485BPOS 1 d320260d485bpos.htm PHLVIC PHOENIX DIMENSIONS PHLVIC Phoenix Dimensions
Table of Contents

As filed with the Securities and Exchange Commission on April 26, 2012

File No. 333-123040

811-08914

 

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

FORM N-4

REGISTRATION STATEMENT

UNDER

  THE SECURITIES ACT OF 1933   
  Pre-Effective Amendment No.    ¨
  Post-Effective Amendment No. 15    x

and/or

REGISTRATION STATEMENT

UNDER

THE INVESTMENT COMPANY ACT OF 1940

  Amendment No. 159    x

(Check appropriate box or boxes.)

 

 

PHL Variable Accumulation Account

(Exact Name of Registrant)

 

 

PHL Variable Insurance Company

(Name of Depositor)

 

 

One American Row, Hartford, Connecticut 06102-5056

(Address of Depositor’s Principal Executive Offices) (Zip Code)

(800) 447-4312

(Depositor’s Telephone Number, including Area Code)

 

 

John H. Beers, Esq.

PHL Variable Insurance Company

One American Row

Hartford, CT 06102-5056

(Name and Address of Agent for Service)

 

 

Approximate Date of Proposed Public Offering: as soon as practicable after the effective date of the Registration Statement

It is proposed that this filing will become effective (check appropriate box)

  ¨ immediately upon filing pursuant to paragraph (b) of Rule 485
  x on April 30, 2012 pursuant to paragraph (b) of Rule 485
  ¨ 60 days after filing pursuant to paragraph (a)(1) of Rule 485
  ¨ on                      pursuant to paragraph (a)(1) of Rule 485

If appropriate, check the following box:

  ¨ this Post-Effective Amendment designates a new effective date for a previously filed Post-Effective Amendment.

 

 

Title of Securities Being Registered: Deferred variable annuity contracts

 

 

 

Table of Contents
Phoenix Dimensions®
PHL Variable Accumulation Account
Issued by: PHL Variable Insurance Company (“PHL Variable”)
 
PROSPECTUS April 30, 2012
 
This prospectus describes a variable and fixed accumulation deferred annuity contract offered to groups and individuals. The contract offers a variety of variable and fixed investment options. You may allocate premium payments and contract value to one or more of the investment options of the PHL Variable Accumulation Account (“Separate Account”) , the Market Value Adjusted Guaranteed Interest Account (“MVA”) and the Guaranteed Interest Account (“GIA”). The assets of each investment option will be used to purchase, at net asset value, shares of a series in the following designated funds.
AIM Variable Insurance Funds (Invesco Variable Insurance Funds)
 
 
❖  Invesco V.I. Core Equity Fund – Series I Shares1
❖  Invesco V.I. Mid Cap Core Equity Fund – Series I Shares1
 
❖  Invesco Van Kampen V.I. American Franchise Fund – Series I Shares2
❖  Invesco Van Kampen V.I. Equity and Income Fund – Series II Shares
 
The Alger Portfolios – Class I-2 Shares
❖  Alger Capital Appreciation Portfolio1
AllianceBernstein Variable Products Series Fund, Inc. – Class B
❖  AllianceBernstein VPS Balanced Wealth Strategy Portfolio
Calvert Variable Products, Inc.-Class 1
❖  Calvert VP S&P MidCap 400 Index Portfolio
DWS Investments VIT Funds – Class A
❖  DWS Equity 500 Index VIP
❖  DWS Small Cap Index VIP
Federated Insurance Series
❖  Federated Fund for U.S. Government Securities II
❖  Federated High Income Bond Fund II – Primary Shares
❖  Federated Prime Money Fund II
Fidelity® Variable Insurance Products – Service Class
❖  Fidelity® VIP Contrafund® Portfolio
❖  Fidelity® VIP Growth Opportunities Portfolio
❖  Fidelity® VIP Growth Portfolio
❖  Fidelity® VIP Investment Grade Bond Portfolio
Financial Investors Variable Insurance Trust – Class II
❖  Ibbotson Aggressive Growth ETF Asset Allocation Portfolio
❖  Ibbotson Balanced ETF Asset Allocation Portfolio
❖  Ibbotson Growth ETF Asset Allocation Portfolio
❖  Ibbotson Income and Growth ETF Asset Allocation Portfolio
Franklin Templeton Variable Insurance Products Trust – Class 2
❖  Franklin Flex Cap Growth Securities Fund
❖  Franklin Income Securities Fund
❖  Mutual Shares Securities Fund
❖  Templeton Developing Markets Securities Fund
❖  Templeton Foreign Securities Fund
❖  Templeton Growth Securities Fund
Lazard Retirement Series, Inc. – Service Shares
❖  Lazard Retirement U.S. Small-Mid Cap Equity Portfolio1
Lord Abbett Series Fund, Inc. – Class VC
❖  Lord Abbett Bond-Debenture Portfolio
❖  Lord Abbett Growth and Income Portfolio
 
❖  Lord Abbett Mid Cap Stock Portfolio3
 
Neuberger Berman Advisers Management Trust – Class S
❖  Neuberger Berman Advisers Management Trust Guardian Portfolio
❖  Neuberger Berman Advisers Management Trust Small Cap Growth Portfolio
Oppenheimer Variable Account Funds – Service Shares
❖  Oppenheimer Capital Appreciation Fund/VA
❖  Oppenheimer Global Securities Fund/VA
 
❖  Oppenheimer Main Street Small- & Mid-Cap Fund®/VA
 
PIMCO Variable Insurance Trust – Advisor Class
❖  PIMCO CommodityRealReturn® Strategy Portfolio
❖  PIMCO Real Return Portfolio
❖  PIMCO Total Return Portfolio
The Rydex Variable Trust
 
❖  Guggenheim VT U.S. Long Short Momentum Fund1, 4
 
❖  Rydex VT Inverse Government Long Bond Strategy Fund1
❖  Rydex VT Nova Fund 1
Sentinel Variable Products Trust
❖  Sentinel Variable Products Balanced Fund
❖  Sentinel Variable Products Bond Fund
❖  Sentinel Variable Products Common Stock Fund
❖  Sentinel Variable Products Mid Cap Fund
❖  Sentinel Variable Products Small Company Fund
Virtus Variable Insurance Trust
❖  Virtus Capital Growth Series
❖  Virtus Growth and Income Series
❖  Virtus International Series
❖  Virtus Multi-Sector Fixed Income Series
❖  Virtus Real Estate Securities Series
❖  Virtus Small-Cap Growth Series
❖  Virtus Small-Cap Value Series
❖  Virtus Strategic Allocation Series
Wanger Advisors Trust
❖  Wanger International
❖  Wanger International Select
❖  Wanger Select
❖  Wanger USA
 
1Closed to new investors on May 1, 2006. 2Effective April 30, 2012, Invesco V.I. Capital Appreciation Fund merged into Invesco Van Kampen V.I.Capital Growth Fund and was renamed Invesco Van Kampen V.I. American Franchise Fund. 3Name change effective May 1, 2012: Previously known as Lord Abbett Series Fund Mid Cap Value Portfolio. 4Name change effective May 1, 2012: Previously known as Rydex|SGI VT U.S. Long Short Momentum.
 
See Appendix A for additional information.
The contract is not a deposit of any bank, and is not insured or guaranteed by the Federal Deposit Insurance Corporation (“FDIC”) or any other government agency. The contract may go down in value. Replacing any existing contract with this contract may not be to your advantage. You should carefully compare this contract with your existing one and you must also determine if the replacement will result in any tax liability.
The Securities and Exchange Commission (“SEC”) has not approved or disapproved these securities, nor passed upon the accuracy or adequacy of this prospectus. Any representation to the contrary is a criminal offense.
Purchasing a variable annuity within a qualified plan or Individual Retirement Account/Annuity (IRA) does not provide any additional tax benefit. Variable annuities should not be sold in qualified plans or IRAs because of the tax-deferral feature alone, but rather when other benefits, such as lifetime income payments and death benefit protection support the recommendation.
 
This prospectus provides information that you should know before investing. Keep this prospectus for future reference. A Statement of Additional Information (“SAI”) dated April 30, 2012 is incorporated by reference and has been filed with the SEC and is available free of charge by contacting us at the address or phone number listed below. A table of contents of the SAI is available on the last page of this prospectus. If you have any questions, please contact:
PHL Variable Insurance Company
Annuity Operations Division PO Box 8027 Boston, MA 02266-8027 		Tel. 800/541-0171
 
TABLE OF CONTENTS
 
Heading Page
Glossary of Special Terms
4
Summary of Expenses
6
Contract Summary
10
Free Look Period
14
Financial Highlights
14
Financial Statements
14
Performance History
14
The Variable Accumulation Annuity
14
PHL Variable and the Separate Account
15
The Variable Investment Options
15
Administrative, Marketing and Support Service Fees
16
GIA
16
MVA
17
Deductions and Charges
18
5-Year Surrender Charge Fee
18
Annual Administrative Charge
18
Daily Administrative Fee
18
Important Information on Current Fees For Optional Benefit Riders
18
Mortality and Expense Risk Fee
22
Surrender Charges
23
Tax
24
Transfer Charge
24
Reduced Fees, Credits and Excess Interest for Eligible Groups
24
Other Charges
24
The Accumulation Period
24
Accumulation Units
24
Accumulation Unit Values
25
Purchase of Contracts
25
Additional Programs
25
Optional Benefits
31
Surrender of Contract and Withdrawals
66
Contract Termination
66
Payment Upon Death Before Maturity Date
66
Internet, Interactive Voice Response and Telephone Transfers
69
Market Timing and Other Disruptive Trading
69
The Annuity Period
71
Annuity Payments
71
Annuity Payment Options
71
Other Conditions
73
Payment Upon Death After Maturity Date
73
Variable Account Valuation Procedures
74
Valuation Date
74
Valuation Period
74
Accumulation Unit Value
74
Net Investment Factor
74
Miscellaneous Provisions
74
Assignment
74
Payment Deferral
74
Amendments to Contracts
75
Substitution of Fund Shares
75
Ownership of the Contract
75
Inherited/Stretch Annuity Feature
75
Community and Marital Property States
76
Federal Income Taxes
76
Introduction
76
Income Tax Status
77
Taxation of Annuities in General—Non-qualified Plans
77
Additional Considerations
78
 
