PIC and Aberdeen Fund Managers, Inc.
PIC, DPIM, Engemann and Seneca are indirect less than wholly owned subsidiaries
of Phoenix. PAIA is jointly owned and managed by PM Holdings, Inc., a subsidiary
of Phoenix, and by Aberdeen Fund Managers, Inc. PVA is a wholly owned subsidiary
of PM Holdings, Inc.
The other investment advisors and their respective funds are:
[diamond] Bankers Trust Company
o EAFE(R) Equity Index Fund
[diamond] Federated Investment Management Company
o Federated Fund for U.S. Government Securities II
o Federated High Income Bond Fund II
[diamond] Franklin Mutual Advisers, LLC
o Mutual Shares 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. A detailed
discussion of the investment advisors and subadvisors, and the investment
advisory and subadvisory agreements, is contained in the accompanying Fund
prospectuses.
REINVESTMENT AND REDEMPTION
All dividend distributions of the Fund are automatically reinvested in shares of
the Fund at their net asset value on
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the date of distribution; all capital gains distributions of the Fund, if any,
are likewise reinvested at the net asset value on the record date. Phoenix
redeems Fund shares at their net asset value to the extent necessary to make
payments under the 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 the shares of any of the portfolios of the Fund should no longer be available
for investment, or if in the judgment of Phoenix's management further investment
in shares of any of the portfolios becomes inappropriate in view of the
objectives of the Policy, then Phoenix may substitute shares of another fund for
shares already purchased, or to be purchased in the future. No substitution of
fund shares held by the Account may take place without prior approval of the SEC
and prior notice to you. In the event of a substitution, you will be given the
option of transferring the Policy Value of the Subaccount in which the
substitution is to occur to another Subaccount without penalty.
CHARGES AND DEDUCTIONS
--------------------------------------------------------------------------------
GENERAL
Charges are deducted in connection with the Policy to compensate us for:
[diamond] our expenses in selling the policy;
[diamond] underwriting and issuing the policy;
[diamond] premium and federal taxes incurred on premiums received;
[diamond] providing the insurance benefits set forth in the policy; and
[diamond] assuming certain risks in connection with the policy.
The nature and amount of these charges are more fully described in sections
below.
When we issue policies under group or sponsored arrangements, we may reduce or
eliminate one or more of:
[diamond] sales charge,
[diamond] issue expense charge,
[diamond] administrative charge, and
[diamond] surrender charge.
Sales to a group or through sponsored arrangement often result in lower per
policy costs and often involve a greater stability of premiums paid into the
policies. Under such circumstances Phoenix tries to pass these savings onto the
purchasers. The amount of reduction will be determined on a case-by-case basis
and will reflect the cost reduction we expect as a result of these group or
sponsored sales.
Certain charges are deducted only once, others are deducted periodically, while
certain others are deducted only if certain events occur.
CHARGES DEDUCTED ONCE
SALES CHARGE
To help reimburse ourselves for a variety of expenses incurred in selling the
policy (e.g., commissions, advertising, printing) we impose a sales charge on
premiums paid on the policy.
The sales charge is assessed according to the following schedule:
[diamond] Policy year 1: 30% of premiums paid up to
the first TAP
4% of premiums in excess of
the TAP
[diamond] Policy years 2 through 5: 16% of premiums paid up to
the first TAP
4% of premiums in excess of
the TAP
[diamond] Policy years 6 through 10 12% of premiums paid up to
the first TAP
4% of premiums in excess of
the TAP
[diamond] Policy years 11-20: 3% of premium
[diamond] Policy years 21 and over: 0% of premium
The TAP is established at the time the policy is issued and is the greater of:
(a) the level premium required to mature the policy, computed at an interest
rate of 6.5% and assuming current mortality and expenses; and (b) $1,200. The
sales charge does not fully cover our total sales expenses, but we expect to
recover these expenses in full over the period the policy remains in force.
[diamond] STATE PREMIUM TAXES. Various states (and countries and cities) impose
a tax on premiums received by insurance companies. Premium taxes vary
from state to state. Currently, these taxes range from 0.75% to 4% of
premiums paid. Moreover, certain municipalities and states also
impose taxes on premiums paid, in addition to the state taxes
imposed. The premium tax charge represents an amount we consider
necessary to pay all premium taxes imposed by these taxing
authorities, and
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we do not expect to derive a profit from this charge. Policies will be
assessed a tax charge equal to 2.25% of the premiums paid. These
charges are deducted from each premium payment.
[diamond] FEDERAL TAX CHARGE. A charge equal to 1.50% of each premium will be
deducted from each premium payment to cover the estimated cost to us
of the federal income tax treatment of deferred acquisition costs.
PERIODIC CHARGES
MONTHLY
[diamond] ISSUE EXPENSE CHARGE. The issue expense charge is $3,000 and is to
reimburse Phoenix for underwriting and start-up expenses in connection
with issuing a policy. Rather than deduct the full amount at once, the
issue expense charge is deducted in equal monthly installments of $50
over the first 12 months of the policy.
[diamond] ADMINISTRATIVE CHARGE. This charge is assessed to cover our variable
administrative expenses such as the preparation of billings,
statements and mailings to policyholders. The administrative charge is
$7.50 plus $.02 for each $1,000 of face amount each month.
[diamond] COST OF INSURANCE. To determine this expense, we multiply the
appropriate cost of insurance rate by the difference between your
policy's death benefit and the policy value. Generally, cost of
insurance rates are based on the sex, attained age, duration and risk
class of the insureds. However, in certain states and for policies
issued in conjunction with certain qualified plans, cost of insurance
rates are not based on sex. The actual monthly costs of insurance
rates are based on our expectations of future mortality experience.
They will not, however, be greater than the guaranteed cost of
insurance rates set forth in the policy. These guaranteed maximum
rates are equal to 100% of the 1980 Commissioners Standard Ordinary
("CSO") Mortality Table, with appropriate adjustment for the Insureds'
risk classification. 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. Your
risk class may affect your cost of insurance rate. We currently place
insureds into a standard risk class or a risk class involving a higher
mortality risk, depending on the health of the insureds as determined
by the medical information that we request. For otherwise identical
policies, insureds in the standard risk class will have a lower cost
of insurance than those in the risk class with the higher mortality
risk. The standard risk class is divided into three categories: smoker
and 2 classes of nonsmokers. Nonsmokers will generally incur a lower
cost of insurance than similarly situated insureds who smoke.
[diamond] COST OF ANY RIDERS TO YOUR POLICY. Certain policy riders require the
payment of additional premiums to pay for the benefit provided by the
rider.
Monthly deductions are made on each monthly calculation day. The amount deducted
is allocated among Subaccounts and the unloaned portion of the GIA based on an
allocation schedule specified by you.
You initially choose this schedule in your application, but can later change it
from time to time. If any subaccount or the unloaned portion of the GIA is
insufficient to permit the full withdrawal of the monthly deduction, the
withdrawals from the other Subaccounts or GIA will be proportionally increased.
DAILY
[diamond] MORTALITY AND EXPENSE RISK CHARGE. A charge at an annual rate of 0.40%
is deducted daily from the Account. We may increase this charge, but
guarantee it will never be more than 0.60%. No portion of this charge
is deducted from the GIA.
The mortality risk assumed by us is that collectively our insureds may
live for a shorter time than projected because of inaccuracies in that
projecting process and, therefore, that the total amount of death
benefits that we will pay out will be greater than that we expected.
The expense risk assumed is that expenses incurred in issuing and
maintaining the Policies may exceed the limits on administrative
charges set in the Policies. If the expenses do not increase to an
amount in excess of the limits, or if the mortality projecting process
proves to be accurate, we may profit from this charge. We also assume
risks with respect to other contingencies including the incidence of
Policy loans, which may cause us to incur greater costs than expected
when we designed the Policies. To the extent we profit from this
charge, we may use those profits for any proper purpose, including the
payment of sales expenses or any other expenses that may exceed income
in a given year.
CONDITIONAL CHARGES
These are other charges that are imposed only if certain events occur.
[diamond] SURRENDER CHARGE. During the first 5 policy years, there is a
difference between the amount of policy value and the amount of cash
surrender value of the policy. This difference is the surrender
charge, which is a contingent deferred sales charge. The surrender
charge is designed to recover the expense of distributing policies
that are terminated before distribution expenses have been recouped
from revenue generated by these policies. These are contingent charges
because they are paid only if the policy is surrendered (or the face
amount is reduced or the policy lapses) during this period. They are
deferred charges because they are not deducted from premiums.
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During the first 5 policy years, the surrender charge described below will
apply if you either surrender the policy for its cash surrender value or let
the policy lapse. There is no surrender charge after the 5th policy year.
During the first 5 policy years, the maximum surrender charge that you can
pay while you own the Policy is equal to the percentage amount shown in the
following Surrender Charge Table.
SURRENDER CHARGE TABLE
----------------------
SURRENDER SURRENDER SURRENDER
POLICY CHARGE POLICY CHARGE POLICY CHARGE
MONTH % OF TAP MONTH % OF TAP MONTH % OF TAP
------ -------- ------ --------- ------ ---------
1-70 % 87 % 104 %
71 % 88 % 105 %
72 % 89 % 106 %
73 % 90 % 107 %
74 % 91 % 108 %
75 % 92 % 109 %
76 % 93 % 110 %
77 % 94 % 111 %
78 % 95 % 112 %
79 % 96 % 113 %
80 % 97 % 114 %
81 % 98 % 115 %
82 % 99 % 116 %
83 % 100 % 117 %
84 % 101 % 118 %
85 % 102 % 119 %
86 % 103 % 120 %
[diamond] PARTIAL SURRENDER FEE. In the case of a partial surrender, but not a
decrease in face amount, an additional fee is imposed. The fee is
equal to 2% of the amount withdrawn but not more than $25. The fee is
intended to recover the actual costs of processing the partial
surrender request. The fee will be deducted from each subaccount and
GIA in the same proportion as the withdrawal is allocated. If no
allocation is made at the time of the request for the partial
surrender, withdrawal allocation will be made in the same manner as
are monthly deductions.
