HARTFORD, Conn.--(BUSINESS WIRE)--Feb. 7, 2008--The Phoenix
Companies, Inc. (NYSE:PNX) announced today that it intends to spin off
its asset management subsidiary, Phoenix Investment Partners ("PXP"),
to Phoenix's shareholders.
"Our Board and management team believe that separating these
businesses is the next logical step in our ongoing efforts to build
value for all of our shareholders," said Dona D. Young, chairman,
president and chief executive officer of The Phoenix Companies.
"This action is the culmination of careful, thoughtful moves we
have made over the course of five years to rebuild our asset
management business - a series of steps that opened up an increasingly
broader range of options. Last year, we began another comprehensive
analysis of these options, together with independent financial
advisors, and concluded it is now possible to pursue a spin-off.
Separation will increase clarity on valuation for the respective
businesses and serve the best long-term interests of both companies
and their shareholders by allowing them to grow under different
operating models best suited to each business," Mrs. Young said.
"We have great confidence in the competitive strengths of PXP. Its
product performance has turned around, resulting in much improved
flows, and margins have increased. With this step, PXP's management
will have the focus and clarity necessary to build on those advantages
and use its stable cash profitability to reinvest in growth.
"At the same time, as a 'pure play' life and annuity company
serving the high-growth affluent and high-net-worth marketplace, we
believe Phoenix will be able to demonstrate our full economic value to
the investment community. Our franchise has solid fundamentals and a
strong balance sheet. We generated 22 percent compound annual growth
in life and annuity pre-tax operating income between 2002 and 2007 and
substantial sales growth in 2007 - 29 percent in life and 51 percent
in annuity," she said.
"We are already leveraging this foundation to pursue related
growth businesses through our newly established Alternative Products
division and Life Solutions subsidiary, and we have access to
additional capital from our closed block that can be redeployed into
higher return opportunities. Going forward, I believe our greater
focus will enhance our excellent prospects, and the clarity of
stand-alone reporting will allow the life and annuity company to
achieve valuation based on its inherent strengths," Mrs. Young said.
Goodwin Capital Advisers, Inc., currently part of PXP with $17.9
billion in assets under management (AUM), will remain with Phoenix and
continue to manage Phoenix's general account assets. With its strong
fixed income team, Goodwin also will continue to manage certain PXP
retail mutual funds, with current AUM of $2.9 billion, under a
sub-advisory agreement, as well as institutional accounts.
The new asset management company will be led by PXP's current
president, George R. Aylward, and as an independent public company,
will build on several key competitive strengths:
-- Established asset management firm with $40.4 billion in AUM
(including Goodwin mutual funds) in all major products and
across retail and institutional markets.
-- A multi-manager, multi-style operation conducted through
independent boutique firms, including Duff & Phelps Investment
Management, Kayne Anderson Rudnick Investment Management, SCM
Advisors, Oakhurst Asset Managers, Phoenix/Zweig Advisors,
Engemann Asset Management, and Walnut Asset Management.
-- A leading retail complex with assets in all major market
categories including the PhoenixFunds(SM), with $17.2 billion
of AUM, $5.1 billion of closed end funds AUM, and $5.4 billion
of separately managed accounts AUM.
-- Strong investment performance in multiple products.
-- A broad distribution footprint providing access to all major
wirehouse and independent brokers.
-- A recently strengthened management team with key additions in
sales and marketing.
-- A stable and improving financial profile, with improving cash
earnings and operating margins.
"The entire PXP team is confident that we can enhance our business
model strategically, operationally and financially," said Mr. Aylward.
"We intend to build on our 2007 accomplishments, including leveraging
our strong product performance and distribution footprint to the
benefit of both investors in our funds and our new company. One of our
historic strengths has been the independent cultures of our individual
partner firms, and we are committed to continuing to recruit and
retain top investment talent as we grow the business for the future."