2
Glossary of Special Terms
Most of the terms used throughout this prospectus are described within the text where they first appear. Certain terms marked by italics when they first appear are described below.
Account Value: The value of all assets held in the Separate Account.
Accumulation Unit: A standard of measurement for each investment option used to determine the value of a contract and the interest in the investment options prior to the start of annuity payments.
Accumulation Unit Value: The value of one accumulation unit was set at $1.000 on the date assets were first allocated to each investment option. The value of one accumulation unit on any subsequent valuation date is determined by multiplying the immediately preceding accumulation unit value by the applicable net investment factor for the valuation period just ended.
Annuitant(s)/Joint Annuitant: There may be one or two annuitants. One is the primary annuitant and the other is considered to be the joint annuitant. Prior to the maturity date the annuitants may be changed. However, there may be tax consequences.
Annuity Payment Option: The provisions under which we make a series of annuity payments to the annuitant or other payee, such as Life Annuity with Ten Years Certain. See “Annuity Payment Options.”
Annuity Unit: A standard of measurement used in determining the amount of each periodic payment under the variable payment Annuity Options I, J, K, M and N. The number of annuity units in each investment option with assets under the chosen option is equal to the portion of the first payment provided by that investment option divided by the annuity unit value for that investment option on the first payment calculation date.
Annuity Unit Value: On the first valuation date selected by us, we set all annuity unit values in each investment option of the Separate Account at $1.00. The annuity unit value on any subsequent valuation date is equal to the annuity unit value of the investment option on the immediately preceding valuation date multiplied by the net investment factor for that investment option for the valuation period divided by 1.00 plus the rate of interest for the number of days in the valuation period based on the assumed investment rate.
Claim Date: The valuation date following receipt of a certified copy of the death certificate at our Annuity Operations Division.
Contract Date: The date that the initial premium payment is invested under a contract.
Contract Owner (owner, you, your): Usually, the person or entity to whom we issue the contract.
Contract Value: Prior to the Maturity Date, the sum of all Accumulation Units held in the investment options of the Separate Account and the value held in the GIA and/or MVA. For Tax-sheltered Annuity plans (as described in Internal Revenue Code (IRC) 403(b)) with loans, the contract value is the sum of all Accumulation Units held in the investment options of the Account and the value held in the GIA and/or MVA plus the value held in the Loan Security Account, less any Loan Debt.
Death Benefit Options: The selected death benefit option determines the method of death benefit calculation upon death of the owner or if there are more than one owner, on the earliest death of any of the owners.
Fixed Payment Annuity: An annuity payment option providing payments with a fixed dollar amount after the first payment is made.
Inherited/Stretch Annuity: A post-death distribution option that provides an extended payout option for the beneficiary of a deceased Owner’s Contract.
MVA: An account that pays interest at a guaranteed rate if amounts allocated to the account are held to the end of the guarantee period. If amounts are withdrawn, transferred or applied to an annuity payment option before the end of the guarantee period we will make a market adjustment to the value of that account. Assets allocated to the MVA are not part of the assets allocated to the Separate Account or the general account of PHL Variable but are held in the Market Value Interest Adjusted Account established by PHL Variable. The MVA is described in a separate prospectus.
Maturity Date: The date elected by the owner as to when annuity payments will begin. Unless we agree otherwise, or as required by applicable law, the maturity date will not be any earlier than the fifth contract anniversary and no later than the younger annuitant’s 95th birthday or ten years from the contract date. The election is subject to certain conditions described in “The Annuity Period.” If there is more than one annuitant, the younger annuitant’s age will be used to determine that maturity date.
Minimum Initial Payment: The amount that you pay when you purchase a contract. We require minimum initial payments of:
❖  Non-qualified plans—$25,000
❖  IRA/Qualified plans—$3,500
Net Asset Value: Net asset value of a Series’ shares is computed by dividing the value of the net assets of the Series by the total number of Series’ outstanding shares.
 
Required Minimum Distribution (RMD): The annual distribution that must be taken from an IRA/qualified plan during the life of the Owner. The Required Minimum Distribution will be computed based on Internal Revenue Code requirements (including Internal Revenue Service guidance) and incorporates the actuarial value of all benefits under the contract. There is no lifetime RMD from a Roth IRA.
 
4
 
Spouse: Federal law defines “spouse” under the Defense of Marriage Act (DOMA), as a man or a woman legally joined. Neither individuals married under State or foreign laws that permit a marriage between two men or two women nor individuals participating in a civil union or other like status are spouses for any federal purposes, including provisions of the Internal Revenue Code relevant to this Contract. This definition may be modified to the extent that there is a change in Federal law to the definition of spouse. In addition, certain state laws have different definitions which apply to provisions of the contract which are not impacted by Federal law.
 
Valuation Date: A Valuation Date is every day the New York Stock Exchange (“NYSE”) is open for trading and we are open for business.
PHL Variable (our, us, we, company): PHL Variable Insurance Company.
5
Summary of Expenses
The following tables describe the fees and expenses that you will pay when owning and surrendering the contract. There are no additional fees, other than the contract fees set forth below, charged at the time you purchase this contract.
This table describes the fees and expenses that you will pay upon surrender of the contract or when you transfer contract value between investment options. State premium taxes ranging from 0.00% to 3.50%, depending on the state, may also be deducted.
When you purchase your contract, you will need to elect a Surrender Charge Schedule. The 5-Year Surrender Charge Schedule is an Optional Benefit and if you elect it, you will be charged the premium-based fee listed in the Optional Benefit Fees table (in addition to being subject to the 5-Year Surrender Charge Schedule).
CONTRACT OWNER TRANSACTION EXPENSES
7-Year Surrender Charge Schedule (as a percentage of amount surrendered):
Age of Premium Payment in Complete Years 0
 7%
Age of Premium Payment in Complete Years 1
 6%
Age of Premium Payment in Complete Years 2
 5%
Age of Premium Payment in Complete Years 3
 4%
Age of Premium Payment in Complete Years 4
 3%
Age of Premium Payment in Complete Years 5
 2%
Age of Premium Payment in Complete Years 6
 1%
Age of Premium Payment thereafter
 None
Optional 5-Year Surrender Charge Schedule (as a percentage of amount surrendered):
Age of Premium Payment in Complete Years 0
 7%
Age of Premium Payment in Complete Years 1
 6%
Age of Premium Payment in Complete Years 2
 5%
Age of Premium Payment in Complete Years 3
 4%
Age of Premium Payment in Complete Years 4
 3%
Age of Premium Payment thereafter
 None
Transfer Charge1
Current
 None
Maximum
$20
1 We reserve the right to impose a transfer charge of up to $20 per transfer after the first 12 transfers in each contract year. See “Transfer Charge.”
This table describes the fees and expenses that you will pay during the time you own the contract, not including annual fund fees and expenses.
ANNUAL ADMINISTRATIVE CHARGE
Current
 $35
Maximum2
 $35
MAXIMUM ANNUAL SEPARATE ACCOUNT EXPENSES (as a percentage of average Account Value)
Death Benefit Option 1 – Return of Premium
Mortality and Expense Risk Fee
 1.125%
Daily Administrative Fee
 .125%
Total Annual Separate Account Expenses
 1.250%
Death Benefit Option 2 – Annual Step-Up
Mortality and Expense Risk Fee
 1.375%
Daily Administrative Fee
 .125%
Total Annual Separate Account Expenses
 1.500%
Death Benefit Option 3 – Earnings Enhancement Benefit
Mortality and Expense Risk Fee
 1.375%
Daily Administrative Fee
 .125%
Total Annual Separate Account Expenses
 1.500%
Death Benefit Option 4 – Greater of Annual Step-Up or Annual Roll-Up
Mortality and Expense Risk Fee
 1.625%
Daily Administrative Fee
 .125%
Total Annual Separate Account Expenses
 1.750%
2 This charge is deducted annually on the contract anniversary on a pro rata basis from each of the selected investment options. See “Deductions and Charges.”
6
Optional Benefit Fees
This table describes the current and maximum 5-year surrender charge fee percentage and the maximum other fees and expenses that you will pay periodically during the time that you own the contract if you elect an optional benefit (excluding annual fund fees and expenses). These fees are charged in addition to the applicable charges shown in the preceding table in this Summary of Expenses.
5-YEAR SURRENDER CHARGE FEE PERCENTAGE*
Current
 0.25%
Maximum
1.00%
For an additional fee, a 5-Year Surrender Charge option can be elected in lieu of the 7-Year schedule, if you elect any of the Optional Guaranteed Benefits.
* The 5-Year Surrender Charge Fee Percentage will be deducted annually on the contract anniversary only if you elected the 5-Year Surrender Charge Schedule. The fee percentage is locked in at the time you elect the benefit. See “Optional Benefits.”
Only one of the following Optional Benefits can be elected. Consult with your financial advisor as to which Optional Benefit may fit your particular needs. If you select any optional benefit other than the Phoenix Income Protector, you must allocate all premium and contract value to an approved asset allocation program.
 
GUARANTEED MINIMUM ACCUMULATION BENEFIT (“GMAB”) FEE1
PHOENIX PRINCIPAL PROTECTOR
(as a percentage of the greater of the Guaranteed Amount4 or Contract Value)
Maximum
1.00%
 
GUARANTEED MINIMUM INCOME BENEFIT (GMIB) FEE2
PHOENIX INCOME PROTECTOR
(Not available beginning March 9, 2009)
(as a percentage of the greater of the Guaranteed Annuitization Value or Contract Value)
Maximum
1.00%
GUARANTEED MINIMUM WITHDRAWAL BENEFIT (GMWB) RIDER FEE4,5
PHOENIX FLEXIBLE WITHDRAWAL PROTECTORSM
Available August 18, 2008 subject to state approval
Fees effective March 9, 2009
Fees are expressed as a percentage of the greater of the Benefit Base6 and Contract Value
Single
Life Option 		Spousal
Life Option
Maximum fee without Extended Care Enhancement
 2.50% 2.50%
Maximum additional fee to add Extended Care Enhancement
 0.50% 0.50%
GUARANTEED MINIMUM WITHDRAWAL BENEFIT 2007 (GMWB 2007) FEE3
Prior to availability of Phoenix Flexible Withdrawal Protector in your applicable state
(as a percentage of the Greater of the Benefit Base6 and Contract Value)
Single
Life Option 		Spousal
Life Option
Maximum
1.50% 1.50%
GMWB Fee Version I Prior to January 16, 20073
(as a percentage of the greater of the Benefit Amount4 and Contract Value)
GMWB 5 – 5% Withdrawal Limit Lifetime GMWB – 5% Withdrawal Limit
Maximum
 1.00% Maximum
 1.00%
GMWB 7 – 7% Withdrawal Limit
 Lifetime GMWB for 2 – Spousal Continuation – 5% Withdrawal Limit
Maximum
1.00% Maximum
1.00%
FLEXIBLE COMBINATION BENEFIT (GMAB/GMWB) RIDER FEE4,5
PHOENIX RETIREMENT PROTECTORSM
Available August 18, 2008 subject to state approval
Fees effective March 9, 2009
Fees are expressed as a percentage of the greatest of the GMWB Benefit Base6, GMAB Benefit Base6 and Contract Value
Single
Life Option 		Spousal
Life Option
Maximum fee without optional Guaranteed Minimum Death Benefit
 2.75% 2.75%
Maximum additional fee to add optional Guaranteed Minimum Death Benefit
 0.50% 0.50%
7
1 The Phoenix Principal Protector fee is deducted annually on the contract anniversary, only if the benefit is selected. The current fee percentage is locked in at the time you elect the benefit. See “Optional Benefits” and “Important Information on Current Fees for Optional Benefit Riders.”
2 The Phoenix Income Protector fee is deducted annually on the contract anniversary only if the benefit is selected. The current fee percentage is locked in at the time you elect the benefit. See “Optional Benefits” and “Important Information on Current Fees for Optional Benefit Riders.”
3 The Guaranteed Minimum Withdrawal Benefit 2007 fee is deducted annually on the contract anniversary only if the benefit is elected. The fee will vary depending on which Version and option within a Version you elected. After January 15, 2007 and before Phoenix Flexible Withdrawal Protector became available in your applicable state only GMWB 2007 was available. For GMWB 2007, the then current fee applied at the time you elected the benefit. The fee percentage may be subject to increases after election, but will not exceed the maximum charge shown above. For Version I the current fee percentage was locked in at the time you elected the benefit. The fee charged at the time you elect the Optional Reset may be higher or lower than when you first elected Version I. The fee, however, will not exceed the maximum charge shown above. See “Optional Benefits” and “Important Information on Current Fees for Optional Benefit Riders.”
4 See “Important Information on Current Fees for Optional Benefit Riders” for information on current fees. We may change the current fees. If your Benefit Base “steps-up” as provided by the rider, the current fee in effect at the time of the step-up will be applicable to your contract. See “Optional Benefits”, “Phoenix Flexible Withdrawal Protector”, and “Phoenix Retirement Protector” for descriptions of the rider-specific step-up features, the impact of a step-up on your rider fee, and how you may decline an automatic step-up.
5 The maximum fee shown in this table is the highest fee for this rider. A different fee applies to various asset allocation options. If you choose this rider, you must allocate all premium and contract value to an approved asset allocation program. If you transfer from one asset allocation program or option to another during a rider year, the fee percentage you will pay for the rider will be the highest applicable rider fee associated with the various asset allocation programs in which your contract value was invested during that rider year. The rider fee is deducted on each contract anniversary when the rider is in effect for your contract and is generally deducted on a pro rata basis from each investment option and, if allocation to the GIA and MVA is then permitted, the GIA and the MVA in which the contract has value. Upon contract surrender or rider termination, we will deduct a portion of the annual rider fee for the portion of the contract year elapsed from the surrender proceeds or the contract value, respectively.
6 The Benefit Base for Phoenix Flexible Withdrawal Protector and GMWB 2007, and the GMAB Benefit Base and the GMWB Benefit Base under the Phoenix Retirement Protector rider are amounts we calculate solely to determine the value of the benefit(s) provided by the rider and unlike the Contract Value, are not available for withdrawals or surrenders. These amounts are affected by various factors including withdrawals and premium payments. See the description of these riders in “Optional Benefits” for information about how each Benefit Base is calculated and used.
 