[diamond] PARTIAL SURRENDER CHARGE. If less than all of the policy is
surrendered, the amount withdrawn is a "partial surrender." A charge
as described below is deducted from the policy value upon a partial
surrender of the policy. The charge is a fraction of the applicable
surrender charge that would apply to a full surrender, determined by
how much of the full cash surrender value is being withdrawn. This
amount is assessed against the subaccounts and the GIA in the same
proportion as the withdrawal is allocated.
A partial surrender charge also is deducted from policy value upon a
decrease in face amount. The charge is equal to the applicable
surrender charge multiplied by a fraction (equal to the decrease in
face amount divided by the face amount of the policy prior to the
decrease).
INVESTMENT MANAGEMENT CHARGE
As compensation for investment management services to the Funds, the Advisors
are entitled to fees, payable monthly and based on an annual percentage of the
average aggregate daily net asset values of each Series.
These fund charges and other expenses are described more fully in the
accompanying fund prospectuses.
OTHER TAXES
Currently no charge is made to the Account for federal income taxes that may be
attributable to the Account. We may, however, make such a charge in the future
for these or any other taxes attributable to the Account.
GENERAL PROVISIONS
--------------------------------------------------------------------------------
POSTPONEMENT OF PAYMENTS
Payment of any amount upon complete or partial surrender, policy loan or
benefits payable at death (in excess of the initial face amount) or maturity may
be postponed:
[diamond] for up to six months from the date of the request, for any
transactions dependent upon the value of the GIA;
[diamond] whenever the NYSE is closed other than for customary weekend and
holiday closings or trading on the NYSE is restricted as decided by
the SEC; or
[diamond] whenever an emergency exists, as decided by the SEC as a result of
which disposal of securities is not reasonably practicable or it is
not reasonably practicable to determine the value of the Account's net
assets.
Transfers also may be postponed under these circumstances.
PAYMENT BY CHECK
Payments under the policy of any amounts derived from premiums paid by check may
be delayed until such time as the check has cleared your bank.
THE CONTRACT
The policy and attached copy of the application are the entire contract. Only
statements in the application can be used to void the policy. The statements are
considered representations and not warranties. Only an executive officer of
Phoenix can agree to change or waive any provisions of the policy.
SUICIDE
If either of the insureds 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 insureds' lifetimes for 2 years from the policy date.
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CHANGE OF OWNER OR BENEFICIARY
The beneficiary, as named in the policy application or subsequently changed,
will receive the policy benefits at the death of the last surviving insured. If
the named beneficiary dies before the death of the last surviving Insured, the
contingent Beneficiary, if named, becomes the Beneficiary. If no Beneficiary
survives the last surviving Insured, the death benefit payable under the Policy
will be paid to you or your estate.
As long as the policy is in force, the policyowner and the beneficiary may be
changed by written request, satisfactory to us. A change in beneficiary will
take effect as of the date the notice is signed, whether or not the last
surviving 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 either of the insureds 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
of the insureds.
SURPLUS
You may share in divisible surplus of Phoenix to the extent decided annually by
the Phoenix Board of Directors. However, it is not currently expected that the
Board will authorize these payments since you will be participating directly in
the Subaccount's investment results.
PAYMENT OF PROCEEDS
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SURRENDER AND DEATH BENEFIT PROCEEDS
Death benefit proceeds and the proceeds of full or partial surrenders will be
processed at unit values next computed after we receive the request for
surrender or due proof of death, provided such request is complete and in good
order. Payment of surrender or death proceeds usually will be made in one lump
sum within 7 days, unless another payment option has been elected. Payment of
the death proceeds, however, may be delayed if the claim for payment of the
death proceeds needs to be investigated; e.g., to ensure payment of the proper
amount to the proper payee. Any such delay will not be beyond that reasonably
necessary to investigate such claims consistent with insurance practices
customary in the life insurance industry. Under this policy, the death proceeds
will be paid upon the death of the last surviving insured.
You may elect a payment option for payment of the death proceeds to the
beneficiary. You may do this only before the second death. You may revoke or
change a prior election, unless such right has been waived. The beneficiary may
make or change an election before payment of the death proceeds, unless you have
made an election that does not permit such further election or changes by the
beneficiary.
A written request in a form satisfactory to us is required to elect, change or
revoke a payment option.
The minimum amount of surrender or death proceeds that may be applied under any
payment option is $1,000.
If the policy is assigned as collateral security, we will pay any amount due the
assignee in one lump sum. Any remaining proceeds will remain under the option
elected.
PAYMENT OPTIONS
All or part of the surrender or death proceeds of a policy may be applied under
one or more of the following payment options or such other payment options or
alternative versions of the options listed as we may choose to make available in
the future.
OPTION 1--LUMP SUM Payment in one lump sum.
OPTION 2--LEFT TO EARN INTEREST
A payment of interest during the payee's lifetime on the amount payable as a
principal sum. Interest rates are guaranteed to be at least 3% per year.
OPTION 3--PAYMENT FOR A SPECIFIC PERIOD
Equal installments are paid for a specified period of years whether the payee
lives or dies. The first payment will be on the date of settlement. The assumed
interest rate on the unpaid balance is guaranteed not to be less than 3% per
year.
OPTION 4--LIFE ANNUITY WITH SPECIFIED PERIOD CERTAIN
Equal installments are paid until the later of:
[diamond] the death of the payee and
[diamond] the end of the period certain. The first payment will be on the date
of settlement. The period certain must be chosen when this option is
elected. The periods certain that may be chosen are as follows:
[diamond] 10 years;
[diamond] 20 years;
[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
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<PAGE>
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; and
[diamond] the death of the other named annuitant. The other annuitant must be
named when this option is elected and cannot later be changed.
The other annuitant must have an attained age of at least 40. 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.
FEDERAL INCOME TAX CONSIDERATIONS
--------------------------------------------------------------------------------
INTRODUCTION
The ultimate effect of federal income taxes on values under the Account and on
the economic benefit to you or your beneficiary depends on Phoenix's income tax
status and upon the income tax status of the individual concerned. The
discussion contained herein is general in nature and is not intended as income
tax advice. For complete information on federal and state income tax
considerations, a qualified tax advisor should be consulted. No attempt is made
to consider any estate and inheritance taxes, or any state, local or other tax
laws. Because the discussion herein is based upon our understanding of federal
income tax laws as they are currently interpreted, we cannot guarantee the tax
status of any Policy. The Internal Revenue Service ("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
Phoenix is taxed as a life insurance company under the Internal Revenue Code of
1986, as amended ("Code"). For federal income tax purposes, neither the 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 Account are
reinvested and taken into account in determining the value of the Account.
Investment income of the Account, including realized net capital gains, is not
taxed to Phoenix. Due to Phoenix's income tax status under current provisions of
the Code, no charge currently will be made to the VUL Account for Phoenix's
federal income taxes, which may be attributable to the VUL Account. Phoenix
reserves the right to make a deduction for taxes if the federal income tax
treatment of Phoenix is determined to be other than what Phoenix currently
believes it to be, if changes are made affecting the income tax treatment to
Phoenix of variable life insurance contracts, or if changes occur in Phoenix's
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 ("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. Phoenix intends to monitor the premiums to assure compliance
with such conditions. However, if the premium limitation is exceeded during the
year, Phoenix may return the excess premium, with interest, to the Policyowner
within 60 days after the
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<PAGE>
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, a 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. Phoenix suggests 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
Phoenix believes that any loan received under a Policy will be treated as
indebtedness of a Policyowner. If the Policy is a modified endowment contract,
loans are fully taxable to the extent of income in the Policy and are possibly
subject to an additional 10% tax. See the discussion on modified endowment
contracts below. If the Policy is not a modified endowment contract, Phoenix
believes that no part of any loan under a Policy will constitute income to a
Policyowner.
The deductibility by a Policyowner of loan interest under a Policy may be
limited under Code Section 264, depending on circumstances. A Policyowner
intending to fund premium payments through borrowing should consult a tax
advisor with respect to the tax consequences thereof. Under the "personal"
interest limitation provisions of the Code, interest on Policy loans used for
personal purposes is not tax deductible. Other rules may apply to allow all or
part of the interest expense as a deduction if the loan proceeds are used for
"trade or business" or "investment" purposes. See your tax advisor for further
guidance.
BUSINESS-OWNED POLICIES
If a business or a corporation owns the Policy, the Code may impose additional
restrictions. The Code limits the interest deduction on business-owned Policy
loans and may impose tax upon the inside build-up of corporate-owned life
insurance policies through the corporate alternative minimum tax.
MODIFIED ENDOWMENT CONTRACTS
GENERAL
Pursuant to Code Section 72(e), loans and other amounts received under modified
endowment contracts will, in general, be taxed to the extent of accumulated
income (generally, the excess of cash value over premiums paid). Life insurance
policies can be modified endowment contracts if they fail to meet what is known
as "the 7-pay test." The measuring stick for this test is a hypothetical life
insurance policy of equal face amount which requires 7 equal annual premiums but
which, after the seventh year is "fully paid-up," continuing to provide a level
death benefit without the need for any further premiums. A Policy becomes a
modified endowment contract, if, at any time during the first 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 Phoenix 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 amount 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; or
[diamond] attributable to the taxpayer's disability (within the meaning of Code
Section 72(m)(7)); or
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<PAGE>
[diamond] part of a series of substantially equal periodic payments (not less
often than annually) made for the life (or life expectancy) of the
taxpayer or the joint lives (or life expectancies) of the taxpayer and
his Beneficiary.
