The Phoenix Companies - Life Insurance

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Sales

$2.6 billion

Business Description
The company is a provider of life insurance, annuity and asset management products for the accumulation, preservation
and transfer of wealth. We provide products and services to affluent and high-net-worth individuals through
their advisors and to institutions directly and through consultants. We offer a broad range of life insurance,
annuity and asset management products and services through a variety of distributors.

The companies website is www.phoenixwm.com.

The affluent and high-net-worth market is a growing market with significant demand for customized products and
services. We define affluent as those households with anet worth of $500,000 or greater, excluding their
primary residence. We define high-net-worth, a subset of the affluent category, as those households that have
net worth, excluding primary residence, of over $1,000,000. Our wealth management products and services are
designed to assist advisors and their clients in this target market to achieve three main goals:

• the accumulation of wealth, primarily during an individual's working years;

• the preservation of income and wealth during retirement and following death; and

• the efficient transfer of wealth in a variety of situations, including through estate planning,
business continuation planning and charitable giving.

We provide our wealth management products and services through various distribution channels, such as:

• non-affiliated financial intermediaries such as national and regional broker-dealers, banks,
financial planning firms, advisor groups and other insurance companies; and

• our affiliated retail producers, most of whom are registered representatives of our wholly-owned
retail broker-dealer WS Griffith Advisors, Inc., or WS Griffith.

We have two operating segments, Life and Annuity and Asset Management, which include three product lines: life
insurance, annuities and asset management. Both segments serve the affluent and high-net-worth market, which
presents opportunities to leverage our capabilities and relationships. In addition to managing third-party
assets, Asset Management manages both the general accounts of the Life Companies and many of the separate
account portfolios available through variable life and annuity products.

Life and Annuity Segment

Our Life and Annuity segment offers a variety of life insurance and annuity products through affiliated and
non-affiliated distributors. We believe our competitive advantage in this segment consists of five main
components:

• our innovative products;
• our diversified asset management capability;
• our distribution relationships with institutions that have access to our target market and the
value-added the distributors provide those institutions;
• our ability to combine products and services that distributors and their clients find attractive; and
• our underwriting expertise.

Life and Annuity Products

Life Products

Our life insurance products include variable universal life, universal life, term life and other insurance
products. Because of our target market, we are a leading writer of second-to-die life insurance. Second-to-die
products aretypically used for estate planning purposes and insure two lives rather than one, with the policy

proceeds paid after the death of both insured individuals.

Variable Universal Life. Variable universal life products provide insurance coverage and give the policyholder
various investment choices, flexible premium payments and coverage amounts and limited guarantees. The
policyholder may direct premiums and cash value into a variety of separate investment accounts, accounts that
are maintained separately from the other assets of the Life Companies and are not part of the general accounts
of the Life Companies, or into the general account. In separate investment accounts, the policyholder bears the
entire risk of the investment results. We collect fees for the management of these various investment accounts
and the net return is credited directly to the policyholder's accounts. With some variable universal products,
by maintaining a certain premium level the policyholder receives guarantees that protect the policy's death
benefit if, due to adverse investment experience, the policyholder's account balance is zero. We retain the
right within limits to adjust the fees we assess for providing administrative services. We also collect fees to
cover mortality costs; these fees may be adjusted by us but may not exceed contractual limits.

Universal Life. Universal life products provide insurance coverage on the same basis as variable universal life
products, except that premiums, and the resulting accumulated balances, are allocated only to our general
account for investment. Universal life products may allow the policyholder to increase or decrease the amount
of death benefit coverage over the term of the policy, and also may allow the policyholder to adjust the
frequency and amount of premium payments. Some universal life products provide guarantees that protect the
policy's death benefit if specified minimum premiums are paid. We credit premiums, net of expenses, to an
account maintained for the policyholder. We credit interest to the account at rates that we determine, subject
to certain minimums. Specific charges are made against the account for expenses. We also collect fees to cover
mortality costs; these fees may be adjusted by us but may not exceed contractual limits.

Term Life. Term life insurance provides a guaranteed benefit upon the death of the insured within a specified
time period, in return for the periodic payment of premiums. Specified coverage periods range from one to
thirty years, but not longer than the period over which premiums are paid. Premiums may be level for the
coverage period or may vary. Term insurance products are sometimes referred to as pure protection products, in
that there are normally no savings or investment elements. Term contracts expire without value at the end of
the coverage period. Our term insurance policies allow policyholders to convert to permanent coverage,
generally without evidence of insurability.

