UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

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FORM 10-K

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(Mark one)
þ	ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, ~~2013~~ 2014



¨	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ________ to ________

Commission file number 333-20277

PHL VARIABLE INSURANCE COMPANY

(Exact name of registrant as specified in its charter)



Connecticut	06-1045829
(State or other jurisdiction of	(I.R.S. Employer Identification No.)
incorporation or organization)

One American Row, Hartford, Connecticut	06102-5056
(Address of principal executive offices)	(Zip Code)

(860) 403-5000
(Registrant’s telephone number, including area code)

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. YES ¨ NO þ

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. YES ¨ NO þ

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES ¨þ NO þ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). YES ¨ þ NO þ¨

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Annual Report on Form 10-K or any amendment to this Annual Report on Form 10-K. þ

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definition of “large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):



Large accelerated filer o	Accelerated filer o	Non-accelerated filer þ	Smaller reporting company o
		(Do not check if smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). YES ¨ NO þ

PHL Variable Insurance Company is a wholly owned indirect subsidiary of The Phoenix Companies, Inc., and there is no market for the registrant’s common stock. As of ~~August~~April 216, ~~2014~~2015, there were 500 shares of the registrant’s common stock outstanding.

The registrant is filing this Form 10-K with the reduced disclosure format permitted by General Instruction (I)(1)(a) and (b) of Form 10-K.

Explanatory Note

This Annual Report on Form 10-K for the year ended December 31, ~~2013~~2014 (this “~~Form~~2014 Form 10-K”), is being filed ~~with the Securities and Exchange Commission (the “SEC”)~~ by PHL Variable Insurance Company (“we,” “our,” “us,” the “Company,” or “PHL Variable”), ~~prior~~contains toaudited ~~the~~financial ~~filing~~statements of the Company’s, ~~Quarterly~~prepared ~~Reports~~in onaccordance ~~Form~~with ~~10-Q~~United ~~for~~States ~~each~~Generally ofAccepted Accounting Principles (“U.S. GAAP”), for the ~~periods~~years ended ~~March~~December 31, ~~June 30 and September 30~~2014, 2013 ~~(the~~and ~~“2013~~2012, ~~Quarterly~~and ~~Periods”)~~unaudited U.S. ~~However,~~GAAP ~~this~~quarterly ~~Form~~financial ~~10-K~~statements ~~does~~and ~~contain~~financial ~~interim~~information ~~unaudited~~of ~~quarterly~~the ~~information~~Company for each of the ~~four~~ quarterly periods in(including six and nine month periods) of 2014 and 2013., ~~Pursuant~~which are presented on a revised basis to the ~~Order~~extent contained in a periodic report previously filed by the Company with the Securities and Exchange Commission (the “SEC”), and except as ~~defined~~indicated below), generally with the ~~Company~~same ~~intends~~level toof ~~file~~disclosure ~~Forms~~as ~~10-Q~~would ~~covering~~be ~~each~~contained in such periodic reports of the ~~2013~~Company, ~~Quarterly~~and ~~Periods~~with ~~following~~appropriate indication of the ~~filing~~financial ofstatements ~~this~~being ~~Form~~revised ~~10-K~~(the “Previously Issued Financial Statements”).

~~The~~This ~~Company~~2014 ~~filed a Current Report on~~ Form 810-K ~~with~~also ~~the~~corrects ~~Securities and Exchange Commission (~~the ~~“SEC”)~~Previously onIssued ~~September 18,~~Financial ~~2012~~Statements ~~(as~~for ~~was~~certain ~~amended~~known ~~by Forms 8-K/A filed by the Company on November 8~~errors, ~~2012,~~some ~~March 15, 2013 and April 24, 2013, respectively) disclosing its conclusion that certain~~ of ~~its~~which ~~previously~~are ~~issued~~recorded ~~annual audited and interim unaudited financial statements contained~~ in ~~its~~preceding ~~historical~~SEC ~~Annual~~periodic ~~Reports~~reports onas ~~Form 10~~out-~~K and Quarterly Reports on Form 10~~of-Qperiod ~~filed prior to September 18~~adjustments, ~~2012 should no longer be relied upon~~ and ~~should~~includes bea ~~restated~~note ~~(the~~to ~~“Restatement”).~~financial Onstatements ~~April~~regarding ~~25, 2014,~~ the ~~Company~~impact ~~filed~~of ~~its~~these ~~Annual~~prior ~~Report~~period ~~on Form 10-K for the year ended December 31, 2012 (the “2012 Form 10-K”) with the SEC containing the Restatement~~adjustments.

On ~~February 12~~March 31, ~~2014~~2015, ~~PHL Variable and its ultimate parent,~~ The Phoenix Companies, Inc. (“~~PNX” or “~~Phoenix”), ~~submitted~~filed ~~an Offer of Settlement~~ with the SEC ~~pursuant~~its toAnnual ~~which~~Report ~~PHL~~on ~~Variable~~Form ~~and Phoenix consented to the issuance of the form of an Order Instituting Cease~~10-~~and-Desist~~K ~~Proceedings~~for ~~Pursuant to Section 21C of~~ the ~~Securities~~year ~~Exchange~~ended ~~Act of 1934~~December 31, ~~Making Findings and Imposing a Cease-and-Desist Order (the “March~~ 2014 ~~Order”).~~containing ~~The~~audited ~~March~~consolidated ~~2014~~financial ~~Order~~statements ~~was~~of ~~approved~~Phoenix byfor the ~~SEC~~years onended ~~March 21~~December 31, 2014~~. Pursuant to the March 2014 Order~~, ~~PHL~~2013 ~~Variable~~ and ~~Phoenix~~2012, ~~have been directed to cease~~ and ~~desist~~unaudited ~~from~~quarterly ~~committing~~consolidated orfinancial ~~causing~~statements ~~any violations~~ and ~~any~~financial ~~future~~information ~~violations~~ of ~~Section~~Phoenix ~~13(a)~~for each of the ~~Securities~~quarterly ~~Exchange~~periods ~~Act of 1934, as amended~~ (~~the~~including ~~“Exchange~~six ~~Act”)~~ and ~~Rules~~nine ~~13a-1~~month ~~and~~periods) ~~13a-13~~of ~~thereunder~~2014 and ~~Section~~2013, ~~15(d)~~all of ~~the~~which ~~Exchange~~are ~~Act~~presented ~~and~~on ~~Rules~~a ~~15d-1~~restated ~~and~~or ~~15d-13~~revised ~~thereunder.~~basis ~~PHL~~to ~~Variable~~the ~~and~~extent ~~PNX~~contained ~~each~~in ~~paid~~ a ~~civil~~periodic ~~monetary~~report ~~penalty~~previously infiled ~~the~~by ~~amount~~Phoenix ofwith ~~$375,000 to~~ the ~~U.S.~~SEC ~~Treasury following~~ (the ~~entry~~“Phoenix ~~of the March 2014 Order~~Restatement”).

~~PNX~~This ~~filed~~2014 ~~the 2012~~ Form 10-K arevises ~~day~~the ~~after~~following ~~the~~financial ~~date~~statements ~~required~~and byfinancial ~~the~~information ~~March~~of ~~2014~~the ~~Order,~~Company: ~~filed~~(i) ~~its~~the ~~third~~statement ~~quarter~~of ~~2012~~income ~~Form~~and ~~10-Q~~comprehensive ~~eight~~income, ~~days~~statement ~~after~~of ~~the~~cash ~~date~~flow ~~required~~and bystatement ~~the~~of ~~March~~changes ~~2014~~in ~~Order,~~stockholders’ ~~and~~equity ~~announced~~for onthe ~~June~~year 3ended December 31, ~~2014~~2012; ~~that~~(ii) itthe ~~would~~statement ~~not~~of ~~file~~income ~~its~~and ~~2013~~comprehensive ~~Annual~~income, ~~Report~~balance onsheet, ~~Form~~statement ~~10-K~~of bycash ~~the~~flow ~~date~~and ~~required~~statement byof ~~the~~changes ~~March~~in ~~2014~~stockholders’ ~~Order.~~equity ~~PHL~~for ~~Variable~~the ~~filed~~year ~~its~~ended ~~2012~~December 31, ~~Form~~2013; ~~10-K~~and ~~ten~~(iii) ~~days~~the ~~after~~statements ~~the~~of ~~date~~income ~~required~~and bycomprehensive ~~the~~income ~~March~~for ~~2014~~the ~~Order~~quarterly and ~~announced~~year-to-date onperiods ~~June~~ending 3March, ~~2014~~June ~~that~~and itSeptember ~~would~~of ~~not file its~~ 2013 ~~Annual~~and ~~Report~~2014, onas ~~Form~~well ~~10-~~as ~~K by~~ the ~~date~~associated ~~required~~balance bysheets, ~~the~~statements ~~March~~of ~~2014~~cash ~~Order.~~flow ~~PHL~~and ~~Variable~~statements ~~filed~~of ~~its~~changes ~~third~~in ~~quarter~~stockholders’ ~~2012~~equity ~~Form~~for ~~10-Q~~each inof ~~compliance with~~ the ~~March~~respective ~~2014 Order~~periods.

OnThis ~~July 16,~~ 2014, ~~the~~Form ~~Company~~10-K ~~and~~also ~~PHL~~includes ~~Variable~~the ~~submitted~~following anexplanatory ~~Amended~~disclosures: ~~Offer~~(i) ofNote ~~Settlement~~2 ~~with~~“Revision ~~the~~of ~~SEC~~Previously ~~(the~~Reported ~~“Amended~~Financial ~~Offer~~Information”) ~~pursuant~~discussing tothe ~~which~~cause ~~PHL Variable~~ and ~~Phoenix~~impact ~~consented~~of tothe the ~~issuance~~correction of errors in the ~~form~~periods ofbeing anrevised ~~Order~~in ~~Amending~~the ~~Order~~Company’s ~~Instituting~~financial ~~Cease-and-Desist~~statements; ~~Proceedings~~(ii) ~~Pursuant~~table toheaders, ~~Section~~where ~~21C~~appropriate, ofindicating the ~~Securities~~financial ~~Exchange~~information ~~Act~~in ofspecified ~~1934,~~columns ~~Making~~is ~~Findings,~~revised; and ~~Imposing~~(iii) acontrols ~~Cease-~~and~~-Desist~~ ~~Order~~procedures ~~(the~~disclosures ~~“Amended~~under ~~Order”).~~Part ~~Except~~II, asItem ~~amended~~9A, describing material weaknesses in internal control over financial reporting identified by the ~~Amended~~Company ~~Order,~~and ~~which~~the ~~was~~related plan of remediation.

~~approved~~For bymore ~~the SEC on August 1~~information, ~~2014,~~see ~~the~~Note 2 ~~March~~“Revision ~~2014 Order remains in effect. PHL Variable and Phoenix each paid a civil monetary penalty in the amount~~ of ~~$100,000~~Previously toReported ~~the~~Financial ~~U.S.~~Information” ~~Treasury following the entry of the Amended Order,~~ and ~~will~~Note 26 be required to pay the following additional monetary penalties with respect to a future late filing of any PHL Variable and/or Phoenix periodic report covered by the Amended Order: $20,000 per filing for the first week in which a filing is delinquent, plus, for each week or partial week thereafter an additional amount equal to the sum of a) $20,000 and b) $5,000 multiplied by the number of complete weeks that the filing has been delinquent before the week in which the late filing is made. PNX filed its Annual Report on Form 10-K for the year ended December 31, 2013 with the SEC on August 6, 2014 in compliance with the Amended Order. As of the date of filing of this Form 10-K, each of PHL Variable and Phoenix are subject to certain amended deadlines for their respective SEC periodic reports, as further described in the risk factor regarding the March 2014 Order and the Amended Order under “~~Risks~~Supplemental ~~Related~~Unaudited toQuarterly ~~the Restatement, Failure to File Timely Periodic Reports with the SEC and our Internal Control Over~~ Financial ~~Reporting~~Information” ~~contained~~ in ~~“Item 1A: Risk Factors” in Part I of~~ this ~~Form~~2014 ~~10-K. This~~ Form 10-K ~~is being filed in accordance with the Amended Order~~.

2PHL VARIABLE INSURANCE COMPANY

~~The~~Annual ~~delay~~Report in the filing of this Form 10-K is primarily as a result of the Restatement, Phoenix’s restatement of its financial statements prepared in accordance with generally accepted accounting principles in the United States (“U.S. GAAP”), Phoenix’s insurance company subsidiaries’ restatements of their respective U.S. GAAP financial statements, and the utilization of interim measures taken to address weaknesses in the Company’s internal control over financial reporting, which has added to the time necessary to both prepare the Company’s U.S. GAAP financial statements for the year ended December 31, 2013 and complete the related audit process. Financial statements contained in this Form 10-K for periods ended on ~~or prior to June 30, 2012 reflect the Restatement. Further, certain disclosures in this~~ Form 10-K relating to our business, risk factors, legal proceedings and related matters are updated to include certain information for periods after December 31, 2013 through the date of the filing of this Form 10-K.

AsFor of the ~~date~~year ofended ~~filing of this Form 10-K~~December 31, ~~the Company has not filed any periodic reports under the Exchange Act for any period in~~ 2014 ~~and, as a result, U.S. GAAP financial information of the Company for 2014 has not yet been made publicly available.~~

For additional information regarding certain risks associated with the Company’s failure to file timely periodic reports and resume a timely filing schedule under the Exchange Act, please see the risk factors under “Risks Related to the Restatement, Failure to File Timely Periodic Reports with the SEC and our Internal Control Over Financial Reporting” contained in “Item 1A: Risk Factors” in Part I of this Form 10-K.

TABLE OF CONTENTS

Part I		Page
Item 1.	Business	5
Item 1A.	Risk Factors	10
Item 1B.	Unresolved Staff Comments	26
Item 2.	Properties	26
Item 3.	Legal Proceedings	26
Item 4.	Mine Safety Disclosures	26
Part II
Item 5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	27
Item 6.	Selected Financial Data	27
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	28
Item 7A.	Quantitative and Qualitative Disclosures About Market Risk	57
Item 8.	Financial Statements and Supplementary Data	57
Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	57
Item 9A.	Controls and Procedures	57
Item 9B.	Other Information	63
Part III
Item 10.	Directors, Executive Officers and Corporate Governance	64
Item 11.	Executive Compensation	64
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	64
Item 13.	Certain Relationships and Related Transactions, and Director Independence	64
Item 14.	Principal Accounting Fees and Services	64
Part IV
Item 15.	Exhibits, Financial Statement Schedules	65
Signatures		66
Exhibit Index		E-1

Table of Contents



Part I		Page

Item 1.	Business	4
Item 1A.	Risk Factors	10
Item 1B.	Unresolved Staff Comments	22
Item 2.	Properties	23
Item 3.	Legal Proceedings	23
Item 4.	Mine Safety Disclosures	23

Part II

Item 5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	24
Item 6.	Selected Financial Data	24
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	25
Item 7A.	Quantitative and Qualitative Disclosures About Market Risk	54
Item 8.	Financial Statements and Supplementary Data	54
Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	55
Item 9A.	Controls and Procedures	55
Item 9B.	Other Information	59

Part III

Item 10.	Directors, Executive Officers and Corporate Governance	60
Item 11.	Executive Compensation	60
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	60
Item 13.	Certain Relationships and Related Transactions, and Director Independence	60
Item 14.	Principal Accounting Fees and Services	60

Part IV

Item 15.	Exhibits, Financial Statement Schedules	61

Signatures		62

Exhibit Index		E-1

Table of Contents

PART I

Unless otherwise stated, “we,” “our” or “us” means PHL Variable Insurance Company (the “Company” or “PHL Variable”). Furthermore, “Phoenix Life” refers to Phoenix Life Insurance Company and “PNX” or “Phoenix” refers to The Phoenix Companies, Inc.


Item 1.	Business

Overview

We provide life insurance and annuity products through independent agents and financial advisors. Our policyholder base includes both affluent and middle market consumers, with our more recent business concentrated in the middle market. Most of our life insurance in force is permanent life insurance (universal life and variable universal life) insuring one or more lives. Our annuity products include fixed and variable annuities with a variety of death benefit and guaranteed living benefit options.

In ~~2013~~2014, 99% of PHL Variable product sales, as defined by total annuity deposits and total life premium, were annuities, and 8994% of those sales were fixed indexed annuities.

Saybrus Partners, Inc. (“Saybrus”), an affiliate, provides dedicated life insurance and other consulting services to financial advisors in partner companies, as well as support for sales of Phoenix’s product line through independent distribution organizations.

Target Market

Our current target market consists of middle market and mass affluent families and individuals planning for or living in retirement. This market has a variety of financial planning needs, such as tax-deferred savings, safety of principal, guaranteed income during retirement, income replacement and death benefits. Our target customer is age 50 or older with investable assets of $500,000 or less. Historically, our marketing strategies focused on high-net-worth and affluent households with sophisticated estate planning and other financial needs, and the majority of our life insurance and annuities in force reflects this market focus.

Competition

We believe our competitive strengths include product features, underwriting and mortality risk management expertise, partnering capabilities and value-added support provided to our distributors. Our ability to compete is based on these as well as other factors, including investment performance, service, price, distribution capabilities, scale, commission structure, brand recognition and financial strength ratings.

Major Products

Annuities

Fixed Indexed Annuities: This product provides single premium deferred annuities that offer a fixed interest account and a variety of indexed accounts that allow contract owners to earn index credits based on the performance of specific equity market or other price indices. Our major source of revenue on these contracts is the excess of investment income earned over interest and index credits, if any. Most contracts allow contract owners to change accounts once a year. One of the most popular indexed accounts credits the contract owners’ accounts with a return equal to the annual appreciation of the S&P 500 index, subject to a specified cap. Caps are changed regularly to reflect current market conditions; during ~~2013~~2014, caps ranged from 12.2500% to 5.50%. Certain contracts also provide “premium bonuses,” which we contribute to contract owner account balances at issue and which also earn interest or index credits. Approximately 28% of indexed annuity deposits in ~~2013~~2014 included premium bonuses ranging from 4% to 1015% of the initial deposit.

~~Contract~~Table ~~owners also may elect a guaranteed minimum withdrawal benefit (“GMWB”), which for a separate fee provides a guaranteed income stream for the lifetime~~ of the contract owners. The amount of income available is based on a separate “benefit base” that increases at a guaranteed rate established when the contract is sold and that is independent of the growth of the account balance. Withdrawals may begin immediately or after several years. Once a contract owner elects to receive income, withdrawals are first made from the account balance. If and when the balance is depleted, we continue to make the guaranteed income payments. In 2013, approximately 93% of all indexed annuity contracts sold included a GMWB. Certain annuities with a GMWB also include an enhanced withdrawal benefit (“EWB”) that allows for an additional amount of guaranteed income if certain qualifying conditions are met (confinement to a nursing care facility and/or inability to perform activities of daily living). In 2013, approximately 20% of all indexed annuity contracts sold included an EWB. Certain fixed indexed annuities include a guaranteed minimum death benefit (“GMDB”), pursuant to which beneficiaries receive an amount in excess of contract value if the annuitant dies in exchange for an additional fee. In 2013, approximately 37% of all indexed annuity contracts sold included a GMDB.Contents

Contract owners also may elect a guaranteed minimum withdrawal benefit (“GMWB”), which for a separate fee provides a guaranteed income stream for the lifetime of the contract owners. The amount of income available is based on a separate “benefit base” that increases at a guaranteed rate established when the contract is sold and that is independent of the growth of the account balance. Withdrawals may begin immediately or after several years. Once a contract owner elects to receive income, withdrawals are first made from the account balance. If and when the balance is depleted, we continue to make the guaranteed income payments. In 2014, approximately 90% of all indexed annuity contracts sold included a GMWB. Certain annuities with a GMWB also include an enhanced withdrawal benefit (“EWB”) that allows for an additional amount of guaranteed income if certain qualifying conditions are met (confinement to a nursing care facility and/or inability to perform activities of daily living). In 2014, approximately 18% of all indexed annuity contracts sold included an EWB. Certain fixed indexed annuities include a guaranteed minimum death benefit (“GMDB”), pursuant to which beneficiaries receive an amount in excess of contract value if the annuitant dies in exchange for an additional fee. In 2014, approximately 25% of all indexed annuity contracts sold included a GMDB.

Fixed Annuities: This product meets the needs of clients who want a guaranteed rate of return over a specified period. The contract owner receives a guaranteed rate of return over the initial interest rate guarantee period and has the option to elect a new guarantee period at the end of the initial term, at then current rates, subject to certain minimums.

Single Premium Immediate Annuities: This product provides guaranteed income beginning immediately, including one product that is designed for use in elder-care planning in conjunction with government benefits.

Variable Annuities: This product allows contract owners to direct deposits into a variety of separate investment accounts (accounts that are maintained separately from the other assets of the Company) or into the general accounts of the Company. Deposits allocated to the general account earn interest at a specified rate of return determined by us, subject to certain minimums. In the separate investment accounts, the contract owner bears the risk of investment results. We credit to the separate investment accounts the return on the underlying investments in the separate account specified net of specified fees and charges.

We collect fees for the management of these various investment accounts and assess charges against these accounts for the administrative services we provide. Our major sources of revenue from variable annuities are mortality and expense fees charged to the contract owner, generally determined as a percentage of the market value of any underlying separate account balances and a portion of the fees we collect for the management of the various investment accounts.

Many of our variable annuities include guaranteed minimum death (“GMDB”), accumulation (“GMAB”), withdrawal (“GMWB”) and income (“GMIB”) benefits.

Life Insurance

~~Universal~~Whole Life: This product provides permanent insurance coverage ~~with~~and a tax -deferred savings ~~element.~~in Itreturn ~~allows~~for ~~the~~predetermined ~~policyholder to adjust the frequency and amount of~~ premium payments ~~subject to certain limitations~~. Premiums, ~~net of cost of insurance charges and administrative expenses,~~ are invested in our general account ~~and are credited interest at rates determined by us, subject to certain minimums~~. We retain the right within limits to adjust the fees we assess for providing administrative services and the rate we charge for the cost of insurance; these may be adjusted by us but may not exceed guaranteed contractual limits. Some universal life products provide secondary guarantees that protect the policy’s death benefit even if there is insufficient value in the policy to pay the monthly deduction.

Universal Life: This product provides permanent insurance coverage with a tax-deferred savings element. It allows the policyholder to adjust the frequency and amount of premium payments subject to certain limitations. Premiums, net of cost of insurance charges and administrative expenses, are invested in our general account and are credited interest at rates determined by us, subject to certain minimums. We retain the right, within limits, to adjust the fees we assess for providing administrative services and the rate we charge for the cost of insurance; these may be adjusted by us, but may not exceed guaranteed contractual limits. Some universal life products provide secondary guarantees that protect the policy’s death benefit even if there is insufficient value in the policy to pay the monthly deduction.

Indexed Universal Life: This product is a type of universal life where premiums may be allocated to a fixed interest account and/or a variety of indexed accounts that allow policyholders to earn index credits based on the performance of specific equity market or other price indices.

Table of Contents

Variable Universal Life: This product is similar to universal life, except that premiums may be directed into a variety of separate investment accounts (accounts that are maintained separately from the other assets of the Company) or into the general accounts of the Company. 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. Account balances invested in the general account earn interest at rates determined by us, subject to certain minimums. Specific charges are made against the accounts for administrative expenses and cost of insurance charges. We retain the right, within limits, to adjust the fees we assess for providing administrative services and the rate we charge for the cost of insurance; these may be adjusted by us but may not exceed guaranteed contractual limits. With some variable universal products, maintaining a certain premium level provides the policyholder with guarantees that protect the policy’s death benefit if, due to adverse investment experience, the policyholder’s account balance is zero.

Variable annuities, a limited number of fixed annuities and variable life products offered by the Company are registered under the federal securities laws. The Company has not offered these products to new customers since our audited financial statements for the most recent fiscal year end, in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”), have not yet been completed. Existing customers with existing contracts have been able to continue to invest in these products and change investment elections, but certain investment alternatives have closed for new investment.

Term: This product provides insurance coverage for a temporary period of time in return for predetermined premium payments. After the level term period ends, coverage may be renewable annually at higher premium rates. Premiums are invested in our general account.

Distribution and Related Services

Independent Producers: We distribute our products through independent producers who serve the middle market and are typically affiliated with one or more independent marketing organizations (“IMOs”). We have established selling agreements with IMOs representing more than 1114,~~500~~000 independent producers. In ~~2013~~2014, nearly 2,~~200~~800 producers sold our products. Our distribution strategy for IMOs is to continue to expand the number of relationships and producers who do business with us by providing competitive products at competitive commission rates, providing exclusive product designs and features to certain IMOs, and enhancing our servicing and support technology.

Saybrus Partners, Inc.: Saybrus, Phoenix’s distribution company, sells Phoenix products through selected independent producers and IMOs and provides consulting services to partner firms in support of policies written by companies other than Phoenix. Saybrus’ revenues ~~primarily~~ consist of commissions based on successful sales.

Investments

Investment activities are an integral part of our business and net investment income is a significant component of our total revenues. We manage investments in our general account to match the durations of our insurance liabilities. We invest primarily in high-grade public and privately placed debt securities, balancing credit risk with investment yield. As of December 31, ~~2013~~2014, 9695.06% of our total available-for-sale debt securities portfolio was investment grade. We invest a small percentage of our assets in limited partnerships and other investments that have variable returns. While our returns are more volatile, these asset classes have contributed substantially to our investment returns over time. As of December 31, ~~2013~~2014, 0.3% of cash and total investments were allocated to this asset class.

Table of Contents

Hedging

Certain features of our variable and indexed annuity products expose us to risks such as equity price risk, equity volatility risk and interest rate risk. We hedge certain of those risks using derivatives. Our focus is on hedging the economic exposure related to potential future claims. For example, we hedge fixed indexed annuity premiums directed into indexed accounts by purchasing options designed to fund the index credits on these accounts. Our hedges generally do not qualify for hedge accounting and may result in significant reported accounting gains or losses. In addition, our hedges may expose us to counterparty credit risk. As of December 31, ~~2013~~2014, our net mark-to-market exposure to derivative counterparties prior to credit valuation adjustment (“CVA”) was $~~128~~73.01 million, and the post CVA net mark-to-market exposure was $~~127~~71.09 million. All of our counterparties had a credit rating of A or better with at least one Nationally Recognized Statistical Rating Organization (“NRSRO”). For additional information regarding hedging related business risks, please see the risk factors entitled “We may not be able to hedge our positions due to the inability to replace hedges as a result of our credit rating” and “Guaranteed benefits within our products that protect policyholders against significant downturns in equity markets may decrease our earnings, increase the volatility of our results if hedging strategies prove ineffective, result in higher hedging costs and expose us to increased counterparty risk, which may have a material adverse effect on our results of operations, financial condition and liquidity” contained in “Item 1A: Risk Factors” in Part I of this Form 10-K.

Policy Administration

As of December 31, ~~2013~~2014, we had 5958,~~202~~612 life insurance policies and 6061,~~094~~811 annuity contracts in force. Our Customer Care Center services policies on a number of administrative systems, supporting both policyholders and their advisors or agents. The cost of servicing policies is a significant component of our overall operating expenses. Servicing of some policies is outsourced to vendors who specialize in insurance policy administration.

Reinsurance

We use reinsurance agreements to limit potential losses, reduce exposure to larger risks and provide capital relief with respect to certain statutory requirements. We remain liable to the extent that reinsuring companies may not be able to meet their obligations under reinsurance agreements in effect. Failure of the reinsurers to honor their obligations could result in losses to the Company. Since we bear the risk of nonpayment, on a quarterly basis we evaluate the financial condition of our reinsurers and monitor concentrations of credit risk. Based on our review of their financial statements, reputation in the reinsurance marketplace and other relevant information, we believe that we have no material exposure to uncollectible life reinsurance. At December 31, ~~2013~~2014, five major reinsurance companies, including our affiliate, Phoenix Life, account for approximately 73% of the reinsurance recoverable. Phoenix Life comprised approximately 15%, or $67.2 million, of this total reinsurance recoverable.

We cede risk to other insurers under various agreements that cover individual life insurance policies. The amount of risk ceded depends on our evaluation of the specific risk and applicable retention limits. For business sold prior to December 31, 2010, our retention limit on any one life is $10 million for single life and joint first-to-die policies and $12 million for joint last-to-die policies. Beginning January 1, 2011, our retention limit on new business is $5 million for single life and joint first-to-die policies and $6 million for second-to-die policies. We also assume reinsurance from other insurers. Typically our reinsurance contracts allow us to recapture ceded policies after a specified period. This right is valuable in the event our mortality experience is sufficiently favorable to make it financially advantageous for us to reassume the risk rather than continue paying reinsurance premiums.

See Note 34 to our financial statements under “Item 8: Financial Statements and Supplementary Data” in this Form 10-K for additional information regarding reinsurance.

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Regulation

We are subject to regulation and supervision in each jurisdiction where they conduct business. Areas of regulation include the following:


•	Financial considerations, including standards of solvency, statutory reserves, reinsurance and capital adequacy;


•	Trade practices, market conduct and licensing of companies and agents;


•	Mandating certain insurance benefits and regulating certain premium rates;


•	Approval of policy forms and certain other related materials;


•	Permitted types and concentration of investments;


•	Permitted dividends or other distributions, as well as transactions between affiliates and changes in control; and


•	Approval of interest payments on surplus notes.

We file regular reports, including detailed annual financial statements, with insurance regulatory authorities and are subject to periodic examination by such authorities. See ~~Notes~~Note 1516 ~~and 18~~ to our financial statements under “Item 8: Financial Statements and Supplementary Data” in this Form 10-K for additional information ~~regarding late filings~~.

The National Association of Insurance Commissioners (“NAIC”) provides standardized insurance industry accounting and reporting guidance. However, statutory accounting principles continue to be established by individual state laws, regulations and permitted practices.

Most of the jurisdictions in which we are admitted to transact business require us to participate in guaranty associations, which are organized to pay certain contractual insurance benefits owed pursuant to insurance policies issued by impaired, insolvent or failed insurers. These associations levy assessments, up to prescribed limits, on all member insurers in a particular state on the basis of the proportionate share of the premiums written by member insurers in the lines of business in which the impaired, insolvent or failed insurer is engaged.

8As part of their regulatory oversight process, state insurance departments conduct periodic detailed examinations of the books, records, accounts and business practices of insurers domiciled in their states. State insurance departments also have the authority to conduct examinations of non-domiciliary insurers that are licensed in their states. The Connecticut Insurance Department issued a financial examination report on May 28, 2014 and a market conduct examination report on December 29, 2014.

As part of their regulatory oversight process, state insurance departments conduct periodic detailed examinations of the books, records, accounts and business practices of insurers domiciled in their states. State insurance departments also have the authority to conduct examinations of non-domiciliary insurers that are licensed in their states. PHL Variable is currently under market conduct examination by the Connecticut Insurance Department. The Connecticut Insurance Department issued a financial examination report of PHL Variable on May 28, 2014. We expect to receive a final market conduct examination report in 2014.

Annually, we are required to conduct an analysis of the adequacy of all statutory reserves. In each case, a qualified actuary must submit an opinion which states that the statutory reserves, when considered in light of the assets held with respect to such reserves, make good and sufficient provision for the associated contractual obligations and related expenses of the insurer. If such an opinion cannot be provided, the insurer must set up additional reserves by moving funds from surplus. The most recent opinions were provided on a timely basis.

PHL Variable reports its risk based capital (“RBC”) based on a formula calculated by applying factors to various risk characteristics of the insurer. The major categories of risks involved are asset risk, insurance risk, interest rate risk, market risk and business risk. The formula is used as an early warning tool by regulators to identify possible inadequately capitalized insurers for purposes of initiating regulatory action and not as a means to rank insurers generally. State insurance laws provide insurance regulators the authority to require various actions by, or take various actions against, insurers whose RBC ratio does not meet or exceed certain levels. As of December 31, ~~2013~~2014, PHL Variable’s RBC ratio was in excess of ~~250~~200% of ~~company~~Company ~~action~~Action ~~level risk based capital~~Level, the highest regulatory threshold.

Most states, including Connecticut, have enacted legislation or adopted administrative regulations affecting the acquisition of control of insurance companies, as well as transactions between insurance companies and persons controlling them. Most states require administrative approval of the direct or indirect acquisition of 10% or more of the outstanding voting securities of an insurance company incorporated in the state.

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General Development of Business

PHL Variable was incorporated in Connecticut in 1981. Our principal executive offices are located at One American Row, Hartford, Connecticut 06102-5056. Our telephone number is (860) 403-5000. Our web site is located at www.phoenixwm.com. (This and all other URLs included herein are intended to be inactive textual references only. They are not intended to be an active hyperlink to our web site. The information on our web site is not, and is not intended to be, part of this Form 10-K and is not incorporated into this report by reference.)

Our parent company, Phoenix Life, is a wholly owned subsidiary of ~~PNX~~Phoenix.

The following chart illustrates our corporate structure as of December 31, ~~2013~~2014.




		The Phoenix Companies, Inc.


100%		85%	100%

Phoenix Life Insurance Company		Saybrus Partners, Inc.	Other Subsidiaries

100%

PM Holdings, Inc.

100%

	PHL Variable Insurance Company
	PHL Variable Insurance Company

100%

	Other Subsidiaries
	Other Subsidiaries

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Item 1A.	Risk Factors

Risks Related to the ~~Restatement,~~Restatements ~~Failure~~of toPrior ~~File~~Period ~~Timely~~Financial ~~Periodic~~Statements ~~Reports with the SEC~~ and

our Internal Control Over Financial Reporting.

We face risks related to the ~~Restatement,~~restatement of our prior period financial statements and the ~~restatement~~restatements of ~~historical~~the prior period financial statements of our indirect parent, The Phoenix Companies, Inc. ~~and that, following the filing of this Form 10-K, we remain delayed in our SEC reporting obligations.~~

As discussed in our Annual Report on Form 10-K for the year ended December 31, 2012 (the “2012 Form 10-K”) in the Explanatory Note and in Note 2 to our financial statements under “Item 8: Financial Statements and Supplementary Data” ~~in the 2012 Form 10-K~~ (and as previously reported in our Current Report on Form 8-K, filed with the SEC on September 18, 2012, as amended ~~by Forms 8-K/A filed with the SEC on November 8, 2012, March 15, 2013 and April 24, 2013, respectively~~), the Company’s audit committee concluded that certain of the Company’s previously issued U.S. GAAP financial statements should no longer be relied upon and should be restated because of certain errors in those financial statements. ~~Additionally~~On April 25, as2014, ~~previously~~we ~~reported~~effected bythis ~~our~~restatement ~~indirect~~through ~~parent,~~the ~~PNX,~~filing inwith athe ~~Current~~SEC ~~Report~~of onour 2012 Form 810-K ~~filed~~containing ~~with~~our audited financial statements for the ~~SEC~~years onended ~~November~~December 831, 2012, as2011 ~~amended~~and by2010 ~~Forms~~and ~~8-K/A~~interim ~~filed~~unaudited byfinancial ~~PNX~~statements ~~with~~presented ~~the~~for ~~SEC~~each onperiod ~~March 15,~~during ~~2013~~the fiscal years 2012 and ~~April 24~~2011, ~~2013,~~ ~~respectively,~~in ~~management~~each ofcase ~~PNX~~presented ~~concluded~~on ~~that~~a ~~certain~~restated ofand ~~PNX’s~~amended ~~previously~~basis ~~issued~~to ~~financial~~the ~~statements~~extent ~~should~~previously nofiled ~~longer~~in bea ~~relied~~periodic ~~upon~~report ~~and~~by ~~should~~the beCompany ~~restated~~with ~~because~~the ofSEC, ~~certain~~and ~~errors~~other indisclosures ~~those~~regarding ~~financial~~this ~~statements~~restatement.

As previously reported by our indirect parent, Phoenix, in a Current Report on Form 8-K filed with the SEC on November 8, 2012, as amended, management of Phoenix concluded that certain of it’s previously issued U.S. GAAP financial statements should no longer be relied upon and should be restated because of certain errors in those financial statements. Phoenix effected this restatement on April 1, 2014 through the filing with the SEC of its Annual Report on Form 10-K for the year ended December 31, 2012 containing audited consolidated financial statements for the years ended December 31, 2012, 2011 and 2010 and interim unaudited consolidated financial statements presented for each period during the fiscal years 2012 and 2011, which in each case are presented on a restated and amended basis to the extent previously filed in a periodic report by Phoenix with the SEC, and other disclosures regarding this restatement. In addition, as previously reported in a Phoenix Current Report on Form 8-K filed with the SEC on February 6, 2015, Phoenix concluded that certain of its previously issued U.S. GAAP financial statements should no longer be relied upon and should be restated because of certain errors in those financial statements. Phoenix effected this restatement through the filing with the SEC of its Annual Report on Form 10-K for the year ended December 31, 2014, containing audited consolidated financial statements for the years ended December 31, 2014, 2013 and 2012 and interim unaudited consolidated financial statements presented for each period during the fiscal years 2014 and 2013, which correct the financial statements for the full year ended December 31, 2012, all periods of 2013 and the first three quarters and six and nine month periods of 2014, as well as other disclosures regarding this restatement.

As discussed in the Explanatory Note and in Note 2 to our financial statements under “Item 8: Financial Statements and Supplementary Data” in this Form 10-K, we are revising certain financial statements and financial information of the Company.