MATERIAL CHANGE RULES
Any determination of whether the Policy meets the 7-pay test will begin again
any time the Policy undergoes a "material change," which includes any increase
in death benefits or any increase in or addition of a qualified additional
benefit, with the following 2 exceptions:
[diamond] first, if an increase is attributable to premiums paid "necessary to
fund" the lowest death benefit and qualified additional benefits
payable in the first 7 Policy Years or to the crediting of interest or
dividends with respect to these premiums, the "increase" does not
constitute a material change.
[diamond] second, to the extent provided in regulations, if the death benefit or
qualified additional benefit increases as a result of a cost-of-living
adjustment based on an established broad-based index specified in the
Policy, this does not constitute a material change if:
o the cost-of-living determination period does not exceed the
remaining premium payment period under the Policy, and
o the cost-of-living increase is funded ratably over the remaining
premium payment period of the Policy. A reduction in death benefits
is not considered a material change unless accompanied by a
reduction in premium payments.
A material change may occur at any time during the life of the Policy (within
the first 7 years or thereafter), and future taxation of distributions or loans
would depend upon whether the Policy satisfied the applicable 7-pay test from
the time of the material change. An exchange of policies is considered to be a
material change for all purposes.
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. Phoenix intends to comply
with the limitations in calculating the premium it is permitted to receive from
you.
QUALIFIED PLANS
A Policy may be used in conjunction with certain qualified plans. Since the
rules governing such use are complex, you should not use the Policy in
conjunction with a qualified plan until you have consulted a competent pension
consultant or tax advisor.
DIVERSIFICATION STANDARDS
To comply with the Diversification Regulations under Code Section 817(h),
("Diversification Regulations") each Series of the Funds is required to
diversify its investments. The Diversification Regulations generally require
that on the last day of each calendar quarter that the Series assets be invested
in no more than:
[diamond] 55% in any 1 investment
[diamond] 70% in any 2 investments
[diamond] 80% in any 3 investments
[diamond] 90% in any 4 investments
A "look-through" rule applies to treat a pro rata portion of each asset of a
Series as an asset of the VUL Account; therefore, each Series of the Fund will
be tested for compliance with the percentage limitations. For purposes of these
diversification rules, all securities of the same issuer are treated as a single
investment, but each United States government agency or instrumentality is
treated as a separate issuer.
The general diversification requirements are modified if any of the assets of
the VUL Account are direct obligations of the United States Treasury. In this
case, there is no limit on the investment that may be made in Treasury
securities, and for purposes of determining whether assets other than Treasury
securities are adequately diversified, the generally applicable percentage
limitations are increased based on the value of the VUL Account's investment in
Treasury securities. Notwithstanding this modification of the general
diversification requirements, the portfolios of the Funds will be structured to
comply with the general diversification standards because they serve as an
investment vehicle for certain variable annuity contracts that must comply with
these standards.
In connection with the issuance of the Diversification Regulations, the Treasury
announced that such regulations
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<PAGE>
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 will provide. It is possible that the Policy may
need to be modified to comply with such future Treasury announcements. For these
reasons, Phoenix reserves the right to modify the Policy, as necessary, to
prevent you from being considered the owner of the assets of the VUL Account.
Phoenix intends 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 one or both of the Insureds 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 Insureds. If the surrendered Policy is
subject to a policy loan, this may be treated as the receipt of money on the
exchange. Phoenix recommends that any person contemplating such actions seek the
advice of a qualified tax consultant.
OTHER TAXES
Federal estate tax, state and local estate, inheritance and other tax
consequences of ownership or receipt of Policy proceeds depend on the
circumstances of each Policyowner or Beneficiary. We do not make any
representations or guarantees regarding the tax consequences of any Policy with
respect to these types of taxes.
VOTING RIGHTS
--------------------------------------------------------------------------------
We will vote the Funds' shares held by the Subaccounts at any regular and
special meetings of shareholders of the Funds. To the extent required by law,
such voting will be pursuant to instructions received from you. However, if the
1940 Act or any regulation thereunder should be amended or if the present
interpretation thereof should change, and as a result we decide that we are
permitted to vote the Funds' shares at our own discretion, we may elect to do
so.
The number of votes that you have the right to cast will be determined by
applying your percentage interest in a Subaccount to the total number of votes
attributable to the Subaccount. In determining the number of votes, fractional
shares will be recognized.
Funds' shares held in a Subaccount for which no timely instructions are
received, and Funds' shares which are not otherwise attributable to
Policyowners, will be voted by Phoenix in proportion to the voting instructions
that are received with respect to all Policies participating in that Subaccount.
Instructions to abstain on any item to be voted upon will be applied to reduce
the votes eligible to be cast by Phoenix.
You will receive proxy materials, reports and other materials related to the
Funds.
We may, when required by state insurance regulatory authorities, disregard
voting instructions if the instructions require that the shares be voted so as
to cause a change in the subclassification or investment objective of one or
more of the portfolios of the Funds or to approve or disapprove an investment
advisory contract for the Funds. In addition, Phoenix itself may disregard
voting instructions in favor of changes initiated by a Policyowner in the
investment policies or the Investment Advisor of the Funds if Phoenix reasonably
disapproves of such changes. A change would be disapproved only if the proposed
change is contrary to state law or prohibited by state regulatory authorities or
we decide that the change would have an adverse effect on the General Account
because the proposed investment policy for a Series may result in overly
speculative or unsound investments. In the event Phoenix does disregard voting
instructions, a summary of that action and the reasons for such action will be
included in the next periodic report to Policyowners.
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
25
<PAGE>
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 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
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
David W. Searfoss Executive Vice President and
Chief Financial Officer
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
Jack F. Solan, Jr. Senior Vice President,
Strategic Development
Simon Y. Tan Senior Vice President, Market and
Product Development
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 Phoenix during the last 5 years.
SAFEKEEPING OF THE VUL ACCOUNT'S ASSETS
--------------------------------------------------------------------------------
Phoenix holds the assets of the Account. The assets of the Account are kept
physically segregated and held separate and apart from the General Account of
Phoenix. Phoenix maintains records of all purchases and redemptions of shares of
the funds.
SALES OF POLICIES
--------------------------------------------------------------------------------
Policies may be purchased from registered representatives of W.S. Griffith &
Co., Inc. ("WSG"), a New York corporation incorporated on August 7, 1970,
licensed to sell Phoenix insurance policies as well as policies, annuity
contracts and funds of companies affiliated with Phoenix. WSG, an indirect
wholly-owned subsidiary of Phoenix, is registered as a broker-dealer with the
SEC under the Securities Exchange Act of 1934 ("1934 Act") and is a
26
<PAGE>
member of the National Association of Securities Dealers, Inc. PEPCO serves as
national distributor of the Policies. PEPCO is an indirect wholly-owned
subsidiary of Phoenix Investment Partners, Ltd. ("PXP"), in which Phoenix owns a
majority interest. Policies also may be purchased from other broker-dealers
registered under the 1934 Act whose representatives are authorized by applicable
law to sell Policies under terms of agreements provided by PEPCO. Sales
commissions will be paid to registered representatives on purchase payments
received by Phoenix under these Policies. Phoenix may pay a maximum total sales
commission of 50% of premiums to PEPCO. To the extent that the sales charge
under the Policies is less than the sales commissions paid with respect to the
Policies, Phoenix may pay the shortfall from its General Account assets, which
will include any profits it may derive under the Policies.
STATE REGULATION
--------------------------------------------------------------------------------
Phoenix is subject to the provisions of the New York insurance law applicable to
mutual life insurance companies and to regulation and supervision by the New
York Superintendent of Insurance. Phoenix also is subject to the applicable
insurance laws of all the other states and jurisdictions in which it does an
insurance business.
State regulation of Phoenix includes certain limitations on the investments that
it may make, including investments for the Account and the GIA. It does not
include, however, any supervision over the investment policies of the 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 Account is not engaged in any litigation. Phoenix is not involved in any
litigation that would have a material adverse effect on the ability of Phoenix
to meet its obligations under the policies.
LEGAL MATTERS
--------------------------------------------------------------------------------
Edwin L. Kerr, Counsel of Phoenix, has passed upon the organization of Phoenix,
its authority to issue variable life insurance Policies and the validity of the
Policy, and upon legal matters relating to the federal securities and income tax
laws for Phoenix.
REGISTRATION STATEMENT
--------------------------------------------------------------------------------
A Registration Statement has been filed with the SEC, under the Securities Act
of 1933 ("1933 Act") with respect to the securities offered. This Prospectus is
a summary of the contents of the Policy and other legal documents and does not
contain all the information set forth in the Registration Statement and its
exhibits. We refer you to the registration statement and its exhibits for
further information concerning the VUL Account, Phoenix and the Policy.
FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
The financial statements of the Account are for the subaccounts available as of
the period ended December 31, 1999. The consolidated 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.
27
<PAGE>
PHOENIX HOME LIFE
VARIABLE UNIVERSAL LIFE ACCOUNT
FINANCIAL STATEMENTS
DECEMBER 31, 2000
As of the date of this prospectus, there have been no deposits to the Account;
therefore, financial statements are not available.
28
<PAGE>
PHOENIX HOME LIFE MUTUAL
INSURANCE COMPANY
CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999
29
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
TABLE OF CONTENTS
--------------------------------------------------------------------------------
Report of Independent Accountants ........................................31
Consolidated Balance Sheet at December 31, 1999 and 1998..................32
Consolidated Statement of Income, Comprehensive Income and Equity
for the Years Ended December 31, 1999, 1998 and 1997 ....................33
Consolidated Statement of Cash Flows for the Years Ended
December 31, 1999, 1998 and 1997 ........................................34
Notes to Consolidated Financial Statements ............................35-71
30
<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
31
<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.
32
<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.
33
<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.
34
<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.
35
<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.
36
<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
37
<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
38
<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.
39
<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
40
<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.
41
<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.
42
<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.