The table below shows the minimum and maximum fees and expenses as a percentage of daily net assets, for the year ended December 31, 2011, charged by the funds that you may pay indirectly during the time that you own the contract. This table does not reflect any fees that may be imposed by the funds for short-term trading. Funds of funds may have higher operating expenses than other funds since funds of funds invest in underlying funds which have their own expenses. Total Annual Fund Operating Expenses are deducted from a fund’s assets and include management fees, distribution and/or 12b-1 fees, and other expenses, but do not include any redemption fees that may be imposed by various funds. More detail concerning each of the fund’s fees and expenses is contained in the prospectus for each fund.
 
TOTAL ANNUAL FUND OPERATING EXPENSES
 
Minimum Maximum
Gross Annual Fund Operating Expenses
 0.33% 4.89%
Net Annual Fund Operating Expenses1
 0.33% 4.89%
1 Advisors and/or other service providers to the funds have contractually agreed to reduce the management fees or reimburse certain fees and expenses for certain funds. The Gross Total Annual Fund Operating Expenses shown in the first row of the table do not reflect the effect of any fee reductions or reimbursements. The Net Annual Fund Operating Expenses shown in the second row reflects the effect of fee reductions and waiver arrangements that are contractually in effect at least through April 30, 2013. There can be no assurance that any contractual arrangement will extend beyond its current terms and you should know that these arrangements may exclude certain extraordinary expenses. See each fund’s prospectus for details about the annual operating expenses of that fund and any waiver or reimbursement arrangements that may be in effect.
 
8
EXPENSE EXAMPLES
These examples will help you compare the cost of investing in the contract if you elect the 5-Year Surrender Charge Schedule and the Phoenix Retirement Protector Rider with the optional Guaranteed Minimum Death Benefit at a maximum fee of 3.25%. These examples reflect the maximum charges under the contract and assume that optional benefit charges are assessed as a percentage of Contract Value.
If you surrender your contract prior to the Maturity Date, or after the Maturity Date under Variable Annuity Payment Options K or L, your maximum costs would be:
Death Benefit Option 1
 
1 Year 3 Years 5 Years 10 Years
$1,522 $3,033 $4,428 (surrender)
$4,212 (annuitize) 		$7,574
 
Death Benefit Option 2
 
1 Year 3 Years 5 Years 10 Years
$1,544 $3,090 $4,510 (surrender)
$4,297 (annuitize) 		$7,682
 
Death Benefit Option 3
 
1 Year 3 Years 5 Years 10 Years
$1,544 $3,090 $4,510 (surrender)
$4,297 (annuitize) 		$7,682
 
Death Benefit Option 4
 
1 Year 3 Years 5 Years 10 Years
$1,566 $3,146 $4,591 (surrender)
$4,381 (annuitize) 		$7,787
 
If you do not surrender or annuitize your contract at the end of the applicable time period, your maximum costs would be:
Death Benefit Option 1
 
1 Year 3 Years 5 Years 10 Years
$920 $2,640 $4,212 $7,574
 
Death Benefit Option 2
 
1 Year 3 Years 5 Years 10 Years
$943 $2,700 $4,297 $7,682
 
Death Benefit Option 3
 
1 Year 3 Years 5 Years 10 Years
$943 $2,700 $4,297 $7,682
 
Death Benefit Option 4
 
1 Year 3 Years 5 Years 10 Years
$966 $2,759 $4,381 $7,787
These examples are intended to help you compare the cost of investing in the contract with the cost of investing in other variable annuity contracts. These costs include contract owner transaction expenses, maximum annual administrative charges, maximum transfer charges, maximum contract fees, maximum rider and benefit fees, separate account annual expenses and the maximum annual fund operating expenses that were charged for the year ended 12/31/11.
 
The examples assume that you invest $10,000 in the contract for the time periods indicated. The examples also assume that your investment has a 5% return each year and assumes the maximum fees and expenses of the funds and that you have allocated all of your contract value to the fund with the maximum fees and expenses. Although your actual costs may be higher or lower based on these assumptions, your costs are shown in the table above.
9
Contract Summary
This prospectus contains information about all the material rights and features of the annuity contract that you should understand before investing. This summary describes the general provisions of the annuity contract.
Overview
This contract is designed to give you maximum flexibility in obtaining your investment goals. The contract is intended for those seeking income and long-term tax-deferred accumulation of assets to provide income for retirement or other purposes. Those considering the contract for other purposes should consult with their tax advisors. Participants in qualified plans and IRAs should note that this contract does not provide any additional tax deferral benefits beyond those provided by the qualified plan or IRA and should not consider the contract for its tax treatment, but for its investment and annuity benefits. For more information, see “Purchase of Contracts.”
The contract offers a combination of variable and fixed investment options. Investments in the variable options provide results that vary and depend upon the performance of the underlying funds. The owner assumes the risk of gain or loss according to the performance of the underlying funds. Investments in the GIA or MVA provide guaranteed interest earnings subject to certain conditions. There is no guarantee that the contract value will equal or exceed payments made under the contract at maturity date. For more information, see “The Variable Investment Options,” “GIA,” and “MVA.”
You select a death benefit option suitable to your financial objectives. The Death Benefit Options differ in the manner in which the death benefit and the amount of the mortality and expense risk fee are calculated. Age restrictions may apply to each death benefit option. For more information, see “The Accumulation Period—Payment Upon Death Before the Maturity Date” and “Taxation of Annuities in General—Nonqualified Plans” and “Taxation of Annuities in General—Qualified Plans.”
Although investment performance is not guaranteed in a variable annuity, each Optional Living Benefit rider available with this annuity provides a type of guarantee but only if you meet certain conditions. You should read the section entitled “Optional Benefits” carefully if you think you may be interested in one of the Optional Benefit riders. When choosing any Optional Living Benefit rider for your annuity, it is important to understand if your long-term need for a guarantee pertains to accumulation, income, future withdrawals, or a combination thereof to ensure the Optional Living Benefit you choose suits your financial long term needs. You should know that all guarantees are based on the claims paying ability of the issuing company. When purchasing any annuity with a guaranteed benefit, you should not only consider the additional costs of the living benefit but compare the total cost of the annuity to determine if the annuity suits your needs.
Optional Guaranteed Benefits
You may elect one of the following optional benefits with the contract:
❖   a Guaranteed Minimum Accumulation Benefit (GMAB) (called Phoenix Principal Protector),
❖   a Guaranteed Minimum Income Benefit (GMIB) (called Phoenix Income Protector. The Phoenix Income Protector is not available beginning March 9, 2009),
❖   a Guaranteed Minimum Withdrawal Benefit (GMWB) (called Phoenix Flexible Withdrawal ProtectorSM) plus, for an additional fee, an optional Extended Care Enhancement, or
We call these benefits “Optional Guaranteed Benefits”. These benefits are provided by rider and have separate fees. The guarantees provided by the Optional Benefits in excess of your Contract Value are based on the claims-paying ability of PHL Variable. If you elect an Optional Guaranteed Benefit, you must allocate all premium and contract value to an asset allocation program approved by us for use with these riders (except when you elect Phoenix Income Protector). Taking contract withdrawals during the effective dates of these riders may reduce their benefits. For more information, see “Deductions and Charges”, “Additional Programs” and “Optional Benefits”.
Suitability
Annuities are designed for long-term financial planning and are not designed for short-term investment strategies. Make sure you understand all the options for payment and how long you must wait before annuity payments begin. While an annuity offers the potential for appreciation, fees, charges, and poor investment performance can negatively affect the value of your annuity. You bear the investment risk, whether a gain or loss, for any contract value allocated to the Separate Account.
Annuities do not provide any additional tax deferred advantages when they fund a qualified plan, or an IRA. If your only or main investment objective for your qualified plan or IRA is tax deferral, an annuity product may be more expensive than other products providing tax deferred benefits.
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Replacements
Replacing your existing variable annuity contract(s) with this contract may not be to your advantage. Talk with your registered representative before you replace any existing contract. Carefully compare the risks, charges, and benefits of your existing contract to this contract to determine if a replacement benefits you. Replacing your contract could result in adverse tax consequences. Consult with your tax professional. Once you have replaced your contract, you generally cannot reinstate it unless state law requires the insurer to do so, even if you choose not to accept your new contract during your “free look” period.
Conflicts of Interest
Broker-dealers and registered representatives often sell products issued by several different and unaffiliated insurance companies. The amount of compensation payable to them may vary significantly. Compensation paid to a broker-dealer or registered representative also varies between products issued by the same insurance company. This includes additional compensation payable as part of certain service arrangements. A broker-dealer and its registered representatives may have an incentive to promote or sell one product over another depending on these differences in the compensation. As a result, you may potentially be sold a product that does not best suit your needs. Talk to your registered representative about potential conflicts of interest created by varying compensation plans. More information about the types of compensation arrangements we offer is contained in the “Sales of Variable Accumulation Contracts” section of this prospectus.
Investment Features
Flexible Premium Payments
❖   You may make premium payments anytime until the maturity date for non-qualified contracts. For IRA/qualified plan contracts, there are federal limitations regarding premium payments after a set age.
❖   You can vary the amount and frequency of your premium payments for non-qualified contracts. For IRA/qualified plan contracts, there are federal limitations regarding the amount of premium payments.
❖   Other than the Minimum Initial Payment, there are no required premium payments.
Minimum Premium Payment
❖   Generally, the Minimum Initial Payment is $3,500 for a qualified plan and $25,000 for nonqualified plans. For more information, see “Purchase of Contracts.”
Allocation of Premiums and Contract Value
❖   Premium payments are invested in one or more of the investment options, GIA and the MVA. Each investment option invests directly in a mutual fund. GIA is not available in Massachusetts. The MVA is not available for investment after the Maturity Date. Each investment option invests directly in a professionally managed fund.
❖   Prior to the Maturity Date, you may elect to transfer all or any part of the Contract Value among one or more investment options or the GIA, subject to the limitations established for the GIA and the restrictions related to disruptive trading and market timing. After the Maturity Date under variable annuity payment options, you may elect to transfer all or any part of the Contract Value among one or more investment options. For more information, refer to “GIA,” “Internet, Interactive Voice Response and Telephone Transfers,” and “Market Timing and Other Disruptive Trading.”
❖   Transfers between the investment options and from the investment options into the MVA are subject to disruptive trading and market timing restrictions. For more information, see “Market Timing and Other Disruptive Trading.” Transfers from the MVA may be subject to market value adjustments and are subject to certain rules. For more information see “MVA” and the MVA prospectus.
❖   The contract value allocated to the investment options varies with the investment performance of the funds and is not guaranteed.
❖   The contract value allocated to the GIA will depend on deductions taken from the GIA and interest accumulated at rates we set. Subject to state insurance department approval, the Minimum Guaranteed Interest Rate will equal the statutory required minimum interest rate under applicable state insurance law where the contract is delivered (generally between 1% and 3%).
❖   Payments and transfers to the GIA are subject to a maximum GIA percentage. The maximum GIA percentage is the maximum amount of a premium payment or total contract value that can be allocated to the GIA. The maximum amount is expressed as a percentage and that percentage will never be less than 5%.
❖   You may participate in one of the asset allocation programs we offer. Participation in a program is optional, unless you elect an Optional Guaranteed Benefit (other than Phoenix Income Protector). If you elect an Optional Guaranteed Benefit (other than Phoenix Income Protector) you must allocate all premium payments and Contract Value to one of the programs approved for use with those benefits. We may offer other programs in the future however, whether those programs will be made available to both current and prospective contract owners will be determined at the sole discretion of the Company. For more information about the programs, refer to “Asset Allocation and Strategic Programs” below.
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Withdrawals
❖   You may partially or fully surrender the contract anytime for its contract value less any applicable surrender charge, market value adjustment and premium tax.
 