We resumed our status as a current SEC filer with the November 21, 2014 filing of our Quarterly Report on Form 10-Q for the period ended September 30, 2014, and resumed our timely SEC filer status with the filing of this Form10-K within the extension period afforded under Rule 12b-25 of the Exchange Act. Although the Company is resuming a timely SEC periodic report filing schedule with respect to our SEC periodic reports with the filing of this Form 10-K, the Company expects to continue to face many of the risks and challenges related to the restatements, including the following:

•

In the process of restating our prior period financial statements, we identified material weaknesses in our internal control over financial reporting, which existed as of December 31, 2014 and are reported under Item 9A “Controls and Procedures” in this Form 10-K, and we may fail to remediate these material weaknesses in our internal control over financial reporting and other material weaknesses may be identified in the future, which would adversely affect the accuracy and timing of our financial reporting;

•

The extraordinary processes undertaken to effect the restatements, including restatements of Phoenix’s insurance company subsidiaries, may not have been adequate to identify and correct all errors in our prior period financial statements and, as a result, we may discover additional errors and our financial statements remain subject to the risk of future restatement, which may impact our ability to timely complete our future SEC filings;


•	The outcome of litigation and claims as well as regulatory examinations, investigations, proceedings and orders arising out of the restatements and the failure by the Company and Phoenix to have filed certain previously delayed SEC reports on a timely basis;

OnTable ~~April 25, 2014, the Company filed with the SEC the 2012 Form 10-K containing audited financial statements~~ of PHL Variable for the years ended December 31, 2012, 2011 and 2010 and interim unaudited financial statements presented for each quarter during the fiscal years 2012 and 2011, which in each case are presented on a restated and amended basis to the extent previously filed in a periodic report by the Company with the SEC and other disclosures regarding the Restatement. On April 1, 2014, PNX filed with the SEC its 2012 Annual Report Form 10-K containing audited financial statements of PNX for the years ended December 31, 2012, 2011 and 2010 and interim unaudited financial statements presented for each quarter during the fiscal years 2012 and 2011, which in each case are presented on a restated and amended basis to the extent previously filed in a periodic report by PNX with the SEC and other disclosures regarding its U.S. GAAP restatement. Contents

As• aThe ~~result~~incurrence of ~~the~~significant ~~Restatement~~expenses, ~~our~~including ~~SEC~~audit, ~~reporting~~consulting ~~obligations~~and ~~remain~~other ~~delayed~~professional asfees, ofrelated to the ~~filing date of this Form 10-K~~restatements, ~~and~~the wecompletion ~~cannot~~of ~~assure~~our ~~when~~financial westatements ~~will~~on ~~resume~~ a timely ~~filing~~and ~~schedule~~accurate ~~with~~basis, ~~respect~~and tothe ~~our~~remediation ~~SEC~~of ~~reports.~~weaknesses ~~Even~~in ~~after~~our weinternal ~~complete~~control ~~these~~over ~~delayed~~financial ~~filings,~~reporting weand ~~expect~~disclosure tocontrols ~~continue to face many of the risks~~ and ~~challenges related to the Restatement, including the following:~~procedures;

• weDiversion ~~may~~of ~~fail~~management ~~to remediate material weaknesses in our internal control over financial reporting~~ and other ~~material~~human ~~weaknesses~~resources ~~may~~attention befrom ~~identified in~~ the ~~future,~~operation ~~which~~of ~~would~~our ~~adversely~~business ~~affect~~associated with the ~~accuracy~~restatements and ~~timing~~remediation of our ~~financial~~internal ~~reporting~~controls;

• Risks associated with the ~~extraordinary~~restatements, ~~processes~~and ~~undertaken~~our ability to ~~effect~~amend ~~the~~and ~~Restatement~~update ~~may~~on ~~not~~a ~~have~~timely ~~been~~basis ~~adequate~~our toexisting ~~identify~~registration ~~and~~statements, ~~correct~~or ~~all~~file ~~errors~~new inregistration ~~our~~statements, ~~historical~~under ~~financial~~the ~~statements~~Securities Act and the Investment Company Act, as awell ~~result,~~as werisks ~~may~~associated ~~discover~~with ~~additional~~Phoenix ~~errors~~Life’s ability to amend and ~~our~~update ~~financial~~on a timely basis its existing registration statements, ~~remain~~or ~~subject~~file tonew registration statements, under the ~~risk~~Securities ofAct ~~future~~and ~~restatement~~the Investment Company Act;

• ~~our~~Risks ~~failure~~associated with the ongoing compliance obligations of the Company and Phoenix under the SEC Order Instituting Cease-and-Desist Proceedings Pursuant to ~~have~~Section ~~current~~21C ~~financial~~of ~~information~~the ~~available~~Securities Exchange Act of 1934, Making Findings, and Imposing a Cease-and-Desist Order, which was approved by the SEC in March 2014 (the “March 2014 Order”), as was subsequently amended by an amended SEC administrative order approved by the SEC in August 2014 (the March 2014 Order, as amended, the “Amended Order”), and the risk of noncompliance with such Amended Order;

• ~~the~~The risk that the filing of ~~failure~~single, multi-period comprehensive Annual Reports on Form 10-K to ~~comply~~effect ~~with~~certain of the ~~filing~~restatements ~~deadlines~~did ~~included~~not insatisfy ~~the~~our ~~SEC~~and Phoenix’s ~~Cease~~obligations to file amended reports to each of the applicable previously filed Forms 10-K and 10-~~Desist~~Q. ~~Order,~~We ~~dated~~cannot ~~March~~provide 21assurance that such comprehensive reports satisfied our filing obligations and, ~~2014~~if it is ultimately determined that they did not, aswe may be required to amend such comprehensive reports and/or file other amended byreports. ~~the~~This ~~Amended~~would ~~Cease-~~require us to devote substantial internal and~~-Desist-Order,~~ ~~dated~~external ~~August~~resources 1,and ~~2014~~cause us to incur significant fees and expenses for additional audit services as well as accounting and other consulting services. These fees and expenses, ~~including~~as ~~that~~well as the substantial time devoted by our management to make such filings with the SEC, ~~may~~could ~~seek~~have ~~sanctions~~a ~~against~~material oradverse ~~deregister~~effect ~~PNX~~on our business, profitability and ~~the~~financial ~~Company~~condition; and

• ~~the~~Risks ~~risk~~associated ofwith ~~PNX~~our and Phoenix Life’s failure to file ~~its~~timely ~~delayed SEC filings~~ and ~~2014~~accurate ~~Quarterly~~reports ~~Reports on Form 10-Q by March 16, 2015, the extended deadline for providing these SEC filings to the bond trustee, as well as the risk associated~~ with ~~seeking~~state ~~additional~~regulatory ~~consents from PNX’s bondholders of PNX’s outstanding 7~~authorities.~~45% Quarterly Interest Bonds Due 2032 regarding these SEC filings;~~

• the outcome of litigation and claims as well as regulatory examinations, investigations, proceedings and orders arising out of the Restatement and the failure by the Company and PNX to file SEC reports on a timely basis;

• further downgrades or withdrawals of our financial strength credit ratings, which could increase policy surrenders and withdrawals, adversely affect our relationships with distributors, reduce new sales, limit our ability to trade in derivatives and increase our costs of, or reduce our access to, future borrowings;

• our inability to hedge our positions due to our inability to replace hedges as a result of our credit rating;

• the incurrence of significant expenses related to the Restatement, the U.S. GAAP restatement undertaken by PNX, the remediation of weaknesses in our internal control over financial reporting and disclosure controls and procedures, and the preparation of this Form 10-K and our delayed SEC reports;

• diversion of management and other human resources attention from the operation of our business;

• the risk that the Company’s and Phoenix Life’s restatements, the delay in our filing of periodic reports with the SEC and errors corrected in subsequent Statutory financial statement filings with state insurance regulators could result in regulatory investigations, examinations and/or inquiries, which may increase compliance costs and the potential for additional regulatory investigations, proceedings or other claims; and

• risks associated with our failure to file certain reports with state regulatory authorities.

We cannot assure that all of the risks and challenges described above will be eliminated and that lost business opportunities can be recaptured or that general reputational harm will not persist. If one or more of the foregoing risks or challenges persist, our business, operations and financial condition are likely to be materially and adversely affected.

We have concluded that there are material weaknesses in our internal control over financial reporting, which have materially adversely affected our ability to timely and accurately report our results of operations and financial condition. These material weaknesses have not been fully remediated as of the filing date of this Form 10-K and we cannot assure you that other material weaknesses will not be identified in the future. If we fail to maintain an effective system of internal controls, the accuracy and timing of our financial reporting may be adversely affected.

As reported in “Item 9A: Controls and Procedures” of this Form 10-K, we have concluded that there are material weaknesses in our internal control over financial reporting and that our disclosure controls and procedures are ineffective as of December 31, ~~2013~~2014. Some of the interim measures we have taken to address weaknesses in our internal control over financial reporting are manual, which are more time consuming to prepare, more prone to errors than computerized systems, and require more exhaustive audit processes. It is necessary for us to maintain effective internal control over financial reporting to prevent fraud and errors and to maintain effective disclosure controls and procedures so that we can provide timely and reliable financial and other information. A failure to maintain adequate internal controls may adversely affect our ability to provide financial statements that accurately reflect our financial condition and timely report information. This could cause investors to lose confidence in our reported financial and other information and cause an adverse effect on our business and results of operations. A failure to correct material weaknesses in our internal controls and to replace interim measures taken to address weaknesses could result in further restatements of financial statements and correction of other information filed with the SEC or delays in the filing of future SEC reports, and the inability to update or file new registration statements covering the offer and sale of product offerings.

~~The~~In ~~extraordinary~~addition, ~~processes~~in ~~undertaken~~May to2013, ~~effect~~the Committee of Sponsoring Organizations of the ~~Restatement~~Treadway ~~may~~Commission ~~not~~(“COSO”) ~~have~~issued ~~been~~a ~~adequate~~new version of its internal control framework, which became effective December 15, 2014. We intend to ~~identify~~implement ~~and~~the ~~correct~~2013 ~~all~~COSO ~~errors~~framework ininto our ~~historical~~assessment of our internal control over financial ~~statements~~reporting ~~and~~during 2015, aswhich may reveal other deficiencies in our internal controls that may rise to the level of material weakness. Such an occurrence, or a ~~result~~failure to effectively remedy such a material weakness, wecould ~~may~~adversely ~~discover~~affect ~~additional~~investor ~~errors~~confidence in the accuracy and timeliness of our financial ~~statements~~reports. ~~remain~~Failure to implement the 2013 COSO framework in 2015 may subject us to ~~the~~further ~~risk~~scrutiny offrom ~~future~~the ~~restatement~~SEC.

The completion of our Restatement involved many months of review and analysis, including highly technical analyses of our contracts and business practices, estimates and assumptions made by management, tax accounting and the proper application of relevant accounting rules and pronouncements. Many of the enhancements and changes to our processes are ongoing as of the filing date of this Form 10-K and we continue to integrate the complex changes we have already made. Given the complexity and scope of these exercises, and notwithstanding the extensive time, effort and expense that went into them, we cannot assure you that these extraordinary processes were adequate to identify and correct all material errors in our historical financial statements or that additional accounting errors will not come to light in the future in these or other areas.11

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The extraordinary processes undertaken to effect the restatements may not have been adequate to identify and correct all errors in the historical financial statements and, as a result, we may discover additional errors and our financial statements remain subject to the risk of future restatement.

The completion of the restatements involved many months of review and analysis, including highly technical analyses of our contracts and business practices, estimates and assumptions made by management, tax accounting and the proper application of relevant accounting rules and pronouncements. Many of the enhancements and changes to our processes are ongoing as of the filing date of this Form 10-K and we continue to integrate the complex changes we have already made. Given the complexity and scope of these exercises, and notwithstanding the extensive time, effort and expense that went into them, we cannot assure you that these extraordinary processes were adequate to identify and correct all material errors in our historical financial statements or that additional accounting errors will not come to light in the future in these or other areas.

While we have performed additional analyses and other procedures, and either implemented or plan to implement and test remediation measures as of the filing date of this Form 10-K, the previously identified material weaknesses have not been fully addressed and remediated. We continue to improve our internal control over financial reporting and disclosure controls and procedures by, among other things:


•	enhancing our existing accounting policies and procedures;


•	implementing changes in our finance and accounting organization;


•	adopting new accounting and reporting processes and procedures; and


•	introducing new or enhanced accounting systems and processes.

As a result, we cannot assure you that we will not discover additional errors, that future financial reports will not contain material misstatements or omissions, that future restatements will not be required, and that we will be able to timely complete our ~~remaining~~ SEC filings for periods subsequent to this Form 10-K~~, or that we will be able to timely comply with our reporting obligations in the future~~.

WeThe ~~have~~restatements ~~effected~~and ~~the~~failure ~~Restatement~~to ~~through~~timely ~~the~~file ~~filing~~certain ofhistorical aSEC ~~single~~periodic reports, ~~multi-year~~as ~~comprehensive~~well ~~Annual~~as ~~Report~~reported onweaknesses ~~Form~~in ~~10-K~~internal ~~for~~control ~~the~~over ~~year~~financial ~~ended~~reporting ~~December 31,~~and ~~2012.~~the Wefailure to have ~~not~~compliant ~~received~~registration ~~any~~statements ~~assurance~~under ~~from~~ the ~~SEC~~Securities ~~that~~Act ~~such~~and athe ~~comprehensive~~Investment ~~report~~Company ~~satisfies~~Act ~~our~~covering ~~Restatement~~certain ~~filing~~insurance ~~obligations~~products ~~and,~~offered ifby itthe isCompany ~~ultimately~~and ~~determined~~Phoenix ~~that it does not~~Life, we may besubject ~~required~~the toCompany, ~~amend~~Phoenix ~~that~~Life ~~comprehensive report~~ and~~/or~~ ~~file~~Phoenix ~~other amended reports~~ to ~~effect~~a ~~the~~broad ~~Restatement.~~range ~~This~~of ~~would~~potential ~~require~~actions usthat tomay ~~devote~~be ~~substantial~~taken ~~internal~~by ~~and~~the ~~external~~SEC ~~resources~~including, ~~and~~but ~~cause~~not uslimited to, ~~incur~~SEC ~~significant fees~~ cease-and-desist ~~expenses~~orders, ~~for~~suspension ~~additional~~on ~~audit~~trading ~~services~~of asPhoenix ~~well~~securities, asderegistration ~~accounting~~of ~~and~~Phoenix ~~other~~securities ~~consulting services. These fees~~ and/or ~~expenses, as well as~~ the ~~substantial~~assessment ~~time~~of ~~devoted~~possible bycivil ~~our~~monetary ~~management~~penalties toand ~~make~~claims ~~such~~may ~~filings~~be ~~with~~brought ~~the~~by ~~SEC,~~other ~~could~~parties ~~have~~based ~~a material adverse effect~~ on ~~our~~these ~~business, profitability~~ and ~~financial~~other ~~condition~~restatement-related matters.

Because we remain delayed in our SEC reporting obligations, we do not have current financial information available.

We have not yet filed our Quarterly Reports on Form 10-Q for each of the quarterly periods ended June 30, 2014, March 31, 2014, September 30, 2013, June 30, 2013 and March 31, 2013 (the “Delayed SEC Reports”). We are likely to be unable to file our Quarterly Report on Form 10-Q for the period ended September 30, 2014 on a timely basis and we expect to be current with all of our and PNX’s periodic reporting obligations by December 12, 2014. Until we file the Delayed SEC Reports and are otherwise current in our SEC filing requirements, there is a lack of current publicly available information concerning the results of operations and financial condition of the Company. Our ability to file the Delayed SEC Reports and resume a timely filing schedule with respect to our SEC reports is subject to a number of contingencies, including but not limited to, whether we continue to identify errors in our financial statements and whether existing systems and processes can be timely updated, supplemented or replaced.

We have previously announced that until we become current in our SEC reporting requirements and have filed with the SEC new registration statements or amendments to our existing registration statements covering our products to include required financial information, we will continue to not issue any new SEC-registered life insurance and annuity contracts. Phoenix Life similarly has announced that it will continue to not issue any new SEC-registered life insurance and annuity contracts until it has filed with the SEC amendments to its product registration statements to include updated financial information. Phoenix Life is delayed in filing certain U.S. GAAP financial statements with the SEC which it is required to file as a result of its SEC-registered life insurance and annuity contracts. In addition, until the Company becomes current in its SEC reporting requirements and the Company and Phoenix Life have filed with the SEC new registration statements or amendments to their existing registration statements covering their products to include required information, there will be ongoing uncertainty regarding our ability to continue to accept premiums, or to process certain other investment transaction requests, associated with our and Phoenix Life’s outstanding SEC-registered annuity and life contracts. In such an event, these actions may have a material adverse impact on our future revenues, our competitive position and consumer perception of our products, and our retention of existing contracts and may result in claims related to these SEC-registered products against us, PNX and Phoenix Life, any of which could have a material adverse effect on the Company’s business and financial results. In addition, in connection with our product offerings, we rely on third party vendors to supply vendor-generated products. Our failure to be current in our SEC filings may cause such vendors to terminate their relationships with us, which in turn may cause us to terminate many of our product offerings.

The Company and PNX have failed to comply with filing deadlines included in the SEC’s Cease-and-Desist Order, dated March 21, 2014, and may fail to comply with the filing deadlines included in the Amended Cease-and-Desist Order, dated August 1, 2014, and if the Company and/or PNX fail to become timely under the Exchange Act as provided in the Amended Order and otherwise fail to comply with their respective filing obligations under the Exchange Act, the SEC may seek sanctions against both the Company and PNX. The Company and PNX may be subject to further investigation and potential regulatory action.

On February 12, 2014, the Company and PNX submitted an Offer of Settlement with the SEC pursuant to which the Company and PNX consented to the issuance of the form of an Order Instituting Cease-and-Desist Proceedings Pursuant to Section 21C of the Securities Exchange Act of 1934, Making Findings, and Imposing a Cease-and-Desist Order (the “March 2014 Order”). The March 2014 Order was approved by the SEC on March 21, 2014. Pursuant to the March 2014 Order, PNX and the Company have been directed to cease and desist from committing or causing any violations and any future violations of Section 13(a) of the Exchange Act and Rules 13a-1 and 13a-13 thereunder and Section 15(d) of the Exchange Act and Rules 15d-1 and 15d-13 thereunder.

The Company and PNX each paid a civil monetary penalty in the amount of $375,000 to the U.S. Treasury following the entry of the March 2014 Order.

PNX filed the 2012 Form 10-K a day after the date required by the March 2014 Order, filed its third quarter 2012 Form 10-Q eight days after the date required by the March 2014 Order, and announced on June 3, 2014 that it would not file its 2013 Annual Report on Form 10-K by the date required by the March 2014 Order. PHL Variable filed its 2012 Form 10-K ten days after the date required by the March 2014 Order and announced on June 3, 2014 that it would not file its 2013 Annual Report on Form 10- K by the date required by the March 2014 Order. PHL Variable filed its third quarter 2012 Form 10-Q in compliance with the March 2014 Order.

On July 16, 2014, PNX and the Company submitted an Amended Offer of Settlement with the SEC (the “Amended Offer”) pursuant to which the Company and PNX consented to the issuance of the form of an Order Amending Order Instituting Cease-and-Desist Proceedings Pursuant to Section 21C of the Securities Exchange Act of 1934, Making Findings, and Imposing a Cease-and-Desist Order (the “Amended Order”). Except as amended by the Amended Order, which was approved by the SEC on August 1, 2014, the March 2014 Order remains in effect. PNX and the Company each paid a civil monetary penalty in the amount of $100,000 to the U.S. Treasury following the entry of the Amended Order, and will be required to pay the following additional monetary penalties with respect to a future late filing of any Company and/or PNX periodic report covered by the Amended Order: $20,000 per filing for the first week in which a filing is delinquent, plus, for each week or partial week thereafter an additional amount equal to the sum of a) $20,000 and b) $5,000 multiplied by the number of complete weeks that the filing has been delinquent before the week in which the late filing is made. PNX filed its Annual Report on Form 10-K for the year ended December 31, 2013 with the SEC on August 6, 2014 in compliance with the Amended Order.

The following table sets forth the deadlines in the Amended Order for the Company’s SEC periodic reports:

Phoenix Timetable of SEC Periodic Reports
Form	Period	Amended Deadline
10-K	Year ended December 31, 2013	August 6, 2014
10-Q	Quarterly Period ended March 31, 2013	September 10, 2014
10-Q	Quarterly Period ended June 30, 2013	September 10, 2014
10-Q	Quarterly Period ended September 30, 2013	September 10, 2014
10-Q	Quarterly Period ended March 31, 2014	October 17, 2014
10-Q	Quarterly Period ended June 30, 2014	October 24, 2014
10-Q	Quarterly Period ended September 30, 2014	December 5, 2014

As of the date of filing of this Form 10-K, PNX believes it will become a timely filer with the filing of its Annual Report on Form 10-K for the year ending December 31, 2014.

The following table sets forth the deadlines in the Amended Order for PHL Variable’s SEC periodic reports:

PHL Variable Timetable of SEC Periodic Reports
Form	Period	Amended Deadline
10-K	Year ended December 31, 2013	August 22, 2014
10-Q	Quarterly Period ended March 31, 2013	September 12, 2014
10-Q	Quarterly Period ended June 30, 2013	September 12, 2014
10-Q	Quarterly Period ended September 30, 2013	September 12, 2014
10-Q	Quarterly Period ended March 31, 2014	October 21, 2014
10-Q	Quarterly Period ended June 30, 2014	October 28, 2014
10-Q	Quarterly Period ended September 30, 2014	December 12, 2014

As of the date of filing of this Form 10-K, the Company believes it will become a timely filer with the filing of its Annual Report on Form 10-K for the year ending December 31, 2014. This Form 10-K was filed in compliance with the Amended Order.

The SEC has a broad range of potential actions, in addition to those set forth in the Amended Order, that may be taken against PNX and the Company for failure to comply with the undertakings in the March 2014 Order and the Amended Order noted above. Further, PNX is providing to the SEC certain information and documentation regarding the Restatement and the staff of the SEC has indicated to PNX that the matter remains subject to further investigation and potential further regulatory action. We cannot predict the outcome of any of such investigations or actions related to these or other matters. An adverse ruling in any SEC enforcement action or other regulatory proceeding could impose upon the Company and/or PNX fines, penalties, or other remedies, including the suspension of trading of PNX’s securities or deregistration of PNX and the Company under the Exchange Act, which could have a material adverse effect on our results of operations and financial condition. Even if we are successful in defending against an SEC enforcement action or other regulatory proceeding, such an action or proceeding may be time consuming, expensive and diverting management from the operation of our business and could have a material adverse effect on our business, financial condition and results of operations. In the event of any such action or proceeding, we may also become subject to costly indemnification obligations to current or former officers, directors, or employees.

If PNX fails to file one or more of the Relevant PNX SEC Reports by March 16, 2015, it may seek additional consents from certain bondholders to extend the date for providing its Relevant SEC Reports to the Indenture Trustee.

The reporting covenant (“Reporting Covenant”) contained in the indenture (the “Indenture”) covering PNX’s outstanding 7.45% Quarterly Interest Bonds due 2032 (the “Bonds”), requires PNX to file with the trustee (“Trustee”), within fifteen days after it is required to file with the SEC, copies of the annual reports, quarterly reports and of the information, documents and other reports that PNX is required to file with the SEC pursuant to Section 13 or Section 15(d) of the Securities Exchange Act of 1934, as amended, and the rules and regulations adopted by the SEC thereunder. Additionally, under the Indenture, the Trustee or the holders (“Holders”) of 25% or more of the outstanding principal amount of the Bonds have the right to notify PNX if they believe PNX has breached a covenant under the Indenture and may, following any applicable cure periods, declare an Event of Default and cause the outstanding principal amount of the Bonds to become immediately due and payable.

Because of the delay in filing PNX’s 2012 Annual Report on Form 10-K and certain of its delayed SEC reports, the Trustee under the Indenture covering the Bonds sent notices of default under the Indenture initiating the 60-day cure periods thereunder. Consequently, PNX sought and successfully obtained the consents of Holders representing a majority of the outstanding principal amount of the Bonds (“Requisite Consents”) to amend the Indenture, and to provide related waivers, that allowed PNX to ultimately extend the date for providing its 2012 Annual Report on Form 10-K, its Quarterly Report on Form 10-Q for the third quarter 2012, its 2013 Quarterly Reports on Form 10-Q, its 2013 Form 10-K, and its 2014 Quarterly Reports on Forms 10-Q (collectively, the “Relevant PNX SEC Reports”) to the Trustee to a date on or prior to March 16, 2015. If PNX fails to file one or more of the Relevant PNX SEC Reports by March 16, 2015, PNX may seek an additional consent from the Holders to amend the Indenture, and to provide a related waiver, that will allow PNX to extend the date for providing such Relevant PNX SEC Reports to the Trustee.

If PNX does seek an additional consent from Holders to amend the Indenture and to provide a related waiver, there can be no assurance that it will receive the Requisite Consents to any additional amendments and waivers of the Reporting Covenant on a timely basis, or at all, or that the extension of the Reporting Covenant for the Relevant PNX SEC Reports will extend for a sufficient period of time to avoid an Event of Default, an acceleration event or other adverse impact on our business operations that may result therefrom. If PNX is unsuccessful in curing the default or obtaining the Requisite Consents to such additional amendments and waivers, the Trustee or the Holders of 25% or more of the outstanding principal amount of the Bonds will be able to accelerate payment of outstanding principal on the Bonds for the existing breach of the Reporting Covenant in accordance with the Indenture. In the event that Holders of a majority in principal amount of the Bonds do not provide PNX with the Requisite Consents to such amendments and waivers and determine to accelerate payment of the Bonds, PNX may lack the ability to meet those obligations out of its currently available cash and liquid assets available at the holding company. Although PNX believes that it could take actions designed to satisfy its obligations under the Indenture, there can be no assurance that any of these actions would be sufficient, available or available on satisfactory terms, any of which could materially and adversely impact PNX’s and our business, liquidity and financial position. Even if PNX is successful in amending the Indenture and obtaining a waiver from the Holders, there can be no assurances that PNX will make the filings with the SEC or the Trustee by such extended date, which could result in a default under the Indenture.

The outcome of litigation and other claims as well as regulatory examinations, investigations, proceedings and orders arising out of the Restatement and the failure by the Company and PNX to file SEC reports on a timely basis are unpredictable and any orders, actions or rulings not in our favor could have a material adverse effect on our financial condition, liquidity or results of operations.

The circumstances which gave rise to the Restatement, the U.S. GAAP restatements by PNX and Phoenix Life and the related SEC filing delays continue to create the risk of litigation and claims by investors and examinations, investigations, proceedings and orders by regulatory authorities, which could be expensive and damaging to our business and financial condition. For additional information regarding litigation related business risks, please see the risk factor below under “Risks Related to our Business” entitled, “Legal actions and proceedings are inherent in our businesses and could adversely affect our results of operations or financial position or harm our business or reputation.”

In connection with the Restatement, the failure by the Company to file the Delayed SEC Reports and become a timely filer under the Exchange Act, and PNX’s failure to file its corresponding SEC reports and become a timely filer under the Exchange Act, as well as the reported weaknesses in internal control over financial reporting, may subject the Company and PNX to a broad range of potential actions that may be taken against the Company and PNX by the staff of the SEC, including, but not limited to, a cease and desist order, suspension of trading of PNX’s securities, deregistration of PNX or the Company and/or the assessment of possible civil monetary penalties.

Any orders, actions or rulings relating to any of the foregoing that are not in our favor could have a material adverse effect on our financial condition, liquidity or results of operations.

The events which caused the need for the Restatement and the failure to timely file the 2012 Form 10-K, this Form 10-K and certain of our other delayed SEC reports have resulted in certain rating agencies placing us on negative credit watch, downgrading our credit ratings and/or withdrawing these ratings and further credit rating downgrades of our financial strength ratings or withdrawal of these ratings are possible. These downgrades or withdrawals could result in an increase in policy surrenders and withdrawals, adversely affect relationships with distributors, reduce new sales, limit our ability to trade in derivatives and increase our costs of, or reduce our access to, future borrowings.

Rating agencies assign the Company and Phoenix Life financial strength ratings, and assign PNX debt ratings, based in each case on their opinions of the ability by the Company, PNX and Phoenix Life to meet their respective financial obligations.

Our ratings relative to other companies in the industry affect our competitive position. The Company, PNX and Phoenix Life and their securities have been placed on negative credit ratings watch and/or downgraded or withdrawn by certain rating agencies in connection with the events which caused the need for this Restatement and the failure to timely file the 2012 Form 10-K and certain of our and PNX’s delayed SEC reports. These recent developments and any future rating downgrades or withdrawals may cause reputational damage, which could materially and adversely affect our ability to distribute our products through unaffiliated third parties, new sales of our products, the persistency of existing customers, increase policy surrenders and withdrawals and our ability to borrow. We cannot predict what actions rating agencies may take, or what actions we may take in response. At this time, we cannot estimate the impact of specific future rating agency actions on sales or persistency. Financial statement restatements may result in downgrades or withdrawals of our financial strength credit ratings, which could increase policy surrenders and withdrawals, adversely affect relationships with distributors, reduce new sales, limit our ability to trade in derivatives and increase our costs of, or reduce our access to, future borrowings, any of which could negatively impact our liquidity. Such an increase would decrease our earnings, could reduce access to financing and have a material adverse effect on our operations.

In light of the difficulties experienced by many financial institutions, including insurance companies, rating agencies have increased the frequency and scope of their credit reviews and requested additional information from the companies that they rate, including us. They may also adjust upward the capital and other requirements employed in the rating agency models for maintenance of certain ratings levels.

We may not be able to hedge our positions due to the inability to replace hedges as a result of our credit rating.

We use derivative instruments to hedge the liability exposure and the volatility of earnings associated with certain variable and fixed indexed annuity liabilities. Certain derivative counterparty agreements of certain subsidiaries contain provisions that permit the parties to terminate the agreements upon the occurrence of a default under the Indenture covering ~~the~~Phoenix’s 7.45% Quarterly Interest Bonds due 2032. In addition, certain of these agreements require our financial strength rating to be above a certain threshold. Given that our financial strength ratings are below a specified credit rating threshold in certain of our derivative agreements, the counterparties can request immediate payment, demand immediate and ongoing full collateralization on derivative instruments in net liability positions, or trigger a termination of existing derivatives and/or future derivative transactions. In certain derivative counterparty agreements, our financial strength ratings ~~are~~have been below the specified threshold levels since March 2009 and, ~~have~~when ~~been~~requested, ~~since~~the ~~March 2009~~Company has provided collateralization on those derivative instruments.

If we are forced to terminate any derivative agreements, we may be unable to replace the derivative positions, thereby increasing our exposure to periods of significant and sustained downturns in equity markets, increased equity volatility, or reduced interest rates, which could result in an increase in the valuation of the future policy benefit associated with such products and result in a material adverse effect on our earnings and financial condition.

We have incurred and expect to continue to incur significant expenses related to the Restatement, the remediation of weaknesses in our internal control over financial reporting and disclosure controls and procedures, the preparation of this Form 10-K and the Delayed SEC Reports, and the efforts otherwise necessary for the Company and PNX to each become a timely filer under the Exchange Act.12

WeTable ~~have devoted and expect to continue to devote substantial internal and external resources to remediation relating to the Restatement, the PNX U.S. GAAP restatement, and the preparation and filing~~ of this Form 10-K and the preparation of the Delayed SEC Reports, and otherwise becoming a timely filer under the Exchange Act. As a result of these efforts, we have incurred and expect that we will continue to incur significant incremental fees and expenses for additional auditor services, financial and other consulting services, legal services, consent waivers as well as the implementation and maintenance of systems and processes that will need to be updated, supplemented or replaced. These expenses, as well as the substantial time devoted by our management towards identifying and addressing any internal weaknesses in our internal control over financial reporting and our disclosure controls and procedures, could have a material adverse effect on our business, profitability and financial condition. For additional information regarding principal accounting fees and services, please see Part III, Item 14 of this Form 10-K.Contents

The ~~Restatement~~ process, ~~the preparation~~ of ~~this~~undertaking ~~Form~~the ~~10-K~~restatements, the preparation of ~~the~~previously ~~Delayed~~delayed SEC ~~Reports~~reports, ~~and~~ the efforts otherwise necessary for the Company and ~~PNX~~Phoenix to ~~each~~ become acurrent and timely ~~filer~~filers under the Exchange Act and the ongoing remediation of material weaknesses in internal control over financial reporting have diverted, and continue to divert, management and other human resources from the operation of our business. ~~The absence of timely and accurate financial information may hinder our ability to effectively manage the business of the Company.~~

The Restatement process and the preparation of this Form 10-K, the Delayed SEC Reports, and the efforts otherwise necessary for the Company and PNX to each become a timely filer under the Exchange Act have diverted, and continue to divert, management and other human resources from the operation of our business. As a result of the delay in completing the Restatement, we have delayed filing our Delayed SEC Reports and we are likely to be unable to file our Quarterly Report on Form 10-Q for the period ending September 30, 2014 on a timely basis and we expect to be current with all of our and PNX’s periodic reporting obligations by December 12, 2014. The Board of Directors, members of management, and the accounting, legal, administrative and other staff of the Company and ~~PNX~~Phoenix ~~have~~ spent significant time on the ~~Restatement and the U.S. GAAP~~ restatements ~~of the Company~~ and ~~Phoenix Life, and~~ continue to spend significant time on the preparation of ~~the Delayed~~ SEC ~~Reports~~filings, related disclosures and remediation of disclosure controls and procedures and internal control over financial reporting of the Company and ~~PNX~~Phoenix’s insurance company subsidiaries, and efforts otherwise necessary for the Company and ~~PNX~~Phoenix to each become acurrent and timely ~~filer~~filers under the Exchange Act. These resources have been, and will likely continue to be, diverted from the strategic and day-to-day management of our business. In addition, current, accurate financial information is essential to the management of our complex business, including controlling the financial risk associated with the products that the Company offers and sells. ~~The absence of current publicly available financial information may make it more difficult to accomplish the strategic objectives of the Company.~~

17The Company and Phoenix Life are delayed in filing with the SEC amendments to existing registration statements, or filing new registration statements, under the Securities Act or the Investment Company Act covering the offer and sale of certain of their respective insurance products, and errors were found in certain audited and unaudited Statutory financial statements of the Company and Phoenix Life, any or all of which may have a material adverse impact on the business and financial condition of the Company and Phoenix.

~~The~~Phoenix ~~Company~~conducts ~~and~~the majority of its business through Phoenix Life’s ~~restatements,~~and the ~~delay~~Company. inThe ~~our~~Company previously ~~filing~~announced ofthat ~~periodic~~it ~~reports~~will ~~with~~continue ~~the~~to ~~SEC~~not ~~and~~issue ~~errors~~any ~~corrected~~new inSEC-registered ~~subsequent~~life ~~Statutory~~insurance ~~financial~~and ~~statement~~annuity ~~filings~~contracts ~~with~~until ~~state~~new ~~insurance~~registration ~~regulators~~statements ~~could~~or ~~result~~amendments into ~~regulatory~~existing ~~investigations,~~registration ~~examinations~~statements ~~and/or~~covering ~~inquiries,~~the ~~which~~offer ~~may~~and ~~increase~~sale ~~compliance~~of ~~costs~~these ~~and~~products ~~the~~have ~~potential~~been ~~for~~filed ~~additional~~with ~~regulatory~~and ~~investigations,~~declared ~~proceedings~~effective orby ~~other~~the ~~claims~~SEC.

AsIn ~~a result of PNX’s U.S. GAAP financial statement restatement~~addition, ~~certain~~until ~~errors~~the ~~were~~Company ~~found in our~~ and Phoenix Life’s ~~financial~~have ~~statements prepared in accordance with Statements of Statutory Accounting Principles (“Statutory”)~~ filed with the ~~applicable~~SEC ~~state~~new ~~insurance~~registration ~~regulators.~~statements ~~Those~~or ~~errors~~amendments ~~were~~to ~~corrected~~their inexisting ~~subsequent~~registration ~~filings~~statements ~~with~~covering ~~the~~their ~~applicable~~products, ~~state~~and ~~insurance~~those ~~regulators.~~new Weregistration dostatements ~~not~~or ~~believe~~amendments ~~the~~are ~~state~~effective, ~~insurance~~there ~~regulators~~ will ~~deem~~be itongoing ~~necessary~~uncertainty toregarding ~~adjust~~ our orability ~~Phoenix~~to ~~Life’s~~continue ~~historical~~to ~~unaudited~~accept ~~Statutory~~premiums, ~~financial~~or ~~statement~~to ~~filings~~process ~~with~~certain ~~the~~other ~~applicable~~investment ~~state~~transaction ~~insurance regulators. However~~requests, ~~PNX~~associated ~~concluded~~with ~~that~~ the ~~audited~~outstanding ~~Statutory~~SEC-registered ~~financial~~life ~~statements~~insurance ~~for~~and ~~the~~annuity ~~year~~contracts ~~ended~~of ~~December~~the ~~31,~~Company ~~2012~~and ~~filed by~~ Phoenix Life. ~~with~~In ~~its~~such ~~applicable~~an ~~state insurance regulators~~event, ~~which~~these ~~restate~~actions ~~Statutory~~may ~~financial~~have ~~statements~~a ~~for~~material ~~the~~adverse ~~year~~impact ~~ended~~on ~~December~~Phoenix’s ~~31,~~future ~~2011~~revenues, ~~materially~~competitive ~~differ~~position ~~from~~and ~~the~~consumer ~~annual~~perception ~~unaudited~~of ~~Statutory~~Phoenix’s ~~financial~~products, ~~statements~~and ~~for~~its ~~the~~retention ~~year~~of ~~ended~~existing ~~December~~contracts ~~31,~~and ~~2012~~may ~~previously~~result ~~filed~~in byclaims ~~Phoenix~~related ~~Life.~~to ~~Also,~~these ~~the~~SEC-registered ~~fact~~products ofagainst ~~the~~us ~~Restatement, PNX’s~~ and Phoenix Life~~’s restatements~~, ~~and~~any ~~the delay in our filing~~ of ~~periodic~~which ~~reports with the SEC,~~ could ~~result~~have ina ~~various~~material ~~regulatory~~adverse ~~bodies~~effect ~~conducting~~on ~~examinations~~Phoenix’s orbusiness ~~investigations~~ and~~/or~~ ~~making~~financial ~~inquiries~~results. ofIn usaddition, ~~and~~in ~~Phoenix~~connection ~~Life concerning compliance~~ with ~~applicable~~its ~~laws~~product ~~and regulations~~offerings, ~~which~~PHL ~~may~~Variable ~~increase~~relies ~~our~~on ~~compliance~~third-party ~~costs~~vendors ~~and~~to ~~the~~supply ~~potential~~vendor-generated ~~for~~products. ~~regulatory~~PHL ~~investigations~~Variable’s orfailure ~~proceedings~~to orfile ~~other~~new ~~claims.~~registration ~~Any~~statements ~~existing~~ or ~~future~~amendments ~~litigation,~~to ~~investigations,~~existing ~~proceedings~~registration orstatements ~~claims~~may ~~that~~cause ~~we,~~such ~~PNX~~vendors ~~and~~to ~~Phoenix~~terminate ~~Life~~their ~~are~~relationships orwith ~~could~~PHL ~~become~~Variable, ~~involved~~which in, orturn ~~become~~may ~~the~~cause ~~subject~~PHL ~~of,~~Variable ~~could~~to ~~have~~terminate amany ~~material~~of ~~adverse~~its ~~effect~~product ~~on our financial condition, liquidity or financial statements~~offerings.