43
<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>
44
<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>
45
<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>
46
<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.
47
<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 $22.3
at December 31, 1999 and 1998, respectively.
48
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
DERIVATIVE INSTRUMENTS
Derivative instruments at December 31, are summarized below:
<TABLE>
<CAPTION>
1999 1998
($ 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.
49
<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>
50
<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.
51
<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>
52
<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.
53
<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>
54
<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>
55
<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.
56
<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.
57
<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.
58
<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>
59
<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>
60
<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>
61
<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.
62
<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.
63
<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>
64
<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.
65
<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.
66
<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.
67
<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.
68
<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.
69
<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.
70
<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."
71
<PAGE>
PHOENIX HOME LIFE MUTUAL
INSURANCE COMPANY
UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2000
[To be filed by amendment]
72
<PAGE>
APPENDIX A
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 June 30, 2000.
Example:
Value of hypothetical pre-existing account with exactly
one unit at the beginning of the period:............
Value of the same account (excluding capital changes)
at the end of the 7-day period:.....................
Calculation:
Ending account value ............................... [To be filed
Less beginning value ............................... by amendment]
Net change in account value ........................
Base period return:
(adjusted change/beginning value) ..................
Current yield = return x (365/7) .....................
Effective yield = [(1 + return)365/7] - 1 ............
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.
73
<PAGE>
The following performance tables display historical investment results of the
subaccounts of the 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 JUNE 30, 2000(1)
===================================================================================================================================
INCEPTION DATE 1 YEAR 5 YEARS 10 YEARS SINCE INCEPTION
===================================================================================================================================
<S> <C> <C> <C> <C> <C>
Phoenix-Aberdeen International Series..................... 5/1/90
-------------------------------------------------------------------------------
Phoenix-Aberdeen New Asia Series.......................... 9/17/96
-------------------------------------------------------------------------------
Phoenix-Bankers Trust Dow 30 Series....................... 12/15/99
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
Phoenix-Duff & Phelps Real Estate Securities Series....... 5/1/95
-------------------------------------------------------------------------------
Phoenix-Engemann Capital Growth Series.................... 12/31/82
-------------------------------------------------------------------------------
Phoenix-Engemann Nifty Fifty Series....................... 3/2/98
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
Phoenix-Federated U.S. Government Bond Series............. 12/15/99
-------------------------------------------------------------------------------
Phoenix-Goodwin Money Market Series....................... 10/8/82
-------------------------------------------------------------------------------
Phoenix-Goodwin Multi-Sector Fixed Income Series.......... 12/31/82
-------------------------------------------------------------------------------
Phoenix-Hollister Value Equity Series..................... 3/2/98
-------------------------------------------------------------------------------
Phoenix-J.P. Morgan Research Enhanced Index Series........ 7/14/92
-------------------------------------------------------------------------------
Phoenix-Janus Equity Income Series........................ 12/15/99
-------------------------------------------------------------------------------
Phoenix-Janus Flexible Income Series...................... 12/15/99
-------------------------------------------------------------------------------
Phoenix-Janus Growth Series............................... 12/15/99
-------------------------------------------------------------------------------
Phoenix-Morgan Stanley Focus Equity Series................ 12/15/99 [To be filed by
------------------------------------------------------------------------------- amendment]
Phoenix-Oakhurst Balanced Series.......................... 5/1/92
-------------------------------------------------------------------------------
Phoenix-Oakhurst Growth and Income Series................. 3/2/98
-------------------------------------------------------------------------------
Phoenix-Oakhurst Strategic Allocation Series.............. 9/17/84
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
Phoenix-Sanford Bernstein Mid-Cap Value Series............ 3/2/98
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
Phoenix-Seneca Mid-Cap Growth Series...................... 3/2/98
-------------------------------------------------------------------------------
Phoenix-Seneca Strategic Theme Series..................... 1/29/96
-------------------------------------------------------------------------------
EAFE(R) Equity Index Fund.................................. 8/22/97
-------------------------------------------------------------------------------
Federated Fund for U.S. Government Securities II.......... 3/28/94
-------------------------------------------------------------------------------
Federated High Income Bond Fund II........................ 3/1/94
-------------------------------------------------------------------------------
Technology Portfolio...................................... 11/30/99
-------------------------------------------------------------------------------
Mutual Shares Securities Fund-- Class 2(2)................ 11/2/98
-------------------------------------------------------------------------------
Templeton Asset Strategy Fund-- Class 2(2)................ 11/28/88
-------------------------------------------------------------------------------
Templeton Developing Markets Securities Fund-- Class 2(2). 9/27/96
-------------------------------------------------------------------------------
Templeton Growth Securities Fund-- Class 2(2)............. 11/3/88
-------------------------------------------------------------------------------
Templeton International Securities Fund-- Class 2(2)...... 5/11/92
-------------------------------------------------------------------------------
Wanger Foreign Forty...................................... 2/1/99
-------------------------------------------------------------------------------
Wanger International Small Cap............................ 5/1/95
-------------------------------------------------------------------------------
Wanger Twenty............................................. 2/1/99
-------------------------------------------------------------------------------
Wanger U.S. Small Cap..................................... 5/1/95
-------------------------------------------------------------------------------
</TABLE>
(1)The average annual total return is the annual compound return that results
from holding an initial investment of $100,000 for the time period indicated.
Returns are net of Investment Management Fees and Mortality and Expense Risk
Charges. Performance data quoted represent the investment return of the
appropriate series adjusted for the charges had the subaccount started on the
inception date of the appropriate series.
74
<PAGE>
(2)Because Class 2 shares were not offered until May 1, 1997 (November 10, 1998
for Mutual Shares Securities), performance shown for periods prior to that
date represents the historical results of Class 1 shares. Performance since
that date reflects Class 2's high annual fees and expenses resulting from its
Rule 12b-1 plan. Maximum annual plan expenses are 0.25%. The manager is
limiting fund expenses, which increases total returns.
75
<PAGE>
Advertisements, sales literature and other communications may contain
information about any series' or advisor's current investment strategies and
management style. Current strategies and style may change to respond to a
changing market and economic conditions. From time to time, the series may
discuss specific portfolio holdings or industries in such communications. To
illustrate components of overall performance, the series may separate their
cumulative and average annual returns into income results and capital gains or
losses; or cite separately, as a return figure, the equity or bond portion of a
series' portfolio; or compare a series' equity or bond return figure to
well-known indices of market performance including, but not limited to, the
Standard & Poor's 500 Composite Stock Price Index (the "S&P 500"), Dow Jones
Industrial Average[SM], First Boston High Yield Index and Salomon Brothers
Corporate and Government Bond Indices.
Occasionally, The 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 Average[SM]
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.
76
<PAGE>
<TABLE>
<CAPTION>
ANNUAL TOTAL RETURN(1,4)
===========================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Series 1983 1984 1985 1986 1987 1988 1989 1990 1991
===========================================================================================================
Phoenix-Aberdeen International Series
---------------------------------------------
Phoenix-Aberdeen New Asia Series
---------------------------------------------
Phoenix-Bankers Trust Dow 30 Series
---------------------------------------------
Phoenix-Duff & Phelps Real Estate
Securities Series
---------------------------------------------
Phoenix-Engemann Capital Growth Series
---------------------------------------------
Phoenix-Engemann Nifty Fifty Series
---------------------------------------------
Phoenix-Federated U.S. Government Bond
Series
---------------------------------------------
Phoenix-Goodwin Money Market Series
---------------------------------------------
Phoenix-Goodwin Multi-Sector Fixed Income
Series
---------------------------------------------
Phoenix-Hollister Value Equity Series
---------------------------------------------
Phoenix J.P. Morgan Research Enhanced
Index Series
---------------------------------------------
Phoenix-Janus Equity Income Series
---------------------------------------------
Phoenix-Janus Flexible Income Series
---------------------------------------------
Phoenix-Janus Growth Series
---------------------------------------------
Phoenix-Morgan Stanley Focus Equity Series
---------------------------------------------
Phoenix-Oakhurst Balanced Series
---------------------------------------------
Phoenix-Oakhurst Growth and Income Series
---------------------------------------------
Phoenix-Oakhurst Strategic Allocation
Series
---------------------------------------------
Phoenix-Sanford Bernstein Mid-Cap Value [To be filed by
Series amendment]
---------------------------------------------
Phoenix-Seneca Mid-Cap Growth Series
---------------------------------------------
Phoenix-Seneca Strategic Theme Series
---------------------------------------------
EAFE(R)Equity Index Fund
---------------------------------------------
Federated Fund for U.S. Government
Securities II
---------------------------------------------
Federated High Income Bond Fund
---------------------------------------------
Technology Portfolio
---------------------------------------------
Mutual Shares Securities Fund--
Class 2(2,3)
---------------------------------------------
Templeton Asset Strategy Fund--
Class 2(2,3)
---------------------------------------------
Templeton Developing Markets Securities
Fund-- Class 2(2,3)
---------------------------------------------
Templeton Growth Securities Fund--
Class 2(2,3)
---------------------------------------------
Templeton International Securities Fund--
Class 2(2,3)
---------------------------------------------
Wanger Foreign Forty
---------------------------------------------
Wanger International Small Cap
---------------------------------------------
Wanger Twenty
---------------------------------------------
Wanger U.S. Small Cap
==========================================================================================================
</TABLE>
<TABLE>
<CAPTION>
ANNUAL TOTAL RETURN(1,4)
===========================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Series 1992 1993 1994 1995 1996 1997 1998 1999
===========================================================================================================
Phoenix-Aberdeen International Series
---------------------------------------------
Phoenix-Aberdeen New Asia Series
---------------------------------------------
Phoenix-Bankers Trust Dow 30 Series
---------------------------------------------
Phoenix-Duff & Phelps Real Estate
Securities Series
---------------------------------------------
Phoenix-Engemann Capital Growth Series
---------------------------------------------
Phoenix-Engemann Nifty Fifty Series
---------------------------------------------
Phoenix-Federated U.S. Government Bond
Series
---------------------------------------------
Phoenix-Goodwin Money Market Series
---------------------------------------------
Phoenix-Goodwin Multi-Sector Fixed Income
Series
---------------------------------------------
Phoenix-Hollister Value Equity Series
---------------------------------------------
Phoenix J.P. Morgan Research Enhanced
Index Series
---------------------------------------------
Phoenix-Janus Equity Income Series
---------------------------------------------
Phoenix-Janus Flexible Income Series
---------------------------------------------
Phoenix-Janus Growth Series
---------------------------------------------
Phoenix-Morgan Stanley Focus Equity Series
---------------------------------------------
Phoenix-Oakhurst Balanced Series
---------------------------------------------
Phoenix-Oakhurst Growth and Income Series
---------------------------------------------
Phoenix-Oakhurst Strategic Allocation
Series
---------------------------------------------
Phoenix-Sanford Bernstein Mid-Cap Value [To be filed by
Series amendment]
---------------------------------------------
Phoenix-Seneca Mid-Cap Growth Series
---------------------------------------------
Phoenix-Seneca Strategic Theme Series
---------------------------------------------
EAFE(R)Equity Index Fund
---------------------------------------------
Federated Fund for U.S. Government
Securities II
---------------------------------------------
Federated High Income Bond Fund
---------------------------------------------
Technology Portfolio
---------------------------------------------
Mutual Shares Securities Fund--
Class 2(2,3)
---------------------------------------------
Templeton Asset Strategy Fund--
Class 2(2,3)
---------------------------------------------
Templeton Developing Markets Securities
Fund-- Class 2(2,3)
---------------------------------------------
Templeton Growth Securities Fund--
Class 2(2,3)
---------------------------------------------
Templeton International Securities Fund--
Class 2(2,3)
---------------------------------------------
Wanger Foreign Forty
---------------------------------------------
Wanger International Small Cap
---------------------------------------------
Wanger Twenty
---------------------------------------------
Wanger U.S. Small Cap
==========================================================================================================
(1) Rates are net of Mortality and Expense Risk Charges and Investment Management fees for the Subaccounts.