PXP's full year revenue in 2007 was $214.6 million. Excluding
Goodwin's third-party revenue, estimated revenue in 2007 for the
independent company would be $203.2 million. PXP's full year 2007
EBITDA was $38.9 million. Excluding Goodwin's 2007 EBITDA of
approximately $5 million, and with adjustments to reflect a new
expense structure for the independent company, estimated EBITDA in
2007 would be in the range of $37 million to $42 million. Phoenix
intends to eliminate corporate expenses currently allocated to PXP in
the next 18 to 24 months.
PXP's full year 2007 net income was $3.6 million and pre-tax
operating income was $7.4 million, both of which include $30.4 million
in pre-tax intangible asset amortization. See "Non-GAAP Financial
Measures" below for a reconciliation of GAAP net income to EBITDA,
which is a non-GAAP measure.
The transaction is expected to be consummated in the third quarter
of 2008. The company intends to structure the transaction on a
tax-free basis for the company and shareholders, and a registration
statement with an attached information statement detailing the
proposed spin-off will be filed with the Securities and Exchange
Commission. The registration statement will include important
information about Phoenix, PXP, the proposed spin-off and related
matters. Shareholders are urged to read the registration statement
when it becomes available.
PXP is currently reviewing listing alternatives among the various
Goldman Sachs Group Inc. and Wachovia Securities are acting as the
company's financial advisors in connection with the transaction.
Simpson Thacher & Bartlett LLP is acting as legal advisor.
With roots dating to 1851, The Phoenix Companies, Inc. (NYSE:PNX)
helps individuals and institutions solve their often highly complex
personal financial and business planning needs through its broad array
of life insurance, annuities and investments. In 2007, Phoenix had
annual revenues of $2.6 billion and total assets of $30.2 billion. For
more information, visit www.phoenixwm.com.
FORWARD LOOKING STATEMENTS
This press release may contain forward-looking statements within
the meaning of the Private Securities Litigation Reform Act of 1995
which, by their nature, are subject to risks and uncertainties. We
intend for these forward-looking statements to be covered by the safe
harbor provisions of the federal securities laws relating to
forward-looking statements. These include statements relating to
trends in, or representing management's beliefs about, our future
transactions, strategies, operations and financial results, as well as
other statements including words such as "anticipate", "believe,"
"plan," "estimate," "expect," "intend," "may," "should" and other
similar expressions. Forward-looking statements are made based upon
our current expectations and beliefs concerning trends and future
developments and their potential effects on the company. They are not
guarantees of future performance. Actual results may differ materially
from those suggested by forward-looking statements as a result of
risks and uncertainties which include, among others, the risks and
uncertainties described herein or in any of our filings with the SEC.
We undertake no obligation to update or revise publicly any
forward-looking statement, whether as a result of new information,
future events or otherwise.
NON-GAAP FINANCIAL MEASURES
In managing our Asset Management business, we analyze our
performance on the basis of earnings before interest, taxes,
depreciation and amortization ("EBITDA"), which does not equate to net
income as determined in accordance with GAAP. Rather, it is the
measure of profit or loss used by our management to evaluate
performance, allocate resources and manage our Asset Management
operations. We believe that EBITDA is an appropriate measure that is
useful to investors as well, because EBITDA provides additional
perspective on the operating efficiency and profitability of our Asset
Management business. EBITDA is not a substitute for net income and may
be different from similarly titled measures of other companies. A
reconciliation of net income to EBITDA is set forth below.
Reconciliation of Asset Management Net Income to Operating Income and
Earnings Before Income Taxes, Depreciation and Amortization (EBITDA)
For the Year-Ended December 31, 2007
$ in millions
Net Income $3.6
Adjustments for Operating Income:
Applicable income taxes 3.3
Realized investment losses, after income taxes 0.5
Operating Income 7.4
Adjustments for EBITDA:
Intangible asset amortization and impairments 30.4
CONTACT: The Phoenix Companies, Inc.
Alice S. Ericson, 860-403-5946
Ronald Aldridge, 860-403-6494
SOURCE: The Phoenix Companies, Inc.