As a result of the restatements, certain errors were found in our and Phoenix Life’s financial statements filed with the applicable state insurance regulators. Those errors were corrected in subsequent filings with the applicable state insurance regulators. We do not believe the state insurance regulators will deem it necessary to adjust our or Phoenix Life’s historical unaudited Statutory financial statement filings with the applicable state insurance regulators. However, Phoenix concluded that the audited Statutory financial statements for the year ended December 31, 2012 filed by Phoenix Life with its applicable state insurance regulators, which restate Statutory financial statements for the year ended December 31, 2011, materially differ from the annual unaudited Statutory financial statements for the year ended December 31, 2012 previously filed by Phoenix Life. Also, the fact of our and Phoenix Life’s U.S. GAAP financial statement restatements and the delay in our filing of periodic reports with the SEC could result in various regulatory bodies conducting examinations or investigations and/or making inquiries of us and Phoenix Life concerning compliance with applicable laws and regulations, which may increase our compliance costs and the potential for regulatory investigations or proceedings or other claims. Any existing or future litigation, investigations, proceedings or claims that we, Phoenix and Phoenix Life are or could become involved in, or become the subject of, could have a material adverse effect on the business and financial condition.

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Our failure to file, or timely file, audited Statutory financial statements with state regulatory authorities may result in, among other things, the imposition of sanctions and penalties against us, which could have a material adverse effect on our financial condition, results of operations and cash flows.

We are required to file audited Statutory financial statements with the applicable regulatory authorities annually. As a result of the ~~Restatement~~U.S. GAAP restatements of prior period financial statements of the Company, Phoenix and Phoenix Life, we filed our audited Statutory financial statements for 2013 and 2012 after the initial due date, but within extensions granted by our domiciliary insurance regulator. Any delays in connection with the filing of audited Statutory financial statements with our applicable state regulatory authorities may result in, among other things, the imposition of sanctions and penalties against us, which could have a material adverse effect on our financial condition, results of operations and cash flows.

We have not timely filed our 2013 annual audited Statutory financial statements with our applicable state insurance regulators. We have received from our domiciliary insurance regulator extensions for submission of our 2013 annual audited Statutory financial statements and management’s report on internal control over financial reporting. We intend to seek further extensions, as necessary. If such extensions are not granted, failure to timely file such audited Statutory financial statements and management’s report can result in, among other things, the imposition of sanctions and penalties, including operating restrictions, which could have a material adverse effect on our financial condition, results of operations and cash flows.

Risks Related to Our Business

Our business, financial condition, and results of operations could be materially and adversely affected by unfavorable economic developments and the performance of the debt and equity markets.

Economic and market conditions materially and adversely affected us in the last recession. The economy may once again deteriorate. The resulting lack of credit, increase in defaults, lack of confidence in the financial sector, volatility in the financial markets and reduced business activity could materially and adversely affect our business, financial condition and results of operations.

These effects include, but are not limited to, the following:


•	Lower fee revenue and higher expenses. Significant declines in equity markets would decrease assets in our variable annuity and variable life product lines, resulting in lower fee income and increased amortization of deferred policy acquisition costs.

•

Realized and unrealized losses in our fixed income portfolio. The value of the portfolio would be depressed by general interest rate increases or credit spread widening, as well as by illiquidity and by changes in assumptions we use to estimate the fair value of securities. Bonds supported by residential and commercial mortgages could experience losses if the delinquency rates of the underlying mortgage loans increase.


•	Realized and unrealized losses in alternative asset classes. We invest in private equity funds which generate returns that are more volatile than other asset classes and are relatively illiquid and, therefore, may be harder to value or sell in adverse market conditions.


•	Higher statutory reserve and capital requirements. Certain regulatory reserve and capital requirements incorporate actual and expected future capital market conditions and could increase materially in the event of significant equity market declines or changes in interest rates, credit spreads and credit default rates.


•	Losses due to changes in accounting estimates. Significant accounting estimates may be materially affected by the equity and debt markets and their impact on expected customer behavior. For example, in setting amortization schedules for our deferred policy acquisition costs, we make assumptions about future market performance, interest rates and policyholder behavior.


•	Increased funding requirements for our ultimate parent company’s pension plan. Future market declines could result in additional funding requirements. Also, the funding requirements of our ultimate parent company’s pension plan are sensitive to interest rate changes. Should interest rates decrease materially, the plan liabilities would increase.

•

Hedging losses or increased reserve requirements in our variable annuity business. We use derivatives to hedge the value of certain guaranteed benefits. These hedges and other management procedures could prove ineffective, especially during times of significant market volatility. For benefits that are not hedged, such as minimum death benefits and minimum income benefits we could be required to increase reserves in the event of a significant decline in the equity markets.

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Persistent low interest rates or significant increases in interest rates could adversely affect our business and results of operations.

Our products expose us to significant interest rate risk. A substantial portion of our business is spread-based, meaning that profitability depends on our ability to invest premiums at yields in excess of the rates we credit to policyholders. The current low interest rate environment has meant that we have invested or reinvested cash flows at substantially lower yields than our existing portfolio yield, while our ability to reduce credited rates has been limited by contractual minimums. Persistent low interest rates could compound this spread compression. In addition, they could cause additional premium payments on products with flexible premium features, repayment of policy loans and lower policy surrenders.

Persistent low interest rates may also result in higher U.S. GAAP insurance liabilities. The long-term liability for profits followed by losses on the universal life business is particularly sensitive to interest rates.

Persistent low interest rates could also result in higher statutory reserve and capital requirements. The Company and its insurance company affiliates are subject to annual asset adequacy testing, which requires additional reserves to be posted if projected asset cash flows and future premiums are not able to support future policy claims and surrenders under a range of possible scenarios.

Low interest rates ~~have~~ also have increased the liability of our pension plans and other post-employment benefits. Further declines in interest rates could result in additional increases in these liabilities.

Conversely, if interest rates rise significantly, we could face an increase in unrealized losses in our investment portfolio. At the same time, it could cause life insurance policy loans, surrenders and withdrawals to increase as policyholders seek investments with higher returns. This could require us to sell invested assets at a time when their prices are depressed, which could cause us to realize investment losses.

Legal actions and proceedings are inherent in our businesses and could adversely affect our results of operations or financial position or harm our businesses or reputation.

We are regularly involved in litigation and arbitration, both as a defendant and as a plaintiff. In addition, various regulatory bodies regularly make inquiries of us and, from time to time, conduct examinations or investigations concerning our compliance with, among other things, insurance laws, securities laws, laws governing the activities of broker-dealers and other laws and regulations affecting our registered products. We are, and in the future may be, subject to and involved in legal actions and proceedings in the ordinary course of our businesses. Some of these proceedings have been brought, and may be brought in the future, on behalf of various alleged classes of complainants. In certain of these matters, the plaintiffs are seeking large and/or indeterminate amounts, including punitive or exemplary damages. Furthermore, certain institutional investors have purchased, or may purchase in the future, large numbers of Company policies in the secondary market and have asserted, or may assert, claims against us before regulatory agencies and in litigation. Substantial legal liability in these or future legal actions could have an adverse effect on us or cause us reputational harm, which in turn could, among other items, harm our business prospects, result in regulatory or legislative responses and have an adverse effect on our financial statements.

In addition to potential for legal actions and proceedings related to the ordinary course of our business, there is a risk of litigation and other claims as well as regulatory examinations, investigations, proceedings and orders arising out of the restatements and the failure by the the Company and Phoenix to file SEC reports on a timely basis and the failure by Phoenix’s insurance company subsidiaries to have compliant registration statements covering certain insurance products offered and sold by them. Phoenix is providing information to the staff of the SEC in connection with the restatements, which may result in further regulatory actions by the SEC. The potential outcomes and claims are unpredictable and any orders, actions or rulings not in our favor could have a material adverse effect on our financial condition, liquidity or results of operations.

It is difficult to predict or determine the ultimate outcome of legal or regulatory proceedings or to provide reasonable ranges of potential losses. We believe that the outcomes of our litigation and regulatory matters are not likely, either individually or in the aggregate, to have a material adverse effect on our financial statements. However, given the large or indeterminate amounts and/or other remedies sought in certain of these matters and the inherent unpredictability of litigation and regulatory matters, it is possible that an adverse outcome in certain matters could, from time to time, have a material adverse effect on the way we conduct our business and our financial condition, liquidity or financial statements in particular quarterly or annual periods. For a more detailed discussion of certain current litigation and other proceedings please refer to the discussion under “Item 3: Legal Proceedings” of this Form 10-K.

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Downgrades or withdrawals of debt and financial strength ratings could result in an increase in policy surrenders and withdrawals, adversely affect relationships with distributors, reduce new sales, limit our ability to trade in derivatives and increase our costs of, or reduce our access to, future borrowings.

Rating agencies assign the Company and Phoenix Life financial strength ratings, and assign Phoenix debt ratings, based in each case on their opinions of the ability by the Company, Phoenix and Phoenix Life to meet their respective financial obligations.

Phoenix’s ratings relative to other companies in the industry affect our competitive position. The Company, Phoenix, and Phoenix Life and their securities have been placed on negative credit ratings watch and/or downgraded or withdrawn by certain rating agencies in connection with the events which caused the need for the restatements and the failure to timely file the 2012 Form 10-K, the 2013 Form 10-K and certain of our other previously delayed SEC reports. These developments and any other events that could affect the ability of the Company to pay claims may cause downgrades or withdrawals which may cause reputational damage. This could materially and adversely affect our ability to distribute our products through unaffiliated third parties, new sales of our products, the persistency of existing customers, increase policy surrenders and withdrawals and our ability to borrow. We cannot predict what actions rating agencies may take, or what actions we may take in response. At this time, we cannot estimate the impact of specific future rating agency actions on sales or persistency.

Our actuarial reserve calculations, particularly for universal life death benefits and guaranteed annuity benefits, require many assumptions and significant management judgment, which, if incorrect, could adversely affect our results of operations and financial condition.

We establish reserves to pay future policyholder benefits and claims. A significant proportion of our reserves do not represent policyholder funds but rather are actuarial estimates based on assumptions that include future premiums, benefits, claims, expenses, interest credits, investment results (including equity market returns), mortality, morbidity and persistency. As a result, we cannot be certain that the assets supporting our policy liabilities, together with future premiums, will be sufficient for payment of benefits and claims. If, in the future, we determine this to be the case, we would need to increase our reserves in the period in which we make the determination, which would adversely affect our results of operations and financial condition.

We may experience losses if capital market conditions, mortality or longevity experience, policyholder behavior (e.g., persistency, premium payments, benefit utilization rates) or other factors differ significantly from the assumptions that we used in pricing products or that are reflected in our current financial results.

We set prices for our insurance and annuity products based upon capital market assumptions, expected mortality or longevity, and expected policyholder behavior. For capital market assumptions such as equity market returns and investment portfolio yields we use current market observations, historical information and management judgment. For mortality and longevity rates we use standard actuarial tables, company experience and management judgment. For policyholder behavior assumptions we use available industry and company data. Assumptions used in pricing our products generally are consistent with assumptions used to initially determine the amortization of deferred policy acquisition costs. Adverse experience relative to these assumptions could have a material adverse effect on our results from operations and financial condition.

Recent trends in the life insurance industry may affect our mortality, persistency and funding levels. The evolution of the financial needs of policyholders and the emergence of a secondary market for life insurance and increased availability and subsequent contraction of premium financing suggest that the reasons for some purchases of our products changed. At the same time, prior to 2009, we experienced an increase in life insurance sales to older individuals. While we instituted certain controls and procedures to screen applicants, we believe that our sales of universal life products include sales of policies to third -party investors who, at the time of policy origination, had no insurable interest in the insured.

2016

~~Deviations~~Table ~~in experience from our pricing assumptions have had, and could continue to have, an adverse effect on the profitability~~ of certain universal life products. Most of our current products permit us to increase charges and adjust crediting rates during the life of the policy or contract (subject to guarantees in the policies and contracts). In 2011 and 2010, we implemented increases in the cost of insurance rates for certain universal life policies. However, these and any other permitted adjustments do not allow us to recoup past losses and may not be sufficient to maintain profitability in the future. In addition, increasing charges on in force policies or contracts may adversely affect our relationships with distributors, future sales and surrenders. Furthermore, some of our in force business consists of products that do not permit us to adjust the charges and credited rates of in force policies or contracts.Contents

~~Our~~Deviations ~~recent~~in ~~development~~experience from our pricing assumptions have had, and could continue to have, an adverse effect on the profitability of ~~fixed~~certain ~~indexed~~universal ~~annuity~~life products. ~~has~~Most ~~required~~of our current products permit us to ~~make~~increase ~~pricing~~charges ~~assumptions~~and ~~about~~adjust crediting rates during the ~~behavior~~life of ~~policyholders~~the policy or contract (subject to guarantees in athe ~~market~~policies ~~segment~~and ~~with~~contracts). ~~which~~However, wemost of our contracts are ~~not~~currently ~~historically~~at ~~familiar~~or close to their minimum guaranteed crediting rates. In 2011 and ~~for~~2010, ~~product~~we ~~features~~implemented ~~for~~increases ~~which~~in ~~there~~the iscost ~~limited~~of ~~long-term~~insurance ~~industry~~(“COI”) ~~experience.~~rates Infor ~~particular~~certain universal life policies. However, ifthese ~~our~~and ~~pricing~~any ~~assumptions~~other ~~with~~permitted ~~respect~~adjustments do not allow us to ~~persistency~~recoup past losses and ~~benefit~~may ~~utilization~~not be sufficient to maintain profitability in the future. ~~prove~~In ~~inaccurate~~addition, weincreasing charges on in force policies or contracts may ~~experience~~adversely anaffect ~~adverse~~our ~~impact~~relationships onwith distributors, future sales and surrenders. Furthermore, some of our ~~results~~in force business consists of ~~operations~~products orthat ~~financial~~do ~~condition~~not permit us to adjust the charges and credited rates of in force policies or contracts.

Our fixed indexed annuity products have required us to make pricing assumptions about the behavior of policyholders in a market segment with which we are not historically familiar and for product features for which there is limited long-term industry experience. In particular, if our pricing assumptions with respect to persistency and benefit utilization in the future prove inaccurate, we may experience an adverse impact on our results of operations or financial condition.

Adverse experience relative to our pricing assumptions could also result in higher amortization of deferred policy acquisition costs. The recovery of deferred policy acquisition costs is dependent upon the future profitability of the related business. See “Item 7: Management’s Discussion and Analysis of Financial Condition and Results of Operations-Critical Accounting Estimates” in this Form 10-K. If our estimates of future gross profits or margins cannot support the continued amortization or recovery of deferred policy acquisition costs the amortization of such costs is accelerated in the period in which the pricing assumptions are changed, resulting in an “unlocking” charge to income. Such adjustments may in the future have a material adverse effect on our results of operations or financial condition.

We have limited access to external sources of liquidity and financing.

Our current financial strength and credit ratings limit our access to external sources of liquidity and financing. During periods of capital market volatility, this access could be further constrained, and the cost of financing could increase significantly. Our ongoing needs for liquidity include policy claims, surrenders, policy loans, commissions, interest and operating expenses. In addition, we may from time to time have discrete needs for liquidity, such as contributions to our pension plan or legal settlements. Our principal sources of liquidity are insurance premiums, annuity considerations, deposit funds and cash flow from our investment portfolio. Sales of assets that are readily convertible into cash represent an additional source. We do not have in place credit facilities or letters of credit that we could draw upon to meet our liquidity requirements. Without sufficient liquidity, we could be forced to realize investment losses, deplete capital or curtail certain of our operations, which would adversely impact our results of operations and financial condition.

Management targets a minimum company action level risk based capital of 225% at the Company. In 2014 and 2013, The Phoenix Companies, Inc. made capital contributions of $15.0 million and $45.0 million, respectively for our benefit. The Phoenix Companies, Inc. is a holding company and has no operations of its own. Its ability to pay interest and principal on outstanding debt obligations and to pay dividends to shareholders and corporate expenses depends primarily upon the ability of subsidiaries to pay dividends or to advance or repay funds which in some cases are restricted by laws and regulations, including laws establishing minimum solvency and liquidity thresholds. Phoenix Life has made a guarantee that the Company’s capital and surplus will be maintained at Authorized Control Level RBC at 250% (125% Company Action Level). PHL Variable may be unable to maintain its RBC at targeted levels.

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Guaranteed benefits within our products that protect policyholders against significant downturns in equity markets may decrease our earnings, increase the volatility of our results if hedging strategies prove ineffective, result in higher hedging costs and expose us to increased counterparty risk, which may have a material adverse effect on our results of operations, financial condition and liquidity.

Certain of our products include guaranteed benefits. These include GMDBs, ~~guaranteed minimum accumulation benefits (“~~GMABs”), GMWBs and ~~guaranteed minimum income benefits (“~~GMIBs”). Periods of significant and sustained downturns in equity markets, increased equity volatility or reduced interest rates could result in an increase in the valuation of the future policy benefit associated with such products, resulting in a reduction to earnings. We use derivative instruments to hedge the liability exposure and the volatility of earnings associated with some of these liabilities and, even when these and other actions would otherwise successfully mitigate the risks related to these benefits, we remain liable for the guaranteed benefits in the event that derivative counterparties are unable or unwilling to pay. In addition, we are subject to the risk that hedging and other management procedures prove ineffective or that unanticipated policyholder behavior, including lower withdrawals or mortality, combined with adverse market events, produces economic losses beyond the scope of the risk management techniques employed. Hedging instruments we hold to manage product and other risks have not, and may continue to not, perform as intended or expected, resulting in higher realized losses. Market conditions can also result in losses on product related hedges and such losses may not be recovered in the pricing of the underlying products being hedged. These factors, individually or collectively, may adversely affect our profitability, financial condition or liquidity.

Our risk management policies and procedures may leave us exposed to unidentified or unanticipated risk, which could adversely affect our businesses or result in losses.

We have devoted significant resources to develop and periodically update our risk management policies and procedures to reflect our ongoing review of our risks. However, our policies and procedures to monitor and manage risks may not be fully effective and may leave us exposed to unidentified and unanticipated risks. We use models in many aspects of our operations, including but not limited to the pricing of products, estimation of actuarial reserves, amortization of deferred policy acquisition costs, and the valuation of certain other assets and liabilities. These models rely on assumptions and projections that are inherently uncertain. In addition, the risk of a natural or man-made catastrophe, pandemic, malicious act, terrorist act, or the occurrence of climate change, could adversely affect mortality, morbidity, or other relevant factors and, as a result, have a significant negative impact on our business. Our risk management efforts and other precautionary plans and activities may not adequately predict the impact on our business from such events.

Management of operational, legal and regulatory risks requires, among other things, policies and procedures to record properly and verify a large number of transactions and events, and these policies and procedures may not be fully effective. Past or future misconduct by our employees or employees of our vendors could result in violations of law by us, regulatory sanctions and/or serious reputational or financial harm and the precautions we take to prevent and detect this activity may not be effective in all cases. A failure of our computer systems or a compromise of their security could also subject us to regulatory sanctions or other claims, harm our reputation, interrupt our operations and adversely affect our business, results of operations or financial condition.

Our statutory capital could decrease or our capital requirements could increase and adversely affect our business.

Accounting standards and statutory capital and reserve requirements for these entities are prescribed by their respective insurance regulators and the National Association of Insurance Commissioners (“NAIC”). In addition, NAIC regulations define minimum risk-based capital (“RBC”) requirements relating to insurance, business, asset and interest rate risks, which are intended to be used by insurance regulators to identify deteriorating or weakly capitalized companies. Separately, some rating agencies have their own capital models that are used to assess capital adequacy as part of the rating process.

Statutory surplus and regulatory or capital requirements may increase or decrease due to a variety of factors, including but not limited to the following: the amount of statutory income generated by the Company and its insurance company affiliates, changes in interest rates and equity market levels, unrealized gains or losses on equity and certain fixed income holdings, unrealized gains or losses on derivatives, changes in ~~interest rates and equity market levels, changes in~~ the credit quality of our fixed income investments, changes in policy reserves, funding requirements of our pension plan, additional reserve requirements as a result of annually required asset adequacy testing, changes in the capital models or applicable risk factors, and changes in statutory accounting rules or regulatory determinations. Most of these factors are outside of our control. One or more of these factors could significantly decrease statutory surplus or increase required RBC. If so, we could experience downgrades, loss of distribution relationships, higher surrenders and increased regulatory supervision.

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We may be unsuccessful in our efforts to generate earnings growth in new market segments, particularly the sale of fixed indexed annuities to middle market customers.

We are implementing a business plan that leverages existing product manufacturing strengths and partnering capabilities to focus new business development in areas that are less capital intensive and appeal to distributors with middle market clients. We have limited experience in the middle market and in the design and sale of fixed indexed annuities. These products have required us to institute new processes for ensuring product suitability, executing hedges using derivatives and processing transactions. In addition, the ultimate profitability of these products is significantly influenced by future investment earnings, policy holder behavior and estimates of longevity. If the new risk management processes we designed prove inadequate, or if future investment earnings, policyholder behavior or longevity differs significantly from expectations, our results from operations may be adversely affected and our growth may not be sustained.

Our valuation of debt securities and equity securities may include methodologies, estimations and assumptions that are subject to differing interpretations and could result in changes to investment valuations that may materially and adversely affect our results of operations and financial condition.

We record debt securities at fair value on our balance sheet. During periods of market disruption, including periods of significantly rising or high interest rates, rapidly widening credit spreads or illiquidity, the valuation of securities may require the adoption of certain estimates and assumptions. In addition, prices provided by independent broker quotes or independent pricing services that are used in the determination of fair value can vary significantly for a particular security. As a result, valuations may include inputs and assumptions that require greater estimation and judgment as well as valuation methods which are more complex. These values may not be ultimately realizable in a market transaction, and may change very rapidly as market conditions change or assumptions are modified. Significant changes in value may have a material adverse effect on our results of operations and financial condition. In addition, a decline in fair value below the amortized cost of a security requires management to assess whether an other-than-temporary impairment (“OTTI”) has occurred. The decision on whether to record an OTTI or write-down is determined in part by our assessment of the financial condition and prospects of a particular issuer, projections of future cash flows and recoverability of the particular security as well as management’s assertion of whether it is more likely than not that we will sell the securities before recovery. See “Item 7: Management’s Discussion and Analysis of Financial Condition and Results of Operations-Critical Accounting Estimates” in this Form 10-K for further information regarding our impairment decision-making process. Management’s determination of whether a decline in value is other -than -temporary includes our analysis of the underlying credit and our intention and ability not to have to sell the security, versus the extent and duration of a decline in value. Our conclusions on such assessments may ultimately prove to be incorrect as facts and circumstances change, which could result in a material adverse effect on our results of operation and financial condition.

We may incur losses if our reinsurers are unwilling or unable to meet their obligations under reinsurance agreements. The availability, pricing and terms of reinsurance may not be sufficient to protect us against losses.

We use reinsurance agreements to limit potential losses, reduce exposure to larger risks and provide capital relief with regard to certain reserves. Under these reinsurance arrangements, other insurers assume a portion of our losses and related expenses; however, we remain liable as the direct insurer on all risks reinsured. Consequently, reinsurance arrangements do not eliminate our obligation to pay claims and we assume credit risk with respect to our ability to recover amounts due from our reinsurers. Although we regularly evaluate the financial condition of our reinsurers, the inability or unwillingness of any reinsurer to meet its financial obligations could negatively affect our operating results. In addition, market conditions beyond our control determine the availability and cost of reinsurance. No assurances can be made that reinsurance will remain available to the same extent and on the same terms and rates as have been historically available. If we are unable to maintain our current level of reinsurance or purchase new reinsurance protection in amounts that we consider sufficient and at prices that we consider acceptable, we would have to either accept an increase in our net exposure or develop other alternatives to reinsurance. Any of these alternatives may adversely affect our business, financial condition or operating results.

We might be unable to attract or retain personnel who are key to our business.

The success of our business is dependent to a large extent on our ability to attract and retain key employees. Competition in the job market for senior executives and professionals such as sales personnel, technology professionals, finance, actuaries and investment professionals can be intense. In general, our employees are not subject to employment contracts or non-compete agreements. Difficulty in attracting and retaining employees could have a negative impact on us. Further, for as long as we remain delayed with our SEC reporting obligations, we are likely to continue to experience a certain amount of difficulty attracting and retaining highly qualified personnel, particularly at more senior levels, due to concerns about our status, and our ability to use our common stock to retain and motivate employees will also continue to be a challenge and subject us to certain restrictions.

~~Our business operations and results could be adversely affected by inadequate performance of third-party relationships.~~19

WeTable ~~are~~of dependent on certain third-party relationships to maintain essential business operations. These services include, but are not limited to, information technology infrastructure, application systems support, transfer agent and cash management services, custodial services, records storage management, backup tape management, security pricing services, medical information, payroll, and employee benefit programs.Contents

Our business operations and results could be adversely affected by inadequate performance of third-party relationships, including with respect to cyber security.

We are dependent on certain third-party relationships to maintain essential business operations. These services include, but are not limited to, information technology infrastructure including cyber security, application systems support, transfer agent and cash management services, custodial services, records storage management, backup tape management, security pricing services, medical information, payroll, and employee benefit programs.

We periodically negotiate provisions and renewals of these agreements and there can be no assurance that their terms will remain acceptable to such third parties or us. An interruption in our continuing relationship with certain of these third parties or any material delay or inability to deliver essential services could materially affect our business operations and adversely affect our results of operations.

We face strong competition in our businesses from insurance companies and other financial services firms. If we are unable to price our products competitively or provide competitive service we could lose existing customers or fail to attract new customers.

We operate in a highly competitive industry. While there is no single company that we identify as a dominant competitor in our business, many of our competitors are substantially larger and enjoy better financial strength ratings, more financial resources and greater marketing and distribution capabilities. Our products compete with similar products sold by other insurance companies and also with savings and investment products offered by banks, asset managers, and broker-dealers. Larger competitors with better financial strength ratings, greater financial resources, marketing and distribution capabilities are better positioned competitively. Larger firms are also able to better withstand market disruption, offer more competitive pricing, and more effectively access debt and equity capital. Moreover, a significant proportion of sales in the life insurance and annuity industries represent exchanges from one company’s to another company’s products. To the extent that a more competitive product alternative with better product features is offered by another company, we could experience higher policy surrenders.

If we fail to compete effectively in this environment, our results of operations and financial condition could be materially and adversely affected.

Tax law and policy are frequently reviewed and changed by the Internal Revenue Service and Congress and future changes in laws or regulations could increase our tax costs and tax assets or make some of our products less attractive to consumers.

Significant and fundamental changes in U.S. federal income tax laws, U.S. Treasury and other regulations have been made in recent years and additional changes are likely. Any such change may affect us. Moreover, judicial decisions, regulations or administrative pronouncements could unfavorably affect our tax costs and tax assets or make certain of our products less attractive to consumers.

Certain products we offer, primarily life insurance and annuities, receive favorable tax treatment under current federal and state tax law. This favorable treatment may be considered as providing certain of our products a competitive tax advantage over non-insurance products. In particular, for individual owners of life insurance policies and annuity contracts, earnings credited to these policies and contracts are tax-deferred until such time as the amounts are withdrawn from the policies or contracts. This differs from the treatment of dividend or interest earnings on other investments. Moreover, for life insurance, the death benefit proceeds are often received tax -free. While an increasing proportion of our annuity contracts are issued in connection with Individual Retirement Accounts (“IRAs”), for which the tax-deferral benefit is the same regardless of whether the IRA is in connection with an annuity, annuities in IRAs often provide lifetime payout guarantees not offered by other IRA investments.

The tax consequences associated with our products could be altered at any time by legislative, judicial, or administrative action. Any such action that increases the taxation on our products or reduces the taxation on competing products could lessen the advantage or create a disadvantage for certain of our products making them less competitive.

In the recent past, there have been proposals to modify the tax treatment of IRAs, including one that would result in more rapid taxation of after-death distributions. These proposals do not target annuities in IRAs, but would impact all IRAs to the same extent. As a result, many of the competing IRA investment options would also be impacted.

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With respect to life insurance company taxation, the administration’s budget proposals in recent years have included changes in the computation of the dividends received deduction relative to both general account and separate account dividends. If enacted, these actions could increase our taxable income and unfavorably impact our tax provision which would reduce our net income. The current administration has proposed certain other changes which, if adopted, could have a material adverse effect on our financial position and our ability to sell our products and could result in the surrender of some existing contracts and policies.

We also benefit from certain tax provisions available to most insurance corporations, including but not limited to, tax-exempt bond interest, dividends-received deductions, tax credits (such as foreign tax credits), and insurance reserve deductions. Congress, as well as foreign, state and local governments, also considers from time to time legislation that could modify or eliminate these benefits, as well as other corporate tax provisions, thereby increasing our tax costs. If such legislation were to be adopted, our balance sheet and results of operations could be adversely impacted.

We cannot predict whether any relevant tax legislation will be enacted, what the impact of such legislation would be on our tax costs and sales of our products, what the specific terms of any such legislation will be or whether any such legislation would have a material adverse effect on our financial condition and results of operations.

Federal and state regulation may increase our cost of doing business, impose additional reserve or capital requirements, levy financial assessments, or constrain our operating and financial flexibility, any of which could adversely affect our business, results of operations, financial condition or liquidity.

We are subject to extensive laws and regulations administered and enforced by a number of different governmental authorities including state insurance regulators, state securities administrators, the SEC, the New York Stock Exchange, the Financial Industry Regulatory Authority, the U.S. Department of Justice, state attorneys general, and foreign regulators. In light of recent events involving certain financial institutions and the last recession, the U.S. government has heightened its oversight of the financial services industry. In addition, it is possible that these authorities may adopt enhanced or new regulatory requirements intended to prevent future crises in the financial services industry and to assure the stability of institutions under their supervision. We cannot estimate whether such regulatory proposals will be adopted, or what impact, if any, such regulation could have on our business, operating results, financial condition or liquidity.

Each of the authorities that regulates us exercises a degree of interpretive latitude. Consequently, we are subject to the risk that compliance with any particular regulator’s or enforcement authority’s interpretation of a legal issue may not result in compliance with another regulator’s or enforcement authority’s interpretation of the same issue, particularly when compliance is judged in hindsight. In addition, there is risk that any particular regulator’s or enforcement authority’s interpretation of a legal issue may change over time to our detriment, or that changes in the overall legal environment may, even absent any particular regulator’s or enforcement authority’s interpretation of a legal issue changing, cause us to change our views regarding the actions we need to take from a legal risk management perspective, thus necessitating changes to our practices that may, in some cases, limit our ability to grow and improve the profitability of our business.

On July 21, 2010, the President signed into law the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Act”), which implements significant changes in the financial regulatory landscape and will impact institutions operating in many segments of the financial services industry, including the Company. Although certain provisions became effective immediately, many of the Act’s provisions require adoption of rules that will govern implementation. The Act may, among other things, increase our regulatory compliance burden by requiring us to invest management attention and resources to evaluate and make necessary changes to our policies and procedures and the manner in which we conduct our business. The U. S. government has created the Federal Insurance Office (“FIO”) under the Act as a branch of the U. S. Treasury Department. Under its charge to improve consumer protection, the FIO may regulate actual product design and mandate additional disclosure rules. We are uncertain as to the impact that this new legislation and regulatory guidance will have on the Company and cannot assure that it will not adversely affect our financial condition and results of operations.

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State insurance laws regulate most aspects of our U.S. insurance businesses, and the Company and its insurance company affiliates are regulated by the insurance departments of the states in which they are domiciled and licensed. State insurance regulators and the NAIC regularly re-examine existing laws and regulations applicable to insurance companies and their products. State laws in the U.S. grant insurance regulatory authorities broad administrative powers with respect to, among other things:


•	Financial considerations, including standards of solvency, statutory reserves, reinsurance, and capital adequacy;


•	Trade practices, market conduct, and licensing of companies and agents;


•	Mandating certain insurance benefits and regulating certain premium rates;


•	Approval of policy forms and certain other related materials;


•	Permitted types and concentration of investments; and


•	Permitted dividends or other distributions, as well as transactions between affiliates and changes in control.

Changes in these laws and regulations, or in interpretations thereof, are often made for the benefit of the consumer at the expense of the insurer and thus could have a material adverse effect on our business, operating results, financial condition and liquidity. Compliance with these laws and regulations is also time consuming and personnel-intensive, and changes in these laws and regulations may increase our direct and indirect compliance costs and other expenses of doing business, thus having an adverse effect on our business, operating results, financial condition and liquidity.

Regulatory actions or examinations could result in financial losses or harm to our businesses.

Various regulatory bodies regularly make inquiries of us and, from time to time, conduct examinations or investigations concerning our compliance with, among other things, insurance laws, securities laws, and laws governing the activities of broker-dealers. During the past several years, there has been a significant increase in federal and state regulatory activity relating to financial services companies, with a number of recent regulatory inquiries focusing on valuation and ~~cost~~COI ~~of insurance~~ increase issues. Financial services companies ~~have~~ also have been the subject of broad industry inquiries by state regulators and attorneys general which do not appear to be company-specific, such as business practices upon notification of death. We continue to cooperate with the applicable regulatory authorities in these matters. We may be subject to further related or unrelated inquiries or actions in the future. In light of recent events involving certain financial institutions, the U.S. government has heightened its oversight of the financial services industry in general and of the insurance industry in particular. Further, recent adverse economic and market events may have the effect of encouraging litigation, arbitration and regulatory action in response to the increased frequency and magnitude of investment losses, which may result in unfavorable judgments, awards and settlements, regulatory fines and an increase in our related legal expenses.

It is not feasible to predict or determine the ultimate outcome of regulatory proceedings or to provide reasonable ranges of potential losses. We believe that the outcomes of regulatory matters are not likely, either individually or in the aggregate, to have a material adverse effect on our financial condition. However, given the inherent unpredictability of regulatory matters, it is possible that an adverse outcome in certain matters could, from time to time, have a material adverse effect on our financial statements in particular quarterly or annual periods.

Changes in accounting standards issued by the Financial Accounting Standards Board or other standard-setting bodies may adversely affect our financial statements.

Our financial statements are subject to the application of U.S. GAAP, which is periodically revised and/or expanded. Accordingly, from time to time we are required to adopt new or revised accounting standards or guidance issued by recognized authoritative bodies, including the Financial Accounting Standards Board.

It is possible that future accounting standards which we are required to adopt could change the current accounting treatment that we apply to our financial statements and that such changes could significantly affect our reported financial condition and results of operations. See Note 3 2 to our financial statements under “Item 8: Financial Statements and Supplementary Data - Adoption of New Accounting Standards” in this Form 10-K for ~~more~~additional information.


Item 1B.	Unresolved Staff Comments

As of December 31, ~~2013~~2014, the Company had no unresolved SEC staff comments regarding its periodic or current reports.

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Item 2.	Properties

Our executive headquarters consist of our main office building at One American Row in Hartford, Connecticut, which we own and occupy. As of December 31, ~~2013~~2014, we also leased space in ~~two~~one ~~garages~~garage in Hartford, Connecticut for employee parking~~, one of which was terminated as of June 1, 2014~~. Property is also leased for our home office in East Greenbush, New York.


Item 3.	Legal Proceedings

See Note 1617 to our financial statements under “Item 8: Financial Statements and Supplementary Data” in this Form 10-K for a discussion of our legal proceedings, which is incorporated herein by reference.


Item 4.	Mine Safety Disclosures

Not applicable.

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PART II


Item 5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

Common Stock

Shares of our common stock are not publicly traded and are all owned indirectly by our ultimate parent company, ~~PNX~~Phoenix.

Dividends

In ~~2013~~2014, ~~2012~~2013 and ~~2011~~2012, we did not pay any dividends.


Item 6.	Selected Financial Data

We have omitted this information from this report pursuant to General Instructions (I)(1)(a) and (b) of Form 10-K and are filing this Form 10-K with the reduced disclosure format permitted by that General Instruction.

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Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations

Management’s narrative analysis of the results of operations is presented in lieu of Management’s Discussion and Analysis of Financial Condition and Results of Operations, pursuant to General Instruction (I)(2)(a) of Form 10-K.