(2) Because Class 2 shares were not offered until May 1, 1997 (November 10, 1998 for Mutual Shares
Securities), performance shown for periods prior to that date represents the historical results of
Class 1 shares. Performance since that date reflects Class 2's high annual fees and expenses resulting
from its Rule 12b-1 plan. Maximum annual plan expenses are 0.25%.
(3) The manager is limiting fund expenses, which increases total returns.
(4) Performance data quoted represent the investment return of the appropriate series adjusted for The Estate
Edge charges had the Subaccount started on the inception date of the appropriate series.
</TABLE>
These rates of return are not an estimate or guarantee of future performance.
77
<PAGE>
APPENDIX B
THE GUARANTEED INTEREST ACCOUNT
--------------------------------------------------------------------------------
Contributions to the GIA under the Policy and transfers to the GIA become
part of the Phoenix General Account (the "General Account"), which supports
insurance and annuity obligations. Because of exemptions and exclusions set
forth in the federal securities laws, interest in the General Account has not
been registered under the 1933 Act nor is the General Account registered as an
investment company under the 1940 Act. Accordingly, neither the General Account
nor any interest it is specifically subject to the provisions of the 1933 or
1940 Acts and the staff of the SEC has not reviewed the disclosures in this
Prospectus concerning the GIA. Disclosures regarding the GIA and the General
Account, however, may be subject to certain generally applicable provisions of
the federal securities laws relating to the accuracy and completeness of
statements made in prospectuses.
The General Account is made up of all of the general assets of Phoenix other
than those allocated to any separate account. Premium payments will be allocated
to the GIA and, therefore, the General Account, as elected by the Policyowner at
the time of purchase or as subsequently changed. Phoenix will invest the assets
of the General Account in assets chosen by it and allowed by applicable law.
Investment income from General Account assets is allocated between Phoenix and
the contracts participating in the General Account, in accordance with the terms
of such contracts.
Investment income from the General Account allocated to Phoenix includes
compensation for mortality and expense risks borne by it in connection with
General Account contracts.
The amount of investment income allocated to the Policies will vary from
year to year in the sole discretion of Phoenix. However, Phoenix guarantees that
it will credit interest at a rate of not less than 4% per year, compounded
annually, to amounts allocated to the unloaned portion of the GIA. The loaned
portion of the GIA will be credited interest at an effective annual rate of 2%
(4% on Policies issued in New York). Phoenix may credit interest at a rate in
excess of 4% per year; however, it is not obligated to credit interest in excess
of 4% per year.
On the last business day of each calendar week, Phoenix will set the excess
interest rate, if any, that will apply to premium payments made to the GIA. That
rate will remain in effect for such premium payments for an initial guarantee
period of one full year from the date of premium payments. Upon expiration of
the initial one-year guarantee period (and each subsequent one-year guarantee
period thereafter), the rate to be applied to any premium payments whose
guaranteed period has just ended will be the same rate as is applied to new
premium payments allocated at that time to the GIA. This rate will likewise
remain in effect for a guarantee period of one full year from the date the new
rate is applied.
Excess interest, if any, will be determined by Phoenix based on information
as to expected investment yields. Some of the factors that Phoenix may consider
in determining whether to credit interest to amounts allocated to the GIA and
the amount thereof, are general economic trends, rates of return currently
available and anticipated on investments, regulatory and tax requirements and
competitive factors. ANY INTEREST CREDITED TO AMOUNTS ALLOCATED TO THE GIA IN
EXCESS OF 4% PER YEAR WILL BE DETERMINED IN THE SOLE DISCRETION OF PHOENIX AND
WITHOUT REGARD TO ANY SPECIFIC FORMULA. THE CONTRACT OWNER ASSUMES THE RISK THAT
INTEREST CREDITED TO GIA ALLOCATIONS MAY NOT EXCEED THE MINIMUM GUARANTEE OF 4%
FOR ANY GIVEN YEAR.
Phoenix is aware of no statutory limitations on the maximum amount of
interest it may credit, and the Board of Directors has set no limitations.
However, inherent in Phoenix's exercise of discretion in this regard is the
equitable allocation of distributable earnings and surplus among its various
Policyholders and Contract Owners.
Excess interest, if any, will be credited on the GIA Policy Value. Phoenix
guarantees that, at all times, the GIA Policy Value will not be less than the
amount of premium payments allocated to the GIA, plus interest at the rate of 4%
per year, compounded annually, plus any additional interest which Phoenix may
credit to the GIA, less the sum of all annual administrative or surrender
charges, any applicable premium taxes deducted from the GIA, and less any
amounts surrendered or loaned. If the Policyowner surrenders the Policy, the
amount available from the GIA will be reduced by any applicable surrender charge
and annual administration charge. See "Deductions and Charges."
IN GENERAL, YOU CAN MAKE ONLY ONE TRANSFER PER YEAR FROM THE GIA. THE AMOUNT
THAT CAN BE TRANSFERRED OUT IS LIMITED TO THE GREATER OF $1,000 OR 25% OF THE
POLICY VALUE IN THE GIA AT THE TIME OF THE TRANSFER. IF YOU ELECT THE SYSTEMATIC
TRANSFER PROGRAM, APPROXIMATELY EQUAL AMOUNTS MAY BE TRANSFERRED OUT OF THE GIA
OVER A MINIMUM 18-MONTH PERIOD. ALSO, THE TOTAL POLICY VALUE ALLOCATED TO THE
GIA MAY BE TRANSFERRED OUT OF THE GIA TO ONE OR MORE OF THE SUBACCOUNTS OF THE
VUL ACCOUNT OVER A CONSECUTIVE FOUR-YEAR PERIOD ACCORDING TO THE FOLLOWING
ANNUALLY RENEWABLE SCHEDULE:
YEAR ONE: 25% YEAR TWO: 33%
YEAR THREE: 50% YEAR FOUR: 100%
78
<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 have never smoked. In states where cost
of insurance rates are not based on the Insured's sex, the tables designated
"male" apply to all standard risk Insureds who have never smoked. Account values
and Cash Surrender Values may be lower for smokers or former smokers or for risk
classes involving higher mortality risk. Planned premium payments are assumed to
be paid at the beginning of each Policy Year. The difference between the Policy
Value and the Cash Surrender Value in the first 10 years is the surrender
charge. Tables are included for death benefit Option 1 and Option 2. Tables also
are included to reflect the blended cost of insurance charge applied under a
Multiple Life Policy.
The death benefit, account value and Cash Surrender Value amounts reflect
the following current charges:
1. Issue charge of $600.
2. Monthly administrative charge of $20 per month. ($20 per month for Face
Amounts of less than or equal to $400,000; $0.05 per thousand for Face
Amounts of $400,001 up to $1,600,000; and $80 per month for Face Amounts
over $1,600,000.)
3. Premium tax charge of 2.25%.
4. A federal tax charge of 1.50%.
5. Cost of insurance charge. The tables illustrate cost of insurance at both
the current rates and at the maximum rates guaranteed in the Policies.
(See "Charges and Deductions--Cost of Insurance.")
6. Mortality and expense risk charge, which is a daily charge equivalent to
.80% on an annual basis (.25% on an annual basis after the 15th Policy
Year), against the VUL Account for mortality and expense risks. (See
"Charges and Deductions--Mortality and Expense Risk Charge.")
These illustrations also assume an average investment advisory fee of .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--Investment Management Charge.")
Taking into account the mortality and expense risk charge and the investment
advisory fees and expenses, the gross annual investment return rates of 0%, 6%
and 12% on the Funds' assets are equivalent to net annual investment return
rates of approximately -1.76%, 4.19% and 10.15%, respectively (applicable for
the first 15 Policy Years for Single Life Policies and -1.22%, 4.69% and 10.75%,
respectively, after the 15th Policy Year for Single Life Policies). 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 "Charges and
Deductions--Other Charges--Taxes.")