❖   Each year you may withdraw part of your Contract Value free of any surrender charges. In the first contract year, you may withdraw up to 10% of the Contract Value at the time of the first withdrawal without surrender charges. In subsequent years, the free withdrawal amount is 10% of the Contract Value as of the end of the previous contract year. Any unused percentage of the free withdrawal amount from prior years may be carried forward to the current contract year, up to a maximum of 30% of your Contract Value as of the last contract anniversary. Withdrawals in the amount of the “Required Minimum Distribution” (“RMD”), as defined in the Internal Revenue Code may also be made without a surrender charge. For more information, see “Deductions and Charges—Surrender Charges.”
 
❖   Withdrawals may be subject to income tax on any gains plus a 10% penalty tax if the Contract Owner is under age 59½. For more information, see “Federal Income Taxes.”
❖   Withdrawals may negatively impact guarantees provided by certain Optional Living Benefit riders if certain conditions are not met. Please see the section entitled “Optional Benefits” for further details.
Deductions and Charges
From the Contract Value
❖   Annual Administrative Charge—maximum of $35 each year. For more information, see “Deductions and Charges.”
❖   Guaranteed Minimum Accumulation Benefit (Phoenix Principal Protector) fee—the current fee percentage shown on your rider specifications page multiplied by the greater of the guaranteed amount and the contract value on the date the fee is deducted. For more information, see “Deductions and Charges” and “Important Information on Current Fees for Optional Benefit Riders” below.
❖   Guaranteed Minimum Income Benefit Rider (Phoenix Income Protector) fee—the current fee percentage shown on your rider specifications page multiplied by the greater of the guaranteed annuitization value and the contract value on the date the fee is deducted. For more information, see “Deductions and Charges” and “Important Information on Current Fees for Optional Benefit Riders” below.
❖   Guaranteed Minimum Withdrawal Benefit (Phoenix Flexible Withdrawal Protector) fee—the fee equals a stated percentage multiplied by the greater of the Benefit Base and the Contract Value. The fee for this rider depends on whether you choose the single life option or the joint life option, and which asset allocation model you have chosen for allocation of your premium payments and Contract Values. Additionally, if you choose the Extended Care Enhancement for your rider (not available after contract issue date), we assess a charge for that feature. The maximum fees are shown in the table of “Optional Benefit Fees”. The fee for your rider may change if you change asset allocation models or if you do not decline an automatic step-up provided by the rider. If you change asset allocation programs during a contract year and the rider fees related to the use of those programs are different, you will pay the highest rider fee associated with the various asset allocation programs in which your Contract Value was invested during that contract year. Also, you will pay the current rider fee then in effect beginning on the date of any automatic step-up of the Benefit Base. For more information see “Important Information on Current Fees for Optional Benefit Riders.” See “Optional Benefits” for additional information about the impact of an automatic step-up on your rider and your ability to decline a step-up.
❖    GMWB 2007 fee. The fee percentage varies depending upon when you elected the Benefit and which Version, and option within a version you elected.
For GMWB 2007 (issued on or after January 16, 2007 and prior to the availability of Phoenix Flexible Withdrawal Protector in your applicable state), the fee is equal to a stated percentage multiplied by the greater of the Benefit Base and Contract Value on the date that the fee is deducted. The maximum fee percentages are shown in the table of “Optional Benefit Fees.”
We may increase the rider fee percentage, but it will not exceed the maximum rider fee percentage shown in the table of “Optional Benefit Fees.” For more information see “Important Information on Current Fees for Optional Benefit Riders.”
Version I (issued prior to January 16, 2007)—the fee percentage will vary depending on which one of the four available GMWB versions you elected. The fee is equal to a stated percentage multiplied by the greater of Benefit Amount and Contract Value on the date the fee is deducted. The maximum fee percentages are shown in the table of “Optional Benefit Fees.”
For more information, see “Deductions and Charges” and “Important Information on Current Fees for Optional Benefit Riders.” below.
❖   Combination Guaranteed Minimum Accumulation Benefit/Guaranteed Minimum Withdrawal Benefit (Phoenix Retirement Protector) fee—the fee equals a stated percentage multiplied by the greatest of the GMWB Benefit Base, the GMAB Benefit Base, and the Contract Value. The fee for this rider depends on whether you choose the single life option or the joint life option, and which asset allocation model you have chosen for allocation of your premium payments and Contract Values. Additionally, if you choose the Guaranteed Minimum Death Benefit option (not available after contract issue date) for your rider, we assess a charge for that feature. The maximum fees are shown in the table of “Optional Benefit Fees”. The fee for your rider may change if you change asset allocation models. If you change asset allocation programs during a contract year and the rider fees related to the use of those programs are
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different, you will pay the highest rider fee associated with the various asset allocation programs in which your Contract Value was invested during that contract year. Also, you will pay the current rider fee then in effect beginning on the date of an automatic step-up of the GMWB Benefit Base or elective step-up of the GMAB Benefit Base as provided by the rider. For more information see “Important Information on Current Fees for Optional Benefit Riders.” See “Optional Benefits” for additional information about the impact of an automatic or elective step-up on your rider and your ability to decline an automatic step-up.
❖   Market Value Adjustment—any withdrawal from the MVA is subject to a market value adjustment and is taken from the withdrawal amount. For more information, see “MVA.”
❖   Surrender Charges—may occur when you surrender your contract or request a withdrawal if the assets have not been held under the contract for a specified period of time. If we impose a surrender charge, it is deducted from amounts withdrawn. The surrender charge is designed to recover the expense of distributing contracts that are terminated before distribution expenses have been recouped from revenue generated by these contracts.
Two surrender charge schedules are available. There is no additional fee applicable to the 7-Year Surrender Charge Schedule.
7-Year Surrender Charge Schedule:
Percent 7% 6% 5% 4% 3% 2% 1% 0%
Age of Premium Payment in Complete Years 0 1 2 3 4 5 6 7+
If, however, you elect the optional 5-Year Surrender Charge Schedule, you will be charged a fee. Currently, the fee is 0.25% of each premium payment for five contract anniversaries following each payment. The fee will not exceed the maximum percentage of 1.0%.
5-Year Surrender Charge Schedule:
Percent 7% 6% 5% 4% 3% 0%
Age of Premium Payment in Complete Years 0 1 2 3 4 5+
No surrender charges are taken upon the death of the owner. A declining surrender charge is assessed on withdrawals in excess of the free withdrawal amount, based on the date the premium payments are deposited.
For more information, see “Deductions and Charges” below.
❖   Taxes—taken from the contract value upon premium payments or commencement of annuity payments.
• PHL Variable will reimburse itself for such taxes upon the remittance to the applicable state. For more information, see “Tax” and Appendix B.
❖   Transfer Charge—currently, there is no transfer charge, however, we reserve the right to charge up to $20 per transfer after the first 12 transfers each contract year. For more information, see “Deductions and Charges.”
From the Separate Account
❖   Daily administrative fee—currently 0.125% annually. For more information, see “Deductions and Charges.”
❖   Mortality and expense risk fee—varies based on the benefit option selected. For more information, see “Deductions and Charges.”
Other Charges or Deductions
In addition, certain charges are deducted from the assets of the funds for investment management services. For more information, see the fund prospectuses.
Death Benefit
The death benefit is calculated differently under each Death Benefit Option and the amount varies based on the Option selected.
Death Benefit Options
The contract offers four Death Benefit Options. At purchase, you select a death benefit option that best meets your financial needs. Each death benefit option varies in the method of death benefit calculation, the amount of the mortality and expense risk fee. Age restrictions apply to certain Death Benefit Options.
For more information, see “The Accumulation Period—Payment Upon Death Before Maturity Date.”
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Additional Information
Free Look Period
We may mail the contract to you or we may deliver it to you in person. You may return a contract for any reason within ten days after you receive it and receive in cash the adjusted Contract Value less any charges. (A longer Free Look Period may be required by your state.) If a portion or all of your initial premium payment has been allocated to the GIA, we also will refund any earned interest. However, if applicable state or federal law requires a return of premium payments less any withdrawals, we will return the greater of premium payments less any withdrawals or the Contract Value less any applicable surrender charges.
Termination
If on any Valuation Date the total Contract Value equals zero, the contract will immediately terminate without value, unless you elected the Guaranteed Minimum Withdrawal Benefit rider and the Benefit Amount is greater than zero.
Financial Highlights
Financial highlights give the historical value for a single unit of each of the available investment options and the number of units outstanding at the end of each of the past ten years, or since the investment option began operations, if less. These tables are highlights only.
More information, including the Separate Account and Company financial statements, is in the SAI and in the annual report. You may obtain a copy of the SAI by calling the Annuity Operations Division at 800/541-0171.
There are four different sets of financial highlight tables in this prospectus, please be sure you refer to the appropriate set for your contract. The tables are set forth in Appendix C.
Financial Statements
 
The financial statements of PHL Variable Accumulation Account as of December 31, 2011, and the results of its operations and the changes in its net assets for each of the periods indicated and the financial statements of PHL Variable Insurance Company as of December 31, 2011 and 2010, and for each of the three years in the period ended December 31, 2011 are contained in the Statement of Additional Information (SAI), which you can get free of charge by calling the toll free number given on page one by writing to us at Phoenix Variable Products Mail Operations, P.O. Box 8027, Boston MA 02266-8027, or by visiting our website www.phoenixwm.com. In addition, the SAI is available on the SEC’s website at www.sec.gov. The financial statements of PHL Variable Insurance Company included herein should be considered only as bearing upon the ability of PHL Variable Insurance Company to meet its obligations under the policies. You should not consider them as bearing on the investment performance of the assets held in the Separate Account or the Guaranteed Interest Account’s rates that we credit during a guarantee period.
 
Performance History
We may include the performance history of the investment options in advertisements, sales literature or reports. Performance information about each investment option is based on past performance only and is not an indication of future performance. Historical returns are usually calculated for one, five and ten years. If the investment option has not been in existence for at least one year, returns are calculated from inception of the investment option. Standardized average annual total return is measured by comparing the value of a hypothetical $1,000 investment in the investment option at the beginning of the relevant period to the value of the investment at the end of the period, assuming the reinvestment of all distributions at Net Asset Value and the deduction of all applicable contract charges except for taxes (which may vary by state).
The Variable Accumulation Annuity
The individual deferred variable accumulation annuity contract (the “contract”) issued by PHL Variable is significantly different from a fixed annuity contract in that, unless the GIA or MVA is selected, it is the owner under a contract who bears the risk of investment gain or loss rather than PHL Variable. To the extent that payments are not allocated to the GIA or MVA, the amounts that will be available for annuity payments under a contract will depend on the investment performance of the amounts allocated to the investment options. Upon the maturity of a contract, the amounts held under a contract will continue to be invested in the Separate Account and monthly annuity payments will vary in accordance with the investment experience of the investment options selected. However, a fixed annuity may be elected, in which case the amounts held under a contract will be transferred to the General Account of PHL Variable and PHL Variable will guarantee specified monthly annuity payments.
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PHL Variable and the Separate Account
We are PHL Variable Insurance Company, a Connecticut stock life insurance company incorporated on July 15, 1981 (“PHL Variable”). We sell life insurance policies and annuity contracts through producers of affiliated distribution companies and through brokers. Our executive and our administrative offices are located at One American Row, Hartford, Connecticut, 06102-5056.
PHL Variable is a wholly owned subsidiary of Phoenix Life Insurance Company (“Phoenix”) through its holding company, PM Holdings, Inc. Phoenix is a life insurance company, which is wholly owned by The Phoenix Companies, Inc. (“PNX”), which is a manufacturer of insurance, annuity and asset management products.
On December 7, 1994, we established the Separate Account, a separate account created under the insurance laws of Connecticut. The Separate Account is registered with the SEC as a unit investment trust under the Investment Company Act of 1940 (the “1940 Act”) and it meets the definition of a “separate account” under the 1940 Act. Registration under the 1940 Act does not involve supervision by the SEC of the management or investment practices or policies of the Separate Account or of PHL Variable.
The Separate Account has several investment options with varying degrees of investment risk. You may make contributions to the Separate Account but you assume all of the investment risk for the contract value that you contribute and allocate to the Separate Account. You may also make contributions to the MVA. The MVA is a non-unitized separate account established pursuant to Connecticut insurance law. For more complete information see the “MVA” section below. Under Connecticut law these Separate Account assets are segregated from our general account and all income, gains or losses, whether or not realized, of the Separate Account must be credited to or charged against the amounts placed in the Separate Account without regard to the other income, gains and losses from any other business or activity of the insurer. The assets of the Separate Account may not be used to pay liabilities arising out of any other business that an insurer conducts and as such are insulated from the creditors of the insurer. However, the assets in the Separate Account are attributable to more than one variable annuity product or to more than one variable life insurance product that we sell. Therefore, although these assets are insulated from our creditors, they all may be used to support Separate Account obligations. To the extent that the assets in the Separate Account become deficient for any reason, we will transfer assets from our General Account to the extent they are available. We reserve the right to add, remove, modify, or substitute any investment option in the Separate Account.
Obligations under the contracts are obligations of PHL Variable Insurance Company. You may make contributions to the GIA which is supported by the assets in PHL Variable’s general account and such contributions are not invested in the Separate Account. The GIA is part of the general account of PHL Variable (the “General Account”). The General Account supports all insurance and annuity obligations of PHL Variable and is made up of all of its general assets other than those allocated to any separate account such as the Separate Account. For more complete information, see the “GIA” section below.
Contract Guarantees
Any guarantee under the contract, such as interest credited to the GIA, MVA, or any guarantee provided by a rider to your variable annuity are paid from our general account. Therefore, any amounts that we may pay under the contract as part of a guarantee are subject to our long-term ability to make such payments. The assets of the Separate Account are available to cover the liabilities of our General Account to the extent that the Separate Account assets exceed the Separate Account liabilities arising under the policies supported by it.
 
