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As Phoenix Cos. posted its fifth straight net loss in the third quarter, the U.S. life insurer said it formed a distribution company, which inked a deal with financial services firm Edward Jones to provide life insurance consulting services.
The formation of Saybrus Partners, the distribution company, is "very good news" for Phoenix because it's one of the ways the company is taking its existing capabilities and applying them in new ways, said Alice Ericson, a spokeswoman for Phoenix (NYSE: PNX).
The company is now working with Edward Jones to help their financial advisers address clients' life insurance needs, which would be a new source of fee-based revenue for Phoenix, Ericson explained.
Annualized premium for life insurance declined sharply to $4.5 million from $55.8 million in last year's third quarter, while deposits into its annuities showed a significant drop to $12.6 million from $157.1 million, the company said in a statement.
To grow life sales, Phoenix continues to pursue new distribution relationships, particularly with independent marketing organizations, Ericson said.
In March, State Farm Mutual Automobile Insurance Co. told the company that it would suspend sales of its life insurance and variable annuities because of downgrades by rating agencies to Phoenix's life insurance subsidiaries (BestWire, March 4, 2009). Soon after, A.M. Best Co. downgraded the financial strength rating to B++ (Good) from A (Excellent) of Phoenix's core life insurance entities (BestWire, March 10, 2009).
The company narrowed its net loss to $26.6 million, compared with a $339.5 million net loss in last year's third quarter. Results included $45.7 million in noncash charges, including $27 million on goodwill impairment and $18.7 million in expense write-downs; and $12.7 million in severance and other costs.
"We believe this quarter's results indicate we've turned the corner on many key metrics," said James D. Wehr, president and chief executive officer, in a statement. "Expense reductions began to have an impact, and surrenders remained at manageable levels."
The company completed the previously announced layoffs of 35% of its work force, which it said is a big part of eliminating $110 million in annual expenses.
Separately, Phoenix said Saybrus would provide consultation services to partner companies and support for its products within its own distribution channels. Its wealth management consultants will work with more than 11,700 Edward Jones financial advisers.
The initial three-year agreement focuses the consultants on two new insurers in the Edward Jones retail distribution network -- John Hancock Life Insurance Co. (USA) and Pacific Life Insurance Co.
Wehr said Phoenix's investment portfolio "continues to be a strong contributor to improving Phoenix's balance sheet and stabilizing statutory surplus."
Gross credit impairments totaled $14.9 million but were down from $38.1 million the same period a year ago.
Total revenues fell 4.5% to $543.4 million.
Wehr took over as president and CEO in April, succeeding Dona D. Young, who retired from the Hartford, Conn.-based life insurer after 29 years.
On the afternoon of Nov. 4, Phoenix's stock was down 6.18% from the previous close, trading at $3.34 a share.
Phoenix Life Insurance Co. currently has a Best's Financial Strength Rating of B++ (Good).
(By Fran Matso Lysiak, senior associate editor, BestWeek: fran.lysiak@ambest.com)
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