The second column of each table shows the amount that would accumulate if an
amount equal to the premiums paid were invested to earn interest, after taxes,
at 5% compounded annually. These tables show that if a Policy is returned in its
very early years for payment of its 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.
79
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY PAGE 1 OF 2
MALE 35 NEVERSMOKE FACE AMOUNT: $250,000
FEMALE 35 NEVERSMOKE INITIAL ANNUAL PREMIUM: $2,000
SURVIVORSHIP VARIABLE UNIVERSAL LIFE POLICY
A FLEXIBLE PREMIUM VARIABLE UNIVERSAL
LIFE INSURANCE POLICY OPTION 1
ASSUMING CURRENT CHARGES
<TABLE>
<CAPTION>
CASH CASH CASH
ASSUMED PREMIUM ACCOUNT SURRENDER DEATH ACCOUNT SURRENDER DEATH ACCOUNT SURRENDER DEATH
PREMIUM ACCUM. VALUE VALUE@ BENEFIT VALUE VALUE BENEFIT VALUE VALUE BENEFIT
YEAR PAYMENTS @ 5.0% @ 0% 0% @ 0% @ 6% @ 6% @ 6% @ 12% @ 12% @ 12%
-------- --------- --------- --------- ---------- ---------- ---------- --------- ---------- ---------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 2,000 2,100 610 0 250,000 668 0 250,000 727 0 250,000
2 2,000 4,305 1,461 737 250,000 1,631 907 250,000 1,809 1,085 250,000
3 2,000 6,620 2,299 1,756 250,000 2,638 2,094 250,000 3,005 2,462 250,000
4 2,000 9,051 3,124 2,762 250,000 3,688 3,326 250,000 4,326 3,964 250,000
5 2,000 11,604 3,935 3,754 250,000 4,785 4,604 250,000 5,784 5,603 250,000
6 2,000 14,284 5,400 5,400 250,000 6,621 6,621 250,000 8,108 8,108 250,000
7 2,000 17,098 6,842 6,842 250,000 8,538 8,538 250,000 10,676 10,676 250,000
8 2,000 20,053 8,260 8,260 250,000 10,540 10,540 250,000 13,511 13,511 250,000
9 2,000 23,156 9,655 9,655 250,000 12,631 12,631 250,000 16,643 16,643 250,000
10 2,000 26,414 11,026 11,026 250,000 14,813 14,813 250,000 20,102 20,102 250,000
11 2,000 29,834 12,535 12,535 250,000 17,262 17,262 250,000 24,104 24,104 250,000
12 2,000 33,426 14,017 14,017 250,000 19,818 19,818 250,000 28,524 28,524 250,000
13 2,000 37,197 15,477 15,477 250,000 22,491 22,491 250,000 33,412 33,412 250,000
14 2,000 41,157 16,918 16,918 250,000 25,288 25,288 250,000 38,819 38,819 250,000
15 2,000 45,315 18,340 18,340 250,000 28,215 28,215 250,000 44,800 44,800 250,000
16 2,000 49,681 19,743 19,743 250,000 31,279 31,279 250,000 51,417 51,417 250,000
17 2,000 54,265 21,127 21,127 250,000 34,484 34,484 250,000 58,738 58,738 250,000
18 2,000 59,078 22,493 22,493 250,000 37,839 37,839 250,000 66,836 66,836 250,000
19 2,000 64,132 23,840 23,840 250,000 41,349 41,349 250,000 75,794 75,794 250,000
20 2,000 69,439 25,170 25,170 250,000 45,023 45,023 250,000 85,704 85,704 250,000
21 2,000 75,010 26,541 26,541 250,000 48,930 48,930 250,000 96,734 96,734 250,000
22 2,000 80,861 27,894 27,894 250,000 53,019 53,019 250,000 108,936 108,936 250,000
23 2,000 87,004 29,222 29,222 250,000 57,292 57,292 250,000 122,429 122,429 250,000
24 2,000 93,454 30,524 30,524 250,000 61,755 61,755 250,000 137,352 137,352 250,000
25 2,000 100,227 31,798 31,798 250,000 66,417 66,417 250,000 153,855 153,855 250,000
26 2,000 107,338 33,043 33,043 250,000 71,286 71,286 250,000 172,110 172,110 250,000
27 2,000 114,805 34,257 34,257 250,000 76,370 76,370 250,000 192,302 192,302 250,000
28 2,000 122,645 35,438 35,438 250,000 81,677 81,677 250,000 214,638 214,638 270,445
29 2,000 130,878 36,585 36,585 250,000 87,218 87,218 250,000 239,337 239,337 296,779
30 2,000 139,522 37,695 37,695 250,000 93,001 93,001 250,000 266,649 266,649 325,312
</TABLE>
Based on 0% interest rate and guaranteed charges, the policy will lapse in year
__.
Death benefit, account value, and cash surrender value are based on hypothetical
gross interest rates shown, assume current and guaranteed charges and no policy
loans or withdrawals, and are calculated at the end of the policy year. Assumed
premium payments shown are assumed paid in full at the beginning of the policy
year. Payment at later times would reduce values and benefits below those
illustrated. Values shown reflect an effective annual asset charge of 1.37%
(includes mortality and expense risk charge of 0.40% and average fund operating
expenses of .97% applicable to the investment subaccounts). Hypothetical gross
interest rates are presented for illustrative purposes only to illustrate funds
allocated entirely to the investment subaccounts of the Account and do not in
any way represent actual results or suggest that such results will be achieved
in the future. Actual values will differ from those shown whenever actual
investment results differ from hypothetical gross interest rates illustrated. A
Guaranteed Interest Account providing interest at a minimum guaranteed rate of
4% also is available under this product through the General Account.
This illustration assumes a premium tax of 2.25%.
80
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY PAGE 2 OF 2
MALE 35 NEVERSMOKE FACE AMOUNT: $250,000
FEMALE 35 NEVERSMOKE INITIAL ANNUAL PREMIUM: $2,000
SURVIVORSHIP VARIABLE UNIVERSAL LIFE POLICY
A FLEXIBLE PREMIUM VARIABLE UNIVERSAL
LIFE INSURANCE POLICY OPTION 1
ASSUMING GUARANTEED CHARGES
<TABLE>
<CAPTION>
CASH CASH CASH
ASSUMED PREMIUM ACCOUNT SURRENDER DEATH ACCOUNT SURRENDER DEATH ACCOUNT SURRENDER DEATH
PREMIUM ACCUM. VALUE VALUE@ BENEFIT VALUE VALUE BENEFIT VALUE VALUE BENEFIT
YEAR PAYMENTS @ 5.0% @ 0% 0% @ 0% @ 6% @ 6% @ 6% @ 12% @ 12% @ 12%
-------- --------- --------- --------- ---------- ---------- ---------- --------- ---------- ---------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 2,000 2,100 609 0 250,000 666 0 250,000 725 0 250,000
2 2,000 4,305 1,456 731 250,000 1,625 901 250,000 1,803 1,078 250,000
3 2,000 6,620 2,289 1,745 250,000 2,625 2,082 250,000 2,991 2,448 250,000
4 2,000 9,051 3,107 2,744 250,000 3,668 3,305 250,000 4,301 3,939 250,000
5 2,000 11,604 3,910 3,729 250,000 4,753 4,572 250,000 5,745 5,564 250,000
6 2,000 14,284 5,364 5,364 250,000 6,575 6,575 250,000 8,049 8,049 250,000
7 2,000 17,098 6,793 6,793 250,000 8,473 8,473 250,000 10,589 10,589 250,000
8 2,000 20,053 8,196 8,196 250,000 10,451 10,451 250,000 13,389 13,389 250,000
9 2,000 23,156 9,572 9,572 250,000 12,513 12,513 250,000 16,475 16,475 250,000
10 2,000 26,414 10,923 10,923 250,000 14,660 14,660 250,000 19,876 19,876 250,000
11 2,000 29,834 12,408 12,408 250,000 17,069 17,069 250,000 23,807 23,807 250,000
12 2,000 33,426 13,864 13,864 250,000 19,577 19,577 250,000 28,140 28,140 250,000
13 2,000 37,197 15,289 15,289 250,000 22,187 22,187 250,000 32,915 32,915 250,000
14 2,000 41,157 16,683 16,683 250,000 24,905 24,905 250,000 38,178 38,178 250,000
15 2,000 45,315 18,044 18,044 250,000 27,731 27,731 250,000 43,977 43,977 250,000
16 2,000 49,681 19,371 19,371 250,000 30,670 30,670 250,000 50,369 50,369 250,000
17 2,000 54,265 20,662 20,662 250,000 33,725 33,725 250,000 57,412 57,412 250,000
18 2,000 59,078 21,914 21,914 250,000 36,897 36,897 250,000 65,173 65,173 250,000
19 2,000 64,132 23,124 23,124 250,000 40,189 40,189 250,000 73,726 73,726 250,000
20 2,000 69,439 24,290 24,290 250,000 43,603 43,603 250,000 83,150 83,150 250,000
21 2,000 75,010 25,406 25,406 250,000 47,141 47,141 250,000 93,537 93,537 250,000
22 2,000 80,861 26,468 26,468 250,000 50,804 50,804 250,000 104,986 104,986 250,000
23 2,000 87,004 27,473 27,473 250,000 54,594 54,594 250,000 117,610 117,610 250,000
24 2,000 93,454 28,416 28,416 250,000 58,513 58,513 250,000 131,533 131,533 250,000
25 2,000 100,227 29,289 29,289 250,000 62,563 62,563 250,000 146,895 146,895 250,000
26 2,000 107,338 30,085 30,085 250,000 66,741 66,741 250,000 163,852 163,852 250,000
27 2,000 114,805 30,791 30,791 250,000 71,046 71,046 250,000 182,579 182,579 250,000
28 2,000 122,645 31,393 31,393 250,000 75,473 75,473 250,000 203,272 203,272 256,123
29 2,000 130,878 31,870 31,870 250,000 80,014 80,014 250,000 226,104 226,104 280,370
30 2,000 139,522 32,197 32,197 250,000 84,656 84,656 250,000 251,268 251,268 306,547
</TABLE>
Based on 0% interest rate and guaranteed charges, the policy will lapse in year
__.
Death benefit, account value, and cash surrender value are based on hypothetical
gross interest rates shown, assume current and guaranteed charges and no policy
loans or withdrawals, and are calculated at the end of the policy year. Assumed
premium payments shown are assumed paid in full at the beginning of the policy
year. Payment at later times would reduce values and benefits below those
illustrated. Values shown reflect an effective annual asset charge of 1.57%
(includes mortality and expense risk charge of 0.60% and average fund operating
expenses of .97% applicable to the investment subaccounts). Hypothetical gross
interest rates are presented for illustrative purposes only to illustrate funds
allocated entirely to the investment subaccounts of the Account and do not in
any way represent actual results or suggest that such results will be achieved
in the future. Actual values will differ from those shown whenever actual
investment results differ from hypothetical gross interest rates illustrated. A
Guaranteed Interest Account providing interest at a minimum guaranteed rate of
4% also is available under this product through the General Account.