Under Connecticut law, insurance companies are required to hold a specified amount of reserves in order to meet the contractual obligations of their general account to contract owners. State insurance regulators also require insurance companies to maintain a minimum amount of capital, which acts as a cushion in the event that the insurer suffers a financial impairment, based on the inherent risks in the insurer’s operations. These risks include those associated with losses that an insurer could incur as the result of its own investment of its general account assets, which could include bonds, mortgages, general real estate investments, and stocks. Useful information about Phoenix’s financial strength, including information on our General Account portfolio of investments, may be found on our website located under “About Us”/“Financial Strength” along with information on ratings assigned to us by one or more independent rating organizations. Additionally, the consolidated financial statements and financial schedules from PNX and subsidiaries’ Annual Report on Form 10-K for the year ended December 31, 2011 and any applicable amendments, may also be found on our website, www.phoenixwm.com, or a copy of any of the above referenced documents may be obtained for free by calling our Annuity Operations Division.
 
The Variable Investment Options
You choose the variable investment options to which you allocate your premium payments. These variable investment options are investment options of the Separate Account. The investment options invest in the underlying funds. You are not investing directly in the underlying fund. Each underlying fund is a portfolio of an open-end management investment company that is registered with the SEC under the Investment Company Act of 1940. These underlying funds are not publicly traded and are offered only through variable annuity and variable life insurance products, or directly to tax qualified plans. They are not the same retail mutual funds as those offered outside of a variable annuity or variable life insurance product, or directly to tax qualified plans, although the investment practices and fund names may be similar, and the portfolio managers may be identical. Accordingly, the performance of the underlying fund is likely to be different from that of the retail mutual fund, and you should not compare the two.
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The underlying funds offered through this product are selected by the Company based on several criteria, including asset class coverage, the strength of the manager’s reputation and tenure, brand recognition, performance, and the capability and qualification of each sponsoring investment firm. Another factor the Company considers during the initial selection process is whether the underlying fund or an affiliate of the underlying fund will compensate the Company for providing administrative, marketing, and support services that would otherwise be provided by the underlying fund, the underlying fund’s investment advisor, or its distributor. Finally, when the Company develops a variable annuity (or life) product in cooperation with a fund family or distributor (e.g. a “private label” product), the Company will generally include underlying funds based on recommendations made by the fund family or distributor, whose selection criteria may differ from the Company’s selection criteria.
Each underlying fund is reviewed periodically after having been selected. Upon review, the Company may remove an underlying fund or restrict allocation of additional premium payments to an underlying fund if the Company determines the underlying fund no longer meets one or more of the criteria and/or if the underlying fund has not attracted significant contract owner assets.
In addition, if any of the underlying funds become unavailable for allocating premium payments, or if we believe that further investment in an underlying fund is inappropriate for the purposes of the Contract, we may substitute another variable investment option. However, we will not make any substitutions without notifying you and obtaining any state and SEC approval, if necessary. From time to time we may make new variable investment options available.
You will find detailed information about the underlying funds and their inherent risks in the current prospectuses for the underlying funds. Since each option has varying degrees of risk, please read the prospectuses carefully. There is no assurance that any of the underlying funds will meet its investment objectives. Copies of the fund prospectuses may be obtained by contacting our Annuity Operations Division at the address or telephone number provided on the first page of this prospectus.
Administrative, Marketing and Support Service Fees
The Company and/or the principal underwriter for the Contracts have entered into agreements with the investment adviser, subadviser, distributor, and/or affiliated companies of most of the underlying funds. These agreements compensate the Company and/or the principal underwriter for the Contracts for providing certain administrative, marketing, or other support services to the underlying funds.
Proceeds of these payments may be used for any corporate purpose, including payment of expenses that the Company and the principal underwriter for the Contracts incur in promoting, issuing, distributing and administering the Contracts. As stated previously, such payments are a factor in choosing which funds to offer in the Company’s variable products. These payments may be significant and the Company and its affiliates may profit from them.
The payments are generally based on a percentage of the average assets of each underlying fund allocated to the variable investment options under the contract or other contracts offered by the Company. The amount of the fee that an underlying fund and its affiliates pay the Company and/or the Company’s affiliates is negotiated and varies with each underlying fund. Aggregate fees relating to the different underlying funds may be as much as 0.40% of the average net assets of an underlying fund attributable to the relevant contracts. A portion of these payments may come from revenue derived from the distribution and/or service fees (12b-1 fees) that are paid by an underlying fund out of its assets as part of its total annual operating expenses and is not paid directly from the assets of your variable insurance product.
These payments reflect in part the administrative service expense savings derived by the funds by having a sole shareholder rather than multiple shareholders in connection with the Separate Account’s investments in the funds.
These administrative services may include, but are not limited to, providing information about the funds from time to time, answering questions concerning the funds, including questions respecting Variable Contract owners’ interests in one or more of the funds, distributing, printing, and mailing of: the underlying funds’ prospectus and any applicable supplement; annual and semi-annual reports; proxy materials (including tabulating and transmitting proxies executed by or on behalf of Variable Contract owner’s); electronic and teleservicing support in connection with the funds; maintenance of investor records reflecting shares purchased, redeemed, transferred and share balances, and conveyance of that information to the fund.
For additional information concerning the available investment options, please see Appendix A.
GIA
Note: Currently, if you have the Phoenix Principal Protector, GMWB, Phoenix Flexible Withdrawal Protector, or Phoenix Retirement Protector in effect for your contract, you cannot transfer Contract Value or allocate premiums to the GIA. All of your premium and contract value must be allocated to an asset allocation program approved by us. We may remove this restriction at any time in the future, e.g. while you participate in an Enhanced Dollar Cost Averaging Program.
In addition to the Separate Account, you may allocate premiums or transfer values to the GIA. Amounts you allocate or transfer to the GIA become part of our general account assets. You do not share in the investment experience of those assets. Rather, we guarantee a minimum rate of return on the allocated amount, as provided under the terms of your product. Although we are not obligated to credit interest at a higher rate than the minimum, we may credit interest at a higher rate than the minimum for new and existing deposits.
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We reserve the right to limit total deposits to the GIA, including transfers, to no more than $250,000 during any one-week period per policy.
Prior to the Maturity Date you may make transfers into or out of the GIA subject to the GIA restrictions described in this section. In general, you may make only one transfer per year out of the GIA. The amount that can be transferred out is limited to the greater of $1,000 or 25% of the Contract Value in the GIA as of the date of the transfer. Also, the Contract Value allocated to the GIA may be transferred out to one or more of the investment options over a consecutive 4-year period according to the following schedule:
❖  Year One: 25% of the total value
❖  Year Two: 33% of remaining value
❖  Year Three: 50% of remaining value
❖  Year Four: 100% of remaining value
We are temporarily waiving these restrictions for transfers out of the GIA to the MVA beginning May 1, 2009. You should know that special charges associated with withdrawals and surrenders apply to the MVA, so you should carefully read the section entitled “MVA” of this prospectus as well as the MVA prospectus for more complete information. We reserve the right to reinstate the transfer restrictions from the GIA to the MVA at any time without advance notice to you.
Transfers from the GIA may also be subject to other rules as described throughout this prospectus. The GIA is available only during the accumulation phase of your contract.
Because of exemptive and exclusionary provisions, we have not registered interests in our general account under the Securities Act of 1933. Also, we have not registered our general account as an investment company under the 1940 Act, as amended. Therefore, neither the general account nor any of its interests are subject to these Acts, and the SEC has not reviewed the general account disclosures. These disclosures may, however, be subject to certain provisions of the federal securities law regarding accuracy and completeness of statements made in this prospectus.
GIA Restrictions
Contracts are subject to a Maximum GIA Percentage provision that restricts investments in the GIA. The Maximum GIA Percentage will never be less than 5%. No more than the Maximum GIA Percentage of each premium payment may be allocated to the GIA. We will not permit transfers into the GIA during the first year, nor allow any transfers during subsequent years that would result in GIA investments exceeding the Maximum GIA Percentage of Contract Value. If you elect the Guaranteed Minimum Accumulation Benefit or the Guaranteed Minimum Withdrawal Benefit, you may not allocate premiums or transfer values to the GIA. These restrictions as well as the availability of the GIA are subject to state insurance department approval. GIA is not available in Massachusetts.
MVA
The MVA is an account that pays interest at a guaranteed rate if amounts allocated to the MVA are held to the end of the guarantee period. If amounts are withdrawn, transferred or applied to an Annuity Payment Option before the end of the guarantee period, a market value adjustment will be made. The MVA is available only during the accumulation phase of your contract. If you elect any Optional Guaranteed Benefit (other than the Phoenix Income Protector) you may not allocate premiums or transfer values to the MVA.
The MVA option currently offers different guarantee periods, which provide you with the ability to earn interest at different guaranteed rates on all or part of your Contract Value. Each allocation has its own guaranteed rate and expiration date. Because we change guaranteed rates periodically, amounts allocated to a guarantee period at different times will have different guaranteed rates and expiration dates. The applicable guaranteed rate, however, does not change during the guarantee period. We will notify you of the expiration of the guarantee period and of your available options within 30 days of the expiration date. You will have 15 days before and 15 days following the expiration date (“window period”) to notify us of your election. During this window period, any withdrawals or transfers from the MVA will not be subject to a market value adjustment. Unless you elect to transfer funds to a different guarantee period, to the investment options of the Separate Account, to the GIA or elect to withdraw funds, we will begin another guarantee period of the same duration as the one just ended and credit interest at the current rate for that new guarantee period. If you choose a guarantee period that is no longer available or if your original guarantee period is no longer available, we will use the guarantee period with the next longest duration.
We reserve the right, at any time, to discontinue guarantee periods or to offer guarantee periods that differ from those available at the time your contract was issued. Since guarantee periods may change, please contact us to determine the current guarantee periods being offered.
Any withdrawal from the MVA will be subject to a market value adjustment unless the effective date of the withdrawal is within the window period. The market value adjustment will be applied to the amount being withdrawn after the deduction of any applicable administrative charge and before the deduction of any applicable contingent deferred sales charges (surrender charges). The market value adjustment can be positive or negative. The amount being withdrawn after application of the market value adjustment can be greater than or less than the amount withdrawn before the application of the market value adjustment.
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A market value adjustment will not be applied upon the payment of the death benefit.
The market value adjustment will reflect the relationship between the current rate (defined below) for the amount being withdrawn and the guaranteed rate. It is also reflective of the time remaining in the applicable guarantee period. Generally, if the guaranteed rate is equal to or lower than the applicable current rate, the market value adjustment will result in a lower payment upon withdrawal. Conversely, if the guaranteed rate is higher than the applicable current rate, the market value adjustment will produce a higher payment upon withdrawal. Assets allocated to the MVA are not part of the assets allocated to the Separate Account or to PHL Variable’s general account. The availability of the MVA is subject to state approval. The MVA is more fully described in a separate prospectus that should be read carefully before investing.