FORWARD-LOOKING STATEMENTS

The discussion in this Form 10-K may contain “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. 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 forward-looking statements include statements relating to trends in, or representing management’s beliefs about our future transactions, strategies, operations and financial results and often contain words such as “will,” “anticipate,” “believe,” “plan,” “estimate,” “expect,” “intend,” “is targeting,” “may,” “should” and other similar words or expressions. Forward-looking statements are made based upon management’s current expectations and beliefs concerning trends and future developments and their potential effects on us. They are not guarantees of future performance. Our actual business, financial condition or results of operations may differ materially from those suggested by forward-looking statements as a result of risks and uncertainties which include, among others: (A) risks related to the ~~Restatement,~~restatement ~~failure~~of toour ~~file~~and ~~timely~~Phoenix’s ~~periodic~~prior ~~reports~~period ~~with~~financial ~~the~~statements ~~SEC~~ and our internal control over financial reporting, which include (i) the presence of material weaknesses in our internal control over financial reporting, the potential failure to remediate material weaknesses in our internal control over financial reporting and that other material weaknesses may be identified in the future, which would adversely affect the accuracy and timing of our financial reporting; (ii) the extraordinary processes undertaken to effect the ~~Restatement~~restatements by the Company and Phoenix may not have been adequate to identify and correct all errors in ~~our~~the historical financial statements and, as a result, we may discover additional errors and our financial statements remain subject to the risk of future restatement; (iii) ~~our failure to have current financial information available; (iv)~~ the ~~risk~~outcome of ~~failure~~litigation toand ~~comply~~claims ~~with~~as ~~the~~well ~~filing~~as ~~deadlines~~regulatory ~~included~~examinations, ininvestigations, ~~the~~proceedings ~~SEC’s Cease-~~and~~-Desist~~ ~~Order,~~orders ~~dated~~arising ~~March~~out ~~21,~~of ~~2014,~~the asrestatement ~~amended~~ by the ~~Amended~~Company ~~Cease-~~and~~-Desist~~ ~~Order,~~Phoenix ~~dated~~and ~~August 1, 2014, including that~~ the ~~SEC~~failure ~~may~~by ~~seek sanctions against or deregister PNX and~~ the Company; ~~(v)~~and ~~the~~Phoenix ~~risk~~to ofhave ~~PNX’s~~filed ~~failure~~certain topreviously ~~file its~~ delayed SEC ~~filings~~reports ~~and its 2014 Quarterly Reports~~ on ~~Form~~a ~~10-Q~~timely bybasis; ~~March 16,~~(iv) ~~2015,~~our ~~the~~inability ~~extended~~to ~~deadline~~hedge ~~for~~our ~~providing~~positions ~~these~~due ~~SEC filings~~ to ~~the~~our ~~bond~~inability ~~trustee,~~to asreplace ~~well~~hedges as ~~the~~a ~~risk~~result ~~associated~~of ~~with~~our ~~seeking~~credit ~~additional~~rating; ~~consents~~(v) ~~from~~the ~~bondholders~~incurrence of ~~its~~significant ~~outstanding~~restatement-related ~~7.45% Quarterly Interest Bonds Due 2032 regarding these SEC filings~~expenses; (vi) ~~the~~diversion ~~outcome~~ of ~~litigation~~management and ~~claims~~other ashuman ~~well~~resources asfrom ~~regulatory~~the ~~examinations,~~operation ~~investigations,~~of ~~proceedings~~our ~~and~~business; ~~orders~~(vii) ~~arising~~risks ~~out~~associated ofwith the ~~Restatement~~restatements ~~and the failure~~ by the Company and ~~PNX~~Phoenix toand ~~file~~the ~~SEC~~Company’s ~~reports~~ability onto aamend ~~timely~~and ~~basis;~~update ~~(vii)~~its ~~further~~existing ~~downgrades~~registration statements, or ~~withdrawals~~file ofnew ~~our~~registration ~~financial~~statements, ~~strength~~under ~~credit~~the ~~ratings,~~Securities ~~which~~Act ~~could~~and ~~increase~~the ~~policy~~Investment ~~surrenders~~Company ~~and~~Act ~~withdrawals~~of 1940, ~~adversely~~as ~~affect~~amended ~~our~~(the ~~relationships~~“Investment ~~with~~Company ~~distributors~~Act”), ~~reduce~~as ~~new~~well ~~sales,~~as ~~limit~~risks ~~our~~associated ~~ability~~with toPhoenix ~~trade~~Life’s inability ~~derivatives~~to amend and ~~increase~~update ~~our~~its ~~costs~~existing ofregistration statements, or ~~reduce~~file ~~our~~new ~~access~~registration tostatements, ~~future~~under ~~borrowings;~~the ~~(viii)~~Securities ~~our~~Act ~~inability~~and tothe ~~hedge~~Investment ~~our~~Company ~~positions~~Act; ~~due~~(viii) torisks ~~our~~associated ~~inability~~with tothe ~~replace~~ongoing ~~hedges~~compliance asobligations ~~a result~~ of ~~our~~Phoenix ~~credit~~and ~~rating;~~the ~~(ix)~~Company under the ~~incurrence~~SEC’s ofCease-and-Desist ~~significant~~Order, ~~expenses~~dated ~~related~~March 21, 2014, toas ~~the~~amended ~~Restatement,~~by the ~~U.S.~~Amended ~~GAAP~~Cease-and-Desist ~~restatement~~Order, ~~undertaken~~dated ~~by PNX~~August 1, 2014; (ix) risk that the ~~remediation~~filing of ~~weaknesses~~single, inmulti-period ~~our~~comprehensive ~~internal~~Annual ~~control~~Reports ~~over~~on ~~financial~~Form ~~reporting~~10-K ~~and~~to ~~disclosure~~effect ~~controls~~certain ~~and~~of ~~procedures,~~the ~~and~~restatements by the ~~preparation~~Company ofand ~~this~~Phoenix ~~Form~~did ~~10-K~~not ~~and~~satisfy our ~~delayed~~filing ~~SEC~~obligations ~~reports;~~and ~~(x)~~that ~~diversion~~we ofmay ~~management~~be ~~and~~required ~~other~~to ~~human~~file ~~resources~~additional ~~attention~~reports ~~from~~to effect the ~~operation of our business~~restatements; (xix) the risk that the Company’s, Phoenix’s and Phoenix Life’s restatements, the delay in ~~our~~ filing of certain periodic reports with the SEC and errors corrected in subsequent ~~Statutory~~statutory financial statement filings with state insurance regulators could result in regulatory investigations, examinations and/or inquiries, which may increase compliance costs and the potential for additional regulatory investigations, proceedings or other claims; and (~~xii~~xi) risks associated with our and Phoenix Life’s failure to file ~~certain~~timely and accurate reports with state regulatory authorities; (B) risks related to our business, which include (i) unfavorable general economic developments including, but not limited to, specific related factors such as the performance of the debt and equity markets; (ii) the potential adverse effect of interest rate fluctuations on our business and results of operations; (iii) the potential adverse effect of legal actions and proceedings inherent in our business on our results of operations, financial position, business or reputation; (iv) further downgrades or withdrawals of our financial strength credit ratings, which could increase policy surrenders and withdrawals, adversely affect our relationships with distributors, reduce new sales, limit our ability to trade in derivatives and increase our costs of, or reduce our access to, future borrowings; (v)the impact on our results of operations and financial condition of any required increase in our reserves for future policyholder benefits and claims if such reserves prove to be inadequate; (vvi) the possibility that mortality rates, persistency rates, funding levels or other factors may differ significantly from our assumptions used in pricing products; (vivii) limited access to external sources of liquidity and financing; (~~vii~~viii) the effect of guaranteed benefits within our products; (~~viii~~ix) potential exposure to unidentified or unanticipated risk that could adversely affect our businesses or result in losses; (ixx) the consequences related to variations in the amount of our statutory capital could adversely affect our business; (xxi) the possibility that we may not be successful in our efforts to implement a business plan focused on new market segments; (xixii) changes in our investment valuations based on changes in our valuation methodologies, estimations and assumptions; (~~xii~~xiii) the availability, pricing and terms of reinsurance coverage generally and the inability or unwillingness of our reinsurers to meet their obligations to us specifically; (~~xiii~~xiv) our ability to attract and retain key personnel in a competitive environment ~~and while delayed in our SEC reporting obligations~~; (~~xiv~~xv) our dependence on third parties to maintain critical business and administrative functions; (xvxvi) the strong competition we face in our business from banks, insurance companies and other financial services firms; (~~xvi~~xvii) changes in tax law and policy may affect us directly or indirectly through the cost of, the demand for or profitability of our products or services; (~~xvii~~xviii) the possibility that federal and state regulation may increase our cost of doing business, impose additional reserve or capital requirements, levy financial assessments or constrain our operating and financial flexibility; (~~xvii~~xix) regulatory actions or examinations may harm our business; and (~~xviii~~xx) changes in accounting standards; and (C) other risks and uncertainties described herein or in any of our filings with the SEC. Certain other factors which may impact our business, financial condition or results of operations or which may cause actual results to differ from such forward-looking statements are discussed or included in our periodic reports filed with the SEC and are available on our website at www.phoenixwm.com under “Investor Relations.” You are urged to carefully consider all such factors. We do not undertake or plan to update or revise forward-looking statements to reflect actual results, changes in plans, assumptions, estimates or projections, or other circumstances occurring after the date of this Form 10-K, even if such results changes or circumstances make it clear that any forward-looking information will not be realized. If we make any future public statements or disclosures which modify or impact any of the forward-looking statements contained in or accompanying this Form 10-K, such statements or disclosures will be deemed to modify or supersede such statements in this Form 10-K.

MANAGEMENT’S DISCUSSION AND ANALYSIS

~~Management’s~~This ~~discussion~~section ~~and analysis~~ reviews our financial condition at December 31, ~~2013~~2014 and ~~2012~~2013; our results of operations for the years ~~2013~~2014, ~~2012~~2013 and ~~2011~~2012; and, where appropriate, factors that may affect our future financial performance. This discussion should be read in conjunction with our financial statements in this Form 10-K. We define increases or decreases greater than or equal to 200% as “NM” or not meaningful.

Table of Contents

Executive Overview

Business

In ~~2013~~2014, 99% of PHL Variable product sales, as defined by total annuity deposits and total life premium, were annuities, and 8994% of those sales were fixed indexed annuities.

Earnings Drivers

Our profitability is driven by interaction of the following elements:

• Fees on life and annuity products consist primarily of: (i) ~~cost of insurance (“~~COI”) charges, which are based on the difference between policy face amounts and the account values (referred to as the net amount at risk or “NAR”); (ii) asset-based fees (including mortality and expense charges for variable annuities) which are calculated as a percentage of assets under management within our separate accounts; (iii) premium-based fees to cover premium taxes and renewal commissions; and (iv) surrender charges.

• Policy benefits include death claims net of reinsurance cash flows, including ceded premiums and recoverables, interest credited to policyholders and changes in policy liabilities and accruals. Certain universal life reserves are based on management’s assumptions about future COI fees and interest margins which, in turn, are affected by future premium payments, surrenders, lapses and mortality rates. Actual experience can vary significantly from these assumptions, resulting in greater or lesser changes in reserves. In addition, we regularly review and reset our assumptions in light of actual experience, which can result in material changes to these reserves. For fixed indexed annuities, policy benefits include the change in the liability associated with guaranteed minimum withdrawal benefits. Certain of our variable annuity contracts include guaranteed minimum death and income benefits. The change in the liability associated with these guarantees is included in policy benefits. The value of these liabilities is sensitive to changes in equity markets, equity market volatility and interest rates, as well as subject to management assumptions regarding future surrenders, rider utilization rates and mortality.

~~For~~In ~~fixed~~addition, ~~indexed~~the ~~annuities,~~universal ~~policy~~life ~~benefits~~block ~~include~~of ~~the~~business ~~change~~has experience which produces profits in earlier periods followed by losses in later periods for which an additional liability is required to be held above the account value liability. ~~associated~~These ~~with~~reserves ~~guaranteed~~for ~~minimum~~future ~~withdrawal~~losses ~~benefits~~are determined by accruing ratably over historical and anticipated positive income. The assumptions used toin ~~calculate~~estimating these liabilities are subject to the ~~guaranteed~~same ~~minimum~~variability ~~withdrawal~~and ~~liability~~risk, ~~are~~and ~~consistent~~these ~~with~~factors ~~those~~can ~~used~~vary ~~for~~significantly ~~amortizing~~from ~~deferred~~period ~~policy~~to ~~acquisition~~period, ~~costs~~particularly the impact from changes in interest rates.

Certain of our variable annuity contracts include guaranteed minimum death and income benefits. The change in the liability associated with these guarantees is included in policy benefits. The value of these liabilities is sensitive to changes in equity markets, equity market volatility and interest rates, as well as subject to management assumptions regarding future surrenders, rider utilization rates and mortality.

In addition, the universal life block of business has experience which produces profits in earlier periods followed by losses in later periods for which an additional liability is required to be held above the account value liability. These reserves for future losses are determined by accruing ratably over historical and anticipated positive income. The assumptions used in estimating these liabilities are consistent with those used for amortizing deferred policy acquisition costs and are subject to the same variability and risk, and these factors can vary significantly from period to period.


•	Interest margins consist of net investment income earned on universal life, fixed indexed annuities and other policyholder funds, gains on options purchased to fund index credits less the interest or index credits applied to policyholders on those funds. Interest margins also include investment income on assets supporting the Company’s surplus.

29• Non-deferred operating expenses are expenses related to servicing policies, premium taxes, reinsurance allowances, non-deferrable acquisition expenses and commissions and general overhead, including professional fees and outside consulting and legal services. They also include pension and other benefit costs which involve significant estimates and assumptions.

• Non-deferred operating expenses are expenses related to servicing policies, premium taxes, reinsurance allowances, non-deferrable acquisition expenses and commissions and general overhead. They also include pension and other benefit costs which involve significant estimates and assumptions.26

•Table ~~Deferred policy acquisition cost amortization is based on the amount~~ of expenses deferred, actual results in each quarter and management’s assumptions about the future performance of the business. The amount of future profit or margin is dependent principally on investment returns in our separate accounts, interest and default rates, reinsurance costs and recoveries, mortality, surrender rates, premium persistency and expenses. These factors enter into management’s estimates of gross profits or margins, which generally are used to amortize deferred policy acquisition costs. Actual equity market movements, net investment income in excess of amounts credited to policyholders, claims payments and other key factors can vary significantly from our assumptions, resulting in a misestimate of gross profits or margins, and a change in amortization, with a resulting impact to income. In addition, we regularly review and reset our assumptions in light of actual experience, which can result in material changes in amortization.Contents

•

Deferred policy acquisition cost (“DAC”) amortization is based on the amount of expenses deferred, actual results in each quarter and management’s assumptions about the future performance of the business. The amount of future profit or margin is dependent principally on investment returns in our separate accounts, interest and default rates, reinsurance costs and recoveries, mortality, surrender rates, premium persistency and expenses. These factors enter into management’s estimates of gross profits or margins, which generally are used to amortize DAC. Actual equity market movements, net investment income in excess of amounts credited to policyholders, claims payments and other key factors can vary significantly from our assumptions, resulting in a change in estimated gross profits or margins, and a change in amortization, with a resulting impact to income. In addition, we regularly review and reset our assumptions in light of actual experience (or “unlock”), which can result in material changes in amortization for the period of the unlock.

•

Net realized investment gains or losses related to investments and hedging programs include transaction gains and losses, OTTIs and changes in the value of certain derivatives and embedded derivatives. Certain of our variable and fixed annuity contracts include guaranteed minimum withdrawal and accumulation benefits which are classified as embedded derivatives. The fair value of the embedded derivative liability is calculated using significant management estimates, including: (i) the expected value of index credits on the next policy anniversary dates; (ii) the interest rate used to project the future growth in the contract liability; (iii) the discount rate used to discount future benefit payments, which includes an adjustment for our credit worthiness; and (iv) the expected costs of annual call options that will be purchased in the future to fund index credits beyond the next policy anniversary. These factors can vary significantly from period to period.

• Income tax expense/benefit consists of both current and deferred tax provisions. The computation of these amounts is a function of pre-tax income ~~or loss~~ and the application of relevant tax law and U.S. GAAP accounting guidance. In assessing the realizability of our deferred tax assets, we make significant judgments with respect to projections of future taxable income, the identification of prudent and feasible tax planning strategies and the reversal pattern of the Company’s book-to-tax differences that are temporary in nature. We also consider the expiration dates and amounts of carryforwards related to net operating losses, capital losses, foreign tax credits and general business tax credits. ~~Based~~We ~~on our assessment, we~~ have recorded a valuation allowance against a significant portion of our deferred tax assets based upon our conclusion that there is insufficient objective positive evidence to overcome the significant negative evidence from our cumulative losses in recent years. This assessment could change in the future, resulting in a release of the valuation allowance and a benefit to income.

Under U.S. GAAP, premiums and deposits for variable life, universal life and annuity products are not immediately recorded as revenues. For certain investment options of variable products, deposits are reflected on our balance sheets as an increase in ~~separate account~~ liabilities. Premiums and deposits for universal life, fixed annuities and certain investment options of variable annuities are reflected on our balance sheets as an increase in policyholder ~~liabilities~~deposit funds. Premiums and deposits for other products are reflected on our balance sheets as an increase in policy liabilities and accruals.

Table of Contents

Recent Trends in Earnings Drivers

• Net realized investment gains (or losses). Net realized investment gains, excluding OTTI, ofhave ~~$5.4~~been ~~million~~driven ~~were~~primarily ~~recognized~~by ~~for the twelve months ended December 31, 2013 compared to net~~ realized ~~investment~~gains or losses, ~~excluding~~on ~~OTTI,~~both ~~of $19.5 million for~~ the ~~twelve~~embedded ~~months~~policy ~~ended~~derivatives ~~December~~associated ~~31,~~with ~~2012. The change in~~ the ~~net~~fixed ~~realized~~indexed ~~investment~~annuity ~~gains~~and isvariable ~~primarily~~annuity ~~attributable~~guarantees, toand athe ~~decrease~~derivative ininstruments ~~realized losses on derivatives~~ that are used to hedge ~~the~~these ~~risks~~businesses. ~~associated~~The ~~with~~changes ~~variable~~in ~~annuity~~the ~~guarantees~~fair ~~and~~value of the ~~fixed~~policy ~~indexed~~embedded ~~annuity~~derivatives ~~liabilities.~~and ~~For~~ the ~~twelve~~derivative ~~months~~instruments ~~ended~~are ~~December~~driven ~~31,~~by ~~2013~~changes ~~there~~in ~~were~~the ~~losses~~equity onmarkets, ~~derivative~~including ~~investments~~interest ofrates, ~~$23.1~~market ~~million~~volatility, ~~while~~and ~~there~~overall ~~were~~market ~~losses~~levels, ofas ~~$49.0~~well ~~million~~as ~~for~~changes ~~the~~in ~~twelve~~actual ~~months~~and ~~ended~~projected ~~December~~policyholder ~~31, 2012~~behavior. ~~The~~In ~~continued~~2014, ~~improvement~~there inwere ~~the~~realized ~~equity markets results in~~ losses on the embedded derivatives, ~~that~~while ~~are~~there ~~used~~were togains ~~hedge~~on the ~~risk associated with the~~ variable annuity ~~guarantees,~~embedded ~~that~~derivatives ~~are~~and ~~offset~~losses ~~by gains~~ on the ~~derivatives that are used to hedge the risks associated with the~~ fixed indexed ~~annuities. The fixed indexed~~ annuity ~~hedging~~embedded ~~gains~~derivative ~~were more significant~~ in 2013. ~~due~~In to2014, ~~more~~the ~~significant~~losses ~~increases~~on in the ~~equity~~embedded ~~market~~derivatives inwere ~~2013~~primarily ~~than~~driven inby ~~2012,~~the ascontinued ~~well~~decline asof ~~additional~~interest ~~derivatives~~rates ~~purchased~~and ~~due~~increased tovolatility ~~continued~~in ~~sales~~the ofequity ~~fixed indexed annuities~~markets.

30• Policy benefits. The most significant drivers of policy benefits expense are claims incurred in the period net of reinsurance, changes in the liability for profits followed by losses on the universal life business, and changes in liabilities associated with guaranteed benefits. Recent trends in these drivers are as follows:

•◦ ~~Policy~~The ~~benefits.~~liability ~~Policy benefits decreased $110.3 million~~ for ~~the~~profits ~~twelve~~followed ~~months~~by ~~ended~~losses ~~December 31~~(“PFBL”), ~~2013~~excluding ~~compared with~~ the ~~twelve~~impact ~~months~~of ~~ended December 31~~unlocking, ~~2012.~~continues ~~The~~to ~~decrease~~increase induring ~~policy~~the ~~benefit~~periods ~~expenses~~in iswhich ~~primarily~~we ~~due~~expect to ~~gains~~have ongross ~~guaranteed~~profits ~~insurance~~on ~~benefit~~the ~~liabilities~~business. ~~and~~This ~~reserves~~long-term ~~for~~liability ~~profits~~is ~~followed~~sensitive byto ~~losses~~projected offuture ~~$84.1~~interest ~~million~~rates, asmost anotably ~~result~~the ofexpected ~~assumption~~yield ~~changes~~on ~~made~~invested ~~during~~assets. ~~the~~The ~~annual~~liability ~~comprehensive~~increased ~~review~~more ofsignificantly ~~assumptions~~ in the ~~fourth~~current ~~quarter~~year ofcompared ~~2013.~~to ~~The~~the ~~most~~prior ~~significant~~year ~~driver~~as a result of ~~the~~decreases ~~positive~~in ~~2013~~the ~~unlock~~new ~~results~~money ~~was~~yield for the ~~incorporation~~year, ofand a ~~mortality~~change ~~improvement assumption~~ in the ~~overall~~slope ~~mortality~~of ~~table~~the forward curve, which ~~resulted~~indicates inthe ~~improved~~market ~~expected~~expectation ~~mortality~~of onfuture ~~universal~~changes ~~life~~in ~~and~~interest ~~variable universal life products~~rates.

•As ~~Operating~~part ~~expenses.~~of ~~Operating~~the ~~expenses~~annual ~~increased~~assumption byreview ~~$13.2~~and ~~million~~unlock, ~~for~~assumptions used in the ~~twelve~~calculation ~~months~~of ~~ended~~the ~~December~~liability ~~31,~~for PFBL are updated. In both 2013 ~~compared~~and ~~with~~2014, ~~the~~updates ~~twelve~~were ~~months~~made ~~ended~~to ~~December~~long-term ~~31,~~mortality ~~2012.~~assumptions ~~The~~that ~~increase~~impacted inexpected ~~operating~~future ~~expenses~~gross ~~was~~profits afavorably. ~~result~~These updates resulted in an unlock benefit of ~~higher~~$4.5 ~~professional~~million ~~fees~~for ~~and~~the ~~outside~~year ~~consulting~~ended ~~services~~December 31, ~~primarily~~2014 asand a ~~result~~benefit of $86.2 million for the ~~restatement~~year ended December 31, 2013.

•◦ ~~Income~~Overall, ~~taxes.~~mortality ~~The~~improved ~~effective~~in ~~tax rate for~~ 2013 and ~~2012~~has ~~was~~stayed ~~(63.8%)~~consistent ~~and (13.3%) respectively. The principal cause of the difference~~ between ~~the~~2013 ~~effective rate~~ and ~~the U~~2014.S. ~~statutory~~As ~~rate of 35% in 2013 was the dividend deduction and~~ a ~~decrease~~result, inpolicy ~~the~~benefit ~~valuation~~expenses ~~allowance~~associated onwith ~~the~~incurred ~~pre-tax~~claims ~~income.~~has ~~The~~remained ~~principal~~consistent ~~cause of the difference~~ between the ~~effective rate and the U~~periods.~~S. statutory rate of 35% in 2012 was the dividend received deduction and an increase in the valuation allowance on the pre-tax loss.~~

◦

Changes in the liabilities associated with guaranteed benefits are impacted by changes in actual policyholder behavior and expected policyholder behavior, as well as market changes and investment results. The most significant driver of changes in liabilities associated with guaranteed benefits is the fixed indexed annuity business. As a result of realized losses on the investments that are used to hedge this business, the liability accrual for the year ended December 31, 2014 was less than that for the year ended December 31, 2013. Generally, realized losses on the derivatives used to hedge this business will be offset by a benefit to the guaranteed benefit liabilities.

•

Other operating expenses. Other operating expenses have remained at elevated levels and continued to impact our earnings. These expenses are driven primarily by professional fees, including audit, outside consulting and legal services due to the preparation of financial statements and remediation efforts. Audit, other professional fees and outside consulting and legal services continue to be a driver of other operating expenses for the Company.

•

Deferred policy acquisition cost amortization. Policy acquisition cost amortization can fluctuate significantly between periods. The most significant drivers of the changes in policy acquisition cost amortization are due to realized gains / losses on the underlying investment portfolios, and changes due to the annual assumption review and unlock. Realized losses on the derivatives that are used to hedge the fixed indexed annuity business have provided benefits to amortization for the year ended December 31, 2014, while the assumption updates implemented as part of the annual unlock provided a benefit for the year ended December 31, 2013 and a loss for the year ended December 31, 2014.

•

Income taxes. The effective tax rate for 2014 and 2013 was (3.6%) and (62.2%), respectively. The primary drivers of the differences between the effective tax rate and the U.S. statutory rate of 35% in 2014 is the increase in the valuation allowance on the pre-tax loss and the dividends received deduction. The primary drivers of the differences between the effective tax rate and the U.S. statutory rate in 2013 is the decrease in the valuation allowance on the pre-tax income and the dividends received deduction.

Table of Contents

Strategy and Outlook

WeSince ~~are~~2009, we have pursued a strategy focused on balance sheet strength, policyholder service, operational efficiency and profitable growth. Within the ~~following~~growth ~~key~~portion ~~strategic~~of ~~pillars~~the strategy, ~~which~~we shifted our target market to middle market and mass affluent families and individuals planning for or living in retirement and focused the majority of our efforts on building and distributing a competitive portfolio of fixed indexed annuity products. On a smaller scale, we developed life insurance products for the same target market. Our ultimate parent company established a distribution company to sell Phoenix products through independent marketing organizations and producers and provide consulting services to partner firms in support of policies written by companies other than Phoenix. These efforts have ~~defined~~produced a firm foundation for continued growth, even as our ~~strategy~~business ~~since~~remains ~~2009:~~sensitive to general economic conditions and capital market trends including equity markets and interest rates.

•We ~~Balance~~believe ~~sheet~~there ~~strength;~~is significant demand for our products among middle market and mass affluent households, which have a variety of financial planning needs, such as tax-deferred savings, safety of principal, guaranteed income during retirement, income replacement and death benefits. The current low interest rate environment provides limited opportunities for consumers to protect principal and generate predictable income. Our fixed indexed annuity products are positioned favorably vis-à-vis traditional investments such as conventional fixed annuities and bank certificates of deposits since they offer principal protection, lifetime income options and earnings potential tied to stock market indices.

•Recent ~~Policyholder~~trends ~~service;~~in the life insurance industry may affect our mortality, policy persistency and premium persistency for certain blocks of in force business. Deviations in experience from our assumptions have had, and could continue to have, an adverse effect on the profitability of certain universal life products. Most of our current products permit us to increase charges and adjust crediting rates during the life of the policy or contract (subject to guarantees in the policies and contracts). We have made, and may in the future make, such adjustments.

•Each ~~Operational~~year ~~efficiency;~~we perform a comprehensive assumption review or an unlocking where we revise our assumptions to reflect the results of recent experience studies, thereby changing our estimate of estimated gross profits (“EGPs”) in the DAC and unearned revenue amortization models, as well as projections within the death benefit and other insurance benefit reserving models.

• Profitable growth.

We believe this strategy has produced a firm foundation and positioned us for continued growth, even as our business remains sensitive to general economic conditions and capital market trends including equity markets and interest rates.

We believe there is significant demand for our products among middle market households seeking to accumulate assets and secure lifetime income during retirement. The current low interest rate environment provides limited opportunities for consumers to protect principal and generate predictable income. Our indexed annuity products are positioned favorably vis-à-vis traditional investments such as bank certificates of deposits.

Recent trends in the life insurance industry may affect our mortality, policy persistency and premium persistency. The evolution of the financial needs of policyholders, the emergence of a secondary market for life insurance, and increased availability and subsequent contraction of premium financing suggest that the reasons for purchasing our products have changed. Deviations in experience from our assumptions have had, and could continue to have, an adverse effect on the profitability of certain universal life products. Most of our current products permit us to increase charges and adjust crediting rates during the life of the policy or contract (subject to guarantees in the policies and contracts). We have made, and may in the future make, such adjustments.

Impact of New Accounting Standards

For a discussion of accounting standards and changes in accounting, see Note 23 to our financial statements under “Item 8: Financial Statements and Supplementary Data” in this Form 10-K.

Critical Accounting Estimates

The discussion and analysis of our financial condition and results of operations are based upon our financial statements, which have been prepared in accordance with U.S. GAAP. In preparing these financial statements in conformity with U.S. GAAP, ~~requires~~we ~~management~~are required to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting ~~period~~periods. ~~Actual~~Significant ~~results~~estimates ~~could~~and ~~differ~~assumptions ~~from~~are ~~those~~made ~~estimates.~~in ~~Critical~~the ~~accounting~~determination ~~estimates~~of ~~are~~EGPs ~~reflective~~used in the valuation and amortization of ~~significant~~assets ~~judgments,~~and ~~often~~liabilities asassociated awith ~~result~~universal life and annuity contracts; policyholder liabilities and accruals; valuation of ~~the~~investments ~~need~~in todebt ~~make~~and ~~estimates~~equity ~~about~~securities; ~~the~~limited ~~effect~~partnerships and other investments; valuation of ~~matters~~deferred ~~that~~tax ~~are~~assets; ~~inherently~~and ~~uncertain~~accruals for contingent liabilities. Actual results could differ from these estimates.

Certain of our critical accounting estimates are as follows:

Deferred Policy Acquisition Costs

We amortize ~~deferred policy acquisition costs (“~~DAC”) based on the related policy’s classification. For universal life, variable universal life and deferred annuities, deferred policy acquisition costs are amortized in proportion to ~~estimated gross profits (“~~EGPs”) discussed more fully below. EGPs are also used to amortize other assets and liabilities in the Company’s balance sheets, such as sales inducement assets (“SIA”) and unearned revenue reserves (“URR”). Components of EGPs are used to determine reserves for universal life and fixed indexed and variable annuity contracts with death and other insurance benefits such as guaranteed minimum death and guaranteed minimum income benefits. EGPs are based on historical and anticipated future experience which is updated periodically.

Deferred policy acquisition costs are adjusted through other comprehensive income (“OCI”) each period as a result of unrealized gains or losses on securities classified as available-for-sale in a process commonly referred to as shadow accounting. This adjustment is required in order to reflect the impact of these unrealized amounts as if these unrealized amounts had been realized.29

~~The~~Table ~~projection~~ of EGPs requires the extensive use of actuarial assumptions, estimates and judgments about the future. Future EGPs are generally projected for the estimated lives of the contracts. Assumptions are set separately for each product and are reviewed at least annually based on our current best estimates of future events. The following table summarizes the most significant assumptions used in the categories set forth below:Contents

Significant Assumption	Product	Explanation and Derivation
Separate account investment return	Variable Annuities(8.0% long-term return assumption)Variable Universal Life(8.0% long-term return assumption)	Separate account return assumptions are derived from the long-term returns observed in the asset classes in which the separate accounts are invested. Short-term deviations from the long-term expectations are expected to revert to the long-term assumption over five years.
Interest rates and default rates	Fixed and Indexed AnnuitiesUniversal Life	Investment returns are based on the current yields and maturities of our fixed income portfolio combined with expected reinvestment rates given current market interest rates. Reinvestment rates are assumed to revert to long-term rates implied by the forward yield curve and long-term default rates. Contractually permitted future changes in credited rates are assumed to help support investment margins.

DAC is adjusted through other comprehensive income (“OCI”) each period as a result of unrealized gains or losses on securities classified as available-for-sale in a process commonly referred to as shadow accounting. This adjustment is required in order to reflect the impact of these unrealized amounts as if these unrealized amounts had been realized.

32The projection of EGPs requires the extensive use of actuarial assumptions, estimates and judgments about the future. Future EGPs are generally projected for the estimated lives of the contracts. Assumptions are set separately for each product and are reviewed at least annually based on our current best estimates of future events.

~~Significant~~The ~~Assumption~~Company ~~Product~~has ~~Explanation~~updated ~~and~~a ~~Derivation~~number ~~Mortality~~of ~~/ longevity Universal LifeVariable Universal LifeFixed and Indexed Annuities Mortality~~ assumptions ~~are~~that ~~based~~have onresulted ~~Company~~in ~~experience~~changes ~~over~~to aexpected ~~rolling~~future ~~five-year~~gross ~~period plus supplemental data from industry sources and trends~~profits. AThe ~~mortality~~most ~~improvement~~significant assumption isupdates ~~also~~made ~~incorporated~~over ~~into~~ the ~~overall~~last ~~mortality~~several ~~table.~~years ~~These~~resulting ~~assumptions~~in ~~can~~a ~~vary~~change byto ~~issue~~future ~~age,~~gross ~~gender,~~profits ~~underwriting class~~ and ~~policy~~the ~~duration.~~amortization ~~Policyholder~~of ~~behavior~~DAC, –SIA ~~policy persistency Universal LifeVariable Universal LifeVariable AnnuitiesFixed~~ and ~~Indexed~~URR ~~Annuities Policy persistency assumptions vary by product and policy year and~~ are ~~updated~~related ~~based on recently observed experience. Policyholders are generally assumed~~ to ~~behave~~changes ~~rationally; hence rates are typically lower when surrender penalties are~~ in ~~effect~~expected ~~or when policy benefits are more valuable. Policyholder behavior –~~ premium persistency ~~Universal LifeVariable Universal Life Future premiums and related fees are projected based on contractual terms~~, ~~product illustrations at~~ the ~~time~~incorporation of ~~sale~~a ~~and~~mortality ~~expected~~improvement ~~policy~~assumption ~~lapses~~and ~~without~~other ~~value.~~updates ~~Assumptions~~to ~~are~~mortality ~~updated~~ based on ~~recently~~updated ~~observed~~ experience. ~~and~~Other ~~include~~of ~~anticipated~~the ~~changes~~more insignificant ~~behavior~~drivers ~~based~~of on changes into ~~policy~~expected ~~charges~~gross ifprofits over the ~~Company~~last ~~has~~several ayears ~~high~~include ~~degree of confidence that such~~ changes ~~will be implemented (e.g., change~~ in ~~COI~~expected ~~charges).~~separate ~~Expenses~~account ~~All~~investment ~~products~~returns ~~Projected~~due ~~maintenance expenses~~ to ~~administer~~changes ~~policies~~ in ~~force~~equity ~~are~~markets; ~~based~~changes onin ~~annually~~expected ~~updated~~future ~~studies~~interest ofrates ~~expenses~~and ~~incurred.~~default ~~Reinsurance~~rates ~~costs~~based /on ~~recoveries~~continued ~~Universal~~experience ~~LifeVariable~~and ~~Universal~~expected ~~LifeVariable~~interest ~~Annuities~~rate ~~Projected~~changes; ~~reinsurance~~changes ~~costs~~in ~~are~~mortality, ~~based~~lapses onand ~~treaty~~other ~~terms~~policyholder ~~currently~~behavior inassumptions ~~force.~~that ~~Recoveries~~ are ~~based~~updated onto ~~the~~reflect ~~Company’s~~more ~~assumed~~recent ~~mortality~~policyholder and ~~treaty~~industry ~~terms.~~experience; ~~Treaty~~and ~~recaptures~~changes ~~are~~in ~~based~~expected onpolicy ~~contract~~administration ~~provisions and management’s intentions~~expenses.

~~Annually,~~See weNote 3 ~~complete~~to a comprehensive assumption review where management makes a determination of best estimate assumptions based on a comprehensive review of recent experience and industry trends. Assumption changes resulting from this review may change our ~~estimates~~financial ofstatements ~~EGPs~~under in“Item ~~the~~8: ~~DAC,~~Financial ~~SIA,~~Statements and ~~URR~~Supplementary ~~models,~~Data” as well as projections within the death benefit and other insurance benefit reserving models, the profits followed by losses reserve models, and cost of reinsurance models. Throughout the year, we may also update the assumptions and adjust these balances if emerging data indicates a change is warranted. All assumption changes, whether resulting from the annual comprehensive review or from other periodic assessments, are considered an unlock in ~~the~~this ~~period~~Form 10-K offor ~~revision~~additional ~~and~~information ~~adjust~~related ~~the DAC, SIA, URR, death and other insurance benefit reserves, profits followed by losses reserve, and cost of reinsurance balances in the balance sheets with an offsetting benefit or charge~~ to ~~income to reflect such changes in the period of the revision~~DAC. An unlock that results in an after-tax benefit generally occurs as a result of actual experience or future expectations of product profitability being more favorable than previous estimates. An unlock that results in an after-tax charge generally occurs as a result of actual experience or future expectations of product profitability being less favorable than previous estimates.

Our process to assess the reasonableness of the EGPs uses internally developed models together with consideration of applicable recent experience and analysis of market and industry trends and other events. Actual gross profits that vary from management’s estimates in a given reporting period may also result in increases or decreases in the rate of amortization recorded in the period.

An analysis is performed annually to assess if there are sufficient gross profits to recover the deferred policy acquisition costs associated with business written during the year. If the estimates of gross profits cannot support the recovery of deferred policy acquisition costs, the amount deferred is reduced to the recoverable amount.

Over the last several years, the Company has revised a number of assumptions that have resulted in changes to expected future gross profits. The most significant assumption updates resulting in a change to future gross profits and the amortization of DAC, SIA and URR in 2013 are related to changes in expected premium persistency, and the incorporation of a mortality improvement assumption. Other of the more significant drivers of changes to expected gross profits over the last several years include changes in expected separate account investment returns due to changes in equity markets; changes in expected future interest rates and default rates based on continued experience and expected interest rate changes; changes in mortality, lapses and other policyholder behavior assumptions that are updated to reflect more recent policyholder and industry experience; and changes in expected policy administration expenses.

Policy Liabilities and Accruals

~~Generally,~~Future ~~future~~ policy benefits are generally payable over an extended period of time and related liabilities are calculated recognizing future expected benefits, expenses and premiums. Such liabilities are established based on methods and underlying assumptions in accordance with U.S. GAAP and applicable actuarial standards. Principal assumptions used in the establishment of liabilities for future policy benefits are mortality, morbidity, policyholder behavior, investment returns, inflation, expenses and other contingent events as appropriate. These assumptions are intended to estimate the experience for the period the policy benefits are payable. Utilizing these assumptions, liabilities are established on a cohort basis, as appropriate. If experience is less favorable than assumed, additional liabilities may be established, resulting in a charge to policyholder benefits and claims.

Additional policyholder liabilities for guaranteed benefits on variable annuity and on fixed index annuity contracts are based on estimates of the expected value of benefits in excess of the projected account balance, recognizing the excess over the accumulation period based on total expected assessments. Because these estimates are sensitive to capital market movements, amounts are calculated using multiple future economic scenarios.