This illustration assumes a premium tax of 2.25%.
81
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY PAGE 1 OF 2
MALE 35 NEVERSMOKE FACE AMOUNT: $250,000
FEMALE 35 NEVERSMOKE INITIAL ANNUAL PREMIUM: $2,000
SURVIVORSHIP VARIABLE UNIVERSAL LIFE POLICY
A FLEXIBLE PREMIUM VARIABLE UNIVERSAL
LIFE INSURANCE POLICY OPTION 2
ASSUMING CURRENT CHARGES
<TABLE>
<CAPTION>
CASH CASH CASH
ASSUMED PREMIUM ACCOUNT SURRENDER DEATH ACCOUNT SURRENDER DEATH ACCOUNT SURRENDER DEATH
PREMIUM ACCUM. VALUE VALUE@ BENEFIT VALUE VALUE BENEFIT VALUE VALUE BENEFIT
YEAR PAYMENTS @ 5.0% @ 0% 0% @ 0% @ 6% @ 6% @ 6% @ 12% @ 12% @ 12%
-------- --------- --------- --------- ---------- ---------- ---------- --------- ---------- ---------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 2,000 2,100 610 0 250,611 668 0 250,669 727 0 250,727
2 2,000 4,305 1,461 737 251,462 1,631 907 251,632 1,809 1,085 251,810
3 2,000 6,620 2,299 1,756 252,300 2,637 2,094 252,638 3,005 2,462 253,006
4 2,000 9,051 3,124 2,761 253,124 3,688 3,326 253,688 4,326 3,963 254,326
5 2,000 11,604 3,935 3,754 253,935 4,785 4,603 254,785 5,784 5,602 255,784
6 2,000 14,284 5,399 5,399 255,400 6,620 6,620 256,621 8,107 8,107 258,108
7 2,000 17,098 6,840 6,840 256,841 8,537 8,537 258,537 10,674 10,674 260,674
8 2,000 20,053 8,258 8,258 258,259 10,538 10,538 260,539 13,508 13,508 263,509
9 2,000 23,156 9,652 9,652 259,653 12,627 12,627 262,628 16,638 16,638 266,639
10 2,000 26,414 11,022 11,022 261,022 14,807 14,807 264,808 20,094 20,094 270,095
11 2,000 29,834 12,529 12,529 262,530 17,254 17,254 267,254 24,092 24,092 274,092
12 2,000 33,426 14,009 14,009 264,009 19,806 19,806 269,806 28,506 28,506 278,506
13 2,000 37,197 15,466 15,466 265,467 22,474 22,474 272,475 33,385 33,385 283,386
14 2,000 41,157 16,904 16,904 266,905 25,266 25,266 275,267 38,783 38,783 288,783
15 2,000 45,315 18,323 18,323 268,323 28,187 28,187 278,188 44,752 44,752 294,753
16 2,000 49,681 19,722 19,722 269,723 31,243 31,243 281,244 51,355 51,355 301,356
17 2,000 54,265 21,103 21,103 271,104 34,441 34,441 284,442 58,658 58,658 308,659
18 2,000 59,078 22,465 22,465 272,466 37,787 37,787 287,788 66,736 66,736 316,736
19 2,000 64,132 23,809 23,809 273,809 41,288 41,288 291,288 75,670 75,670 325,671
20 2,000 69,439 25,134 25,134 275,135 44,950 44,950 294,951 85,552 85,552 335,552
21 2,000 75,010 26,501 26,501 276,502 48,846 48,846 298,846 96,548 96,548 346,548
22 2,000 80,861 27,850 27,850 277,850 52,921 52,921 302,921 108,710 108,710 358,711
23 2,000 87,004 29,173 29,173 279,173 57,177 57,177 307,177 122,154 122,154 372,154
24 2,000 93,454 30,467 30,467 280,468 61,620 61,620 311,620 137,012 137,012 387,013
25 2,000 100,227 31,732 31,732 281,733 66,255 66,255 316,256 153,434 153,434 403,434
26 2,000 107,338 32,966 32,966 282,966 71,091 71,091 321,091 171,582 171,582 421,582
27 2,000 114,805 24,166 24,166 284,167 76,133 76,133 326,133 191,636 191,636 441,637
28 2,000 122,645 35,331 35,331 285,331 81,388 81,388 331,388 213,797 213,797 463,797
29 2,000 130,878 36,457 36,457 286,458 86,863 86,863 336,863 238,283 238,283 488,284
30 2,000 139,522 37,542 37,542 287,543 92,565 92,565 342,565 265,339 265,339 515,340
</TABLE>
Based on 0% interest rate and guaranteed charges, the policy will lapse in year
__.
Death benefit, account value, and cash surrender value are based on hypothetical
gross interest rates shown, assume current and guaranteed charges and no policy
loans or withdrawals, and are calculated at the end of the policy year. Assumed
premium payments shown are assumed paid in full at the beginning of the policy
year. Payment at later times would reduce values and benefits below those
illustrated. Values shown reflect an effective annual asset charge of 1.37%
(includes mortality and expense risk charge of 0.40% and average fund operating
expenses of .97% applicable to the investment subaccounts). Hypothetical gross
interest rates are presented for illustrative purposes only to illustrate funds
allocated entirely to the investment subaccounts of the Account and do not in
any way represent actual results or suggest that such results will be achieved
in the future. Actual values will differ from those shown whenever actual
investment results differ from hypothetical gross interest rates illustrated. A
Guaranteed Interest Account providing interest at a minimum guaranteed rate of
4% also is available under this product through the General Account.
This illustration assumes a premium tax of 2.25%.
82
<PAGE>
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY PAGE 2 OF 2
MALE 35 NEVERSMOKE FACE AMOUNT: $250,000
FEMALE 35 NEVERSMOKE INITIAL ANNUAL PREMIUM: $2,000
SURVIVORSHIP VARIABLE UNIVERSAL LIFE POLICY
A FLEXIBLE PREMIUM VARIABLE UNIVERSAL
LIFE INSURANCE POLICY OPTION 2
ASSUMING GUARANTEED CHARGES
<TABLE>
<CAPTION>
CASH CASH CASH
ASSUMED PREMIUM ACCOUNT SURRENDER DEATH ACCOUNT SURRENDER DEATH ACCOUNT SURRENDER DEATH
PREMIUM ACCUM. VALUE VALUE@ BENEFIT VALUE VALUE BENEFIT VALUE VALUE BENEFIT
YEAR PAYMENTS @ 5.0% @ 0% 0% @ 0% @ 6% @ 6% @ 6% @ 12% @ 12% @ 12%
-------- --------- --------- --------- ---------- ---------- ---------- --------- ---------- ---------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 2,000 2,100 609 0 250,609 666 0 250,667 725 0 250,725
2 2,000 4,305 1,456 731 251,456 1,625 901 251,626 1,803 1,078 251,803
3 2,000 6,620 2,289 1,745 252,289 2,625 2,082 252,626 2,991 2,448 252,992
4 2,000 9,051 3,106 2,744 253,107 3,667 3,305 253,668 4,301 3,939 254,302
5 2,000 11,604 3,909 3,728 253,910 4,753 4,572 254,753 5,744 5,563 255,745
6 2,000 14,284 5,363 5,363 255,364 6,574 6,574 256,574 8,048 8,048 258,048
7 2,000 17,098 6,792 6,792 256,792 8,472 8,472 258,472 10,587 10,587 260,588
8 2,000 20,053 8,194 8,194 258,194 10,449 10,449 260,450 13,386 13,386 263,386
9 2,000 23,156 9,570 9,570 259,570 12,509 12,509 262,510 16,470 16,470 266,470
10 2,000 26,414 10,919 10,919 260,919 14,655 14,655 264,655 19,869 19,869 269,869
11 2,000 29,834 12,403 12,403 262,403 17,061 17,061 267,061 23,796 23,796 273,796
12 2,000 33,426 13,856 13,856 263,857 19,565 19,565 269,565 28,122 28,122 278,123
13 2,000 37,197 15,278 15,278 265,279 22,170 22,170 272,171 32,888 32,888 282,889
14 2,000 41,157 16,668 16,668 266,668 24,880 24,880 274,881 38,138 38,138 288,139
15 2,000 45,315 18,023 18,023 268,024 27,697 27,697 277,698 43,921 43,921 293,921
16 2,000 49,681 19,344 19,344 269,344 30,624 30,624 280,624 50,288 50,288 300,288
17 2,000 54,265 20,626 20,626 270,626 33,662 33,662 283,662 57,298 57,298 307,298
18 2,000 59,078 21,867 21,867 271,868 36,812 36,812 286,813 65,014 65,014 315,014
19 2,000 64,132 23,064 23,064 273,064 40,075 40,075 290,076 73,504 73,504 323,504
20 2,000 69,439 24,212 24,212 274,213 43,452 43,452 293,453 82,843 82,843 332,844
21 2,000 75,010 25,307 25,307 275,307 46,941 46,941 296,941 93,115 93,115 343,116
22 2,000 80,861 26,342 26,342 276,343 50,541 50,541 300,542 104,409 104,409 354,410
23 2,000 87,004 27,315 27,315 277,315 54,251 54,251 304,252 116,826 116,826 366,826
24 2,000 93,454 28,218 28,218 278,218 58,069 58,069 308,070 130,475 130,475 380,475
25 2,000 100,227 29,043 29,043 279,044 61,991 61,991 311,991 145,747 145,747 395,474
26 2,000 107,338 29,781 29,781 279,782 66,008 66,008 316,009 161,950 161,950 411,951
27 2,000 114,805 30,418 30,418 280,419 70,111 70,111 320,112 180,044 180,044 430,044
28 2,000 122,645 30,936 30,936 280,937 74,283 74,283 324,283 199,900 199,900 449,901
29 2,000 130,878 31,311 31,311 281,311 78,499 78,499 328,500 221,675 221,675 471,676
30 2,000 139,522 31,515 31,515 281,515 82,732 82,732 332,732 245,537 245,537 495,537