Annuity Products

We offer a variety of variable annuities to meet the accumulation and preservation needs of the affluent and
high-net-worth market. Deferred annuities, in which funds accumulate for a number of years before periodic
payments begin, enable the contractholder to save for retirement and also provide options that protect against
outliving assets during retirement. Immediate annuities are purchased by means of a single lump sum payment and
begin paying periodic income immediately. We believe this product is especially attractive to those affluent
and high-net-worth retirees who are rolling over pension or retirement plan assets and seek an income stream
based entirely or partly on equity market performance.

Variable annuities are separate account products, which means that the contractholder bears the investment risk
as deposits are directed into a variety of separate investment accounts. The contractholder typically can also
direct funds to a general account option in which case we credit interest at rates we determine, subject to
certain minimums. Contractholders also may elect certain enhanced death benefit guarantees, for which they are
assessed a specific charge. Our major sources of revenues from annuities are mortality and expense fees charged
to the contractholder, generally determined as a percentage of the market value of any underlying separate
account balances, and the excess of investment income over credited interest for funds invested in our general
account.

Other Products and Services

Life and Annuity is focused on the development of other products and distribution relationships that respond to
the affluent and high-net-worth market's demand for wealth management solutions.

Executive Benefits. Many of our products are also designed to be used by corporations to fund special deferred
compensation plans and benefit programs for key employees, commonly referred to as executive benefits. We view
these products as a source of growing fee-based business.

Private Placement Life and Annuity Products. Private placement products are individually customized life and
annuity offerings that include single premium life, second-to-die life and variable annuity products. These
products have minimum deposits of over $500,000, targeting the wealthiest segment of the high-net-worth market.
The average face amount of life insurance policies sold by Philadelphia Financial Group, our private placement
distributor, in 2003 was $21.9 million and the average annuity deposit was $2.8 million.

Underwriting

Insurance underwriting is the process of examining, accepting or rejecting insurance risks, and classifying
those accepted in order to charge appropriate premiums or mortality charges. Underwriting also involves
determining the amount and type of reinsurance appropriate for a particular type of risk.

We believe we have particular expertise in evaluating the underwriting risks relevant to our target market. We
believe this expertise enables us to make appropriate underwriting decisions, including, in some instances, the
issuance of policies on more competitive terms than other insurers would offer. Phoenix Life has a long
tradition of underwriting innovation. Beginning in 1955, we were among the first insurance companies to offer
reduced rates to women. We believe we were the second company to offer reduced rates to non-smokers, beginning
in 1967. Our underwriting team includes doctors and other medical staff to ensure, among other things, that we
are focused on current developments in medical technology.

Our underwriting standards for life insurance are intended to result in the issuance of policies that produce
mortality experience consistent with the assumptions used in product pricing. The overall profitability of our
life insurance business depends, to a large extent, on the degree to which our mortality experience compares to
our pricing assumptions. Our underwriting is based on our historical mortality experience, as well as on the
experience of the insurance industry and of the general population. We continually compare our underwriting
standards to those of the industry to assist in managing our mortality risk and to stay abreast of industry
trends.

Our life insurance underwriters evaluate policy applications on the basis of the information provided by the
applicant and others. We use a variety of methods to evaluate certain policy applications, such as those where
the size of the policy sought is particularly large, or where the applicant is an older individual, has a known
medical impairment or is engaged in a hazardous occupation or hobby. Consistent with industry practice, we
require medical examinations and other tests depending upon the age of the applicant and the size of the
proposed policy.

In the executive benefits market, we issue life policies covering multiple lives on a guaranteed issue basis,
within specified limits per life insured, whereby the amount of insurance issued per life on a guaranteed basis
is related to the total number of lives being covered and the particular need for which the product is being
purchased. Guaranteed issue underwriting applies to employees actively at work, and product pricing reflects
the additional guaranteed issue underwriting risk.

Asset Management Segment

We conduct activities in Asset Management with a focus on two customer groups -- private client and
institutional. Through our private client group, we provide asset management services principally on a
discretionary basis, with products consisting of open-end mutual funds and managed accounts. Managed accounts
include intermediary programs sponsored and distributed by non-affiliated broker-dealers, and direct managed
accounts which are sold and administered by us. These two types of managed accounts generally require minimum
investments of $100,000 and $1 million, respectively. Our private client business also provides transfer
agency, accounting and administrative services to most of our open-end mutual funds.

Through our institutional group, we provide discretionary and non-discretionary investment management services
primarily to corporations, multi-employer retirement funds and foundations, as well as to endowments and
special purpose funds. In addition, we manage closed-end funds and alternative financial products such as
structured finance products. Structured finance products include collateralized obligations such as
collateralized debt obligations, or CDOs, backed by portfolios of public high yield bonds, emerging markets
bonds, commercial mortgage-backed or asset-backed securities.