Additional policyholder liabilities are established for certain contract features that could generate significant reductions to future gross profits (e.g., death benefits when a contract has zero account value and a no-lapse guarantee). The liabilities are accrued over the lifetime of the block based on assessments. The assumptions used in estimating these liabilities are consistent with those used for amortizing deferred policy acquisition costs, and are, thus, subject to the same variability and risk. The assumptions of investment performance and volatility for variable and equity index products are consistent with historical experience of the appropriate underlying equity indices.

We expect that our universal life block of business will generate profits followed by losses and, therefore, we establish an additional liability (“PFBL”) to accrue for the expected losses over the period of expected profits. The assumptions used in estimating these liabilities are consistent with those used for amortizing deferred policy acquisition costs and are subject to the same variability and risk.

~~The~~See ~~Company~~Note 3 ~~periodically~~to ~~reviews~~our ~~its~~financial ~~estimates~~statements ofunder ~~actuarial~~“Item ~~liabilities~~8: ~~for~~Financial ~~policyholder~~Statements ~~benefits~~ and ~~compares~~Supplementary ~~them~~Data” ~~with its actual experience. Differences between actual experience~~ and the ~~assumptions~~“Enterprise ~~used~~Risk inManagement” ~~pricing~~section ~~these~~of ~~policies~~“Item ~~and~~7: ~~guarantees,~~Management’s asDiscussion ~~well~~and asAnalysis ~~in the establishment~~ of ~~the~~Financial ~~related~~Condition ~~liabilities,~~and ~~result~~Results inof ~~variances~~Operations” in ~~profit~~this ~~and~~Form 10-K ~~could~~for ~~result~~additional ~~in losses~~information.

See Note 2 to our financial statements under “Item 8: Financial Statements and Supplementary Data” and the “Enterprise Risk Management” section of “Item 7: Management’s Discussion and Analysis of Financial Condition and Results of Operations” in this Form 10-K for more information.30

34Table of Contents

Embedded Derivative Liabilities

We make guarantees on certain variable annuity contracts, including GMAB, GMWB and combination rider (“COMBO”) as well as provide credits based on the performance of certain indices (“index credits”) on our fixed indexed annuity contracts that meet the definition of an embedded derivative. The GMAB, GMWB and COMBO embedded derivative liabilities associated with our variable annuity contracts are accounted for at fair value, using a risk neutral stochastic valuation methodology with changes in fair value recorded in realized investment gains. The inputs to our fair value methodology include estimates derived from the asset derivatives market, including the equity volatility and the swap curve. Several additional inputs are not obtained from independent sources, but instead reflect our internally developed assumptions related to mortality rates, lapse rates and policyholder behavior. The fair value of the embedded derivative liabilities associated with the index credits on our fixed indexed annuity contracts is calculated using the budget method with changes in fair value recorded in realized investment gains. The initial value under the budget method is established based on the fair value of the options used to hedge the liabilities. The value of the index credits in future years is estimated to be the budgeted amount. The budget amount is based on the impact of projected interest rates on the discounted liabilities. Several additional inputs reflect our internally developed assumptions related to lapse rates and policyholder behavior. As there are significant unobservable inputs included in our fair value methodology for these embedded derivative liabilities, we consider the above-described methodology as a whole to be Level 3 within the fair value hierarchy.

Our fair value calculation of embedded derivative liabilities includes a credit standing adjustment (the “CSA”). The CSA represents the adjustment that market participants would make to reflect the risk that guaranteed benefit obligations may not be fulfilled (“non-performance risk”). We estimate our CSA using the credit spread (based on publicly available credit spread indices) for financial services companies similar to the Company and its insurance company affiliates.

The CSA is updated every quarter and, therefore, the fair value will change with the passage of time even in the absence of any other changes that would affect the valuation. For example, the December 31, ~~2013~~2014 fair value of $74160.83 million would increase to $79170.70 million if the spread were decreased by 50 basis points. If the spread were increased by 50 basis points, the fair value would decrease to $70151.24 million.

Valuation of Debt and Equity Securities

We classify our debt and equity securities as available-for-sale and report them in our balance sheets at fair value. Fair value is based on quoted market price or external third -party information, where available. When quoted market prices are not available, we estimate fair value by discounting debt security cash flows to reflect interest rates currently being offered on similar terms to borrowers of similar credit quality, by quoted market prices of comparable instruments and by independent pricing sources or internally developed pricing models.

Fair Value of Securities	As of
Fair Value of Securitiesby Pricing Source: [1]	As of December 31, 2014
by Pricing Source: [1]	December 31, 2013
($ in millions)	FixedMaturitiesat Fair Value		% ofTotalFair Value
($ in millions)	Fixed		% of
Priced via independent market quotations	$	2,965.5	68.9	%
	Maturities		Total
Priced via matrices	1,209.2		28.1	%
	at Fair Value		Fair Value
Priced via broker quotations	15.7		0.4	%
Priced via independent market quotations	$	2,367.8	67.5	%
Priced via other methods	31.4		0.7	%
Priced via matrices	988.8		28.2	%
Short-term investments [2]	79.8		1.9	%
Priced via broker quotations	50.9		1.5	%
Total	$	4,301.6	100.0	%
Priced via other methods	18.8		0.5	%
Short-term investments [2]	81.0		2.3	%
Total	$	3,507.3	100.0	%

———————


[1]	Inclusive of short-term investments.


[2]	Short-term investments are valued at amortized cost, which approximates fair value.

See Note 910 to our financial statements under “Item 8: “Financial Statements and Supplementary Data” in this Form 10-K for additional disclosures of our fair value methodologies.

3531

Table of Contents

Other-than-Temporary Impairments on Available-for-Sale Securities

We recognize realized investment losses when declines in fair value of debt and equity securities are considered to be an OTTI.

For debt securities, the other-than-temporarily impaired amount is separated into the amount related to a credit loss and is reported as net realized investment losses included in earnings and any amounts related to other factors are recognized in OCI. The credit loss component represents the difference between the amortized cost of the security and the net present value of its projected future cash flows discounted at the effective interest rate implicit in the debt security prior to impairment. Any remaining difference between the fair value and amortized cost is recognized in accumulated other comprehensive income (“AOCI”). Subsequent to the recognition of an OTTI, the impaired security is accounted for as if it had been purchased on the date of impairment at an amortized cost basis equal to the previous amortized cost basis less the OTTI recognized in earnings. We will continue to estimate the present value of future expected cash flows and, if significantly greater than the new cost basis, we will accrete the difference as investment income on a prospective basis once the Company has determined that the interest income is likely to be collected.

In evaluating whether a decline in value is other-than-temporary, we consider several factors including, but not limited to, the following:


•	the extent and the duration of the decline;


•	the reasons for the decline in value (credit event, interest related or market fluctuations);


•	our intent to sell the security, or whether it is more likely than not that we will be required to sell it before recovery; and


•	the financial condition and near term prospects of the issuer.

AAn impairment of a debt security, ~~impairment~~or certain equity securities with debt-like characteristics, is deemed other-than-temporary if:


•	we either intend to sell the security, or it is more likely than not that we will be required to sell the security before recovery; or


•	it is probable we will be unable to collect cash flows sufficient to recover the amortized cost basis of the security.

Impairments due to deterioration in credit that result in a conclusion that the present value of cash flows expected to be collected will not be sufficient to recover the amortized cost basis of the security are considered other-than-temporary. Other declines in fair value (for example, due to interest rate changes, sector credit rating changes or company-specific rating changes) that result in a conclusion that the present value of cash flows expected to be collected will not be sufficient to recover the amortized cost basis of the security may also result in a conclusion that an OTTI has occurred.

OnAn aequity ~~quarterly~~security ~~basis,~~impairment weis ~~evaluate~~deemed securities in an unrealized loss position for potential recognition of an OTTI. In addition, we maintain a watch list of securities in default, near default or otherwise considered by our investment professionals as being distressed, potentially distressed or requiring a heightened level of scrutiny. We also identify securities whose fair value has been below amortized cost on a continuous basis for zero to six months, six months to 12 months and greater other-than-temporary ~~12 months.~~if:

We• ~~employ~~the ~~a comprehensive process to determine whether or not a~~ security inhas antraded ~~unrealized~~at ~~loss position is other-than-temporarily impaired. This assessment is done on~~ a ~~security-by-security basis and involves~~ significant ~~management~~discount judgment. The assessment of whether impairments have occurred is based on management’s evaluation of the underlying reasons for the decline in estimated fair value. The Company’s review of its debt securities for impairments includes an analysis of the total gross unrealized losses by severity and/or age of the gross unrealized loss, as summarized in the, “Duration of Gross Unrealized Losses on Securities” section. An extended and severe unrealized loss position on a debt security may not have any impact on the ability of the issuer to ~~service all scheduled interest and principal payments and the Company’s evaluation of recoverability of all contractual cash flows or the ability to recover an amount at least equal to its amortized~~ cost ~~based on the present value of the expected future cash flows to be collected. In contrast,~~ for ~~certain equity securities, greater weight and consideration are given by the Company to~~ an extended ~~decline~~period inof ~~market~~time; ~~value and the likelihood such market value decline will recover.~~or

~~Specifically~~• ~~for~~we ~~structured~~determined ~~securities, to determine whether a collateralized security is impaired,~~ we ~~obtain~~may ~~underlying~~not ~~data~~realize ~~from~~ the ~~security’s~~full ~~trustee~~recovery ~~and~~on ~~analyze it for performance trends. A security-specific stress analysis is performed using the most recent trustee information. This analysis forms the basis for~~ our ~~determination of the future expected cash flows to be collected for the security~~investment.

36Equity securities are determined to be other-than-temporarily impaired based on management judgment and the consideration of the issuer’s financial condition along with other relevant facts and circumstances. Those securities which have been in a continuous decline for over twelve months and declines in value that are severe and rapid are considered for reasonability of whether the impairment would be temporary. Although there may be sustained losses for over twelve months or losses that are severe and rapid, additional information related to the issuer performance may indicate that such losses are not other-than-temporary.

See Note 3 and Note 67 to our financial statements under “Item 8: Financial Statements and Supplementary Data” and the “Debt and Equity Securities” and “Enterprise Risk Management” sections of “Item 7: Management’s Discussion and Analysis of Financial Condition and Results of Operations” in this Form 10-K for more information.

Income Taxes

We account for income taxes in accordance with ASC 740, Accounting for Income Taxes.

We are included in the consolidated federal income tax return filed by ~~PNX~~Phoenix and are party to a tax sharing agreement by and among ~~PNX~~Phoenix and its subsidiaries. In accordance with this agreement, federal income taxes are allocated as if they had been calculated on a separate company basis, except that benefits for any net operating losses or other tax credits generated by the Company will be provided at the earlier of when such loss or credit is utilized in the consolidated federal tax return and when the tax attribute would have otherwise expired.

Deferred tax assets and/or liabilities are determined by multiplying the differences between the financial reporting and tax reporting bases for assets and liabilities by the enacted tax rates expected to be in effect when such differences are recovered or settled. U.S. GAAP requires an assessment of the realizability of deferred tax assets in order to determine whether a valuation allowance should be recorded. The total deferred tax asset, net of any valuation allowance, represents the deferred tax asset that management estimates to be realizable. The assessment of the realizability of deferred tax assets involves management making assumptions and judgments about all available positive and negative evidence including the reversal of gross deferred tax liabilities, projected future taxable income, prudent and feasible tax planning strategies and recent operating results, including the existence of cumulative income (loss) incurred over the three-year period ended December 31, 2013.32

AsTable of December 31, 2013, we concluded that our estimates of future taxable income, certain tax planning strategies and other sources of income did not constitute sufficient positive evidence to assert that it is more likely than not that certain deferred tax assets would be realizable. Accordingly, a valuation allowance of $74.2 million has been recorded on net deferred tax assets of $102.2 million. The valuation allowance recorded constitutes a full valuation allowance on the net deferred tax assets that require future taxable income in order to be realized. The remaining deferred tax asset of $28.0 million attributable to available-for-sale debt securities with gross unrealized losses do not require a valuation allowance due to our ability and intent to hold these securities until recovery of fair or principal value through sale or contractual maturity, thereby avoiding the realization of taxable losses. This conclusion is consistent with prior periods. The impact of the valuation allowance on the allocation of tax to the components of the financial statements included a decrease of $31.7 million in net loss and an increase of $0.5 million in OCI-related deferred tax balances.Contents

As of December 31, 2014, we concluded that our estimates of future taxable income, certain tax planning strategies and other sources of income did not constitute sufficient positive evidence to assert that it is more likely than not that certain deferred tax assets would be realizable. Accordingly, a valuation allowance of $127.9 million has been recorded on net deferred tax assets of $141.0 million. The valuation allowance recorded constitutes a full valuation allowance on the net deferred tax assets that require future taxable income in order to be realized. The remaining deferred tax asset of $13.1 million attributable to available-for-sale debt securities with gross unrealized losses does not require a valuation allowance due to our ability and intent to hold these securities until recovery of principal value through sale or contractual maturity, thereby avoiding the realization of taxable losses. This conclusion is consistent with prior periods. The impact of the valuation allowance on the allocation of tax to the components of the financial statements included an increase of $43.1 million in net loss and an increase of $14.9 million in OCI-related deferred tax balances.

The calculation of tax liabilities involves uncertainties in applying certain tax laws. ASC 740 provides that a tax benefit that arises from an uncertain tax position that is more likely than not to be upheld upon IRS examination shall be recognized in the financial statements. The more likely than not threshold requires judgments made by management and the related tax liability is adjusted accordingly as new information becomes available. Due to the complexities of such uncertainties, tax payments made upon IRS examination may be materially different from the current estimate of tax liabilities. The impact of payments that differ from the recognized liability are reflected in the period in which the examinations are completed.

The Company has minimal uncertain tax positions and accordingly, the liability for uncertain tax positions is not material to the financial statements.

See Note 1011 to our financial statements under “Item 8: Financial Statements and Supplementary Data” in this Form 10-K for more information related to income taxes.

Litigation Contingencies

The Company is a party to legal actions and is involved in regulatory investigations. Given the inherent unpredictability of these matters, it is difficult to estimate the impact on our financial position. Liabilities are established when it is probable that a loss has been incurred and the amount of the loss can be reasonably estimated. On a quarterly and annual basis, the Company reviews relevant information with respect to liabilities for litigation, regulatory investigations, and litigation-related contingencies to be reflected in the Company’s financial statements. It is possible that an adverse outcome in certain of the Company’s litigation or the use of different assumptions in the determination of amounts recorded could have a material effect upon the Company’s net income or cash flows in particular quarterly or annual periods.

3733

Table of Contents

Results of Operations

Summary Financial Data:	Years Ended						Increase (decrease) and
Summary Financial Data:($ in millions)	For the years endedDecember 31,						Increase (decrease) andpercentage change
($ in millions)	December 31,						percentage change
	2014			2013			2014 vs. 2013
	2013			2012			2013 vs. 2012
REVENUES:
Premiums	$	1312.94		$	813.59		$	5(1.45	)	64(11	%)
Insurance and investment product fees	~~367~~358.63			~~365~~367.30			2(8.37		)	1(2	%)
Net investment income	~~140~~172.80			~~130~~140.9			931.91			822	%
Net realized investment gains (losses):
Total other-than-temporary impairment (“OTTI”) losses	(1.13		)	(5.0.9		)	3(0.94		)	~~(78~~44	%)
Portion of OTTI losses recognized in other comprehensive income (“OCI”)	~~(0.9~~—		)	2(0.29		)	(30.19		)	NM(100	%)
Net OTTI losses recognized in earnings	(21.03		)	(21.8		)	0.85			(2928	%)
Net realized investment gains (losses), excluding OTTI losses	5(63.47		)	(191.52		)	24(62.95		)	NM
Net realized investment gains (losses)	3(65.40		)	(~~22.~~3.0		)	25(62.70		)	NM
Total revenues	~~525~~477.7			~~482~~518.48			43(41.31		)	9(8	%)
BENEFITS AND EXPENSES:
Policy benefits	~~286~~397.57			~~396~~277.86			~~(110~~120.31		)	~~(28~~43	%)
Policy acquisition cost amortization	8884.49			~~103~~83.54			~~(15.~~1.5		)	~~(15~~2	%)
Other operating expenses	~~116~~100.86			~~103~~118.61			13(17.25		)	13(15	%)
Total benefits and expenses	~~491~~583.72			~~603~~479.91			~~(112~~104.21		)	~~(19~~22	%)
Income (loss) before income taxes	34(105.05		)	~~(121~~39.57		)	~~155~~(145.52		)	NM
Income tax expense (benefit)	~~(21~~3.78		)	16(24.27		)	~~(37~~28.95		)	NM(115	%)
Net income (loss)	$	55(109.73	)	$	~~(137~~64.74	)	$	~~193~~(173.47	)	NM

———————

Not meaningful (NM)

Analysis of Results of Operations

Year ended December 31, ~~2013~~2014 compared to year ended December 31, ~~2012~~2013

The ~~Company~~decrease ~~recorded~~in net income of $55173.7 million for the ~~twelve~~year ~~months~~ ended December 31, ~~2013~~2014 as compared ~~with~~to ~~a net loss of $137.7 million for~~ the ~~twelve~~year ~~months~~ ended December 31, ~~2012.~~2013 ~~The increase in net income~~ is primarily due to the following items:

• ~~Net~~The ~~realized~~increase ~~investment~~in ~~gains,~~policy ~~excluding~~benefits ~~OTTI,~~expense of $5120.41 million ~~were recognized~~ for the ~~twelve~~year ~~months~~ ended December 31, ~~2013~~2014 compared to ~~net realized investment losses, excluding OTTI, of $19.5 million for~~ the ~~twelve~~year ~~months~~ ended December 31, ~~2012.~~2013 ~~The change in the net realized investment gains~~ is primarily ~~attributable~~driven to a decrease in realized losses on derivatives that are used to hedge the risks associated with variable annuity guarantees and the fixed indexed annuity liabilities. For the twelve months ended December 31, 2013 there were losses on derivative investments of $23.1 million, while there were losses of $49.0 million for the twelve months ended December 31, 2012. The continued improvement in the equity markets results in losses on the derivatives that are used to hedge the risk associated with the variable annuity guarantees, that are offset by ~~gains on~~ the derivatives that are used to hedge the risks associated with the fixed indexed annuities. The fixed indexed annuity hedging gains were more significant in 2013 due to more significant increases in the equity market in 2013 than in 2012, as well as additional derivatives purchased due to continued sales of fixed indexed annuities.following:

•◦ ~~Policy~~A ~~benefits~~decrease ~~decreased~~of $~~110~~87.30 million ~~for~~in the ~~twelve~~unlock ~~months~~benefit ~~ended~~in ~~December 31~~2014, ~~2013~~which ~~compared~~was ~~with~~a ~~the~~benefit ~~twelve~~of ~~months ended December 31, 2012~~$95.3 ~~The~~million ~~decrease~~ in ~~policy~~2013 ~~benefit~~and ~~expenses~~a isbenefit ~~primarily~~of ~~due~~$8.3 tomillion ~~gains~~in on2014. ~~guaranteed~~The ~~insurance~~unlock benefit ~~liabilities~~in ~~and~~the ~~reserves~~current ~~for~~year ~~profits~~is ~~followed~~driven primarily by ~~losses of $84.1 million as a result of assumption~~ changes ~~made~~in ~~during~~policyholder ~~the~~behavior ~~annual comprehensive review of~~ assumptions in the ~~fourth~~universal ~~quarter~~life ofbusiness, ~~2013.~~most ~~The~~significantly ~~most~~mortality ~~significant~~and ~~driver~~lapses. ofThe ~~the~~benefit ~~positive~~in 2013 ~~unlock~~was ~~results~~driven ~~was~~primarily by the incorporation of a mortality improvement assumption in the ~~overall mortality table, which resulted in improved expected mortality on~~ universal life ~~and variable universal life products~~business.

38◦ An increase of $40.0 million in PFBL, excluding unlock, in 2014 compared to 2013. The increase in PFBL was primarily driven by a decrease in the new money yield for the year and the slope of the forward curve, which indicates the market expectation of future changes in interest rates which reduces expected future profitability and increases the liability.

•◦ ~~Income~~The ~~taxes~~guaranteed ~~provided~~liability afor ~~benefit~~the offixed indexed annuity GMWB and GMDB increased in both periods, excluding unlock, but increased $2133.71 million for the ~~twelve~~year ~~months~~ ended December 31, ~~2013~~2014 ~~compared~~and ~~with~~increased ~~an expense of~~ $1660.25 million for the ~~twelve~~year ~~months~~ ended December 31, ~~2012~~2013. The ~~primary~~reduction ~~driver~~in of the ~~income~~current ~~tax~~year ~~benefit~~expense is aprimarily ~~decrease~~driven inby realized capital losses on the ~~valuation~~derivative ~~allowance~~investments ofused ~~$31~~to hedge this business, which generally positively impact the guaranteed benefit liabilities.7.

~~Partially offsetting the increase in net income were the following items:~~34

•Table ~~Operating expenses increased by $13.2 million for the twelve months ended December 31, 2013 compared with the twelve months ended December 31, 2012. The increase in operating expenses was a result~~ of ~~higher professional fees and outside consulting services primarily as a result of the restatement.~~Contents

•

Realized losses increased by $62.0 million for the year ended December 31, 2014 compared to the year ended December 31, 2013. In 2014, there were realized losses on the embedded derivatives both in the fixed indexed annuity business and the variable annuity business, while there were gains on the variable annuity embedded derivatives and losses on the fixed indexed annuity embedded derivatives in 2013. In 2014, the losses on the embedded derivatives were primarily driven by the continued decline of interest rates and increased volatility in the equity markets. In 2013, the gains were driven primarily by strong equity market performance decreasing the liability associated with the variable annuity guarantees.


•	The income tax expense increased $28.5 million from a benefit of $24.7 million for the year ended December 31, 2013 to an expense of $3.8 million for the year ended December 31, 2014. The increase in 2014 was primarily driven by an increase in current tax expense accrued.


•	Premium revenue decreased $1.5 million for the year ended December 31, 2014 compared with the year ended December 31, 2013 as a result of lower renewal premiums due to declining policies in force.

Partially offsetting the decrease in net income are the following:


•	Net investment income increased $31.1 million for the year ended December 31, 2014 compared to the year ended December 31, 2013. The increase in net investment income is driven primarily by continued sales of the fixed indexed annuity business and overall higher asset levels while the yield has remained relatively stable.


•	Other operating expenses decreased $17.5 million for the year ended December 31, 2014 compared to the year ended December 31, 2013. The decrease in other operating expenses is driven primarily by a decrease in the amount of audit fees and other professional services fees that are being allocated to the Company.

Effects of Inflation

For the years ~~2013~~2014, ~~2012~~2013 and ~~2011~~2012, inflation did not have a material effect on our results of operations.

Enterprise Risk Management

Our ultimate parent company, ~~PNX~~Phoenix, has an enterprise-wide risk management program under which PHL Variable operations are covered. Our Chief Risk Officer reports to the Chief Executive Officer and monitors our risk management activities. The Chief Risk Officer provides regular reports to the Board without the presence of other members of management. Our risk management governance consists of several management committees to oversee and address issues pertaining to all our major risks—operational, market and product—as well as capital management. In all cases, these committees include one or more of our Chief Executive Officer, Chief Financial Officer, Chief Investment Officer and Chief Risk Officer.

Operational Risk

Operational risk is the risk of loss resulting from inadequate or failed internal processes, people and systems or from external events. As reported in “Item 9A: Controls and Procedures” of this Form 10-K, the Company has concluded that there are material weaknesses in its internal control over financial reporting, which have materially adversely affected its ability to timely and accurately report its results of operations and financial condition, and that its disclosure controls and procedures are ineffective as of December 31, ~~2013~~2014. These material weaknesses have not been fully remediated as of the filing date of this report and the Company cannot assure that other material weaknesses will not be identified in the future. It is necessary for the Company to maintain effective internal control over financial reporting to prevent fraud and errors, and to maintain effective disclosure controls and procedures so that it can provide timely and reliable financial and other information. If the Company fails to maintain an effective system of internal controls, the accuracy and timing of its financial reporting may be adversely affected. Further, the absence of timely and reliable financial and other information about the Company’s business operations may inhibit the Company’s ability to identify operational risk. A failure to correct material weaknesses in our internal controls could result in further restatements of financial statements and correction of other information filed with the SEC. See “Item 1A: Risk Factors” in Part I of this Form 10-K for a description of these and other risks that may impact the Company’s operations. Also see “Item 9A: Controls and Procedures” in Part II of this Form 10-K for more information regarding these weaknesses, an evaluation of the effectiveness of the Company’s disclosure controls and procedures, and the Company’s remediation plans.

PNX has established an Operational Risk Committee, chaired by the Chief Risk Officer, to develop an enterprise-wide framework for managing operational risks. This committee meets periodically and includes membership that represents all significant operating, financial and staff departments of PNX. Among the risks the committee reviews and manages and for which it provides general oversight are business continuity risk, disaster recovery risk and risks related to the Company’s information technology systems.35

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Phoenix has established an Operational Risk Committee, chaired by the Chief Risk Officer, to develop an enterprise-wide framework for managing operational risks. This committee meets periodically and includes membership that represents all significant operating, financial and staff departments of Phoenix. Among the risks the committee reviews and manages and for which it provides general oversight are business continuity risk, disaster recovery risk and risks related to the Company’s information technology systems.

Market Risk

Market risk is the risk that we will incur losses due to adverse changes in market rates and prices. We have exposure to market risk through both our investment activities and our insurance operations. Our investment objective is to maximize after-tax investment return within defined risk parameters. Our primary sources of market risk are:


•	interest rate risk, which relates to the market price and cash flow variability associated with changes in market interest rates;


•	credit risk, which relates to the uncertainty associated with the ongoing ability of an obligor to make timely payments of principal and interest; and


•	equity risk, which relates to the volatility of prices for equity and equity-like investments, such as limited partnerships.

We measure, manage and monitor market risk associated with our insurance and annuity business, as part of our ongoing commitment to fund insurance liabilities. We have developed an integrated process for managing the interaction between product features and market risk. This process involves our Corporate Finance, Corporate Portfolio Management and Life and Annuity Product Development departments. These areas coordinate with each other and report results and make recommendations to our Asset-Liability Management Committee (“ALCO”) chaired by the Chief Risk Officer.

We also measure, manage and monitor market risk associated with our investments, both those backing insurance liabilities and those supporting surplus. This process primarily involves Corporate Portfolio Management. This organization makes recommendations and reports results to our Investment Policy Committee, chaired by the Chief Investment Officer. Please refer to the sections that follow, including “Debt and Equity Securities,” following this discussion of Enterprise Risk Management, for more information on our investment risk exposures. Within the parameters specified in our investment policy, we regularly refine our allocations based on factors including ratings, duration and type of fixed income security to appropriately balance market risk exposure and expected return.

Interest Rate Risk Management

Interest rate risk is the risk that we will incur economic losses due to adverse changes in interest rates. Our debt security investments include U.S. and foreign government bonds, securities issued by government agencies, corporate bonds, asset-backed securities and mortgage-backed securities, most of which are exposed to changes in medium-term and long-term U.S. Treasury rates. Our exposure to interest rate changes results primarily from our significant holdings of fixed rate investments and our interest-sensitive insurance liabilities. Our insurance liabilities largely comprise dividend-paying universal life policies and annuity contracts.

We manage interest rate risk as part of our asset-liability management and product development processes. Asset-liability management strategies include the segmentation of investments by product line and the construction of investment portfolios designed to satisfy the projected cash needs of the underlying product liabilities. All asset-liability strategies are approved by the ALCO. We manage the interest rate risk in portfolio segments by modeling and analyzing asset and product liability durations and projected cash flows under a number of interest rate scenarios.

We also manage interest rate risk by purchasing securities that feature prepayment restrictions and call protection. Our product design and pricing strategies include the use of surrender charges or restrictions on withdrawals in some products. We regularly undertake a sensitivity analysis that calculates liability durations under various cash flow scenarios. In addition, we monitor the short- and medium-term asset and liability cash flows profiles by portfolio to manage our liquidity needs.

One of the key measures we use to quantify our interest rate exposure is duration, a measure of the sensitivity of the fair value of assets and liabilities to changes in interest rates. For example, if interest rates increase by 100 basis points, or 1%, the fair value of an asset or liability with a duration of five is expected to decrease by 5%. We believe that as of December 31, ~~2013~~2014, our asset and liability portfolio durations were reasonably matched.

The Company uses an industry recognized analytic model to calculate the fair value of its fixed income portfolio. The Company’s interest rate sensitivity analysis reflects the change in market value assuming a +/-100 basis point parallel shift in the yield curve. The down 100 basis point shift is floored at zero to prevent rates from going negative. The table below shows the estimated interest rate sensitivity of our fixed income financial instruments measured in terms of fair value.36

Interest Rate Sensitivity of	As of
Fixed Income Financial Instruments:	December 31, 2013
($ in millions)	-100 Basis				+100 Basis
	Point				Point
	Change		Fair Value		Change
Cash and short-term investments	$	262.1	$	262.0	$	261.7
Available-for-sale debt securities	3,628.4		3,426.3		3,231.1
Fair value investments [1]	50.2		48.6		46.9
Totals	$	3,940.7	$	3,736.9	$	3,539.7

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The Company uses an industry recognized analytic model to calculate the fair value of its fixed income portfolio. The Company’s interest rate sensitivity analysis reflects the change in market value assuming a +/-100 basis point parallel shift in the yield curve. The 100 basis point downward shift has a floor of zero to prevent rates from becoming negative. The table below shows the estimated interest rate sensitivity of our fixed income financial instruments measured in terms of fair value.



Interest Rate Sensitivity of Fixed Income Financial Instruments:	As of December 31, 2014
($ in millions)	-100 Basis Point Change		Fair Value		+100 Basis Point Change

Cash and short-term investments	$	242.3	$	242.1	$	241.9
Available-for-sale debt securities	4,479.9		4,221.8		3,975.2
Available-for-sale equity securities	30.8		28.7		26.1
Fair value investments [1]	47.4		46.7		45.6
Totals	$	4,800.4	$	4,539.3	$	4,288.8

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[1]	Includes debt securities where the fair value option has been elected.

40See Note 10 to our financial statements under “Item 8: Financial Statements and Supplementary Data” in this Form 10-K for additional information on fair value instruments.

See Note 9 to our financial statements under “Item 8: Financial Statements and Supplementary Data” in this Form 10-K for more information on fair value instruments.

We also use derivative financial instruments, primarily interest rate swaps, to manage our residual exposure to fluctuations in interest rates. We enter into derivative contracts with a number of highly rated financial institutions, to both diversify and reduce overall counterparty credit risk exposure.

We enter into interest rate swap agreements to reduce market risks from changes in interest rates. We do not enter into interest rate swap agreements for trading purposes. Under interest rate swap agreements, we exchange cash flows with another party at specified intervals for a set length of time based on a specified notional principal amount. Typically, one of the cash flow streams is based on a fixed interest rate set at the inception of the contract and the other is based on a variable rate that periodically resets. No premium is paid to enter into the contract and neither party makes payment of principal. The amounts to be received or paid on these swap agreements are accrued and recognized in net investment income.

The table below shows the interest rate sensitivity of our derivatives measured in terms of fair value, excluding derivative liabilities embedded in products. These exposures will change as our insurance liabilities are created and discharged and as a result of portfolio and risk management activities.

Interest Rate Sensitivity of	As of
Interest Rate Sensitivity ofDerivatives:	As of December 31, 2014
Derivatives:	December 31, 2013
($ in millions)	NotionalAmount		Weighted-Average Term(Years)	-100 BasisPointChange			FairValue			+100 BasisPointChange
($ in millions)			Weighted-	-100						+100 Basis
Interest rate swaps	$	114.0	9.9	$	17.2		7.8			$	(0.7	)
			Average	Basis						Basis
Variance swaps	0.9		2.0	(8.7		)	(8.6		)	(8.5		)
	Notional		Term	Point						Point
Swaptions	777.0		0.2	—			0.2			8.3
	Amount		(Years)	Change			Fair Value			Change
Put options	677.5		3.8	33.6			29.4			25.4
Equity Futures [1]	$	159.7	0.3	$	12.5		$	12.5		$	12.1
Call options [1]	1.5		0.9	0.8			0.9			0.9
Interest Rate Swap	139.0		7.9	1.0			(2.9		)	(6.2		)
Equity futures	2.9		0.3	(0.5		)	(0.5		)	(0.5		)
Variance Swap	0.9		3.0	(8.0		)	(7.9		)	(7.8		)
Total	$	1,573.8		$	42.4		$	29.2		$	24.9
Call Option [2]	155.3		0.1	21.9			22.0			22.0
Put Option	391.0		5.1	35.1			29.5			24.6
Swaption	3,902.0		1.1	7.0			30.7			99.0
Total	$	4,747.9		$	69.5		$	83.9		$	143.7

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[1] ~~Equity~~Excludes ~~futures~~call ~~fair~~options ~~value~~used ~~includes~~to ~~margin~~hedge ~~account~~fixed ~~cash~~indexed ~~balance~~annuity ~~of $12~~products.~~5 million.~~

~~[2]~~See ~~Excludes~~Note 9 ~~call~~to ~~options,~~our ~~hedging~~financial ~~fixed~~statements ~~indexed~~under ~~annuity~~“Item ~~products~~8: Financial Statements and Supplementary Data” in this Form 10-K for additional information on derivative instruments.

~~See Note 8 to our financial statements under “Item 8: Financial Statements and Supplementary Data” in this Form 10-K for more information on derivative instruments.~~37

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To calculate duration for liabilities, we project liability cash flows under a number of stochastically generated interest rate scenarios and discount them to a net present value using a risk-free market rate increased for CSA. For interest-sensitive liabilities the projected cash flows reflect the impact of the specific scenarios on policyholder behavior as well as the effect of minimum guarantees. Duration is calculated by revaluing these cash flows at an alternative level of interest rates and by determining the percentage change in fair value from the base case.

Liabilities in excess of the policyholder account balance for universal life contracts, some of which contain secondary guarantees, are generally determined by estimating the expected value of benefits and expenses when claims are triggered and recognizing those benefits and expenses over the accumulation period based on total expected assessments. The assumptions used in estimating these liabilities are consistent with those used for amortizing ~~deferred policy acquisition costs~~DAC. The universal life block of business has experience which produces profits in earlier periods followed by losses in later periods for which a liability is required to be held in addition to the policy liabilities recorded.

See the “Critical Accounting Estimates” section above for more information on ~~deferred~~DAC ~~policy acquisition costs~~ and policy liabilities and accruals.

To estimate the impact of a 100 basis point increase or decrease in interest rates, the Company revised estimated future new money yields thereby modifying future expected portfolio returns. These shocks resulted in higher or lower investment margins and discount rates for products subject to loss recognition and profits followed by losses. All material, interest sensitive blocks of business were considered; the most significant of which is universal life. We measured the impact upon deferred policy acquisition costs and policy liabilities.

~~Management~~The ~~believes~~selection ~~that~~of ~~the~~a ~~Company’s~~100 ~~exposure~~basis topoint immediate increase or decrease in interest rates at all points on the yield curve is a hypothetical rate ~~volatility~~scenario ~~related~~used to ~~its~~demonstrate ~~fixed~~potential ~~index~~risk. ~~annuity~~While ~~product~~a is100 ~~limited~~basis ~~and~~point ~~has~~immediate ~~been~~increase ~~omitted~~or ~~from~~decrease ~~the~~of ~~analysis~~this ~~below.~~type ~~This~~does ~~exposure~~not represent our view of future market changes, it is ~~limited~~a ~~due~~hypothetical tonear-term change that illustrates the ~~short~~potential ~~duration~~effect of ~~the~~such ~~indexed~~events. ~~credit~~Although ~~feature~~these measurements provide a representation of interest rate sensitivity, they are based on our exposures at a point in time and ~~the~~may ~~lack~~not be representative of ~~guaranteed~~future ~~minimum~~market ~~benefit~~results. ~~exposure~~These ~~that~~exposures ~~varies~~will ~~with~~change ~~interest~~as ~~rates~~a ~~associated~~result onof ~~the~~new ~~product~~business, management’s assessment of changing market conditions and available investment opportunities.

The table below shows the interest rate sensitivity of our deferred policy acquisition costs and policy liabilities.

Interest Rate Sensitivity of	As of
Interest Rate Sensitivity ofDAC and Policy Liabilities:	As of December 31, 2014
Deferred Policy Acquisition Costs and	December 31, 2013
($ in millions)	-100 BasisPointChange		DAC [1]		+100 BasisPointChange		-100 BasisPointChange		Policy Liabilities [1]		+100 BasisPointChange
Policy Liabilities:($ in millions)	-100 Basis Point Change		Deferred Policy Acquisition Costs [1]		+100 Basis Point Change		-100 Basis Point Change		Policy Liabilities [1]		+100 Basis Point Change
Universal life PFBL	$	—	$	—	$	—	$	429.9	$	352.2	$	316.4
Universal and variable universal life	$	186.4	$	192.6	$	194.6	$	433.9	$	368.8	$	359.4
Other universal life	146.1		152.7		155.5		153.7		154.6		154.9
Other life and annuity products [2]	—		—		—		4657.93		4454.41		4251.34

———————


[1]	The values below represent changes to balances before adjustment for unrealized gains/losses.


[2]	Includes term life and payout annuity products subject to loss recognition.