Deductions and Charges
5-Year Surrender Charge Fee
If you elect the 5-Year Surrender Charge Schedule, we will deduct a fee for five contract anniversaries following each premium payment. The fee is calculated by applying the fee percentage to each premium payment. If multiple premium payments are submitted in any one year, these will be added together and the fee applied to the total. The fee is deducted in arrears on each contract anniversary date and upon full surrender of the contract. If you surrender your contract on any other date than the contract anniversary, the fee will be deducted proportionately based on the number of months completed during the contract year.
The current fee percentage is locked in at the time you elect this benefit. Currently the fee percentage is equal to 0.250%. However, we reserve the right to charge up to 1.000%.
Annual Administrative Charge
We deduct an annual administrative charge from the Contract Value. This charge is used to reimburse us for some of the administrative expenses we incur in establishing and maintaining the contracts.
The maximum and current annual administrative charge under a contract is $35. This charge is deducted annually on the contract anniversary date. It is deducted on a pro rata basis from the investment options, GIA or MVA in which you have an interest. If you fully surrender your contract, the full administrative fee if applicable, will be deducted at the time of surrender. The administrative charge will not be deducted (either annually or upon withdrawal) if your Contract Value is $50,000 or more on the day the administrative charge is due. This charge may be decreased but will never increase. If you elect Annuity Payment Options I, J, K, M or N, the annual administrative charge after the Maturity Date will be deducted from each annuity payment in equal amounts.
Daily Administrative Fee
We make a daily deduction from the Contract Value to cover the costs of administration. This current fee is based on an annual rate of 0.125% and is taken against the net assets of the investment options. It compensates the company for administrative expenses that exceed revenues from the annual administrative charge described above. (This fee is not deducted from the GIA or MVA).
Market Value Adjustment
Any withdrawal from your MVA will be subject to a market value adjustment. See the MVA prospectus for information relating to this option.
Important Information on Current Fees For Optional Benefit Riders
Phoenix Principal Protector Fee
You should assume that the guaranteed maximum fee percentage disclosed in this prospectus for the above referenced Optional Benefits will be charged unless we notify you that we will be charging a lower fee percentage or “fee.” If we choose to offer a fee that is lower than the maximum guaranteed fee percentages described in the “Optional Benefit Fee Table,” we will provide that fee to you in writing on a form satisfactory to us. If you accept the fee by signing the form, and the rest of your application is in good order, we will issue your rider and the fee reflected on that form will apply to your rider. The fee will also be reflected on the rider specification pages of your rider. While we do not have the right to change your fee once you purchase the rider, we do reserve the right to increase or decrease the fee for new purchasers, provided that we do not exceed the maximum fee percentage shown in the “Optional Benefit Fee Table.”
Phoenix Income Protector Fee
This rider is no longer offered for sale. Your current fee percentage or “fee” was locked in at the time you purchased the rider. The current fee applied to your rider is the fee displayed on the rider specification pages of your rider. While we do not have the right to change your fee once you have purchased the rider, we reserved the right to increase or decrease the fee for new purchasers, provided that we did not exceed the maximum fee percentage shown in the “Optional Benefit Fee Table.”
GMWB Version I Fee (Offered Prior to January 16, 2007)
This rider is no longer offered for sale. Your current fee percentage or “fee” was locked in at the time you purchased the rider. The fee percentage is displayed on the rider specifications pages of your rider. Unless you exercise the Optional Reset provision as described in your rider, we do not have the right to change your fee once you have purchased the rider. When you exercise the Optional Reset feature,
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you terminate your existing rider and purchase a new rider. To the extent an Optional Reset election is made, you will be charged the then current fee for the new rider which you purchase. Currently, only the Phoenix Flexible Withdrawal Protector rider is available for an Optional Reset. We reserved the right to increase or decrease that fee for new purchasers, including those who exercise the Optional Reset provision as described by their riders. In no case did we exceed the maximum fee percentage shown in the “Optional Benefit Fee Table” for this rider, or in the case of an Optional Reset, in no case did we exceed the maximum fee percentage for the new rider that was purchased To determine whether or not we are offering a fee lower than the guaranteed maximum fee percentage for the Phoenix Withdrawal Protector, please call the Annuity Operations Division or visit our website at www.phoenixwm.com. Please see the section entitled, “Optional Reset” for more complete information on Optional Resets.
GMWB 2007 Fee
This rider is no longer offered for sale. Your current fee percentage or “fee” was set at the time you purchased the rider and is displayed on the rider specification pages of your rider. It cannot change unless your Benefit Base “steps-up” as provided by your rider. We will notify you of a new fee in writing 30 days prior to the effective date of the fee increase (your rider anniversary date.) If your rider is eligible to “step-up” it will do so automatically. This fee will not change again unless an automatic step-up occurs again. Any new fee we may offer will never exceed the maximum guaranteed fee percentages as described in the “Optional Benefit Fee Table” of this prospectus. You may decline an automatic step-up to avoid future rate increases by notifying us at least seven days prior to your rider anniversary.
Phoenix Flexible Withdrawal Protector Fee and Phoenix Retirement Protector Fee
You should assume that the guaranteed maximum fee percentage disclosed in this prospectus for the above referenced Optional Benefits will be charged unless we notify you that we will be charging a lower fee percentage or “fee”. If we choose to offer a fee that is lower than the maximum guaranteed fee percentages described in the “Optional Benefit Fee Table,” we will notify you in two ways: Before your application is submitted, we will provide you with the applicable fees in writing as described below. Once the Contract is issued, we will notify you in writing prior to your eligibility of a “step-up” as provided by your rider because “step-ups” can increase your fees.
Because the fees for the above referenced riders vary by asset allocation program, there is a set of fees (one fee for each asset allocation program) that applies to your rider. If we choose to offer a set of fees that are lower than the maximum guaranteed fee percentages described in the “Optional Benefit Fee Table,” we will provide that set of fees on a form satisfactory to us. If you accept those fees by signing the form, and the rest of your application is in good order, we will issue your rider and the fee schedule reflected on that form will apply to your rider (“Initial Fee Schedule”). The fee for the asset allocation program in which you are first invested will be reflected on the rider specification pages of your rider. As stated previously, these fee percentages vary by asset allocation program. It is important that you review the fees for each asset allocation program because if you transfer into a new asset allocation program with a higher fee, the fee percentage that you will pay for the rider will be the highest fee percentage associated with the various asset allocation programs in which your Contract Value was invested during that rider year. You may request a copy of the signed form by calling our Annuity Operations Division.
The fees in your Initial Fee Schedule can only increase if your Benefit Base “steps-up” automatically or if you elect a “step-up” as provided under the GMAB portion of the Phoenix Retirement Protector Rider. We will notify you in writing 30 days prior to your rider anniversary date, if the fee for the asset allocation program in which you are currently invested will be raised or lowered. We will also notify you in writing on your rider anniversary date of the new fee schedule for each asset allocation program to which you may transfer Contract Value. These fees will not change again unless an automatic step-up occurs again or unless you elect another step-up as provided under the GMAB portion of the Phoenix Retirement Protector Rider. Any new fee schedule that we may offer will never exceed the maximum guaranteed fee percentages as described in the “Optional Benefit Fee Table” of this prospectus. You may decline an automatic step-up under Phoenix Flexible Withdrawal Protector or the GMWB portion of the Phoenix Retirement Protector Rider to avoid future rate increases by notifying us at least seven days prior to your rider anniversary.
You may also find the current fee schedule, as well as previous fee schedules on our website, www.phoenixwm.com.
This document describes whether or not we are currently offering a fee schedule lower than the guaranteed maximum fee percentage shown in this prospectus and the effective date of those fees. If you have not purchased a Rider yet, you should know that this fee schedule may change on a monthly basis. However, if your Rider was issued within five business days of a fee schedule change, you will receive the fee schedule in effect as of the date of your application.
Guaranteed Minimum Accumulation Benefit (Phoenix Principal Protector) Fee
If the Phoenix Principal Protector rider is part of your contract, we will deduct a fee. The fee is deducted on each contract anniversary during the ten year term. If this benefit terminates on a contract anniversary prior to the end of the term for any reason other than death or commencement of annuity payments, the entire fee will be deducted. If this benefit terminates on any other day prior to the end of the term for any reason other than death or commencement of annuity payments, a prorated portion of the fee will be deducted. The rider fee will be deducted from the total Contract Value with each investment option bearing a pro rata share of such fee, based on the proportionate Contract Value of each investment option. We will waive the fee if the benefit terminates due to death or commencement of annuity payments. Should any of the investment options become depleted, we will proportionally increase the deduction from the remaining investment options unless we agree otherwise.
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The current fee percentage is locked in at the time you elect this benefit. The fee is equal to the Rider Fee Percentage shown on your rider specifications page, multiplied by the greater of the guaranteed amount or Contract Value on the day that the fee is deducted. (See the section “Important Information on Current Fees for Optional Benefit Riders” for more complete information.) However, we reserve the right to charge up to the maximum fee percentage shown in the table of “Optional Benefit Fees,” multiplied by the greater of the guaranteed amount or Contract Value on the day that the fee is deducted.
If you elect the Phoenix Principal Protector, you will be unable to elect any other Optional Benefit.
Guaranteed Minimum Income Benefit Rider (Phoenix Income Protector) Fee
If the Phoenix Income Protector rider is part of your contract, we will deduct a fee. The fee is equal to the Rider Fee Percentage shown on your rider specifications page, multiplied by the greater of the guaranteed annuitization value or the Contract Value on the date that the rider fee is deducted.
The maximum fee is the fee percentage shown in the table of “Optional Benefit Fees” multiplied by the greater of the guaranteed annuitization value or the Contract Value on the date that the rider fee is deducted. The current fee percentage is locked in at the time you elect this benefit. (See the section “Important Information on Current Fees for Optional Benefit Riders” for more information.) The fee is deducted on each contract anniversary that this rider is in effect. If this rider terminates on the contract anniversary, the entire fee will be deducted. If this rider terminates on any other day, a prorated portion of the fee will be deducted. The rider fee will be deducted from the total contract value with each investment option, GIA and MVA, if available, bearing a pro rata share of such fee based on the proportionate contract value of each investment option, GIA and MVA. We will waive the rider fee if the contract value on any contract anniversary is greater than twice the guaranteed annuitization value. Should any of the investment options become depleted, we will proportionally increase the deduction from the remaining investment options unless we agree otherwise.
If you elect the Phoenix Income Protector, you will be unable to elect any other Optional Benefit.
Guaranteed Minimum Withdrawal Benefit (Phoenix Flexible Withdrawal Protector) Fee
If you have elected Phoenix Flexible Withdrawal Protector for your contract, we will deduct the rider fee on each rider anniversary while the rider is in effect. Currently, the rider anniversary is the same as the contract anniversary. The fee for this rider is a percentage of the greater of Contract Value or the rider Benefit Base on the date the fee is deducted. We calculate and deduct the rider fee amount after any applicable roll-up and before any automatic step-up of the rider Benefit Base.
Sample calculation of the rider fee without the optional extended care enhancement