</TABLE>
Based on 0% interest rate and guaranteed charges, the policy will lapse in year
__.
Death benefit, account value, and cash surrender value are based on hypothetical
gross interest rates shown, assume current and guaranteed charges and no policy
loans or withdrawals, and are calculated at the end of the policy year. Assumed
premium payments shown are assumed paid in full at the beginning of the policy
year. Payment at later times would reduce values and benefits below those
illustrated. Values shown reflect an effective annual asset charge of 1.57%
(includes mortality and expense risk charge of 0.60% and average fund operating
expenses of .97% applicable to the investment subaccounts). Hypothetical gross
interest rates are presented for illustrative purposes only to illustrate funds
allocated entirely to the investment subaccounts of the Account and do not in
any way represent actual results or suggest that such results will be achieved
in the future. Actual values will differ from those shown whenever actual
investment results differ from hypothetical gross interest rates illustrated. A
Guaranteed Interest Account providing interest at a minimum guaranteed rate of
4% also is available under this product through the General Account.
This illustration assumes a premium tax of 2.25%.
83
<PAGE>
PART II. OTHER INFORMATION
UNDERTAKING TO FILE REPORTS
Subject to the terms and conditions of Section 15(d) of the Securities
Exchange Act of 1934, the undersigned registrant hereby undertakes to file with
the Securities and Exchange Commission such supplementary and periodic
information, documents and reports as may be prescribed by any rule or
regulation of the Commission heretofore or hereafter duly adopted pursuant to
authority conferred in that Section.
RULE 484 UNDERTAKING
Section 723 of the New York Business Corporation Law, as made applicable to
insurance companies by Section 108 of the New York Insurance Law, provides that
a corporation may indemnify any director or officer of the corporation made, or
threatened to be made, a party to an action or proceeding other than one by or
in the right of the corporation to procure a judgment in its favor, whether
civil or criminal, including an action by or in the right of any other
corporation of any type or kind, by reason of the fact that he, his testator or
intestate, served such other corporation in any capacity at the request of the
indemnifying corporation.
Article VI Section 6.1 of the By-laws of Phoenix Home Life provides that:
"To the full extent permitted by the laws of the State of New York, the Company
shall indemnify any person made or threatened to be made a party to any action,
proceeding or investigation, whether civil or criminal, by reason of the fact
that such person ... is or was a Director or Officer of the Company; or ...
serves or served another corporation, partnership, joint venture, trust,
employee benefit plan or other enterprise in any capacity at the request of the
Company, and also is or was a Director or Officer of the Company ... The Company
shall also indemnify any [such] person ... by reason of the fact that such
person or such person's testator or intestate is or was an employee or agent of
the Company ...."
Insofar as indemnification for liability arising under the Securities Act of
1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the registrant of expenses incurred
or paid by a director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
REPRESENTATION PURSUANT TO SECTION 26(E)(2)(A) UNDER THE
INVESTMENT COMPANY ACT OF 1940.
Pursuant to Section 26(e)(2)(A) of the Investment Company Act of 1940, as
amended, Phoenix Home Life Mutual Insurance Company represents that the fees and
charges deducted under the Policies, in the aggregate, are reasonable in
relation to the services rendered, the expenses expected to be incurred and the
risks to be assumed thereunder by Phoenix Home Life Mutual Insurance Company.
II-1
<PAGE>
CONTENTS OF REGISTRATION STATEMENT
This Form S-6 Registration Statement comprises the following papers and
documents:
The facing sheet.
The Prospectus describing Phoenix Home Life Mutual Insurance Company Policy
Forms V602 (Version A) "Estate Edge," consisting of 99 pages and V611
(Version B) "Survivorship Variable Universal Life Policy," consisting of
83 pages.
The undertaking to file reports.
The Rule 484 undertaking.
Representation Pursuant to Section 26(e)(2)(A) of the Investment Company Act
of 1940.
The signature page.
The powers of attorney were filed via Edgar with registrant's Post-Effective
Amendment No. 1 on February 28, 1998 and are incorporated herein by
reference.
Written consents 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 Depositor establishing the
VUL Account is incorporated by reference to Registration
Statement on Form S-6, (No. 33-23251) filed on July 21, 1988 and
filed via Edgar with Registrant's Post-Effective Amendment No. 18
(No. 33-23251) on December 17, 1999.
(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 Registrant's
Registration Statement on Form S-6 filed on March 12, 1997.
(b) Form of Broker Dealer Supervisory and Service Agreement
between Phoenix Equity Planning Corporation and Independent
Brokers with respect to the sale of Policies, filed via Edgar
with Pre-Effective Amendment No. 1 on September 10, 1997.
(c) Not Applicable.
(4) Not Applicable.
(5) Specimen Policies with optional riders.
(a) Version A Estate Edge, Form Number V602 of Depositor, filed
via Edgar with Pre-Effective Amendment No. 1 on September 10,
1997.
(b) Version B form of policy*
(6) (a) Charter of Phoenix Home Life Mutual Insurance Company is
incorporated herein by reference to Post-Effective Amendment
No. 12 to Form S-6, Registration No. 33-23251, filed on
February 13, 1996.
(b) By-laws of Phoenix Home Life Mutual Insurance Company is
incorporated herein by reference to Post-Effective Amendment
No. 12 to Form S-6, Registration No. 33-23251, filed on
February 13, 1996.
(7) Not Applicable.
(8) Not Applicable.
(9) Not Applicable.
(10) (a) Form of application for Estate Edge, filed via Edgar with
Pre-Effective Amendment No. 1, filed on September 10, 1997.
(b) Form of application for Version B.*
II-2
<PAGE>
(11) Memorandum describing transfer and redemption procedures and
method of computing adjustments in payments and cash values upon
conversion to fixed benefit policies, filed via Edgar with
Registrant's Registration Statement on Form S-6 filed on March 12,
1997.
2. Opinion of Edwin L. Kerr, Esq., Counsel of Depositor as to the legality of
the securities being registered, is incorporated by reference and was
filed via Edgar with Pre-Effective Amendment No. 2 on September 15, 1997.
3. Not Applicable. No financial statement will be omitted from the Prospectus
pursuant to Instruction 1(b) or (c) of Part I.
4. Not Applicable.
5. Not Applicable.
6. Consent of PricewaterhouseCoopers LLP.*
7. Consent of Edwin L. Kerr, Esq.*
8. Consent of Paul M. Fischer, FSA, CLU, ChFC*
--------------
* To be filed by amendment.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant,
Phoenix Home Life Variable Universal Life Account certifies that it meets all
the requirements for effectiveness of this Registration Statement under Rule
485(b) of the Securities Act and has duly caused this Registration Statement to
be signed on its behalf by the undersigned thereunto duly authorized, in the
City of Hartford, State of Connecticut on the 13th day of October, 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, Assistant Secretary
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities indicated on the 13th day of October, 2000.
<TABLE>
<CAPTION>
<S> <C> <C>
SIGNATURE TITLE
--------- -----
Director
---------------------------------------
*Sal H. Alfiero
Director
---------------------------------------
*J. Carter Bacot
Director
---------------------------------------
*Peter C. Browning
Director
---------------------------------------
*Arthur P. Byrne
Director
---------------------------------------
*Richard N. Cooper
Director
---------------------------------------
*Gordon J. Davis
Chairman of the Board, Chief Executive
--------------------------------------- Officer (Principal Executive Officer
*Robert W. Fiondella
Director
---------------------------------------
*Jerry J. Jasinowski
Director
---------------------------------------
*John W. Johnstone
</TABLE>
S-1
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
SIGNATURE TITLE
--------- -----
Director
---------------------------------------
*Marilyn E. LaMarche
Director
---------------------------------------
*Philip R. McLoughlin
Director
---------------------------------------
*Indra Nooyi
Executive Vice President and Chief Financial
--------------------------------------- Officer (Principal Accounting and Financial Officer
*David W. Searfoss
Director
---------------------------------------
*Robert F. Vizza
Director
---------------------------------------
*Robert G. Wilson
Director and President
---------------------------------------
*Dona D. Young
By: /s/ Dona D. Young
----------------------------
*DONA D. YOUNG AS ATTORNEY-IN-FACT PURSUANT TO POWERS OF ATTORNEY, PREVIOUSLY
FILED.
</TABLE>
S-2