The ~~selection~~profits offollowed aby ~~100~~losses ~~basis~~reserve ~~point~~is, ~~immediate~~as ~~increase~~indicated orabove, ~~decrease~~particularly insensitive to interest ~~rates~~rate atchanges. ~~all~~Investment ~~points~~earnings on the ~~yield~~portfolio ~~curve~~backing isthese apolicies ~~hypothetical~~as ~~rate~~well ~~scenario~~as ~~used~~the todiscount ~~demonstrate~~rate ~~potential~~on ~~risk.~~the ~~While~~liability aare ~~100~~based ~~basis~~on ~~point~~assumptions ~~immediate~~regarding ~~increase~~the orportfolio ~~decrease~~earned ofrates, ~~this~~both ~~type~~in ~~does~~the ~~not~~near ~~represent~~term ~~our~~as ~~view~~well ofas ~~future~~the ~~market~~ultimate ~~changes,~~long-term itearned israte. aThe ~~hypothetical near~~long-term ~~change~~earned ~~that~~rate ~~illustrates~~is ~~the~~reviewed ~~potential~~annually ~~effect~~as part of ~~such~~the ~~events~~unlock. ~~Although~~Near ~~these~~term ~~measurements~~portfolio ~~provide~~yields aare ~~representation~~assumed ofto ~~interest~~revert ~~rate~~to ~~sensitivity,~~the ~~they~~long-term ~~are~~yield based on ~~our~~market ~~exposures~~implied atforward ~~a point in time and may not be representative of future market results~~rates. ~~These~~This ~~exposures~~analysis ~~will~~is ~~change~~updated asquarterly aand can result ofin ~~new~~volatility ~~business,~~in ~~management’s~~net ~~assessment~~income ofduring ~~changing~~periods ~~market~~in ~~conditions~~which ~~and~~forward ~~available~~rates ~~investment~~change ~~opportunities~~significantly.

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Guaranteed Minimum Interest Crediting Rates

The primary potential risk to our operations related to guaranteed minimum interest crediting rates could arise mainly in our universal life product since the account values with higher guarantees, primarily 4.0%, are concentrated in this product. Our other annuity products also contain guaranteed minimum interest rates but the aggregate account values or the guaranteed minimum rates are relatively lower compared to universal life. At December 31, 2014, we have approximately $5.4 billion of policyholder insurance liabilities and policyholder deposit funds. Of this amount, approximately $4.1 billion represents contracts with crediting rates that may be adjusted over the life of the contract, subject to certain guaranteed minimums. The table below summarizes the related account values of policies with guaranteed minimum interest rates using ranges indicating the percentage of account values at the guaranteed minimum interest rate range. Our products that do not have an account value with a guaranteed minimum crediting rate are not included in the table below, even though most of our products to some degree are sensitive to interest rates. The table below focuses on products with both an account value and a guaranteed minimum interest rate. See the “Low Interest Rate Environment” section below for further discussion.



Range of Guaranteed Minimum Interest Crediting Rates:	As of December 31, 2014
($ in billions)	Account Values		% of Account Values at Guaranteed Minimum Crediting Rate

Less than 1.5% [1]	$	2.8	83.0	%
Equal to or greater than 1.5% but less than 3.5%	0.4		82.6	%
Equal to or greater than 3.5% but less than or equal to 4.0%	0.8		73.5	%
Greater than 4.0% but less than 5.0%	0.1		70.9	%
Total	$	4.1

———————


[1]	Of the $2.8 billion, $2.7 billion represents account value in fixed indexed annuity products. Most of these contracts have guaranteed minimum interest crediting rates of 0%, or close to 0%.

Credit Risk Management

We manage credit risk through the fundamental analysis of the underlying obligors, issuers and transaction structures. Through internal staff and an outsource relationship, we employ experienced credit analysts who review obligors’ management, competitive position, cash flow, coverage ratios, liquidity and other key financial and non-financial information. These analysts recommend the investments needed to fund our liabilities while adhering to diversification and credit rating guidelines. In addition, when investing in private debt securities, we rely upon broad access to management information, negotiated protective covenants, call protection features and collateral protection. We review our debt security portfolio regularly to monitor the performance of obligors and assess the stability of their current credit ratings.

We also manage credit risk through industry and issuer diversification and asset allocation. Maximum exposure to an issuer or derivatives counterparty is defined by quality ratings, with higher quality issuers having larger exposure limits. We have an overall limit on below-investment-grade rated issuer exposure. In addition to monitoring counterparty exposures under current market conditions, exposures are monitored on the basis of a hypothetical “stressed” market environment involving a specific combination of declines in stock market prices and interest rates and a spike in implied option activity.

Equity Risk Management

Equity risk is the risk that we will incur economic losses due to adverse changes in equity prices. At December 31, ~~2013~~2014, we held certain financial instruments that are sensitive to equity market movements, including available-for-sale equity securities, primarily related to our holdings of common stock and mutual funds, private equity partnership interests and other equities, as well as fair value equity instruments, equity options and other investments. We manage equity price risk through industry and issuer diversification and asset allocation techniques.

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The table below shows the sensitivity of our investments that are sensitive to public equity market movements measured in terms of their fair value.

Sensitivity to	As of
Sensitivity toPublic Equity Market Movements:	As of December 31, 2014
Public Equity Market Movements:	December 31, 2013
($ in millions)	Balance after-10% EquityPrice Change		FairValue		Balance after+10% EquityPrice Change
($ in millions)	Balance after-10% EquityPrice Change		FairValue		Balance after+10% EquityPrice Change
Limited partnerships and other investments	$	11.3	$	12.5	$	13.8
Limited partnerships and other investments [1]	$	7.1	$	7.9	$	8.7
Derivative instruments [1]	38.0		29.2		22.7
Derivative instruments [2]	90.3		83.9		78.7

———————

[1] ~~Includes~~Primarily ~~private~~includes ~~equity~~swaptions, ~~funds.~~put ~~The value of private equity investments are not highly correlated to public equity markets~~options, ~~because~~call ofoptions ~~their liquidity~~ and ~~valuation methodologies. Direct private~~ equity ~~investments~~futures, ~~have~~excluding ~~been~~those ~~included~~associated inwith the ~~sensitivity~~fixed ~~because~~indexed ~~they~~annuity ~~have equity exposure for the Company~~products.

[2] Primarily includes swaptions, put options, call options and equity futures, excluding those associated with the fixed indexed annuity products.

Certain liabilities are sensitive to equity market movements. Our exposure to changes in equity prices primarily results from our variable annuity and variable life products. We manage our insurance liability risks on an integrated basis with other risks through our liability and risk management and capital and other asset allocation strategies.

Certain variable annuity products sold by us contain GMDBs. The GMDB feature provides annuity contract owners with a guarantee that the benefit received at death will be no less than a prescribed amount. This minimum amount is based on the net deposits paid into the contract, the net deposits accumulated at a specified rate, the highest historical account value on a contract anniversary or, if a contract has more than one of these features, the greatest of these values. To the extent that the GMDB is higher than the current account value at the time of death, the Company incurs a cost. This typically results in an increase in annuity policy benefits in periods of declining financial markets and in periods of stable financial markets following a decline. As of December 31, ~~2013~~2014, the difference between the GMDB and the current account value (NAR) for all existing contracts was $1316.78 million. This was our exposure to loss had all contract owners died on December 31, ~~2013~~2014. See Note 78 to our financial statements under “Item 8: Financial Statements and Supplementary Data” in this Form 10-K for ~~more~~additional information.

Certain variable annuity products sold by us contain guaranteed minimum living benefits. These include guaranteed minimum accumulation, withdrawal, income and payout annuity floor benefits. The GMAB guarantees a return of deposit to a policyholder after 10 years regardless of market performance. The GMWB guarantees that a policyholder can withdraw a certain percentage for life regardless of market performance. The GMIB guarantees that a policyholder can convert his or her account value into a guaranteed payout annuity at a guaranteed minimum interest rate and a guaranteed mortality basis, while also assuming a certain level of growth in the initial deposit. We also offer a combination rider that offers both GMAB and GMDB benefits. We have established a hedging program for managing the risk associated with our guaranteed minimum accumulation and withdrawal benefit features. We continue to analyze and refine our strategies for managing risk exposures associated with all our separate account guarantees.

~~Management~~See ~~believes~~Note 5 ~~that the Company’s exposure~~ to ~~equity~~our ~~market~~financial ~~volatility~~statements ~~related~~under to“Item ~~its~~8: ~~fixed~~Financial ~~index~~Statements ~~annuity product is limited~~ and ~~has~~Supplementary ~~been~~Data” ~~omitted~~in ~~from~~this ~~the~~Form ~~analysis~~10-K ~~below.~~for ~~This~~additional ~~exposure~~information isregarding ~~limited to the indexed credit feature of the product, which is reasonably managed through the Company’s ongoing hedging program~~DAC.

~~See Note 4 to our financial statements under “Item 8: Financial Statements and Supplementary Data” in this Form 10-K for more information regarding deferred policy acquisition costs.~~40

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The table below shows the estimated equity risk sensitivity of our liability products that are sensitive to equity market movements measured in terms of their fair value.

Equity Risk Sensitivity of	As of
Equity Risk Sensitivity ofOur Liability Products:	As of December 31, 2014
Our Liability Products:	December 31, 2013
($ in millions)	Balance after-10% EquityPrice Change			FairValue			Balance after+10% EquityPrice Change
($ in millions)	Balance after-10% EquityPrice Change			FairValue			Balance after+10% EquityPrice Change
GMAB [1]	$	1.2		$	(0.3	)	$	(1.8	)
GMAB [1]	$	3.7		$	1.5		$	(0.7	)
GMWB [1]	10.5			6.9			3.5
GMWB [1]	(2.3		)	(5.1		)	(7.8		)
COMBO [1]	(0.1		)	(0.2		)	(0.2		)
COMBO [1]	(0.3		)	(0.4		)	(0.4		)

———————


[1]	The values above represent changes to balances before adjustment for unrealized gains/losses.

The selection of a 10% increase or decrease in equity prices is a hypothetical rate scenario used to demonstrate potential risk. While a 10% increase or decrease does not represent our view of future market changes, it is a hypothetical near-term change that illustrates the potential effect of such events. Although these fair value measurements provide a representation of equity market sensitivity, they are based on our exposures at a point in time and may not be representative of future market results. These exposures will change as a result of new business, management’s assessment of changing market conditions and available investment opportunities.

Low Interest Rate Environment

As a result of the continuing low interest rate environment, the Company’s current reinvestment yields are generally lower than the current investment portfolio yield, primarily for our investments in fixed income securities. We expect our portfolio income yields to continue to gradually decline in future periods if interest rates remain low. Approximately 80% of the Company’s $5.4 billion total policy liabilities and deposit funds have account values that contain certain guaranteed minimum interest rates, principally universal life, fixed indexed annuities, and the fixed return portion of variable annuities.

For certain products, we guarantee interest rates to our policyholders and primarily invest in fixed rate securities to fund those guaranteed rates. Interest rate spread management could impact the Company most significantly in its universal life policies, since guaranteed interest rates, in some cases, are near or approaching our current reinvestment rate on our related fixed income securities. However, universal life account values represent less than 20.0% of our total policy liabilities, accruals, and deposit funds. The current book yield of the investment portfolio backing our universal life policies was approximately 4.6% for the year ended December 31, 2014 while the guaranteed minimum policyholder crediting rate for these policies was primarily at 4.0%.

While fixed indexed annuities comprise a larger balance of policies with guaranteed minimum interest rates to protect the initial investment, the crediting/guarantee rates on these products adjust more consistently with interest rates so there is a less significant impact to our results of operations.

The Company estimates that the annualized net investment income yield on its fixed income securities was approximately 4.3% during the year ended December 31, 2014. The average investment rate on fixed income securities purchases during the year ended December 31, 2014 was approximately 4.0% on total purchases of approximately $1.1 billion. Management estimates that proceeds from maturities, calls and prepayments of approximately $220 million is expected to be available for reinvestment over the next 12 months, before considering new deposits and premiums and other cash flow uses. Assuming such amounts are reinvested at new money interest rates prevailing at December 31, 2014, we estimate that would reduce net investment income by less than $3 million during the next 12 months. The estimated impact is subject to change as the composition of the portfolio changes through normal portfolio management and other factors.

The low interest rate environment discussion immediately above does not include the additional and interrelated impacts to earnings from the amortization of deferred policy acquisition costs and profits followed by losses which occurs in response to changing estimated gross profits. (See “Enterprise Risk Management - Market Risk - Interest Rate Sensitivity of DAC and Policy Liabilities” discussion above.)

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Estimated Fair Value Measurement

Fair value is based upon quoted market prices, where available. If listed prices or quotes are not available, or are based on disorderly transactions or inactive markets, fair value is based upon internally developed models that use primarily market-based or independently sourced market parameters, including interest rate yield curves, option volatilities and currency rates. Valuation adjustments may be made to ensure that financial instruments are recorded at fair value. These adjustments include amounts to reflect counterparty credit quality, our own creditworthiness, liquidity and unobservable parameters that are applied consistently over time.

Using professional judgment and experience, we evaluate and weigh the relevance and significance of all readily available market information to determine the best estimate of fair value. The fair ~~values~~value investments with unobservable inputs are determined by management after considering prices from our pricing vendors. Fair values for debt securities are primarily based on yield curve ~~analysis~~analyses along with ratings and spread data. Other inputs may be considered for fair value calculations including published indexed data, sector specific performance, comparable price sources and similar traded securities.

See Note 910 to our financial statements under “Item 8: Financial Statements and Supplementary Data” in this Form 10-K for additional information regarding the estimated fair value of investments.

Debt and Equity Securities

We invest in a variety of debt and equity securities. We classify these investments into various sectors using industry conventions; however, our classifications may differ from similarly titled classifications of other companies. We classify debt securities into investment grade and below-investment-grade securities based on ratings prescribed by the National Association of Insurance Commissioners (“NAIC”). In a majority of cases, these classifications will coincide with ratings assigned by one or more Nationally Recognized Statistical Rating Organizations (“NRSROs”); however, for certain structured securities, the NAIC designations may differ from NRSRO designations based on the amortized cost of the securities in our portfolio.

Our available-for-sale debt securities portfolio consists primarily of investment grade publicly traded and privately placed corporate bonds, residential mortgage-backed securities (“RMBS”), commercial mortgage-backed securities (“CMBS”) and other asset-backed securities (“ABS”). As of December 31, ~~2013~~2014, available-for-sale equity securities include $28.7 million of perpetual preferred securities, of which $6.9 million was below-investment-grade. As of December 31, 2014, our available-for-sale debt securities, with a fair value of $34,~~426~~221.38 million, represented 8891.5% of total investments.



Available-for-Sale Debt Securities Ratings by Percentage:		As of December 31, 2014
($ in millions) NAIC Rating	S&P Equivalent Designation	Fair Value		% of Fair Value		Amortized Cost		% of Amortized Cost

1	AAA/AA/A	$	2,477.2	58.7	%	$	2,363.8	58.2	%
2	BBB	1,557.8		36.9	%	1,510.3		37.2	%
	Total investment grade	4,035.0		95.6	%	3,874.1		95.4	%
3	BB	133.2		3.1	%	132.3		3.2	%
4	B	50.0		1.2	%	51.2		1.3	%
5	CCC and lower	0.6		—	%	0.6		—	%
6	In or near default	3.0		0.1	%	2.7		0.1	%
	Total available-for-sale debt securities	$	4,221.8	100.0	%	$	4,060.9	100.0	%

Available-for-Sale Debt Securities Ratings by Percentage:		As of
($ in millions)		December 31, 2013
		FairValue		% ofFairValue		AmortizedCost		% ofAmortizedCost
NAIC	S&P Equivalent
Rating	Designation
1	AAA/AA/A	$	1,936.3	56.5	%	$	1,924.4	56.6	%
2	BBB	1,352.3		39.4	%	1,343.6		39.4	%
	Total investment grade	3,288.6		95.9	%	3,268.0		96.0	%
3	BB	108.8		3.2	%	105.9		3.1	%
4	B	19.5		0.6	%	20.0		0.6	%
5	CCC and lower	2.8		0.1	%	3.8		0.1	%
6	In or near default	6.6		0.2	%	4.9		0.2	%
	Total available-for-sale debt securities	$	3,426.3	100.0	%	$	3,402.6	100.0	%

Available-for-Sale Debt Securities by Type:	As of
($ in millions)	December 31, 2013
					Unrealized Gains (Losses)
	FairValue		AmortizedCost		GrossGains		GrossLosses			Net
U.S. government and agency	$	68.6	$	66.1	$	3.3	$	(0.8	)	$	2.5
State and political subdivision	154.6		156.2		3.8		(5.4		)	(1.6		)
Foreign government	65.5		63.1		2.7		(0.3		)	2.4
Corporate	2,207.3		2,194.9		69.5		(57.1		)	12.4
CMBS	253.7		241.9		13.0		(1.2		)	11.8
RMBS	509.8		513.7		7.9		(11.8		)	(3.9		)
CDO/CLO	70.9		70.6		1.7		(1.4		)	0.3
Other asset-backed	95.9		96.1		3.7		(3.9		)	(0.2		)
Total available-for-sale debt securities	$	3,426.3	$	3,402.6	$	105.6	$	(81.9	)	$	23.7

Table of Contents

Available-for-Sale Debt Securities by Type and Credit Quality:	As of
Available-for-Sale Debt Securities by Type:	As of December 31, 2014
($ in millions)	~~December 31, 2013~~				Unrealized Gains (Losses)
	Investment Grade				Below Investment Grade
	FairValue		AmortizedCost		GrossGains		GrossLosses			Net
	Fair Value		Amortized Cost		Fair Value		Amortized Cost
U.S. government and agency	$	89.3	$	82.4	$	6.9	$	—		$	6.9
U.S. government and agency	$	68.6	$	66.1	$	—	$	—
State and political subdivision	229.2		217.2		13.6		(1.6		)	12.0
State and political subdivision	154.6		156.2		—		—
Foreign government	73.8		69.2		5.4		(0.8		)	4.6
Foreign government	62.2		60.0		3.3		3.1
Corporate	2,831.9		2,730.7		128.4		(27.2		)	101.2
Corporate	2,096.5		2,085.0		110.8		109.9
CMBS	255.6		236.2		19.4		—			19.4
CMBS	249.6		237.8		4.1		4.1
RMBS	576.4		558.9		20.9		(3.4		)	17.5
RMBS	500.2		504.6		9.6		9.1
Collateralized debt obligation (“CDO”) / collateralized loan obligation (“CLO”)	83.5		84.2		0.4		(1.1		)	(0.7		)
CDO/CLO	64.3		65.4		6.6		5.2
Other ABS	82.1		82.1		3.8		(3.8		)	—
Other asset-backed	92.6		92.9		3.3		3.2
Total available-for-sale debt securities	$	4,221.8	$	4,060.9	$	198.8	$	(37.9	)	$	160.9
Total available-for-sale debt securities	$	3,288.6	$	3,268.0	$	137.7	$	134.6
Percentage of total available-for-sale debt securities	96.0%		95.9%		4.0%		4.1%

We manage credit risk through industry and issuer diversification. Maximum exposure to an issuer is defined by quality ratings, with higher quality issuers having larger exposure limits. Our investment approach emphasizes a high level of industry diversification. The top five industry holdings as of December 31, 2013 in our available-for-sale debt and short-term investment portfolio were banking (6.5%), electrical utilities (5.8%), diversified financial services (5.1%), oil (4.1%), and real estate investment trusts (3.2%).



Available-for-Sale Debt Securities by Type and Credit Quality:	As of December 31, 2014
($ in millions)	Investment Grade				Below Investment Grade
	Fair Value		Amortized Cost		Fair Value		Amortized Cost

U.S. government and agency	$	89.3	$	82.4	$	—	$	—
State and political subdivision	229.2		217.2		—		—
Foreign government	70.4		66.2		3.4		3.0
Corporate	2,669.9		2,567.3		162.0		163.4
CMBS	255.6		236.2		—		—
RMBS	565.0		547.7		11.4		11.2
CDO/CLO	81.4		82.4		2.1		1.8
Other ABS	74.2		74.7		7.9		7.4
Total available-for-sale debt securities	$	4,035.0	$	3,874.1	$	186.8	$	186.8
Percentage of total available-for-sale debt securities	95.6%		95.4%		4.4%		4.6%

45We manage credit risk through industry and issuer diversification. Maximum exposure to an issuer is defined by quality ratings, with higher quality issuers having larger exposure limits. Our investment approach emphasizes a high level of industry diversification. The top five industry holdings as of December 31, 2014 in our available-for-sale debt and short-term investment portfolio were banking (7.1%), electrical utilities (6.6%), oil/oil services and equipment (6.0%), diversified financial services (4.4%) and real estate investment trusts (3.8%).

Table of Contents

Eurozone Exposure

The following table presents exposure to European debt. We have focused on the countries experiencing significant economic, fiscal or political strain that could increase the likelihood of default.

Fair Value of Eurozone Exposure by Country	As of December 31, 2014
($ in millions)	~~December 31, 2013~~SovereignDebt		FinancialInstitutions		All Other		Total		% of DebtSecurities [1]
	Sovereign		Financial		All				% of Debt
Spain	$	—	$	—	$	6.9	$	6.9	0.2	%
	Debt		Institutions		Other		Total		Securities [2]
Ireland	—		—		7.1		7.1		0.2	%
Spain	$	—	$	1.0	$	7.9	$	8.9	0.2	%
Italy	—		—		2.3		2.3		0.1	%
Ireland	—		—		6.9		6.9		0.2	%
Total	—		—		16.3		16.3		0.5	%
Italy	—		—		2.2		2.2		0.1	%
All other Eurozone [2]	2.2		17.8		108.6		128.6		2.9	%
Total	—$	2.2	~~1.0~~$	17.8	~~17.0~~$	124.9	~~18.0~~$	144.9	03.54	%
All other Eurozone [1]	—		13.0		92.1		105.1		3.0	%
Total	$	—	$	14.0	$	109.1	$	123.1	3.5	%

———————

[1] ~~Includes~~Inclusive ~~Finland,~~of ~~France,~~available-for-sale ~~Germany,~~debt ~~Luxembourg~~securities and ~~Netherlands~~short-term investments.

[2] ~~Inclusive~~Includes ofFinland, ~~available-for-sale~~France, ~~debt~~Germany, ~~securities~~Latvia, Luxembourg and ~~short-term investments~~Netherlands.

Residential Mortgage-Backed Securities

We invest directly in RMBS. To the extent these assets deteriorate in credit quality and decline in value for an extended period, we may realize impairment losses. When making investment decisions, we have been focused on identifying those securities that could withstand significant increases in delinquencies and foreclosures in the underlying mortgage pools before incurring a loss of principal.

Most of our RMBS portfolio is highly rated. At December 31, ~~2013~~2014, 9798.91% of the total residential portfolio was rated investment grade. We hold $5848.28 million of RMBS investments backed by prime rated mortgages, $7364.97 million backed by Alt-A mortgages and $4543.83 million backed by sub-prime mortgages, which combined amount to 4.3.2% of our total investments. The majority of our prime, Alt-A, and sub-prime exposure is investment grade, with 9479% ~~being~~ rated NAIC-1 and ~~another 4~~13% rated NAIC-2. We have employed a disciplined approach in the analysis and monitoring of our mortgage-backed securities. Our approach involves a monthly review of each security. Underlying mortgage data is obtained from the security’s trustee and analyzed for performance trends. A security-specific stress analysis is performed using the most recent trustee information. This analysis forms the basis for our determination of whether the security will pay in accordance with the contractual cash flows. There were no RMBS impairments ~~during~~for the year ended December 31, ~~2013 totaled $1~~2014.~~5 million. These impairments consist of $0.1 million from prime, $1.0 million from Alt-A and $0.4 million from sub-prime.~~

Residential Mortgage-Backed Securities:
($ in millions)	As of December 31, ~~2013~~2014
							NAIC Rating
							1		2		3		4		5		6
							AAA/								CCC		In or
	AmortizedCost [1]		FairValue [1]		% Invested Assets [2]		AAA/AA/A		BBB		BB		B		CCC andBelow		In orNearDefault
	Amortized		Market		% General		AA/								And		Near
	Cost [1]		Value [1]		Account [2]		A		BBB		BB		B		Below		Default
Collateral
Agency	$	~~357~~427.89	$	~~350~~437.97	89.72	%	100.0	%	~~0.0~~—	%	~~0.0~~—	%	~~0.0~~—	%	~~0.0~~—	%	~~0.0~~—	%
Prime	5746.3		5848.28		1.40	%	7972.34	%	1617.14	%	47.6	%	02.06	%	~~0.0~~—	%	~~0.0~~—	%
Alt-A	7362.23		7364.97		1.83	%	7871.9	%	1219.15	%	98.06	%	~~0.0~~—	%	~~0.0~~—	%	~~0.0~~—	%
Sub-prime	4440.75		4543.83		10.19	%	9398.50	%	~~3.1~~—	%	1.2.0	%	~~2.2~~—	%	~~0.0~~—	%	~~0.0~~—	%
Total	$	~~533~~577.0	$	~~528~~594.85	1312.04	%	94.25	%	3.76	%	1.97	%	0.2	%	~~0.0~~—	%	~~0.0~~—	%

———————

[1] Individual categories may not agree with the Available-for-Sale Debt Securities by Type table on previous page due to nature of underlying collateral. In addition, RMBS holdings in this exhibit include $1918.01 million classified as fair value investments on the balance sheets. For these fair value investments, there is no impact to OCI as carrying value is equal to ~~market~~fair value.

[2] Percentages based on ~~market~~fair value of total investments, ~~and~~including cash and cash equivalents.

4644

Prime Mortgage-Backed Securities:
($ in millions)		As of December 31, 2013
								Year of Issue
	S&P Equivalent	Amortized		Market		% Investment		Post-										2003 and
Rating	Designation	Cost		Value		Assets [1]		2007		2007		2006		2005		2004		Prior
NAIC-1	AAA/AAA/A	$	45.4	$	46.2	1.1	%	0.0	%	0.0	%	4.3	%	27.0	%	48.9	%	19.8	%
NAIC-2	BBB	9.3		9.4		0.2	%	0.0	%	6.6	%	18.3	%	49.7	%	18.5	%	6.9	%
NAIC-3	BB	2.6		2.6		0.1	%	0.0	%	0.0	%	0.0	%	21.0	%	79.0	%	0.0	%
NAIC-4	B	—		—		—	%	0.0	%	0.0	%	0.0	%	0.0	%	0.0	%	0.0	%
NAIC-5	CCC and below	—		—		—	%	0.0	%	0.0	%	0.0	%	0.0	%	0.0	%	0.0	%
NAIC-6	In or near default	—		—		—	%	0.0	%	0.0	%	0.0	%	0.0	%	100.0	%	0.0	%
Total		$	57.3	$	58.2	1.4	%	0.0	%	1.1	%	6.4	%	30.4	%	45.3	%	16.8	%

Table of Contents

———————

[1] Percentages based on market value of total investments and cash and cash equivalents.

Alt-A Mortgage-Backed Securities:
($ in millions)		As of December 31, 2013
								Year of Issue
	S&P Equivalent	Amortized		Market		% Investment		Post-										2003 and
Rating	Designation	Cost		Value		Assets [1]		2007		2007		2006		2005		2004		Prior
NAIC-1	AAA/AAA/A	$	57.9	$	58.3	1.4	%	2.0	%	5.2	%	8.8	%	12.9	%	44.3	%	26.8	%
NAIC-2	BBB	8.9		9.0		0.2	%	0.0	%	0.0	%	0.0	%	0.0	%	83.3	%	16.7	%
NAIC-3	BB	6.4		6.6		0.2	%	0.0	%	0.0	%	0.0	%	43.6	%	27.6	%	28.8	%
NAIC-4	B	—		—		—	%	0.0	%	0.0	%	0.0	%	0.0	%	0.0	%	0.0	%
NAIC-5	CCC and below	—		—		—	%	0.0	%	0.0	%	0.0	%	0.0	%	0.0	%	0.0	%
NAIC-6	In or near default	—		—		—	%	0.0	%	0.0	%	0.0	%	0.0	%	0.0	%	0.0	%
Total		$	73.2	$	73.9	1.8	%	1.6	%	4.1	%	6.9	%	14.1	%	47.6	%	25.7	%

———————

[1] Percentages based on market value of total investments and cash and cash equivalents.

Sub-Prime Mortgage-Backed Securities:
($ in millions)		As of December 31, 2013
								Year of Issue
	S&P Equivalent	Amortized		Market		% Investment		Post-										2003 and
Rating	Designation	Cost		Value		Assets [1]		2007		2007		2006		2005		2004		Prior
NAIC-1	AAA/AAA/A	$	41.7	$	42.8	1.1	%	0.0	%	26.4	%	9.4	%	27.4	%	4.3	%	32.5	%
NAIC-2	BBB	1.4		1.4		—	%	0.0	%	0.0	%	0.0	%	100.0	%	0.0	%	0.0	%
NAIC-3	BB	0.5		0.6		—	%	0.0	%	0.0	%	100.0	%	0.0	%	0.0	%	0.0	%
NAIC-4	B	1.1		1.0		—	%	0.0	%	0.0	%	0.0	%	100.0	%	0.0	%	0.0	%
NAIC-5	CCC and below	—		—		—	%	0.0	%	0.0	%	0.0	%	0.0	%	0.0	%	0.0	%
NAIC-6	In or near default	—		—		—	%	0.0	%	0.0	%	0.0	%	0.0	%	0.0	%	100.0	%
Total		$	44.7	$	45.8	1.1	%	0.0	%	24.7	%	10.0	%	30.9	%	4.0	%	30.4	%

———————

[1] Percentages based on market value of total investments and cash and cash equivalents.

Commercial Mortgage-Backed Securities

We invest directly in CMBS. To the extent these assets deteriorate in credit quality and decline in value for an extended period, we may realize impairment losses. When making investment decisions, we have been focused on identifying those securities that could withstand significant increases in delinquencies and foreclosures in the underlying mortgage pools before incurring a loss of principal.

Commercial Mortgage-Backed Securities:
($ in millions)		As of December 31, ~~2013~~2014
								Year of Issue
Rating	S&PEquivalentDesignation	AmortizedCost [1]		~~MarketValue~~FairValue [1]		% ~~Investment~~Invested Assets [2]		Post-2007		2007		2006		2005		2004 andPrior
NAIC-1	AAA/~~AAA~~AA/A	$	~~239~~237.95	$	~~251~~256.9	65.24	%	6670.92	%	54.06	%	1312.83	%	1110.17	%	32.2	%
NAIC-2	BBB	2.81		2.81		0.1	%	~~0.0~~—	%	~~0.0~~—	%	8582.18	%	1417.92	%	~~0.0~~—	%
NAIC-3	BB	~~3.5~~—		~~3.4~~—		~~0.1~~—	%	~~0.0~~—	%	~~51.7~~—	%	~~48.3~~—	%	~~0.0~~—	%	~~0.0~~—	%
NAIC-4	B	—		—		~~0.0~~—	%	~~0.0~~—	%	~~0.0~~—	%	~~0.0~~—	%	~~0.0~~—	%	~~0.0~~—	%
NAIC-5	CCC and below	—		—		~~0.0~~—	%	~~0.0~~—	%	~~0.0~~—	%	~~0.0~~—	%	~~0.0~~—	%	~~0.0~~—	%
NAIC-6	In or near default	21.28		21.59		~~0.0~~—	%	~~0.0~~—	%	~~0.0~~—	%	~~0.0~~—	%	~~0.0~~—	%	100.0	%
Total		$	~~248~~241.4	$	260.69	65.45	%	6469.61	%	54.5	%	1412.98	%	10.97	%	42.19	%

———————

[1] Includes commercial mortgage-backed CDOs with amortized cost and ~~market~~fair values of $2.01 million and $2.32 million, respectively. CMBS holdings in this exhibit include $43.51 million classified as fair value investments on the balance sheets. For these fair value investments, there is no impact to OCI as carrying value is equal to ~~market~~fair value.

[2] Percentages based on ~~market~~fair value of total investments, ~~and~~including cash and cash equivalents.

Table of Contents

Realized Gains and Losses

The following table presents certain information with respect to realized investment gains and losses including those on debt securities pledged as collateral, with losses from OTTI charges reported separately in the table. These impairment charges were determined based on our assessment of factors enumerated below, as they pertain to the individual securities determined to be other-than-temporarily impaired.



Sources and Types of Net Realized Investment Gains (Losses):	For the years ended December 31,
($ in millions)	2014			2013			2012

Total other-than-temporary debt impairments	$	(1.3	)	$	(0.9	)	$	(5.0	)
Portion of losses recognized in OCI	—			(0.9		)	2.2
Net debt impairments recognized in earnings	$	(1.3	)	$	(1.8	)	$	(2.8	)
Debt security impairments:
U.S. government and agency	$	—		$	—		$	—
State and political subdivision	—			—			(0.1		)
Foreign government	—			—			—
Corporate	(1.3		)	—			—
CMBS	—			(0.3		)	(0.1		)
RMBS	—			(1.3		)	(1.9		)
CDO/CLO	—			(0.2		)	(0.4		)
Other ABS	—			—			(0.3		)
Net debt security impairments	(1.3		)	(1.8		)	(2.8		)
Equity security impairments	—			—			—
Impairment losses	(1.3		)	(1.8		)	(2.8		)
Debt security transaction gains	6.1			11.3			22.8
Debt security transaction losses	(2.4		)	(0.4		)	(0.7		)
Equity security transaction gains	—			—			—
Equity security transaction losses	(0.1		)	—			—
Limited partnerships and other investment transaction gains	—			—			—
Limited partnerships and other investment transaction losses	—			—			(0.3		)
Net transaction gains (losses)	3.6			10.9			21.8
Derivative instruments	(21.9		)	(23.1		)	(49.0		)
Embedded derivatives [1]	(45.4		)	11.0			4.0
Related party reinsurance derivatives	—			—			(8.0		)
Net realized investment gains (losses), excluding impairment losses	(63.7		)	(1.2		)	(31.2		)
Net realized investment gains (losses), including impairment losses	$	(65.0	)	$	(3.0	)	$	(34.0	)

Net realized investment gains (losses)

Sources and Types of Net Realized Investment Gains (Losses):	Years Ended December 31,
($ in millions)	2013			2012			2011
Total other-than-temporary debt impairments	$	(1.1	)	$	(5.0	)	$	(9.7	)
Portion of loss recognized in OCI	(0.9		)	2.2			6.9
Net debt impairments recognized in earnings	$	(2.0	)	$	(2.8	)	$	(2.8	)
Debt security impairments:
U.S. government and agency	$	—		$	—		$	—
State and political subdivision	—			(0.1		)	—
Foreign government	—			—			—
Corporate	—			—			(0.4		)
CMBS	(0.3		)	(0.1		)	(0.4		)
RMBS	(1.5		)	(1.9		)	(1.5		)
CDO/CLO	(0.2		)	(0.4		)	(0.4		)
Other asset-backed	—			(0.3		)	(0.1		)
Net debt security impairments	(2.0		)	(2.8		)	(2.8		)
Equity security impairments	—			—			(0.4		)
Impairment losses	(2.0		)	(2.8		)	(3.2		)
Debt security transaction gains	11.3			22.8			2.5
Debt security transaction losses	(0.4		)	(0.7		)	(0.7		)
Limited partnerships and other investment gains	—			—			0.1
Limited partnerships and other investment losses	—			(0.3		)	(0.1		)
Net transaction gains (losses)	10.9			21.8			1.8
Derivative instruments	(23.1		)	(49.0		)	6.2
Embedded derivatives [1]	17.6			11.2			(33.2		)
Related party reinsurance derivatives	—			(3.5		)	9.0
Assets valued at fair value	—			—			—
Net realized investment gains (losses), excluding impairment losses	5.4			(19.5		)	(16.2		)
Net realized investment gains (losses), including impairment losses	$	3.4		$	(22.3	)	$	(19.4	)

———————

[1] Includes the change in fair value of embedded derivatives associated with fixed index annuity indexed crediting feature and variable annuity ~~GMWB, GMAB and COMBO~~ riders. See Note 8 to our financial statements under “Item 8: Financial Statements and Supplementary Data” in this Form 10-K for additional disclosures.

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Other-than-Temporary Impairments

Management assessed all securities in an unrealized loss position in determining whether impairments were temporary or other-than-temporary. In reaching its conclusions, management exercised significant judgment and used a number of issuer-specific quantitative indicators and qualitative judgments to assess the probability of receiving a given security’s contractual cash flows. This included the issue’s implied yield to maturity, cumulative default rate based on rating, comparisons of issue-specific spreads to industry or sector spreads, specific trading activity in the issue and other market data, such as recent debt tenders and upcoming refinancing requirements. Management also reviewed fundamentals such as issuer credit and liquidity metrics, business outlook and industry conditions. Management maintains a watch list of securities that is reviewed for impairments. Each security on the watch list was evaluated, analyzed and discussed, with the positive and negative factors weighed in the ultimate determination of whether or not the security was other-than-temporarily impaired. For securities for which no OTTI was ultimately indicated at December 31, ~~2013~~2014, management does not have the intention to sell, nor does it expect to be required to sell, these securities prior to their recovery. OTTIs recorded in 2014 were immaterial.

OTTIs recorded on available-for-sale debt securities in 2013 were primarily concentrated in structured securities. These impairments were driven primarily by increased collateral default rates. In our judgment, these credit events or other adverse conditions of the collateral have caused, or will most likely lead to, a deficiency in the contractual cash flows related to the investment. Therefore, based upon these credit events, we have determined that OTTIs exist. Total debt impairments recognized through earnings were $2.0 million in 2013, $2.8 million in 2012 and $2.8 million in 2011. There were equity security OTTIs of $0 in 2013, $0 in 2012 and $0.4 million in 2011. There were no limited partnerships and other investment OTTIs in 2013, 2012 and 2011.

In addition to these credit-related impairments recognized through earnings, we impaired securities to fair value through other comprehensive loss for any impairments related to non-credit related factors. These types of impairments were driven primarily by market or sector credit spread widening or by a lack of liquidity in the securities. The amount of impairments recognized as an adjustment to other comprehensive loss due to these factors was $(0.9) million in 2013, $2.2 million in 2012 and $6.9 million in 2011.

The following table presents a roll-forward of pre-tax credit losses recognized in earnings related to available-for-sale debt securities for which a portion of the OTTI was recognized in OCI.

