Phoenix Cleared to Become Thrift Holding Company
Phoenix Cos. is the latest life insurer to move closer to a possible capital injection from the federal Treasury after gaining approval from the U.S. Office of Thrift Supervision to convert to a savings and loan holding company.
The OTS approved the Phoenix (NYSE: PNX) application in concert with its proposed take-over of Sugar Creek, Minn.-based American Sterling Bank. First announced in November, the deal marked Phoenix's bid to become eligible for the Treasury Department's Capital Purchase Program, which is limited to federally regulated, U.S.-controlled banks, savings associations, and certain bank and savings and loan holding companies.
In its announcement, OTS noted Phoenix proposed to "inject a significant amount of capital into the savings bank to re-capitalize the savings bank," and that insurer "has demonstrated adequate resources and appears financially successful and stable." The approval is contingent on the deal closing within 30 days; the bank meeting its obligations under the Community Reinvestment Act; and for OTS to review the backgrounds of certain senior Phoenix officers and directors.
Phoenix has noted that the transaction is contingent on receiving Treasury approval to participate in the CPP, as well as noting that it has "made no final decision to participate in the program" (BestWire, Nov. 21, 2008). Rolled out Oct. 14, the CPP allows eligible institutions to sell preferred shares, along with warrants for common shares, to the Treasury that pay 5% annual dividends for the first five years, which then escalate to 9% dividends thereafter.
The OTS previously approved applications by Hartford Financial Services Group and Lincoln National Corp. to purchase savings-and-loan institutions and convert to thrift holding company status, while a similar application by Genworth Financial Inc. remains under review (BestWire, Jan. 16, 2009). Dutch financial services giant Aegon N.V. had sought a similar conversion through its Cedar Rapids, Iowa-based subsidiary Transamerica Life Insurance Co., but it withdrew that application last month.
More recently, the Federal Reserve Board approved Protective Life Corp.'s application to become a bank holding company, as it looks to acquire Florida-based Bonifay Holding Co. Inc. and subsidiary Bank of Bonifay in a similar bid for CPP funds. Prudential Financial Inc. and Principal Financial Group, which both already were eligible for the CPP by virtue of their ownership of federally regulated savings banks, also have confirmed they applied to participate in the Treasury program.
On Jan. 15, A.M. Best assigned a negative outlook for Phoenix's life insurance entities, which currently are rated A (Excellent), citing "below-average operating returns, recently declining life insurance and annuity sales and lower predicted renewal premiums in the closed block."
"The revised outlook reflects Phoenix's significant unrealized loss position within its investment portfolio, as well as the dampening effect that the current environment has had on Phoenix’s previously favorable sales and earnings trends," A.M. Best said. "Additionally, given the market environment, A.M. Best anticipates material investment impairments at year-end 2008, with the likelihood of further write-downs in 2009."
Earlier this month, Phoenix spun off its Virtus Investment Partners wealth management unit into a separate, publicly traded firm, distributing one share of Virtus for every 20 shares of Phoenix held by stockholders. The company also filed a $750 million universal shelf registration with the U.S. Securities and Exchange Commission on Jan. 6, replacing the $750 million registration that expired Nov. 30, 2008.
(By R.J. Lehmann, Washington bureau manager: [email protected])
Advisor News
Annuity News
Health/Employee Benefits News
Property and Casualty News