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Sources: Troubled Insurer The Phoenix Cos. Explores Sale

The financially troubled Phoenix Cos. has hired investment banks Goldman Sachs Group Inc. and Sandler O'Neill and Partners to explore a sale, according to people familiar with the matter.

The Hartford-based life insurer began exploring a sale earlier this month, contacting potential buyers, the sources said.

Shares of the insurance holding company, which had a market capitalization of about $271 million, soared more than 14 percent on the news.

Representatives from Phoenix, Goldman Sachs and Sandler O'Neill declined to comment.

The company has struggled since the recession from a series of setbacks, including the 2009 loss of its distribution through State Farm and National Life Group, ratings downgrades and the discovery in fall 2012 that it had to restate several years of financial performance to the U.S. Securities and Exchange Commission.

On April 1, Phoenix restated its 2012 audited financials with the SEC. The company's 2013 annual filings were subsequently delayed and are now due to be filed with the regulators on Wednesday.

Phoenix, an old-line insurer that dates to 1851, has two main divisions: Phoenix Life Insurance Co. and its annuity business, PHL Variable Insurance Co.

The company was founded in Hartford by a group of business, religious and civic leaders as the American Temperance Life Insurance Co. It became Phoenix Mutual Life Insurance Co. in 1861.

Phoenix is headquartered in the distinctive boat building, a gleaming, blue-glass building that has two curved sides and that from the air resembles a canoe. The building turned 50 last year.

Problems with the company's financial statements surfaced on Sept. 18, 2012, when PHL Variable announced that its audited statements for 2009, 2010 and 2011 needed to be restated because the filings had errors in accounting for an intercompany reinsurance treaty between PHL Variable and Phoenix Life Insurance Co.

Last summer, A.M. Best Co. downgraded the financial strength ratings of the company to B, or fair, from B+, or good."

"A.M. Best has become concerned with the increased potential for material and adverse adjustments to be reported during the course of the restatement process, and the ultimate impact on Phoenix's reported GAAP and statutory results," the Oldwick, N.J., ratings agency said in an Aug. 28, 2013, release.

A March 21 settlement with the SEC called for payments of $375,000 to be made by both the parent company and PHL Variable.

In August 2012, the company did a 1-for-20 reverse stock split, reducing the shares of common stock from about 116 million to about 5.8 million.

In early 2009, financial analysts and ratings agencies expressed doubts about the company's financial well-being. State Farm said in March 2009 it would no longer offer Phoenix products. A day later, the company lost its next biggest distributor, Vermont-based National Life Group.

After the loss of its major distribution channels, the company stabilized with a much smaller staff. Phoenix has 620 workers, including 350 in Connecticut. In 2007, the company had 1,575 workers, and 855 in Connecticut. The decline in its workforce is a result of layoffs, attrition and divestitures.

A Phoenix spokeswoman would not confirm whether the company is for sale.

"As a matter of corporate policy, we do not comment on market speculation or rumors relating to our business," Phoenix spokeswoman Alice S. Ericson said in a statement.

Courant staff writer Matthew Sturdevant contributed to this story.

Copyright © 2014, The Baltimore Sun
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