A.M. Best Revises Outlook to Negative for The Phoenix Companies, Inc. and Its Core Subsidiaries

A.M. Best Co. has revised the outlook to negative from stable and affirmed the financial strength rating (FSR) of A (Excellent) and issuer credit ratings (ICR) of "a” of the core life insurance entities of The Phoenix Companies, Inc. (Phoenix) (Hartford, CT) [NYSE: PNX]. In addition, A.M. Best has revised the outlook to negative from stable and affirmed the ICR of "bbb” of Phoenix and the debt ratings on securities issued by Phoenix and Phoenix Life Insurance Company (New York), the group’s lead operating company. (See below for a detailed list of the companies and ratings.)

The ratings of Phoenix and its core life insurance entities reflect their adequate risk-adjusted capital positions and their profitable operating results on both a statutory and GAAP basis. Phoenix maintains significant market positions in the sale of individual life and annuity products, utilizing a broad, non-affiliated distribution platform to meet the needs of the affluent and high net worth market. A.M. Best notes that although Phoenix realized a decline in both absolute and risk-adjusted capital through the first three quarters of 2008, the company implemented certain strategic initiatives, which are expected to lead to an improvement in the reported statutory surplus position of its core life companies at year-end.

Offsetting rating factors include below-average operating returns, recently declining life insurance and annuity sales and lower predicted renewal premiums in the closed block. A.M. Best also notes that Phoenix maintains higher than industry average exposure to commercial mortgage-backed securities, Alt-A residential mortgage-backed securities and below investment grade bonds as a result of its investment strategy. Furthermore, due mainly to strong life and annuity sales prior to 2008, Phoenix’s total intangibles to adjusted equity ratio remains above similarly-rated peers.

The revised outlook reflects Phoenix’s significant unrealized loss position within its investment portfolio, as well as the dampening effect that the current environment has had on Phoenix’s previously favorable sales and earnings trends. Additionally, given the market environment, A.M. Best anticipates material investment impairments at year-end 2008, with the likelihood of further write-downs in 2009. Despite fourth quarter 2008 improvements in absolute and risk-adjusted capitalization driven by asset rebalancing and significant reinsurance transactions, the group’s capital position is expected to decline relative to the previous year-end.

Concurrently, A.M. Best has assigned indicative ratings of "bbb” on senior unsecured debt, "bbb-” on subordinated debt and "bb+” on preferred stock of Phoenix’s $750 million universal shelf registration filed on January 6, 2009 to replace its current $750 million shelf registration, which expired on November 30, 2008. The outlook assigned to the indicative ratings is negative.

The shelf offering allows Phoenix to periodically sell debt securities, ordinary shares, preference shares and other securities with net proceeds to be used for working capital and general corporate purposes. Phoenix’s debt-to-adjusted capital and fixed charge coverage ratios are expected to remain within A.M. Best’s published parameters for the company’s current ratings.

The FSR of A (Excellent) and ICRs of "a” have been affirmed for the following core life insurance entities of The Phoenix Companies, Inc.:

• Phoenix Life Insurance Company
• PHL Variable Insurance Company
• AGL Life Assurance Company

The FSR of A- (Excellent) and ICRs of "a-” have been affirmed for the following non-core life insurance entities of The Phoenix Companies, Inc.:

• Phoenix Life and Annuity Company
• American Phoenix Life and Reassurance Company

The following debt ratings have been affirmed:

The Phoenix Companies, Inc.—

-- "bbb” on $300 million 7.45% senior unsecured notes, due 2032

Phoenix Life Insurance Company—

-- "bbb+” on $175 million 7.15% surplus notes, due 2034

The following debt ratings have been assigned under the $750 million universal shelf registration:

The Phoenix Companies, Inc. —

-- "bbb” on senior unsecured debt

-- "bbb-” on subordinated debt

-- "bb+” on preferred stock

Founded in 1899, A.M. Best Company is a global full-service credit rating organization dedicated to serving the financial and health care service industries, including insurance companies, banks, hospitals and health care system providers. For more information, visit www.ambest.com.