Fitch Downgrades Phoenix Life Insurance Company's IFS to 'BB+'; Outlook Negative

NEW YORK--(Business Wire)--
Fitch Ratings has downgraded the Insurer Financial Strength (IFS) ratings
assigned to the life insurance subsidiaries of The Phoenix Companies, Inc.
(NYSE: PNX) to 'BB+' from 'BBB'. The Rating Outlook remains Negative. A full
rating list is provided below.

Fitch's rating action reflects: 1) its ongoing concerns with respect to PNX's
strategic direction and the impact on its credit profile longer term; 2) its
view that PNX has limited flexibility to improve capital excluding any
regulatory relief; 3) the maintenance of the company's current policyholder
dividend scale into 2010, which Fitch considers an important lever for the
preservation of capital and has been lowered by many of PNX's peers; and 4)
negative credit migration in the company's structured portfolio, which could put
further pressure on capital.

In Fitch's view, and consistent with its rating definitions, the combination of
these concerns has elevated vulnerability for PNX to cease or interrupt
policyholder payments, particularly as the result of adverse economic or market
changes over time. However, business or financial alternatives may be available
to allow for policyholder and contract obligations to be met in a timely manner.

The Negative Outlook is primarily based on concern over PNX's weak operating
earnings profile, very limited financial flexibility, and an expectation of
further deterioration in the company's capital position over the near-term
driven by credit losses.

In Fitch's view, the uncertainty of PNX's strategic direction could have a
negative long-term impact on its credit profile. Fitch believes the potential
income generated by PNX's new distribution company, Saybrus Partners, will not
offset the decline in earnings from insurance operations. Fitch expects
long-term insurance earnings to diminish more rapidly than original expectations
primarily as a result of elevated life and annuity surrenders coupled with the
very low sales volume. Although Fitch recognizes that the latter will result in
less capital strain in the near term, the negative longer-term implications for
earnings growth and statutory capital regeneration is of more concern.

Fitch also believes PNX's capital flexibility is limited and that it will be
difficult for the company to meet its stated RBC target of 300% by year-end
2009, excluding regulatory relief. PNX has estimated its RBC to be 243% at the
end of the third quarter of 2009 (3Q'09), excluding regulatory relief. Self
generation of capital through statutory earnings may be difficult with an
estimated net loss of $35 million through 3Q'09. Fitch estimated PNX's total
adjusted capital (TAC) to be $778 million at the end of 3Q'09, relatively
consistent with second quarter results and down 23% from year-end 2008 ($1,013
million). Approximately 22% of PNX's estimated TAC at Sept. 30, 2009 is made up
of surplus notes.

Fitch considers the policyholder dividend one of PNX's most powerful capital
management tools. Most companies with significant participating policies lowered
their 2010 dividend scale to reflect the difficult economic environment,
particularly high credit losses. In September 2009, PNX announced that it would
maintain the current policyholder dividend scale effective Jan. 1, 2010 for its
participating policies. The amount expected to be paid in 2010 is $300 million.

Ratings migration was meaningful in 3Q'09 with below investment grade (BIG)
bonds moving to 11.4% of total fixed income securities up from 10.5% at 2Q'09
and 8.2% at year-end 2008. Negative rating migration coupled with declining
statutory capital has caused the BIG-to-TAC ratio to increase from 79% at
year-end 2008 to 155% estimated at Sept. 30, 2009. Additionally, the composition
of BIG portfolio has also migrated to lower rating levels. Based on the amount
and quality of the BIG exposure, Fitch believes PNX is more vulnerable to
potential credit losses than considered in the previous rating.

Fitch has downgraded the following ratings:

Phoenix Life Insurance Company

AGL Life Assurance Company

PHL Variable Insurance Company

Phoenix Life and Annuity Company

--IFS to 'BB+' from 'BBB'.

The Outlook remains Negative.

Additional information is available at 'www.fitchratings.com'. The issuer did
not participate in the rating process other than through the medium of its
public disclosure.

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Fitch Ratings
Lauren Kalinowski, CPA, 212-908-0524, New York
Bruce Cox, 312-606-2316, Chicago
or
Media Relations:
Brian Bertsch, 212-908-0549, New York
Email: brian.bertsch@fitchratings.com

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