Assume that you have reached the end of first rider year, and that your rider fee percentage is 2.50%, your initial Benefit Base was $100,000, you made an additional premium payment of $10,000 during the first rider year and your Contract Value is $110,500. Also, assume that you made no withdrawals during the rider year and that you have not elected to opt-out of automatic step-ups.
The Benefit Base at the end of the first rider year is equal to the Benefit Base on the rider date ($100,000) plus the amount of the additional premium payment ($10,000) or $110,000.
Assume that your roll-up percentage is 6.5%. The roll-up amount is equal to 6.5% multiplied by the Benefit Base on the rider date ($100,000) plus the sum of all subsequent premium payments made during the first rider year or [6.5% * ($100,000 + $10,000)] = $7,150.
The Benefit Base after roll-up is the current Benefit Base ($110,000) compared to the following amount: the current Benefit Base ($110,000) plus the roll-up amount for the first rider year ($7,150). The Benefit Base after roll-up is therefore $117,150 ($110,000 + $7,150).
Your rider fee is $2,929 (2.50% of the greater of $110,500 and the $117,150). This rider fee is assessed against your Contract Value and your Contract Value becomes $107,571 ($110,500-$2,929).
The maximum fee percentage for Phoenix Flexible Withdrawal Protector and the maximum additional fee percentage to add the optional Extended Care Enhancement (not available after the contract issue date) are shown in the table of “Optional Benefit Fees.” The current fee percentage in effect at the time your Phoenix Flexible Withdrawal Protector rider is issued is shown on your rider specifications page and varies depending on whether the single life or spousal life option is selected and which asset allocation program is selected. In addition, it may change if your step-up your Benefit Base. See the section entitled “Important Information on Current Fees for Optional Benefit Riders” for more complete information. An additional current fee amount is charged if you add the Extended Care Enhancement. This fee is shown on your rider specifications page, does not vary based on single or spousal life option or the asset allocation program you select and is assessed along with and in the same manner as the fee for the Phoenix Flexible Withdrawal Protector without the Extended Care Enhancement. See the table of “Optional Benefit Fees” for details.
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If you change asset allocation programs during a rider year and the rider fees related to the use of those programs are different, you will pay the highest applicable rider fee associated with the various asset allocation programs in which your Contract Value was invested during that rider year. We may also increase your fee on the date of any automatic step-up to the Benefit Base for this rider. If you do not decline an automatic step-up, you will pay the current rider fee then in effect beginning on the date of any automatic step-up of the Benefit Base.
Sample calculation of the rider fee after transfer to an asset allocation program with a higher rider fee percentage
Assume that at the beginning of your rider year, the rider fee for the asset allocation program you chose was 0.85% and that, during the rider year you chose to reallocate all your Contract Value to another approved asset allocation program for which the rider fee was 1.05%.
At the end of this rider year, your rider fee percentage will be 1.05%. This rider fee percentage is applied to the greater of the Benefit Base and the Contract Value. If the Benefit Base was $100,000 and the Contract Value was $98,000, then the rider fee would be $1,050 (1.05% times $100,000).
In any case, the fee will not exceed the maximum percentage. See “Optional Benefits”, “Phoenix Flexible Withdrawal Protector” for additional information on the potential impact of the step-up feature on the rider fee and your ability to decline the step-up.
Unless we agree otherwise, the rider fee will be deducted from total Contract Value with each investment option and, if allocation to the GIA and MVA is then permitted, the GIA and MVA in which the contract has value bearing a pro rata share of such fee based on the proportionate value in each of those accounts.
If this rider terminates on a contract anniversary for any reason other than death or commencement of annuity payments, the entire rider fee will be deducted. If this rider terminates on any other day, for any reason other than death or commencement of annuity payments, a prorated portion of the fee will be deducted. The prorated rider fee is calculated by multiplying the fee percentage then in effect for the rider by the greater of the Benefit Base or the Contract Value on the date the rider terminates, and then multiplying this amount by the result of the number of days elapsed in the rider year divided by the total number of days of that year.
Fees for GMWB 2007 and prior versions (available only if Phoenix Retirement Protector is not available in your applicable state)
If GMWB 2007 or an earlier version of the rider is part of your contract, we will deduct a fee. The fee is deducted on each contract anniversary that this rider is in effect. If the rider terminates on the contract anniversary for any reason other than death or commencement of annuity payments, the entire fee will be deducted. If the rider terminates on any other day for any reason other than death or commencement of annuity payments, a prorated portion of the fee will be deducted. The rider fee will be deducted from the total Contract Value with each investment option, GIA and MVA, if applicable, bearing a pro rata share of such fee based on the proportionate Contract Value of each investment option, GIA and MVA, if applicable. We will waive the fee if the benefit terminates due to death or commencement of annuity payments. Should any of the investment options become depleted, we will proportionally increase the deduction from the remaining investment options unless we agree otherwise.
The fee percentage will vary depending on when you elected GMWB and which Version, and option within a Version, of GMWB you elected.
For GMWB 2007 (issued on or after January 16, 2007), the fee is equal to a stated percentage multiplied by the greater of the Benefit Base and Contract Value on the date that the fee is deducted. The maximum fee percentages are listed in the table of “Optional Benefit Fees.” See the section “Important Information on Current Fees for Optional Benefit Riders” for more information on current fees.
We may increase the rider fee percentage, but it will not exceed the maximum rider fee percentage shown in the table of “Optional Benefit Fees.”
For Version I (issued prior to January 16, 2007), the fee percentage will vary depending on which one of the four available GMWB versions you elected. The fee is equal to a stated percentage multiplied by the greater of Benefit Amount and Contract Value on the date the fee is deducted. The maximum fee percentages are listed in the table of “Optional Benefit Fees.” See the section “Important Information on Current Fees for Optional Benefit Riders” for more information on current fees.
We may increase the rider fee percentage, but it will not exceed the maximum rider fee percentage shown in the table of “Optional Benefit Fees.” The current fee percentage is locked in on the date that this rider is added to the contract.
If you elect the Guaranteed Minimum Withdrawal Benefit, you will be unable to elect either any other Optional Benefit.
Combination Guaranteed Minimum Accumulation Benefit/Guaranteed Minimum Withdrawal Benefit (Phoenix Retirement Protector) Fee
If you have elected the Phoenix Retirement Protector for your contract, we will deduct the rider fee on each rider anniversary while the rider is in effect. Currently, the rider anniversary is the same as the contract anniversary. The fee for this rider is a percentage of the greatest of (a) Contract Value, (b) the GMAB Benefit Base, and (c) the GMWB Benefit Base on the date the fee is deducted. The rider fee
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amount is calculated and deducted after any applicable roll-up of the GMWB Benefit Base and before any automatic step-up of the GMWB Benefit Base and elective step-up of the GMAB Benefit Base. See the section called “Optional Benefits”, “Phoenix Retirement Protector” for a description of the Benefit Base amounts, the roll-up and step-up features.
The maximum fee percentage for Phoenix Retirement Protector and the maximum additional fee percentage to add the optional guaranteed minimum death benefit (not available after the contract issue date) are shown in the table of “Optional Benefit Fees.” The current fee percentage in effect at the time your Phoenix Retirement Protector rider is issued is shown on your rider specifications page and varies depending on whether the single life or spousal life option is selected and which asset allocation program is selected. In addition, it may change if you step-up your Benefit Base. See the section entitled “Important Information on Current Fees for Optional Benefit Riders” for more complete information. An additional current fee amount is charged if you add the optional guaranteed minimum death benefit. This fee is shown on your rider specifications page, does not vary based on single or spousal life option or the asset allocation program you select and is assessed along with and in the same manner as the fee for the Phoenix Retirement Protector without the Guaranteed Minimum Death Benefit. See the table of “Optional Benefit Fees” for details. For information regarding fees effective in other prior periods, please contact the Annuity Operations Division.
If you change asset allocation programs during a rider year and the rider fees related to the use of those programs are different, you will pay the highest applicable rider fee associated with the various asset allocation programs in which your Contract Value was invested during that rider year. We may also increase the rider fee for your rider on the date of any automatic step-up of the GMWB Benefit Base or elective step-up of the GMAB Benefit Base. If you do not decline an automatic step-up of the GMWB Benefit Base or you elect a step-up of the GMAB Benefit Base, you will pay the current rider fee then in effect beginning on the date of any step-up of the applicable Benefit Base.
In any case, the rider fee will not exceed the maximum percentage. See “Optional Benefits” for additional information on the potential impact of the automatic step-up feature and the elective step-up feature on the rider fee and your ability to decline the automatic step-up and/or not elect the elective step-up.
Unless we agree otherwise, the rider fee will be deducted from total Contract Value with each investment option, and, if allocation to the GIA and MVA is then permitted, the GIA and MVA in which the contract has value bearing a pro rata share of such fee based on the proportionate value in each of those accounts.
If this rider terminates on a contract anniversary for any reason other than death or commencement of annuity payments, the entire rider fee will be deducted. If this rider terminates on any other day, for any reason other than death or commencement of annuity payments, a prorated portion of the fee will be deducted. The prorated rider fee is calculated by multiplying the fee percentage then in effect for the rider by the greatest of the GMWB Benefit Base, the GMAB Benefit Base and the Contract Value on the date the rider terminates, and then multiplying this amount by the result of the number of days elapsed in the rider year divided by the total number of days of that year.
Mortality and Expense Risk Fee
We make a daily deduction from each investment option for the mortality and expense risk fee. The charge is assessed against the daily net assets of the investment options and varies based on the death benefit option you selected. The current charge under each death benefit option is equal to the following percentages on an annual basis:
Death Benefit Option 1
Return of Premium 		Death Benefit Option 2
Annual Step-Up
1.125% 1.375%
Death Benefit Option 3
Earnings Enhancement
Benefit 		Death Benefit Option 4
Greater of Annual Step-Up
or Annual Roll-Up
1.375% 1.625%
Although you bear the investment risk of the Series in which you invest, once you begin receiving annuity payments that carry life contingencies the annuity payments are guaranteed by us to continue for as long as the Annuitant lives. We assume the risk that Annuitants as a class may live longer than expected (requiring a greater number of annuity payments) and that our actual expenses may be higher than the expense charges provided for in the contract.
In assuming the mortality risk, we promise to make these lifetime annuity payments to the owner or other payee for as long as the Annuitant lives.
No mortality and expense risk fee is deducted from the GIA or MVA. If the charges prove insufficient to cover actual administrative costs, then the loss will be borne by us; conversely, if the amount deducted proves more than sufficient, the excess will be a profit to us.
We have concluded that there is a reasonable likelihood that the distribution financing arrangement being used in connection with the contract will benefit the Separate Account and the Contract Owners.
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Surrender Charges
A surrender charge may apply to withdrawals or a full surrender of the contract prior to the Maturity Date or after the Maturity Date under Variable Annuity Payment Options K or L. The amount of a surrender charge depends on the period of time your premium payments are held under the contract and which surrender schedule you elected (refer to the charts shown below). The surrender charge is designed to recover the expense of distributing contracts that are terminated before distribution expenses have been recouped from revenue generated by these contracts. They are contingent charges because they are paid only if you surrender your contract within the surrender period. Surrender charges are waived on the free withdrawal amount and on death benefits. Surrender charges will also be waived when you begin taking annuity payments provided your contract has been in effect for five years. Also, no surrender charge will be taken after the annuity period has begun except with respect to unscheduled withdrawals under Annuity Payment Options K or L. For more information, see “Annuity Payment Options.” Any surrender charge imposed is deducted from amounts withdrawn. The surrender charge is calculated on a first-in, first-out basis. In other words, we calculate your surrender charge by assuming your withdrawal is applied to premium payments in the order your premium payments were received.
 