Credit Losses Recognized in Earnings on Available-for-Sale Debt Securities for	As of December 31,
Credit Losses Recognized in Earnings on Available-for-Sale Debt Securitiesfor which a Portion of the OTTI Loss was Recognized in OCI:	As of December 31,
which a Portion of the OTTI Loss was Recognized in OCI:	2013			2012			2011
($ in millions)	2014			2013			2012
($ in millions)
Balance, beginning of period	$	(18.5	)	$	(17.8	)	$	(21.3	)
Balance, beginning of period	$	(17.8	)	$	(21.3	)	$	(19.9	)
Add: Credit losses on securities not previously impaired [1]	—			(0.3		)	(1.4		)
Add: Credit losses on securities not previously impaired [1]	(0.3		)	(1.4		)	(1.0		)
Add: Credit losses on securities previously impaired [1]				(0.7		)	(1.2		)
Add: Credit losses on securities previously impaired [1]	(0.8		)	(1.2		)	(1.4		)
Less: Credit losses on securities impaired due to intent to sell	—			—			—
Less: Credit losses on securities sold	01.34			60.13			16.01
Less: Increases in cash flows expected on previously impaired securities	—			—			—
Balance, end of period	$	(1817.61	)	$	(1718.85	)	$	(2117.38	)

———————


[1]	Additional credit losses on securities for which a portion of the OTTI loss was recognized in AOCI are included within net OTTI losses recognized in earnings on the statements of income and comprehensive income.

Unrealized Gains and Losses

Net unrealized investment gains and losses on securities classified as available-for-sale and certain other assets are included in our balance sheets as a component of AOCI. The table below presents the special category of AOCI for debt securities that are other-than-temporarily impaired when the impairment loss has been split between the credit loss component (in earnings) and the non-credit component (separate category of AOCI).

Available-for-Sale Debt Securities Non-Credit OTTI Losses in AOCI, by Security Type: [1]	As of December 31,
($ in millions)	~~2013 [1]~~2014			~~2012~~2013
U.S. government and agency	$	—		$	—
State and political subdivision	(0.2		)	(0.2		)
Foreign government	—			—
Corporate	(1.5		)	(1.5		)
CMBS	~~(0.4~~—		)	(0.64		)
RMBS	(8.6		)	(98.06		)
CDO/CLO	(32.07		)	(3.30		)
Other asset-backed	—			—
Other ABS	—			—
Total available-for-sale debt securities non-credit OTTI losses in AOCI	$	(13.70	)	$	(1413.67	)

———————


[1]	Represents the amount of non-credit OTTI losses recognized in AOCI excluding net unrealized gains or losses subsequent to the date of impairment.

5047

Duration of Gross Unrealized Losses on Securities:	As of
($ in millions)	December 31, 2013
				0 – 6			6 – 12			Over 12
	Total			Months			Months			Months
Available-for-sale debt securities
Total fair value	$	1,424.6		$	447.0		$	777.6		$	200.0
Total amortized cost	1,506.5			454.8			823.6			228.1
Unrealized losses	$	(81.9	)	$	(7.8	)	$	(46.0	)	$	(28.1	)
Number of securities	404			120			205			79
Investment grade:
Unrealized losses	$	(78.2	)	$	(7.7	)	$	(44.2	)	$	(26.3	)
Below investment grade:
Unrealized losses	$	(3.7	)	$	(0.1	)	$	(1.8	)	$	(1.8	)

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For available-for-sale debt securities with gross unrealized losses, 95.6% of the unrealized losses after offsets pertain to investment grade securities and 4.4% of the unrealized losses after offsets pertain to below-investment-grade securities at December 31, 2013.



Duration of Gross Unrealized Losses on Securities:	As of December 31, 2014
($ in millions)	Total			0 – 6 Months			6 – 12 Months			Over 12 Months
Available-for-sale debt securities
Total fair value	$	764.4		$	311.0		$	31.7		$	421.7
Total amortized cost	802.3			320.3			32.9			449.1
Unrealized losses	$	(37.9	)	$	(9.3	)	$	(1.2	)	$	(27.4	)
Number of securities	244			110			11			123
Investment grade:
Unrealized losses	$	(32.8	)	$	(7.0	)	$	(1.1	)	$	(24.7	)
Below investment grade:
Unrealized losses	$	(5.1	)	$	(2.3	)	$	(0.1	)	$	(2.7	)
Available-for-sale equity securities
Unrealized losses	$	(0.3	)	$	—		$	—		$	(0.3	)
Number of securities	4			—			—			4

For available-for-sale debt securities with gross unrealized losses, 86.5% of the unrealized losses after offsets pertain to investment grade securities and 13.5% of the unrealized losses after offsets pertain to below-investment-grade securities at December 31, 2014.

The following table represents those securities whose fair value is less than 80% of amortized cost (significant unrealized loss) that have been at a significant unrealized loss position on a continuous basis.

Duration of Gross Unrealized Losses on Securities:	As of December 31, 2014
($ in millions)	~~December 31, 2013~~Total			0 – 6Months			6 – 12Months		Over 12Months
				0 – 6			6 – 12		Over 12
	Total			Months			Months		Months
Available-for-sale debt securities
Unrealized losses over 20% of cost	$	(1211.14	)	$	(01.71	)	$	—	$	(1110.43	)
Number of securities	109			2			—		87
Investment grade:
Unrealized losses over 20% of cost	$	(1110.05	)	$	(0.58	)	$	—	$	(109.57	)
Below investment grade:
Unrealized losses over 20% of cost	$	(10.19	)	$	(0.23	)	$	—	$	(0.96	)
Available-for-sale equity securities
Unrealized losses over 20% of cost	$	—		$	—		$	—	$	—
Number of securities	—			—			—		—

Liquidity and Capital Resources

In the normal course of business, we enter into transactions involving various types of financial instruments such as debt securities. These instruments have credit risk and also may be subject to risk of loss due to interest rate and market fluctuations.

Our liquidity requirements principally relate to the liabilities associated with various life insurance and annuity products and operating expenses. Liabilities arising from life insurance and annuity products include the payment of benefits, as well as cash payments in connection with policy surrenders, withdrawals, and loans.

Historically, we have used cash ~~flow~~flows from operations, investing activities and capital contributions from our shareholder to fund liquidity requirements. Our principal cash inflows from life insurance and annuities activities come from premiums, annuity deposits, and charges on insurance policies and annuity contracts. Principal cash inflows from investing activities result from repayments of principal, proceeds from maturities, sales of invested assets, and investment income.

5148

Summary Cash Flows:	Years Ended December 31,
($ in millions)	2013			2012
Cash used for operating activities	$	(130.5	)	$	(165.4	)
Cash used for investing activities	(487.3		)	(627.2		)
Cash provided by financing activities	715.7			826.2
Change in cash and cash equivalents	$	97.9		$	33.6

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2013 compared to 2012



Summary Cash Flows:	For the years ended December 31,
($ in millions)	2014			2013

Cash provided by (used for) operating activities	$	(83.4	)	$	(130.5	)
Cash provided by (used for) investing activities	(657.3		)	(487.3		)
Cash provided by (used for) financing activities	722.0			715.7
Change in cash and cash equivalents	$	(18.7	)	$	97.9

~~Cash~~2014 ~~used for operating activities decreased by $34.9 million during the year ended December 31, 2013~~ compared to ~~the year ended December 31, 2012. This decrease was driven by lower death benefits paid for universal life during~~ 2013 in conjunction with reduced commissions paid related to lower sales of our fixed indexed annuity product. Partially offsetting this increase were increased audit and consulting fees related to the Restatement.

Cash flows used for ~~investing~~operating activities decreased by $~~139~~47.91 million during the year ended December 31, ~~2013~~2014 compared to the year ended December 31, ~~2012~~2013. asThis ~~a result of an~~ decrease inwas ~~purchases~~driven ofby ~~short~~lower ~~term~~death ~~investments.~~benefits ~~This~~paid isfor ~~primarily~~universal ~~driven~~life byduring ~~less~~2014 ~~cash~~in ~~being~~conjunction ~~provided~~with byreduced ~~financing~~audit and ~~operating~~consulting ~~activities,~~fees ~~namely~~related ~~due~~ to athe ~~reduction~~restatement inof ~~deposits~~our ~~and~~prior anperiod ~~increase~~financial instatements. ~~withdrawals~~Partially ofoffsetting ~~fixed~~this ~~index~~decrease ~~annuities,~~was ~~combined with significantly~~ increased ~~holdings~~commission ofpaid ~~cash~~related ~~and~~to ~~cash~~higher ~~equivalents~~sales inof ~~lieu~~fixed ofindexed ~~reinvestment~~annuity products.

Cash flows ~~provided~~used byfor ~~financing~~investing activities ~~decreased~~increased $~~110~~170.50 million during the year ended December 31, ~~2013.~~2014 ~~This~~compared ~~decline~~to ~~was~~the ~~primarily~~year ended December 31, 2013 as a result of aof ~~decrease~~an increase in ~~policyholder~~purchases ~~deposits~~ of ~~fixed~~available-for-sale ~~indexed~~securities ~~annuities~~and ~~when~~short-term ~~compared to 2012~~investments. ~~Offsetting~~This ~~this~~change ~~decline~~is ~~was~~primarily ~~the~~driven ~~issuance~~by ofmore ~~$30.0~~cash ~~million~~being ofprovided ~~debt~~by ~~during~~operating ~~2013~~activities, ~~which~~namely ~~were~~due ~~purchased~~to bya ~~PNX.~~reduction ~~See~~in ~~Note 11~~death tobenefits ~~our~~and ~~financial~~professional ~~statements~~fees ~~under~~paid. ~~“Indebtedness~~Partially ~~due~~offsetting tothis ~~affiliate”~~increase ~~under~~were ~~"Item~~increased 8.sales ~~Financial Statements~~ and ~~Supplementary~~maturities ~~Data"~~of ~~in this Form 10~~short-Kterm ~~for~~investments ~~additional~~during ~~information~~the ~~on this transaction~~period.

Annuity Actuarial Reserves and Deposit Fund Liability	As of December 31,
Withdrawal Characteristics:	2013				2012
($ in millions)	Amount [1]		Percent		Amount [1]		Percent
Not subject to discretionary withdrawal provision	$	177.1	4	%	$	187.7	5	%
Subject to discretionary withdrawal without adjustment	312.1		7	%	311.5		7	%
Subject to discretionary withdrawal with market value adjustment	2,078.9		46	%	1,727.8		41	%
Subject to discretionary withdrawal at contract value less surrender charge	29.6		1	%	35.8		1	%
Subject to discretionary withdrawal at market value	1,903.2		42	%	1,922.3		46	%
Total annuity contract reserves and deposit fund liability	$	4,500.9	100	%	$	4,185.1	100	%

Cash flows provided by financing activities increased $6.3 million during the year ended December 31, 2014. This was primarily a result of an increase in policyholder deposits of fixed indexed annuity products during 2014. Offsetting this increase were reductions of inflows related to capital contributions and debt issuances.



Annuity Actuarial Reserves and Deposit Fund Liability Withdrawal Characteristics:	As of December 31,
($ in millions)	2014				2013
	Amount [1]		Percent		Amount [1]		Percent

Not subject to discretionary withdrawal provision	$	303.4	6	%	$	177.1	4	%
Subject to discretionary withdrawal without adjustment	290.2		6	%	312.1		7	%
Subject to discretionary withdrawal with market value adjustment	2,602.3		54	%	2,078.9		46	%
Subject to discretionary withdrawal at contract value less surrender charge	0.7		—	%	29.6		1	%
Subject to discretionary withdrawal at market value	1,614.0		34	%	1,903.2		42	%
Total annuity contract reserves and deposit fund liability	$	4,810.6	100	%	$	4,500.9	100	%

———————

[1]

Annuity contract reserves and deposit fund liability amounts are reported on a statutory basis, which more accurately reflects the potential cash outflows and include variable product liabilities. Annuity contract reserves and deposit fund liabilities are monetary amounts that an insurer must have available to provide for future obligations with respect to its annuities and deposit funds. These are liabilities in our financial statements prepared in conformity with statutory accounting practices. These amounts are at least equal to the values available to be withdrawn by policyholders.

Individual life insurance policies are less susceptible to withdrawals than annuity contracts because policyholders may incur surrender charges and be required to undergo a new underwriting process in order to obtain a new insurance policy. As indicated in the table above, most of our annuity contract reserves and deposit fund liabilities are subject to withdrawals at market value.

The cash ~~value~~values of certain individual life insurance policies increase over the lives of the policies. Policyholders have the right to borrow an amount up to a certain percentage of the cash value on those policies. As of December 31, ~~2013~~2014, we had approximately $~~689~~737.87 million in cash values with respect to which policyholders had rights to take policy loans. For eligible policies, the majority of policy loans are at variable interest rates that are reset annually on the policy anniversary. Policy loans at December 31, ~~2013~~2014 were $6668.1 million.

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The primary liquidity risks regarding cash inflows from the investing activities are the risks of default by debtors, interest rate and other market volatility, and potential illiquidity of investments. We closely monitor and manage these risks.

WeManagement ~~believe~~targets ~~that~~a minimum risk based capital of 225% at the ~~existing~~Company. In 2014 and ~~expected~~2013, ~~sources~~The ofPhoenix ~~liquidity~~Companies, ~~are~~Inc. ~~adequate~~made tocapital ~~meet~~contributions ~~both~~of ~~current~~$15.0 million and ~~anticipated~~$45.0 ~~needs~~million, respectively for our benefit. In 2013, we issued a $30.0 million surplus note which was purchased by The Phoenix Companies, Inc.

We believe that our current and anticipated sources of liquidity are adequate to meet our current and anticipated needs.

Ratings

Rating agencies assign financial strength ratings to Phoenix Life and its subsidiaries based on their opinions of the ~~companies~~Companies’ ability to meet their respective financial obligations. A downgrade or withdrawal of any of our credit ratings could negatively impact our liquidity. For additional information regarding certain risks associated with our credit ratings, please see the risk factors under “Risks Related to the Restatement, ~~Failure~~of toPrior ~~File~~Period ~~Timely~~Financial ~~Periodic~~Statements ~~Reports with the SEC~~ and our Internal Control Over Financial Reporting.” contained in “Item 1A: Risk Factors” in Part I of this Form 10-K.

~~On August 28, 2013, A.M. Best Company, Inc. downgraded our financial strength rating from B+ to B.~~ The rating was also removed from under review with negative implications and assigned a stable outlook. On April 9, 2013, A.M. Best Company, Inc. maintained their under review with negative implications outlook on our financial strength ~~rating~~ratings ofas B+. On December 7, 2012, A.M. Best Company, Inc. placed our B+ financial strength rating under review with negative implications. On January 13, 2012, A.M. Best Company, Inc. affirmed our financial strength rating of ~~B+. They changed their outlook from stable to positive. On February 8~~April 6, ~~2011,~~2015 ~~A.M.~~were ~~Best~~as ~~Company, Inc. affirmed our financial strength rating of B+ and changed their outlook from negative to stable.~~ follows:

On January 14, 2014, Moody’s Investor Services withdrew all ratings of The Phoenix Companies, Inc. including the Ba2 financial strength rating of the Company’s life insurance subsidiaries and the B1 debt rating of Phoenix Life’s surplus notes. On September 25, 2013, Moody’s Investor Services maintained the review for downgrade for our Ba2 financial strength rating. On June 21, 2013, Moody’s Investor Services maintained the review for downgrade for our Ba2 financial strength rating. On March 20, 2013, Moody’s Investor Services maintained the review for downgrade for our financial strength rating of Ba2. On



Rating Agency [1]	Financial Strength Ratings of Phoenix Life and PHL Variable	Outlook

A.M. Best Company, Inc.	B	Stable
Standard & Poor’s	B+	Negative

December 12, 2012, Moody’s Investor Services placed our financial strength rating of Ba2 under review for downgrade. On December 16, 2011, Moody’s Investor Services affirmed our financial strength rating of Ba2 and changed their outlook from stable to positive.———————

[1] On ~~August~~January 1214, 2014, ~~Standard & Poor'~~Moody’s ~~lowered~~Investor ~~its~~Services ~~financial~~withdrew ~~strength~~all ratings onof ~~Phoenix Life and PHL Variable to B+ from BB- and affirmed its B- long-term counterparty credit rating on~~ The Phoenix Companies, Inc. ~~They~~including ~~removed~~ the ~~ratings~~Ba2 ~~from CreditWatch and assigned a negative outlook. They also affirmed The Phoenix Companies, Inc.'s long-term counterparty credit rating. On May 20, 2014, Standard & Poor’s placed our~~ financial strength rating of ~~BB-~~the ~~and senior debt rating of B- on CreditWatch with negative implications. On May 22, 2013, Standard & Poor~~Company’s ~~affirmed~~life ~~our~~insurance ~~financial~~subsidiaries ~~strength rating of BB-. All ratings were removed from CreditWatch with Negative Implications~~ and placed on negative outlook. On March 8, 2013, Standard & Poor’s placed our financial strength rating of BB- on CreditWatch Negative. On January 16, 2013, Standard & Poor’s affirmed our financial strength rating of BB-. They also removed the ~~ratings~~B1 ~~from~~debt ~~CreditWatch Negative and returned the outlook to stable. On December 7, 2012, Standard & Poor’s affirmed our financial strength~~ rating of ~~BB-~~Phoenix ~~and placed it on CreditWatch Negative. On April 5, 2012, Standard & Poor~~Life’s ~~affirmed~~surplus ~~our financial strength rating of BB- and maintained their stable outlook on our ratings~~notes.

The financial strength ratings as of August 21, 2014 were as follows:

Financial Strength Ratings of Rating Agency Phoenix Life and PHL Variable Outlook A.M. Best Company, Inc. B Stable Standard & Poor’s B+ Negative

Reference in this report to any credit rating is intended for the limited purposes of discussing or referring to changes in our credit ratings or aspects of our liquidity or costs of funds. Such reference cannot be relied on for any other purposes, or used to make any inference concerning future performance, future liquidity or any future credit rating.

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Financial Condition

Balance Sheets:	As of December 31,						Increase (decrease) andpercentage change
($ in millions)	~~2013~~2014			~~2012~~2013			~~2013~~2014 vs. ~~2012~~2013
ASSETS
Available-for-sale debt securities, at fair value	$	34,~~426~~221.38		$	23,~~972~~416.31		$	~~454~~805.07		1524	%
Short-term investments	81.0			244.9			(163.9		)	(67	%)
Available-for-sale equity securities, at fair value	28.7			11.2			17.5			156	%
Limited partnerships and other investments	10.5			6.7			3.8			57	%
Short-term investments	79.8			81.0			(1.2		)	(1	%)
Policy loans, at unpaid principal balances	66.1			61.0			5.1			8	%
Limited partnerships and other investments	12.5			10.5			2.0			19	%
Derivative instruments	237.8			149.4			88.4			59	%
Policy loans, at unpaid principal balances	68.1			66.1			2.0			3	%
Fair value investments	48.6			38.5			10.1			26	%
Derivative instruments	157.5			225.3			(67.8		)	(30	%)
Total investments	3,870.3			3,472.8			397.5			11	%
Fair value investments	46.7			48.6			(1.9		)	(4	%)
Cash and cash equivalents	181.0			83.1			97.9			118	%
Total investments	4,615.1			3,858.8			756.3			20	%
Accrued investment income	27.3			23.2			4.1			18	%
Cash and cash equivalents	162.3			181.0			(18.7		)	(10	%)
Receivables	8.6			16.2			(7.6		)	(47	%)
Accrued investment income	33.2			27.3			5.9			22	%
Reinsurance recoverable	~~500~~464.6			~~427~~494.13			73(29.57		)	17(6	%)
Deferred policy acquisition costs	~~462~~430.39			~~426~~470.21			36(39.12		)	(8	%)
Deferred income taxes, net	2813.01			1627.28			11(14.87		)	73(53	%)
Receivable from related parties	25.65			—2.6			2.69			NM112	%
Other assets	~~174~~158.83			~~135~~204.51			39(45.38		)	29(22	%)
Separate account assets	21,~~052~~757.75			2,~~061~~052.87			(9295.12		)	—(14	%)
Total assets	$	7,~~308~~640.25		$	67,~~662~~318.17		$	~~646~~321.18		104	%
LIABILITIES
Policy liabilities and accruals	$	12,~~899~~067.0		$	1,~~876~~882.29		$	22184.81		110	%
Policyholder deposit funds	23,~~762~~306.89			2,~~349~~775.82			~~413~~531.07			1819	%
Indebtedness due to affiliate	30.0			—30.0			~~30.0~~—			~~100~~—	%
Payable to related parties	147.16			1114.01			3(6.15		)	28(46	%)
Other liabilities	~~177~~167.17			68182.24			~~108~~(14.97		)	~~160~~(8	%)
Separate account liabilities	21,~~052~~757.75			2,~~061~~052.87			(9295.12		)	—(14	%)
Total liabilities	67,~~935~~336.7			6,~~367~~937.03			~~568~~399.74			96	%
STOCKHOLDER’S EQUITY
Common stock	2.5			2.5			—			—	%
Additional paid in capital	~~847~~862.2			~~802~~847.2			4515.0			62	%
Accumulated other comprehensive loss	(11.9		)	11.4			(23.3		)	NM
Accumulated other comprehensive income (loss)	4.0			(12.7		)	16.7			(131	%)
Retained earnings (accumulated deficit)	(~~465~~564.39		)	(~~521~~455.06		)	55(109.73		)	~~(11~~24	%)
Total stockholder’s equity	~~372~~303.58			~~295~~381.14			(77.46		)	26(20	%)
Total liabilities and stockholder’s equity	$	7,~~308~~640.25		$	67,~~662~~318.17		$	~~646~~321.18		104	%

~~———————~~51

~~Not~~Table ~~meaningful~~of ~~(NM)~~Contents

December 31, ~~2013~~2014 compared to December 31, ~~2012~~2013

Assets

~~The~~Total ~~increase~~assets inincreased ~~total~~$321.8 ~~investments~~million ~~was~~from ~~primarily~~December 31, ~~the~~2013 ~~result of purchases of new securities due~~ to ~~new~~December 31, ~~deposits in the annuity business~~2014. ~~Partially~~The ~~offsetting~~increase ~~this~~is ~~were~~primarily ~~declines~~attributable into the ~~market value of available-for-sale debt securities resulting from increases in interest rates during 2013 and decreases in cash and short-term investments.~~following:

54• An increase in available-for-sale debt and equity securities of $823.2 million, which is primarily driven by continued purchases of fixed indexed annuities, for which there were deposits of $713.7 million for the year, and an increase in market value of $136.6 million for the year due to decreases in interest rates.

• The increase in ~~derivative~~available-for-sale ~~instruments~~debt isand ~~primarily~~equity ~~due~~securities tois ~~gains~~offset onby ~~the~~a ~~call~~decrease ~~options~~in ~~that~~derivative ~~are~~assets ~~used~~of ~~to hedge the fixed indexed annuity business~~$67.8 ~~This~~million ~~increase~~for inthe ~~derivative~~period, ~~assets~~primarily isdue ~~offset~~to bythe ~~increases~~expiration inof ~~derivative~~some ~~liabilities,~~of ~~which~~the ~~are~~swaptions ~~recorded~~and ~~within~~call ~~other~~options ~~liabilities.~~in ~~The~~the ~~net~~first ~~derivative~~quarter ~~position~~ of ~~$127~~2014.0 ~~million~~The asdecrease ofis ~~December~~partially ~~31,~~offset ~~2013~~by ~~has~~a ~~not~~corresponding ~~fluctuated~~decrease ~~significantly~~in ~~from the net~~ derivative ~~position~~liabilities, ofwhich ~~$103.7~~are ~~million~~recorded aswithin ofother ~~December 31, 2012~~liabilities.

The increase in ~~reinsurance~~investments ~~recoverables~~ is ~~primarily~~partially ~~due~~offset toby ~~large claims at~~ the ~~end of 2013 that were not yet reimbursed by third-party reinsurers.~~ following:

~~The~~• ~~increases~~A decrease in ~~deferred~~separate ~~policy~~account ~~acquisition~~assets ~~costs~~of ~~overall~~$295.2 ~~are~~million, primarily ~~driven~~due byto ~~increases~~policyholder inwithdrawals ~~the~~and ~~shadow~~other ~~component~~fund ~~that~~withdrawals, ~~offsets~~which ~~unrealized~~was ~~losses~~partially onoffset ~~investments~~by ~~within~~continued ~~AOCI.~~deposits ~~The deferrals of commissions~~ on ~~new~~current ~~sales~~business ofinforce ~~fixed indexed annuities were relatively stable~~ and ~~were~~positive ~~more~~market ~~than~~performance ~~offset~~during bythe ~~continued amortization of previously deferred costs~~year.

~~The~~• ~~increase~~A decrease in ~~other~~the ~~assets~~DAC asset of $39.2 million, which is driven primarily ~~due~~by toa andecrease ~~increase~~of $38.0 million in the ~~current~~shadow ~~tax~~component ~~asset~~from ~~recoverable~~unrealized ~~from~~gains ~~PNX,~~on ~~due~~investments toas ~~the~~well ~~existing~~as ~~tax~~continued ~~sharing~~amortization ~~agreement.~~of previously deferred costs.


•	A decrease in other assets of $45.8 million, which is driven primarily by a decrease in the current tax receivable due to the Company’s tax sharing agreement, which was a receivable of $26.6 million at December 31, 2013 and was a payable of $22.8 million at December 31, 2014 and is recorded within other liabilities.


•	A decrease in deferred income taxes, net, of $14.7 million driven primarily by a decrease in unrealized losses on available-for-sale debt securities during the period.

Liabilities and Stockholder’s Equity

~~Policyholder~~Total ~~deposit~~liabilities ~~funds~~ increased ~~during~~$399.4 ~~the~~million ~~twelve~~from ~~months ended~~ December 31, 2013 ~~primarily~~to asDecember 31, a2014. ~~result~~The ofincrease ~~continued~~is ~~sales~~primarily ofattributable ~~fixed~~to ~~indexed~~the ~~annuities.~~following:

~~The~~• ~~Company~~An ~~issued~~increase ~~$30~~in ~~million~~policyholder ofdeposit ~~surplus~~funds ~~notes~~of on$531.7 ~~December 30~~million, ~~2013~~ which ~~were~~is ~~purchased~~driven primarily by ~~PNX.~~continued ~~The~~sales ~~notes~~of ~~are~~the ~~due~~fixed onindexed ~~December 30~~annuity products, ~~2043~~for ~~and~~which ~~interest~~there iswere ~~paid~~deposits ~~annually~~of atapproximately a$713.7 ~~rate~~million ofduring 10the period.~~5%.~~

~~The~~• An increase in ~~other~~policy liabilities ~~is due to additional accrued expenses related to audit~~ and ~~consulting~~accruals ~~services, and an increase in the fair value~~ of ~~derivative liabilities~~$184.1 ~~The~~million, ~~increase~~which ~~in the fair value of the derivative liabilities~~ is ~~offset~~driven primarily by continued increases in ~~derivative~~the ~~assets,~~reserves ~~which~~associated ~~are~~with ~~recorded~~guaranteed ~~within~~benefit ~~investments.~~liabilities ~~The net derivative position~~ of $~~127~~88.03 million, as ofwell ~~December~~as ~~31,~~an ~~2013~~increase ~~has~~in ~~not~~the ~~fluctuated~~profits ~~significantly~~followed ~~from~~by losses reserve on the ~~net~~universal ~~derivative~~life ~~position~~business of $~~103~~96.73 million ~~as of December 31, 2012~~.

• The increase in ~~total~~liabilities ~~stockholder’s~~was ~~equity~~partially ~~was~~offset ~~primarily~~by a ~~result~~decrease ofin ~~the~~separate ~~net~~account ~~income~~liabilities ~~recognized~~of ~~for~~$295.2 ~~the~~million. ~~twelve~~The ~~months~~decrease ~~ended~~in ~~December 31,~~separate ~~2013~~account ~~and~~liabilities ~~capital~~was ~~contributions~~primarily ofdue ~~$45.0~~to ~~million~~policyholder ~~during~~withdrawals ~~2013.~~and ~~Partially~~other ~~offsetting~~fund ~~these~~withdrawals, ~~increases~~and ~~were~~was ~~additional~~partially ~~accumulated~~offset ~~other~~by ~~comprehensive~~continued ~~losses~~deposits ~~associated with unrealized losses~~ on ~~available-for-sale~~current ~~debt~~business ~~securities~~inforce ~~due~~and topositive ~~the~~market ~~rise~~performance ~~in interest rates~~ during ~~2013~~the year.

Total stockholder’s equity decreased $77.6 million from December 31, 2013 to December 31, 2014. The decrease is primarily attributable to the following:


•	A net loss for 2014 that increased the accumulated deficit by $109.3 million.


•	The increase in the accumulated deficit was partially offset by an increase in accumulated other comprehensive income of $16.7 million. The increase in accumulated other comprehensive income was driven primarily by net unrealized gains on investments, and the related offsetting impacts, due to decreases in interest rates during 2014.

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Contractual Obligations and Commercial Commitments

Contractual Obligations and Commercial Commitments:	As of December 31, 2014
($ in millions)	~~December 31, 2013~~Total		2015		2016-2017		2018-2019		Thereafter
	Total		2014		2015-2016		2017-2018		Thereafter
Contractual Obligations Due
Purchase liabilities [1]	$	92.10	$	10.94	$	30.8	$	3.0.8	$	~~0.4~~—
Policyholder contractual obligation [2]	1214,~~658~~235.0		~~731~~858.57		1,~~495~~614.90		1,~~344~~477.30		910,~~086~~285.3
Total contractual obligations [3]	$	1214,~~667~~237.10	$	~~733~~859.41	$	1,~~499~~614.78	$	1,~~347~~477.38	$	910,~~086~~285.73
Commercial Commitment Expirations
Other long-term liabilities [4]	$	7060.76	$	7059.35	$	01.41	$	—	$	—
Total commercial commitments	$	7060.76	$	7059.35	$	01.41	$	—	$	—

———————


[1]	Purchase liabilities relate to open purchase orders and other contractual obligations. This does not include purchases made by our ultimate parent company for which the resulting expenses are allocated to us when incurred.


[2]	Policyholder contractual obligations represent estimated benefits from life insurance and annuity contracts issued by us. Policyholder contractual obligations also include separate account liabilities, which are contractual obligations of the separate account assets established under applicable state insurance laws and are legally insulated from our general account assets.

Future obligations are based on our estimate of future investment earnings, mortality and surrenders. Actual obligations in any single year, or ultimate total obligations, may vary materially from these estimates as actual experience emerges. As described in Note 23 to our financial statements under “Item 8: Financial Statements and Supplementary Data” in this Form 10-K, policy liabilities and accruals are recorded on the balance sheets in amounts adequate to meet the estimated future obligations of the policies in force. The policyholder obligations reflected in the table above exceed the policy liabilities, policyholder deposit fund liabilities and separate account liabilities reported on our December 31, ~~2013~~2014 balance sheets because the above amounts do not reflect future investment earnings and future premiums and deposits on those policies. Separate account obligations will be funded by the cash flows from separate account assets, while the remaining obligations will be funded by cash flows from investment earnings on general account assets and premiums and deposits on contracts in force.

55[3] We do not anticipate any increases to unrecognized tax benefits that would have a significant impact on the financial position of the Company. Therefore, no unrecognized tax benefits have been excluded from this table. See Note 11 to our financial statements under “Item 8: Financial Statements and Supplementary Data” in this Form 10-K for additional information on unrecognized tax benefits.

[3] We do not anticipate any increases to unrecognized tax benefits that would have a significant impact on the financial position of the Company. Therefore, no unrecognized tax benefits have been excluded from this table. See Note 10 to our financial statements under “Item 8: Financial Statements and Supplementary Data” in this Form 10-K for additional information on unrecognized tax benefits.


[4]	Other long-term liabilities relate to agreements to fund venture capital partnerships. The venture capital commitments can be drawn down by private equity funds as necessary to fund their portfolio investments through the end of the funding period as stated in each agreement.

Obligations Related to Pension and Postretirement Employee Benefit Plans

Our ultimate parent company provides employees with post-employment benefits that include retirement benefits, through pension and savings plans, and other benefits, including health care and life insurance. This includes three defined benefit pension plans. We incur applicable employee benefit expenses through the process of cost allocation by ~~PNX~~Phoenix.

Employee benefit expense allocated to us for these benefits totaled $3.28 million, $43.62 million and $74.6 million for ~~2013~~2014, ~~2012~~2013 and ~~2011~~2012, respectively. ~~Over~~On ~~the~~August 8, ~~next 12 months~~2014, ~~Phoenix~~the ~~Life~~Highway ~~expects~~and toTransportation ~~make~~Funding ~~contributions~~Act toof ~~the~~2014 ~~pension~~was ~~plan~~enacted ofinto ~~which~~law, ~~approximately~~effective $6immediately.4 ~~million~~The ~~will~~law beextends ~~allocated~~certain topension ~~us.~~funding Onprovisions ~~July 6,~~originally ~~2012,~~included in the ~~Surface~~Moving ~~Transportation~~Ahead ~~Extension~~for Progress in the 21st Century Act (MAP-21). Phoenix Life took advantage of ~~2012,~~this ~~Part~~in ~~II,~~the ~~was~~third ~~enacted~~quarter ~~into~~of ~~law~~2014 ~~and~~which ~~was~~resulted ~~effective~~in ~~immediately.~~no ~~The~~further ~~law~~contributions ~~includes~~to ~~certain~~the pension ~~funding~~plan ~~stabilization~~for ~~provisions,~~the ~~which~~remainder of 2014. Over the ~~Company~~next ~~has~~12 ~~taken~~months, ~~advantage~~Phoenix ofLife indoes ~~2012~~not expect to make any contributions to the pension plan.

See Note 1314 to our financial statements under “Item 8: Financial Statements and Supplementary Data” in this Form 10-K for more information.

Off-Balance Sheet Arrangements

As of December 31, ~~2013~~2014, we did not have any significant off-balance sheet arrangements as defined by Item 303(a)(4)(ii) of SEC Regulation S-K.

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Reinsurance

We ~~use~~maintain reinsurance agreements to limit potential losses, reduce exposure to larger risks and provide ~~capital~~additional ~~relief~~capacity ~~with~~for ~~regard to certain reserves~~growth. We remain liable to the extent that reinsuring companies may not be able to meet their obligations under reinsurance agreements in effect. Failure of the reinsurers to honor their obligations could result in losses to the Company. Since we bear the risk of nonpayment, ~~on a quarterly basis~~ we evaluate the financial condition of our reinsurers and monitor concentrations of credit risk. Based on our review of their financial statements, reputation in the reinsurance marketplace and other relevant information, we believe that we have no material exposure to uncollectible life reinsurance. At December 31, ~~2013~~2014, five major reinsurance companies, including our affiliate, Phoenix Life, account for approximately 73% of the reinsurance recoverable. Phoenix Life comprised approximately 15%, or $67.2 million, of this total reinsurance recoverable.

Statutory Capital and Surplus and Risk-Based Capital

Our statutory basis capital and surplus including asset valuation reserve (“AVR”) decreased from $~~321~~235.02 million at December 31, ~~2012~~2013 to $~~235~~213.27 million at December 31, ~~2013~~2014. The principal factor resulting in this decrease was $~~123~~41.1 million of ~~reserve~~net ~~strengthening, including consideration of results from asset adequacy analysis~~losses. This was partially offset by $4515.0 million of capital contributions received from PM Holdings, Inc. ~~and $30 million relating to the issuance of surplus notes issued by PHL Variable and purchased by PNX.~~

Connecticut Insurance Law requires that Connecticut life insurers report their RBC. RBC is based on a formula calculated by applying factors to various asset, premium and statutory reserve items. The formula takes into account the risk characteristics of the insurer, including asset risk, insurance risk, interest rate risk and business risk. The Connecticut Insurance Department has regulatory authority to require various actions by, or take various actions against, insurers whose Total Adjusted Capital (capital and surplus plus AVR) does not exceed certain RBC levels.

The levels of regulatory action, the trigger point and the corrective actions required are summarized below:

Company Action Level – results when Total Adjusted Capital falls below 100% of Company Action Level at which point the Company must file a comprehensive plan to the state insurance regulators;

Regulatory Action Level – results when Total Adjusted Capital falls below 75% of Company Action Level where in addition to the above, insurance regulators are required to perform an examination or analysis deemed necessary and issue a corrective order specifying corrective actions;

Authorized Control Level – results when Total Adjusted Capital falls below 50% of Company Action Level RBC as defined by the NAIC where in addition to the above, the insurance regulators are permitted but not required to place the Company under regulatory control; and

Mandatory Control Level – results when Total Adjusted Capital falls below 35% of Company Action Level where insurance regulators are required to place the Company under regulatory control.

The ~~estimated~~ RBC of PHL Variable as of December 31, ~~2013~~2014 was in excess of ~~250~~200% of the Company Action Level.

See Note 1516 to our financial statements under “Item 8: Financial Statements and Supplementary Data” in this Form 10-K for ~~more~~additional information.


Item 7A.	Quantitative and Qualitative Disclosures About Market Risk

For information about our management of market risk, see “Item 7: Management’s Discussion and Analysis of Financial Condition and Results of Operations” in this Form 10-K under the heading “Enterprise Risk Management.”


Item 8.	Financial Statements and Supplementary Data

The Financial Statements and Supplementary Data required by this item are presented beginning on page F-1.

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Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

None.


Item 9A.	Controls and Procedures

Evaluation of Disclosure Controls and Procedures

The Company maintains disclosure controls and procedures that are designed to ensure that information required to be disclosed, in the reports the Company files or submits under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and that such information is accumulated and communicated to the Company’s management, including its President and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

In connection with the preparation of this Form 10-K, the Company carried out an evaluation under the supervision of and with the participation of the Company’s management, including the President and Chief Financial Officer, as of December 31, ~~2013~~2014, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures, as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act. Based upon this evaluation, the President and Chief Financial Officer concluded that as of December 31, ~~2013~~2014 the Company’s disclosure controls and procedures were not effective because of the material weaknesses described below under “Management’s Annual Report on Internal Control Over Financial Reporting.” The material weaknesses described below were first identified and reported in the 2012 Form 10-K. and have not been fully remediated as of December 31, ~~2013~~2014 due to insufficient time to fully evaluate, implement and assess the design and operating effectiveness of the related controls.

To address the material weaknesses described below, ~~the~~management ~~Company~~ performed additional analysis and other procedures (as further described below under the subheading “Management’s Remediation Initiatives”) to ensure that the Company’s financial statements were prepared in accordance with U.S. GAAP. Accordingly, the Company’s management believes that the financial statements included in this Form 10-K fairly present, in all material respects, the Company’s financial condition, results of operations and cash flows for the periods presented and that this Form 10-K does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the periods covered by this report.

Management’s Annual Report on Internal Control Over Financial Reporting

Management is responsible for establishing and maintaining adequate internal control over financial reporting for the Company, as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act. ~~The~~Internal ~~Company’s system of internal~~ control over financial reporting is defined as a process designed by or under the supervision of the Company’s principal executive and principal financial officers or persons performing similar functions, and effected by the Company’s Board of Directors, management and other personnel designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external reporting purposes in accordance with U.S. GAAP. Internal control over financial reporting includes those policies and procedures that pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Company to provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with U.S. GAAP, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company, and to provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect every misstatement. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may decrease over time.

Management, including the President and Chief Financial Officer, has conducted an assessment, including testing, of the effectiveness of the Company’s internal control over financial reporting as of December 31, ~~2013~~2014, based on the criteria in Internal Control - Integrated Framework (1992) issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”).

A material weakness is a deficiency or combination of deficiencies in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the annual or interim financial statements will not be prevented or detected on a timely basis. Management has concluded that as of December 31, 2013, the material weaknesses in internal control over financial reporting described below have not been fully remediated due to insufficient time to fully evaluate, implement and assess the design and operating effectiveness of the related controls.55

~~The~~Table ~~material weaknesses included deficiencies in the period-end financial reporting process including the processing~~ of journal entries and the preparation and review of account reconciliations, insufficient complement of personnel with a level of accounting knowledge commensurate with the Company’s financial reporting requirements and ineffective monitoring and review activities.Contents

~~The~~A ~~above~~ material ~~weaknesses~~weakness ~~also~~is ~~contributed~~a todeficiency or combination of deficiencies in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the ~~following~~annual or interim financial statements will not be prevented or detected on a timely basis. Management has concluded that as of December 31, 2014, the material weaknesses in internal control over financial reporting ~~which~~described below have not been ~~identified~~fully remediated due to insufficient time to fully evaluate, implement and ~~included~~assess inthe ~~management’s~~design ~~assessment~~and asoperating effectiveness of ~~December 31,~~the ~~2013:~~related controls.

The material weaknesses included deficiencies in the period-end financial reporting process including the processing of journal entries and the preparation and review of account reconciliations, insufficient complement of personnel with a level of U.S. GAAP accounting knowledge commensurate with the Company’s financial reporting requirements and ineffective monitoring and review activities.

The above material weaknesses also contributed to the following material weaknesses in internal control over financial reporting which have been identified and included in management’s assessment as of December 31, 2014:


1.	Actuarial Finance and Valuation – The Company did not maintain effective controls over the actuarial process. Specifically:


•	The Company did not maintain effective controls to review and approve assumptions and methodologies used in the determination of actuarially derived insurance policy liability estimates.


•	The Company did not maintain effective systems and controls to appropriately measure actuarially derived balances for its fixed indexed annuity products.


•	The Company did not maintain effective controls over key actuarial spreadsheets and certain key reports to ensure the reliability of data, assumptions and valuation calculations.


•	The Company did not maintain effective controls over the application of U.S. GAAP to universal life reserves.


2.	Investments – The Company did not maintain effective controls over certain investment processes. Specifically:


•	The Company did not maintain effective controls over the recognition and measurement of impaired investments.


•	The Company did not maintain effective controls over the recognition and measurement of certain elements of net investment income as well as identifying embedded derivatives related to structured securities.


•	The Company did not maintain effective controls over internally priced securities, including private placement debt securities.


•	The Company did not maintain effective controls over classification in the fair value hierarchy disclosure.


•	The Company did not maintain effective controls to properly recognize and measure counterparty non-performance risk on non-collateralized derivatives.


3.	Reinsurance Accounting – The Company did not maintain effective controls for complex reinsurance treaties. Specifically:

• The Company did not maintain effective controls to analyze, document and review the U.S. GAAP accounting for ~~reinsurance~~such transactions at inception.


•	The Company did not maintain effective controls to analyze, document, review and appropriately account for related party reinsurance transactions including accounting for gains/losses at inception and actuarial valuation of reinsurance balances.

Cash flows and changes in classifications – The Company did not maintain effective controls over the presentation of cash and cash flows. Specifically, the Company did not maintain effective controls over the preparation and review of appropriate detail to support the classification of activity in the statements of cash flows. In addition, there were not effective controls for assessing the classification of cash and related balances for presentation in the balance sheets.


5.	Access to applications and data – The Company did not maintain effective information technology general controls related to restricted access. Specifically, the Company did not maintain effective controls for granting, removing and reviewing access to ensure appropriate segregation of duties and restricted access to programs and data.

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Each of these control deficiencies contributed to misstatements of the previously mentioned financial statements. Additionally, these control deficiencies could result in a material misstatement to the annual or interim financial statements that would not be prevented or detected. Accordingly, management has concluded that these control deficiencies constitute material weaknesses.

As a result of the material weaknesses in internal control over financial reporting described above, management has concluded that, as of December 31, ~~2013~~2014, the Company’s internal control over financial reporting was not effective based on the criteria established in Internal Control - Integrated Framework (1992) issued by COSO.

Management Changes

~~The~~Management ~~Company~~ has made a number of ~~management~~ changes in the finance organization with a focus on increasing U.S. GAAP knowledge and improving financial reporting processes in the organization. ~~These~~In ~~changes~~2014, ~~include~~ the ~~appointment of a Chief Financial Officer, Chief Accounting Officer and head of actuarial finance. The~~ Company ~~also~~ appointed a new Chief Risk Officer, a new head of Internal Audit, a new Chief Accounting Officer and hired additional certified public accountants and actuaries with U.S. GAAP expertise to supplement the staff charged with compiling and filing its U.S. GAAP results. In addition, the Company has established a financial reporting controls committee comprised of members of senior management. The committee was established to provide oversight to the Company’s efforts for ensuring appropriate internal control over financial reporting including, but not limited to, remediation of material weaknesses and other control deficiencies, controls testing, and prioritization and allocation of resources.

Management’s Remediation Initiatives

Since the identification of the material weaknesses, management has taken steps to strengthen its finance skills, capabilities, processes and control environment, and continues to enhance the Company’s financial control governance structure, align its resources and/or ~~enhance~~hire additional actuarial and accounting resources with the ~~Company’s~~requisite ~~skills~~U.S. ~~and~~GAAP ~~financial~~experience. ~~roles~~Moreover, ~~and~~management ~~responsibilities~~has ~~for~~taken ~~each~~steps ~~functional~~to ~~group~~strengthen ~~within~~accounting ~~the~~policy ~~organization~~documentation asfor ~~well~~its ascomplex ~~implement~~processes ~~additional~~and ~~policies~~transactions, enhance its documentation and ~~procedures~~processes related to ~~improve~~assumptions underlying the ~~overall~~financial ~~system~~statements, ofand ~~internal~~enhance ~~control~~communication and training over all financial reporting processes. ToAs ~~remediate~~it works towards remediation of the material weaknesses described in “Management’s Annual Report on Internal Control Over Financial Reporting” above, the Company ~~has~~continues ~~implemented~~to orenhance ~~plans~~controls toover ~~implement~~ the ~~measures~~period-end ~~described~~financial ~~below~~reporting ~~and~~process ~~will~~including ~~continue~~the toprocessing ~~evaluate~~of ~~the~~journal ~~remediation~~entries and ~~may~~preparation inand ~~the~~review ~~future~~of ~~implement~~account ~~additional measures~~reconciliations.

1The Company intends to continue to strengthen monitoring and review activities, including maintaining sufficient personnel with a level of U.S. ~~Actuarial~~GAAP ~~Finance~~accounting knowledge commensurate with the Company’s financial reporting requirements. The Company intends to continue to evaluate and ~~Valuation~~enhance –the ~~Upon~~design ~~identification~~and effectiveness of internal controls and enhance and document policies and procedures to improve the ~~material~~effectiveness ~~weakness~~of our internal control over financial reporting. However, ~~management~~there ~~performed~~remains a risk that the ~~following~~transitional procedures toon ~~gain~~which ~~assurance~~we ~~related~~currently rely will fail to ~~the~~prevent ~~accuracy~~or detect a material misstatement of the ~~Company’s~~annual ~~financial~~or ~~reporting~~interim ~~process:~~2014 financial statements.

•We ~~Performed~~intend ~~procedures~~to ondesign, ~~the~~implement ~~affected~~and ~~actuarial~~maintain ~~balances~~an toeffective ~~ensure~~control ~~the~~environment ~~reasonableness~~over offinancial ~~the~~reporting. ~~amounts~~We ~~being~~have ~~reported.~~taken, ~~The~~or ~~Company~~will take, the following actions:

–Actuarial ~~Validated~~Finance ~~the profit followed by loss reserve for the Universal Life~~ and ~~Variable Universal Life blocks of business~~Valuation

–• ~~Performed~~Perform a ~~detailed~~comprehensive ~~attribution~~risk ~~analysis~~assessment ~~for~~across ~~reserve~~all ~~changes~~products ~~for~~designed ~~fixed~~to ~~indexed~~simplify ~~annuities~~and streamline processes, map key financial statement risks to existing and newly implemented controls, and control the overall actuarial environment

–• ~~Performed~~Assess atechnological ~~detailed~~solutions ~~analysis~~designed atto ~~the~~simplify ~~cohort~~and ~~level~~control ~~for~~data ~~all~~and ~~deferred~~information ~~policy~~and ~~acquisition~~appropriately ~~cost~~implement methodologies and ~~unearned~~assumptions ~~revenue~~used ~~reserve~~for ~~calculations~~the purpose of implementing a new Fixed Indexed Annuity valuation system

–• ~~Validated~~Enhance ~~deficiency~~communication ~~reserves~~with ~~for~~Corporate ~~the~~Finance, ~~term~~Pricing ~~insurance~~Actuaries, and ~~payout~~Investment ~~annuity~~Accounting ~~blocks~~to ensure timely and accurate information is provided and received as it relates to complex transactions, new product development, and the overall accuracy of financial reporting

59• Design and implement new processes and process-level controls, spreadsheet controls, and monitoring/review controls which ensure the reliability of data, assumptions, methodologies, and valuation calculations that are used to measure or determine actuarially determined balances under U.S. GAAP

~~– Validated effects of excess reinsurance on variable universal life and universal life estimated gross profits~~57

–Table ~~Reconciled~~of ~~actual gross profit to the general ledger for all product lines~~Contents

~~• Engaged an external actuarial advisor to provide staff augmentation and assist with the following activities:~~Investments

–• ~~Review~~Assess the current state for Derivatives, Other Invested Assets (“OIA”), Public Securities, Private Securities and ~~enhancement~~the financial close process to determine enhancements and/or redesign of ~~current~~each ~~U.S.~~process, ~~GAAP~~process ~~valuation~~level ~~analytics~~controls, spreadsheet controls and monitoring/review controls to ensure reliability and accuracy

–• ~~Identification~~Assess technological solutions designed to simplify and ~~correction~~control ofdata ~~actuarial~~in ~~related~~each ~~errors~~process

–• ~~Review~~Implement ~~updates~~an toOIA ~~the~~System ~~methods~~to streamline, ~~process~~simplify and ~~assumptions~~control ~~associated~~information ~~with~~related ~~the~~to ~~U.S.~~these ~~GAAP~~assets ~~unlocking process~~types

–• ~~Review~~Redesign ~~and~~the ~~document~~business ~~U.S.~~process ~~GAAP~~for ~~valuation~~receipt ~~methods~~of third-party information that would provide improved quality, accuracy timeliness of financial statement disclosures as well as minimize and ~~assumptions~~streamline processes

–• ~~Project~~Enhance ~~management~~communication ofamong ~~work~~functions ~~streams~~within Corporate Finance as well as with the Investment Department to ensure timely accurate information is provided

–Reinsurance ~~Maintain an interim fixed indexed annuity reserve model~~Accounting

~~The~~• ~~Company’s~~Perform ~~implemented~~a ~~and~~comprehensive ~~planned~~risk ~~remediation~~assessment ~~measures~~to ~~are~~identify ~~intended~~key tofinancial ~~address~~statement ~~material~~risks ~~weaknesses~~and ~~related~~map to ~~Actuarial~~existing ~~Finance.~~and ~~The~~newly ~~Company’s~~designed ~~remediation~~and ~~measures~~implemented ~~include the following:~~controls

~~Implemented~~• Design and implement new controls to properly analyze, document, implement and monitor U.S. GAAP accounting standards, specifically as they relate to complex reinsurance treaties

• ~~Aligned~~Design ~~staff~~and ~~responsibilities~~implement bynew ~~product~~controls around data and information used in assessing and accounting for complex reinsurance treaties

• ~~Upgraded~~Enhance ~~staff~~communication ~~including~~with ~~hiring~~Actuarial ~~experienced~~Finance ~~U.S.~~and ~~GAAP~~Corporate ~~actuaries~~Finance to ensure timely and accurate information is provided and received as it relates to complex treaties, new treaties, and the overall accuracy of the accounting for these treaties

•Cash ~~Enhanced~~flows ~~the~~and ~~process~~changes ofin ~~assumption setting by establishing an assumption governance committee~~classifications

• ~~Formalized~~Perform ~~documentation~~a ~~standards~~comprehensive risk assessment to ~~ensure~~identify ~~consistent~~the ~~documentation~~key offinancial ~~assumptions~~statement risks and ~~methods~~map ~~across~~to ~~product~~existing ~~lines~~and newly identified controls

• ~~Partnered~~Design ~~with~~and ~~pricing~~implement ~~actuaries~~new controls to ~~improve~~properly ~~the~~analyze, ~~process~~document, implement and ~~testing~~monitor ~~for~~U.S. ~~new~~GAAP ~~product~~accounting ~~models~~standards, ~~and~~specifically ~~assumptions~~as they relate to cash flow presentation

• ~~Hired~~Design aand implement new ~~head~~controls ofaround ~~actuarial~~data ~~finance~~and ~~with~~information ~~U.S.~~used ~~GAAP~~in ~~actuarial~~the ~~experience~~presentation of the cash flows

•Access ~~Aligned and added actuarial resources~~ to ~~ensure~~applications ~~the number~~ and ~~level of financial actuarial experts was appropriate~~data

• ~~Held~~Complete ~~third~~a ~~party~~review ~~workshops~~of the controls and ~~training~~narratives ~~resulting~~to indesign ~~the~~and ~~development~~implement ofnew ancontrols ~~enhanced~~associated ~~analytics~~with ~~process~~access to application and data

~~Planned~~• Establish a process for validating provisioning of new and altered provisioning for new hires and consultants

• ~~Design~~Implement ~~and~~a ~~implement~~process ~~detailed~~for ~~actuarial~~test ~~remediation~~code ~~plan~~asset ~~including the following activities:~~management

◦• ~~People~~Finalize ~~and~~the ~~Skills~~process for validating highly privileged accounts

–We ~~Manage~~anticipate ~~key~~devoting ~~person~~significant ~~risk~~resources ~~succession~~toward ~~plan~~our remediation efforts described above in order to make substantial progress in the remediation of our material weaknesses by the end of 2015. Actuarial Finance and Valuation will take additional time and resources to remediate due to the complexity and nature of the products. While these efforts are underway, we are relying on a comprehensive set of manual procedures to help confirm the proper collection, evaluation, and disclosure of the information included in the financial statements.

– Develop a cross-functional team, including Information Technology resources, for initiatives related to any remediation activities and new product implementation

– Assign dedicated staff to new business initiatives

◦ Control and Governance

– Establish a formal peer review process

– Enhance model governance process

◦ Technology

– Consolidate life and variable annuity valuation systems and enhance fixed indexed annuity valuation system

◦ Process

– Simplify and streamline manual processes and the close process

2. Investments – Upon identification of the material weakness, management performed the following procedures to gain assurance related to the accuracy of the Company’s financial reporting process:

• Performed the following procedures on the affected investment balances to ensure the reasonableness of the amounts being reported:

Impaired investments process

– All impairments identified during the reporting year 2013 have been reviewed and approved by the Chief Investment Officer and Chief Accounting Officer

Amortization and accretion for structured securities

– The accounting models and amortization methods and assumptions for the structured securities portfolio have been reviewed and approved by the Chief Investment Officer and Chief Accounting Officer

– Assessed a sample of the structured securities portfolio using the appropriate accounting models to access the accuracy of third party service provider calculations

Investment related reconciliations

– An enhanced reconciliation process has been implemented and all key investment accounting reconciliations have been performed

Private placement debt securities

– Each bond’s cash flows and all other critical inputs to run new and revised valuation models have been validated

– Continued to engage an external advisor to provide assistance in evaluating investment and fair value disclosures as well as significant accounting policy disclosures for compliance with U.S. GAAP

– Replaced the existing valuation model for sinking fund bonds with a new interim discounted cash flow model that was developed and validated by an external advisor

– All debt securities were valued based on external third-party information

Derivative valuation

– A new process and controls for measuring the non-performance risk related to non-collateralized derivative assets was designed and implemented.

The Company’s implemented and planned remediation measures are intended to address material weaknesses related to Investments. The Company’s remediation measures include the following:

Implemented

• Hired a new head of Investment Accounting with U.S. GAAP investment experience

• Aligned and added investment accounting resources to ensure the number and level of qualified accountants was appropriate

Planned

• Design and implement a detailed investment remediation plan including the following activities:

◦ People and Skills

– Evaluate the current staffing model for Investment Accounting and Corporate Portfolio Management to ensure sufficient personnel with knowledge, experience and training

◦ Controls and Governance

– Conduct a detailed assessment of internal controls and related supporting documentation for controls and processes related to Investment Accounting and Corporate Portfolio Management and disclosure policy in an effort to enhance controls across these areas

◦ Technology

– Develop a plan to replace the interim accounting systems and valuation models with a more robust, sustainable and controlled accounting and valuation system

◦ Process

– Simplify and streamline manual processes and the close process

– Evaluate current organizational structure of Investment Accounting and Corporate Portfolio Management to ensure appropriate support and oversight of investment accounting and valuation activities.

– Design new processes and controls for Investment Accounting and Corporate Portfolio Management, specifically the assessment of impaired investments, amortization and accretion processes, investment related reconciliations, valuation and leveling of private placement debt, valuation of certain derivative instruments and accounting for Other Invested Assets

3. Reinsurance Accounting – Upon identification of the material weakness, management performed the following procedures to gain assurance related to the accuracy of the Company’s financial reporting process

• Monitored all complex reinsurance contract activity to ensure appropriate accounting in accordance with U.S. GAAP

The Company’s implemented and planned remediation measures are intended to address material weaknesses related to Reinsurance Accounting. The Company’s remediation measures include the following:

Implemented

• Reviewed and enhanced accounting analysis of existing complex reinsurance treaties

• Strengthened the accounting policy documentation standards for certain transactions, including complex reinsurance treaties and the implementation of new U.S. GAAP standards

Planned

• Review and enhance all processes and controls related to reinsurance accounting

• Evaluate the current governance and staffing model for reinsurance accounting

4. Cash flows and changes in classifications – Upon identification of the material weakness, management performed the following procedures to gain assurance related to the accuracy of the Company’s financial reporting process:

• Evaluated U.S. GAAP guidance for certain cash flow reporting disclosures

• Evaluated reclassification of control disbursement balances to ensure appropriate netting and reclassifications were performed

• Reviewed all cash accounts to ensure cash collateral accounts were reclassified and reported as restricted cash within the balance sheet

• Performed additional procedures on the statement of cash flows to ensure the reasonableness of the amounts being reported. The Company:

– Evaluated the processes and data files supporting deposit and withdrawal activities for certain life products

– Performed a detailed analysis of interest credited for all products including the interest for all policy loans

– Performed a detail analysis of all investing activities; and

– Documented interim processes and data sources for assembling cash flow data for all transaction types

The Company’s planned remediation measures are intended to address material weaknesses related to cash flow and cash balance reporting. The Company’s remediation measures include the following:

Planned

• Review, enhance and document accounting policies and procedures regarding the preparation of the statements of cash flows, cash balance reporting and related disclosures

• Provide all members of Corporate Finance, and those providing data into the cash flow and cash balance reporting process, training on the enhanced process and controls

• Enhance cash flow reporting and disclosure package by reviewing all source materials used in the preparation of the cash flow statement and assembling a prototype reporting package that includes policy matters as well as a detailed reconciliation of cash flows by type and classification

5. Access to Applications and Data – Upon identification of the material weakness, management performed the following procedures to gain assurance related to the accuracy of the Company’s financial reporting process:

• Performed an assessment of segregation of duties; management identified relevant business risks related to all key financial and administrative applications, including all business risks arising from excessive user access. Management identified the relevant mitigating controls which were determined to be effective

• Evaluated the results of the testing performed around the Company’s change management procedures

• Performed a review of the Company’s entity level controls related to fraud monitoring and confirmed that these functions were found to be effective

The Company’s implemented and planned remediation measures are intended to address the material weakness related to Access to Applications and Data. The Company’s remediation measures include the following:

Implemented

• Redesigned the user access entitlement process to include the following procedures:

◦ Enhanced user access request and approval process by requiring more detailed role-based provisioning requests

◦ Implemented a quality control review following the provisioning of access rights for all new hires.

Planned

• Design and implement detailed user access review remediation plan

Control deficiencies not constituting material weaknesses

In addition to the material weaknesses described in “Management’s Report on Internal Control Over Financial Reporting,” management has identified other deficiencies in internal control over financial reporting that did not constitute material weaknesses as of December 31, ~~2013~~2014. The Company ~~has implemented and/or~~ plans to ~~substantially~~ implement ~~during 2014~~ various measures to remediate these control deficiencies ~~and~~as ~~has~~part ~~undertaken~~of ~~other~~the ~~interim~~remediation ~~measures~~efforts tonoted ~~address these control deficiencies, as discussed~~ above.

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Management’s Conclusions

Management has developed a plan for the implementation of the foregoing remediation efforts and will monitor the implementation. In addition, under the direction of the financial reporting controls committee as well as the Audit and Finance Committee of the Board, management will continue to review and make necessary changes to the overall design of the Company’s internal control environment, as well as to policies and procedures to improve the overall effectiveness of internal control over financial reporting. Management believes the efforts discussed above will remediate the material weaknesses. As the Company continues to evaluate and work to improve its internal control over financial reporting, management may determine to take additional measures to address control deficiencies or determine to modify the remediation plan described above.

Further, no system of controls, no matter how well designed and operated, can provide absolute assurance that the objectives of the system of controls will be met, and no evaluation of controls can provide absolute assurance that all control deficiencies or material weaknesses have been or will be detected. Given the breadth of the control deficiencies and material weaknesses described above, there is no assurance that the Company’s remediation efforts have been or will be fully effective. As described above and in “Item 1A: (Risk Factors)”, these material weaknesses have not been fully remediated as of the filing date of this Form 10-K. If the Company’s remediation efforts do not prove effective and control deficiencies and material weaknesses persist or occur in the future, the accuracy and timing of our financial reporting may be adversely affected.

Changes in Internal Control Over Financial Reporting

~~Except~~In ~~for~~May ~~certain~~2013, COSO issued a new version of ~~management’s~~its ~~implemented~~internal ~~remediation~~control ~~measures~~framework, ~~discussed~~which ~~above~~became effective December 15, ~~there~~2014. ~~were~~We noare currently evaluating what changes to ~~the~~our ~~Company’s~~control ~~internal~~environment, ~~control~~if ~~over~~any, ~~financial~~would ~~reporting~~be ~~during~~needed ~~the~~to ~~fourth~~successfully ~~quarter~~implement ofthe 2013 ~~that~~COSO ~~materially~~framework ~~affected,~~during or2015. ~~are~~Until ~~reasonably~~such ~~likely~~time as our transition to ~~materially~~the ~~affect~~2013 COSO framework is complete, we will continue to use the ~~Company’s~~1992 framework in connection with our assessment of internal control over financial reporting.

Except for continued improvements resulting from progress made on the above noted remediation efforts, there were no changes to the Company’s internal control over financial reporting during the fourth quarter of 2014 that materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.


Item 9B.	Other Information

None.

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PART III


Item 10.	Directors, Executive Officers and Corporate Governance

We have omitted this information from this report pursuant to General Instruction (I)(1)(a) and (b) of Form 10-K and are filing this Form 10-K with the reduced disclosure format permitted by that General Instruction.


Item 11.	Executive Compensation


Item 12.	Security Ownership of Certain Beneficial Owners and Management


Item 13.	Certain Relationships and Related Transactions, and Director Independence

We have omitted this information from this report pursuant to General Instruction (I)(1)(a) and (b) of Form 10-K and filing this Form 10-K with the reduced disclosure format permitted by that General Instruction.


Item 14.	Principal Accounting Fees and Services

A description of the fees earned by PwC for services rendered to the Company for each of the two years in the period ended December 31, ~~2013~~2014 is provided below. Fees in ~~2012~~2013 primarily relate to additional fees associated with the restatement of the Company’s financial statements billed and allocated in ~~2012 and~~ 2013. Amounts recorded within the 2013 financial statements were $12,434,859.

	2013		2012
	2014		2013
Audit fees	$	12,~~610~~277,~~125~~287	$	121,~~595~~610,~~620~~125
Audit-related fees	—		—
Tax fees	—		—
All other fees	—		—
Total fees	$	12,~~610~~277,~~125~~287	$	121,~~595~~610,~~620~~125

Audit Fees: Audit fees consist of fees billed and allocated for professional service rendered for the annual audits of the Company’s financial statements and the review of the Company’s interim condensed financial statements. Audit fees also include fees for services that are closely related to the audit, such as consents related to SEC registration statements and audits of the Company’s sponsored separate accounts.

Audit Committee: Prior to each fiscal year, the ~~PNX~~Phoenix Audit Committee receives a written report from PwC describing the elements expected to be performed in the course of its audit of the ~~PNX~~Phoenix consolidated financial statements and those of its insurance company subsidiaries, including PHL Variable, for the coming year. The ~~PNX~~Phoenix Audit Committee may approve the scope and fees not only for the proposed audit, but also for various recurring audit-related services. For services of its independent registered public accounting firm that are neither audit-related nor recurring, a Company vice president may submit in writing a request to the Company’s internal auditor, accompanied by approval of the Company’s Chief Financial Officer or Chief Accounting Officer. The ~~PNX~~Phoenix Audit Committee may pre-approve the requested service as long as it is not a prohibited non-audit service and the performance of such service would be consistent with all applicable rules on auditor independence. The ~~PNX~~Phoenix Audit Committee may also delegate pre-approval authority to one or more of its members.

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PART IV


Item 15.	Exhibits, Financial Statement Schedules


(a)	Documents filed as part of this Form 10-K include:


1.	Financial Statements. The financial statements listed in Part II of the Table of Contents to this Form 10-K are filed as part of this Form 10-K;


2.	Financial Statement Schedules. All financial statement schedules are omitted as they are not applicable or the information is shown in the financial statements or notes thereto; and


3.	Exhibits. Those items listed in the Exhibit Index in Section E of this Form 10-K which are marked with an (*) are filed with this Form 10-K.

* * * * *

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SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

PHL VARIABLE INSURANCE COMPANY

(Registrant)

Dated:	~~August~~April 228, ~~2014~~2015	By: /s/ James D. Wehr
		James D. Wehr
		President
		(Principal Executive Officer)
Dated:	~~August~~April 228, ~~2014~~2015	By: /s/ Bonnie J. Malley
		Bonnie J. Malley
		Executive Vice President and Chief Financial Officer
		(Principal Financial Officer)
Dated:	~~August~~April 228, ~~2014~~2015	By: /s/ ~~Douglas~~Ernest CM. ~~Miller~~McNeill, Jr.
		Douglas C. Miller
		Ernest M. McNeill, Jr.
		Senior Vice President and Chief Accounting Officer
		(Principal Accounting Officer)

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below, dated ~~August~~April 228, ~~2014~~2015, by the following persons on behalf of the Registrant and in the capacities indicated.



/s/ Edward W. Cassidy		/s/ Christopher M. Wilkos
Edward W. Cassidy, Director		Christopher M. Wilkos, Director

/s/ Thomas M. Buckingham
Thomas M. Buckingham, Director

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EXHIBIT INDEX



Exhibit

3.1			Form of Amended and Restated Certificate of Incorporation (as amended and restated effective May 31, 1994) (incorporated herein by reference to Exhibit 3.1 to the PHL Variable Insurance Company’s Form 10-K filed March 31, 2006)

3.2			Bylaws of PHL Variable Life Insurance Company (as amended and restated effective May 16, 2002) (incorporated herein by reference to Exhibit 3.2 to the PHL Variable Insurance Company’s Form 10-K filed March 31, 2006)

10.1			Services Agreement effective as of January 1, 1995 by and among PHL Variable Insurance Company, Phoenix Life Insurance Company, American Life and Reassurance Company, Phoenix American Life Insurance Company and Phoenix Home Life Mutual Insurance Company (incorporated herein by reference to Exhibit 10.1 to the PHL Variable Insurance Company’s Form 10-K filed March 31, 2006)

10.2			Investment Management Agreement effective as of January 1, 1995 by and between PHL Variable Insurance Company and Phoenix Investment Counsel, Inc. (incorporated herein by reference to Exhibit 10.2 to the PHL Variable Insurance Company’s Form 10-K filed March 31, 2006)

10.3			Amendment #1 (effective as of January 1, 1998) to the Investment Management Agreement dated as of January 1, 1995 by and between PHL Variable Insurance Company and Phoenix Investment Counsel, Inc. (incorporated herein by reference to Exhibit 10.3 to the PHL Variable Insurance Company’s Form 10-K filed March 31, 2006)

10.4			Amended and Restated Tax Allocation Agreement dated as of January 1, 2001 by and among The Phoenix Companies, Inc. and most of its subsidiaries (incorporated herein by reference to Exhibit 10.4 to the PHL Variable Insurance Company’s Form 10-K filed March 31, 2006)

10.5			Amendment #1 (effective as of January 1, 2006) to the Amended and Restated Tax Allocation Agreement dated as of January 1, 2001 by and among The Phoenix Companies, Inc. and most of its subsidiaries (incorporated herein by reference to Exhibit 10.5 to the PHL Variable Insurance Company’s Form 10-K filed March 31, 2006)

31.1			Certification of James D. Wehr, President, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002*

31.2			Certification of Bonnie J. Malley, Chief Financial Officer, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002*

32			Certification by James D. Wehr, President and Bonnie J. Malley, Chief Financial Officer, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002*

101.INS			XBRL Instance Document*

101.SCH			XBRL Taxonomy Extension Schema Document*

101.CAL			XBRL Taxonomy Extension Calculation Linkbase Document*

101.LAB			XBRL Taxonomy Extension Label Linkbase Document*

101.PRE			XBRL Taxonomy Extension Presentation Linkbase Document*

101.DEF			XBRL Taxonomy Extension Definition Linkbase Document*

* Filed herewith

We will furnish any exhibit upon the payment of a reasonable fee, which fee shall be limited to our reasonable expenses in furnishing such exhibit. Requests for copies should be directed to: Corporate Secretary, PHL Variable Insurance Company, One American Row, P.O. Box 5056, Hartford, Connecticut 06102-5056.

E-1

Table of Contents

Report of Independent Registered Public Accounting Firm

To the Board of Directors and Stockholder of

PHL Variable Insurance Company:

In our opinion, the accompanying balance sheets and the related statements of income and comprehensive income, of changes in stockholder's equity, and of cash flows present fairly, in all material respects, the financial position of PHL Variable Insurance Company (“the Company”) at December 31, ~~2013~~2014 and ~~2012~~2013, and the results of its operations and its cash flows for each of the three years in the period ended December 31, ~~2013~~2014 in conformity with accounting principles generally accepted in the United States of America. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

As described in Note 1112 to the financial statements, the Company has entered into significant transactions with its affiliates.

/s/ PricewaterhouseCoopers, LLP

Hartford, Connecticut

~~August 22~~April 8, ~~2014~~2015

F-1

Table of Contents

PHL VARIABLE INSURANCE COMPANY

Balance Sheets

($ in millions, except share data)



	As of December 31,
($ in millions, except share data)	2014			2013
ASSETS:
Available-for-sale debt securities, at fair value (amortized cost of $4,060.9 and $3,390.6)	$	4,221.8		$	3,416.1
Available-for-sale equity securities, at fair value (cost of $28.4 and $12.1)	28.7			11.2
Short-term investments	79.8			81.0
Limited partnerships and other investments	12.5			10.5
Policy loans, at unpaid principal balances	68.1			66.1
Derivative instruments	157.5			225.3
Fair value investments	46.7			48.6
Total investments	4,615.1			3,858.8
Cash and cash equivalents	162.3			181.0
Accrued investment income	33.2			27.3
Reinsurance recoverable	464.6			494.3
Deferred policy acquisition costs	430.9			470.1
Deferred income taxes, net	13.1			27.8
Receivable from related parties	5.5			2.6
Other assets	158.3			204.1
Separate account assets	1,757.5			2,052.7
Total assets	$	7,640.5		$	7,318.7

LIABILITIES:
Policy liabilities and accruals	$	2,067.0		$	1,882.9
Policyholder deposit funds	3,306.9			2,775.2
Indebtedness due to affiliate	30.0			30.0
Payable to related parties	7.6			14.1
Other liabilities	167.7			182.4
Separate account liabilities	1,757.5			2,052.7
Total liabilities	7,336.7			6,937.3

COMMITMENTS AND CONTINGENT LIABILITIES (Note 17)

STOCKHOLDER’S EQUITY:
Common stock, $5,000 par value: 1,000 shares authorized; 500 shares issued	2.5			2.5
Additional paid-in capital	862.2			847.2
Accumulated other comprehensive income (loss)	4.0			(12.7		)
Retained earnings (accumulated deficit)	(564.9		)	(455.6		)
Total stockholder’s equity	303.8			381.4
Total liabilities and stockholder’s equity	$	7,640.5		$	7,318.7

December 31, 2013 and 2012

	2013			2012
ASSETS:
Available-for-sale debt securities, at fair value (amortized cost of $3,402.6 and $2,798.1)	$	3,426.3		$	2,972.3
Short-term investments	81.0			244.9
Limited partnerships and other investments	10.5			6.7
Policy loans, at unpaid principal balances	66.1			61.0
Derivative instruments	237.8			149.4
Fair value investments	48.6			38.5
Total investments	3,870.3			3,472.8
Cash and cash equivalents	181.0			83.1
Accrued investment income	27.3			23.2
Receivables	8.6			16.2
Reinsurance recoverable	500.6			427.1
Deferred policy acquisition costs	462.3			426.2
Deferred income taxes, net	28.0			16.2
Receivable from related parties	2.6			—
Other assets	174.8			135.5
Separate account assets	2,052.7			2,061.8
Total assets	$	7,308.2		$	6,662.1
LIABILITIES:
Policy liabilities and accruals	$	1,899.0		$	1,876.2
Policyholder deposit funds	2,762.8			2,349.8
Indebtedness due to affiliate	30.0			—
Payable to related parties	14.1			11.0
Other liabilities	177.1			68.2
Separate account liabilities	2,052.7			2,061.8
Total liabilities	6,935.7			6,367.0
COMMITMENTS AND CONTINGENT LIABILITIES (Note 16)
STOCKHOLDER’S EQUITY:
Common stock, $5,000 par value: 1,000 shares authorized; 500 shares issued	2.5			2.5
Additional paid-in capital	847.2			802.2
Accumulated other comprehensive income (loss)	(11.9		)	11.4
Retained earnings (accumulated deficit)	(465.3		)	(521.0		)
Total stockholder’s equity	372.5			295.1
Total liabilities and stockholder’s equity	$	7,308.2		$	6,662.1

The accompanying notes are an integral part of these financial statements.

F-2

Table of Contents

PHL VARIABLE INSURANCE COMPANY

Statements of Income and Comprehensive Income

($ in millions)



	For the years ended December 31,
($ in millions)	2014			2013			2012
REVENUES:
Premiums	$	12.4		$	13.9		$	8.5
Insurance and investment product fees	358.3			367.0			365.2
Net investment income	172.0			140.9			130.9
Net realized investment gains (losses):
Total other-than-temporary impairment (“OTTI”) losses	(1.3		)	(0.9		)	(5.0		)
Portion of OTTI losses recognized in other comprehensive income (“OCI”)	—			(0.9		)	2.2
Net OTTI losses recognized in earnings	(1.3		)	(1.8		)	(2.8		)
Net realized investment gains (losses), excluding OTTI losses	(63.7		)	(1.2		)	(31.2		)
Net realized investment gains (losses)	(65.0		)	(3.0		)	(34.0		)
Total revenues	477.7			518.8			470.6

BENEFITS AND EXPENSES:
Policy benefits	397.7			277.6			389.3
Policy acquisition cost amortization	84.9			83.4			100.5
Other operating expenses	100.6			118.1			102.9
Total benefits and expenses	583.2			479.1			592.7
Income (loss) before income taxes	(105.5		)	39.7			(122.1		)
Income tax expense (benefit)	3.8			(24.7		)	17.0
Net income (loss)	$	(109.3	)	$	64.4		$	(139.1	)

FEES PAID TO RELATED PARTIES (Note 12)

COMPREHENSIVE INCOME (LOSS):
Net income (loss)	$	(109.3	)	$	64.4		$	(139.1	)
Other comprehensive income (loss) before income taxes:
Unrealized investment gains (losses), net of related offsets	48.6			(33.1		)	31.9
Less: Income tax expense (benefit) related to:
Unrealized investment gains (losses), net of related offsets	31.9			(11.6		)	24.3
Other comprehensive income (loss), net of income taxes	16.7			(21.5		)	7.6
Comprehensive income (loss)	$	(92.6

Filing Compare · PHL VARIABLE INSURANCE CO /CT/