The surrender charge is deducted from amounts withdrawn in excess of the free withdrawal amount available at the time of the withdrawal up to the total of all premium payments paid less any prior withdrawals for which a surrender charge was paid. The free withdrawal amount is equal to 10% of the Contract Value. In the first contract year, you may withdraw up to 10% of the Contract Value at the time of the first withdrawal without surrender charges. In subsequent years, the free withdrawal amount is 10% of the Contract Value as of the end of the previous contract year. Withdrawals in the amount of the “Required Minimum Distribution” (“RMD”), as defined in the Internal Revenue Code may also be made without a surrender charge. Any unused percentage of the free withdrawal amount from prior years may be carried forward to the current contract year, up to a maximum of 30% of your Contract Value as of the last contract anniversary.
 
The surrender charges, expressed as a percentage of the amount withdrawn in excess of the 10% free withdrawal amount, are as follows:
7-Year Surrender Charge Schedule (no fee charged)
Percent 7% 6% 5% 4% 3% 2% 1% 0%
Age of Premium Payment in Complete Years 0 1 2 3 4 5 6 7+
5-Year Surrender Charge Schedule (additional fee charged)
Percent 7% 6% 5% 4% 3% 0%
Age of Premium Payment in Complete Years 0 1 2 3 4 5+
If you elect the 5-Year Surrender Charge Schedule, we will deduct a fee of 0.250% of each premium payment for five contract anniversaries following each premium payment. The fee will be deducted in arrears on each contract anniversary for five years. If this benefit terminates on any other day for any reason other than death or commencement of annuity payments, a pro rated portion of the fee will be deducted.
This contract allows you to choose between two distinct Surrender Charge Schedules. You should consult with a qualified financial advisor before making your election.
Amounts deducted to pay the surrender charges on partial withdrawals are subject to a surrender charge. A surrender charge will be deducted from the affected investment options, GIA and MVA on a pro rata basis. If you request a net withdrawal of a specified amount, we will deduct the surrender charges from the remaining Contract Value. This will result in an additional surrender charge when a net withdrawal is requested. If you request a gross withdrawal of a specified amount, we will deduct the surrender charges from the amount requested. Any distribution costs not paid for by surrender charges will be paid by PHL Variable from the assets of the General Account.
Any withdrawal from the MVA will be subject to a market value adjustment unless the effective date of the withdrawal is within the window period. The market value adjustment will be applied to the amount being withdrawn after the deduction of any applicable administrative charge and before the deduction of any applicable surrender charges. The market value adjustment can be positive or negative. The amount being withdrawn after application of the market value adjustment can be greater than or less than the amount withdrawn before the application of the market value adjustment. For more information, see “MVA” or refer to the MVA prospectus.
Under this contract surrender charges may be waived due to two life situations: admission into a nursing home or a terminal illness. There are no fees for these waivers.
Nursing Home Waiver. Prior to Maturity Date, you may surrender all or a portion of the Contract Value without a surrender charge, provided that:
(a) more than one year has elapsed since the Contract Date; and
(b) the withdrawal is requested within two years of the owner’s admission into a Licensed Nursing Home Facility; and
(c) the owner has been confined to the Licensed Nursing Home Facility (as defined below) for at least the preceding 120 days.
This waiver is subject to state approval (note: this waiver is not available in Massachusetts).
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Licensed Nursing Home Facility: a state licensed hospital or state licensed skilled or intermediate care nursing facility at which medical treatment is available on a daily basis. The owner must provide us with satisfactory evidence of confinement by written notice.
Terminal Illness Waiver. Prior to Maturity Date, you may surrender all or a portion of the Contract Value without a surrender charge, provided that we receive proof, satisfactory to us, of the owner’s terminal illness which is defined as an illness or condition that is expected to result in the owner’s death within six months.
This waiver is subject to state approval (note: this waiver is not available in Massachusetts).
Tax
Tax is considered to be any tax charged by a state or municipality on premium payments, whether or not characterized as purchase payment premium tax (or premium tax). It is also other state or local taxes imposed or any other governmental fees which may be required based on the laws of the state or municipality of delivery, the owner’s state or municipality of residence on the Contract Date. Taxes on premium payments currently range from 0% to 3.5% (the amount of state premium payment tax, if any, will vary from state to state), depending on the state. We will pay any premium payment tax, any other state or local taxes imposed or other governmental fee due and will only reimburse ourselves upon the remittance to the applicable state. For a list of states and taxes, see “Appendix B.”
We reserve the right, when calculating unit values, to deduct a credit or fee with respect to any taxes we have paid for or reserved during the valuation period that we determine to be attributable to the operation of a fund. No federal income taxes are applicable under present law and we are not presently making any such deduction.
Transfer Charge
Currently, there is no charge for transfers; however, we reserve the right to charge a transfer fee of up to $20 per transfer after the first 12 transfers in each contract year to defray administrative costs.
Reduced Fees, Credits and Excess Interest for Eligible Groups
We may reduce or eliminate the mortality and expense risk fee or the withdrawal charge, or credit excess interest, when sales of the contracts are made to certain eligible groups that result in savings of sales expenses. We will consider the following characteristics:
(1) the size and type of the group of individuals to whom the contract is offered;
(2) the amount of anticipated purchase payments;
(3) whether there is a preexisting relationship with the Company such as being an employee of the Company or its affiliates and their spouses; or to employees or agents who retire from the Company or its affiliates or 1851 Securities, Inc. (“1851”), or its affiliates or to registered representatives of the principal underwriter and registered representatives of broker-dealers with whom 1851 has selling agreements; and
(4) internal transfers from other contracts issued by the Company or an affiliate, or making transfers of amounts held under qualified plans sponsored by the Company or an affiliate.
Any reduction or elimination of the mortality and expense risk fee or the withdrawal charge or credit of excess interest will not unfairly discriminate against any person. We will make any reduction or credit according to our own rules in effect at the time the contract was issued. We reserve the right to change these rules from time to time.
Other Charges
As compensation for investment management services, the advisors to the funds are entitled to a fee, payable monthly and based on an annual percentage of the average daily Net Asset Values of each Series. These fund charges and other fund expenses are described more fully in the fund prospectuses.
The Accumulation Period
The accumulation period is that time before annuity payments begin that your payments into the contract remain invested.
Accumulation Units
An Accumulation Unit is used to calculate the value of a contract. Each investment option has a corresponding accumulation unit value. The number of Accumulation Units of an investment option purchased with a specific premium payment will be determined by dividing the premium payment by the value of an Accumulation Unit in that investment option next determined after receipt of the premium payment. The value of the Accumulation Units of an investment option will vary depending upon the investment performance of the applicable Series of the funds, the expenses charged against the fund and the charges and deductions made against the investment option.
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Accumulation Unit Values
On any date before the maturity date of the contract, the total value of the accumulation units in an investment option can be computed by multiplying the number of such units by the value of an accumulation unit on that date. The value of an accumulation unit on a day other than a valuation date is the value of the accumulation unit on the next valuation date. The number of accumulation units credited to you in each investment option and their current value will be reported to you at least annually.
Purchase of Contracts
Generally, we require minimum initial premium payments of:
❖   Nonqualified plans—$25,000
❖   Qualified plans—$3,500
The initial payment is due and payable before the contract becomes effective. Generally, we require minimum subsequent premium payments of $100. An automated payment or bank draft service may be available under certain, very limited circumstances. Contact our Annuity Operations Division for information regarding this service.
The minimum age of the proposed owner to purchase a Contract is the age of majority in the state where the Contract is being purchased, or a guardian must act on your behalf. Generally, a contract may not be purchased for a proposed owner who is 86 years of age or older. Total premium payments in excess of $1,000,000 cannot be made without our permission. While the owner is living and the contract is in force, premium payments may be made anytime before the Maturity Date of a contract.
 
Your initial payments will be applied within two business days of our receipt if the application for a contract is complete. If an incomplete application is completed within five business days of receipt by our Annuity Operations Division, your payment will be applied within two business days of the completion of the application. If our Annuity Operations Division does not accept the application within five business days or if an order form is not completed within five business days of receipt by our Annuity Operations Division, then your payment will be immediately returned. You may request us to hold your premium payment after the five day period while the application is completed and within two business days after completion we will apply your premium payment. Please note that prior to the completion of your application or order form, we will hold the premium in a suspense account, which is a noninterest bearing account. Additional payments allocated to the GIA are deposited on the date of receipt of payment at our Annuity Operations Division. Additional payments allocated to investment options are used to purchase accumulation units of the investment option(s), at the value of such Units next determined after the receipt of the payment at our Annuity Operations Division.
 
Premium payments received under the contract will be allocated in any combination to any investment option, GIA or MVA in the proportion you elect or as otherwise changed by you from time to time; or in an approved asset allocation or strategic program, as described below.
For certain eligible groups, we may reduce the minimum initial or subsequent premium payment amount we accept for a contract. Factors in determining qualifications for any such reduction include:
(1) the make-up and size of the prospective group;
(2) the method and frequency of premium payments; and
(3) the amount of compensation to be paid to registered representatives on each premium payment.
Any reduction will not unfairly discriminate against any person. We will make any such reduction according to our own rules in effect at the time the premium payment is received. We reserve the right to change these rules from time to time.
Payments to the GIA are subject to the Maximum GIA Percentage. If you elect the Guaranteed Minimum Accumulation Benefit or the Guaranteed Minimum Withdrawal Benefit, you may not allocate premiums or transfer values to the GIA or MVA.
Additional Programs
If you have any Optional Guaranteed Benefit (other than Phoenix Income Protector) attached to your contract, you must elect and continue to participate in a single approved asset allocation program or the Optional Guaranteed Benefit will terminate. All initial and subsequent premium payments and Contract Value must be allocated to your chosen program beginning on the date your chosen rider is effective, which currently must be the contract date. There is no charge to participate in any approved program; however, the fee for the Optional Guaranteed Benefit may vary depending on the program you choose and the fee may increase under certain circumstances. See the table of “Optional Benefit Fees” and “Important Information on Current Fees for Optional Benefit Riders.”
Provided that you do not have any Optional Guaranteed Benefit riders attached to your contract, you may elect any of the additional programs described below at any time and at no charge.
We may discontinue, modify or amend these programs as well as offer new programs or change the programs that are approved for use with the Optional Guaranteed Benefits in the future.
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Asset Allocation and Strategic Programs
Asset allocation and strategic programs are intended to optimize the selection of investment options for a given level of risk tolerance, in order to attempt to maximize returns and limit the effects of market volatility. The asset allocation and strategic programs reflect the philosophy that diversification among asset classes may help reduce volatility and boost returns over the long term. An asset class is a category of investments that have similar characteristics, such as stocks or bonds. Within asset classes there are often further divisions. For example, there may be divisions according to the size of the issuer (large cap, mid cap, small cap) or type of issuer (government, corporate, municipal). We currently offer several asset allocation programs many of which are approved for use with the Optional Guaranteed Benefits. Information about the programs we currently offer and whether each is approved for use with an Optional Guaranteed Benefit is provided below.
For ease of reference throughout this section, we refer to the asset allocation and strategic programs described, simply as “programs”, and we refer to the asset allocation options available within the programs, as “options”. Some of these programs are funds offered under the contract. We do not charge for participating in the programs or their options. You may participate in only one asset allocation program at a time and your ability to use an asset allocation program with Asset Rebalancing and Dollar Cost Averaging or Enhanced Dollar Cost Averaging is limited as described in “Use of Dollar Cost Averaging with Asset Rebalancing and Allocation Programs.” Subject to regulatory requirements and approvals, in the future we may modify or eliminate any existing program or option within a program, or may offer other asset allocation services which, at our discretion, may be available to current and/or prospective contract owners. For the most current information on any program or option, please contact your registered representative.
Selecting a Program and Option-Contracts without Optional Guaranteed Benefits
If you have not elected an Optional Guaranteed Benefit for your contract, you are not required to elect an asset allocation program but may do so if you wish. If you are interested in electing a program, you should consult with your registered representative to discuss your choices. For certain programs, a questionnaire may be used to help you and your registered representative assess your financial needs, investment time horizon, and risk tolerance. You should periodically review these factors to determine if you need to change programs or options.
When you participate in a program, all of your premium payments and Contract Value will be allocated to the investment options in accordance with your selected program and, if applicable, the option within that program. You may, at any time, switch your current program or option, and may elect any modified or new programs or options the Company may make available subject to our rules and rates then in effect. You may cancel your participation in a program at any time, and later re-enroll in a program by contacting our Annuity Operations Division. If a program is eliminated, we will notify you of the elimination and you should consult with your registered representative to choose among the other programs available at that time. To enroll in a program, you must properly complete the election form we require and return it to our Annuity Operations Division at the address shown on the first page of your prospectus.
Selecting a Program and Option-Contracts with Optional Guaranteed Benefits
If you purchase a contract with an Optional Guaranteed Benefit (other than the Phoenix Income Protector) you must select one of the approved programs through which to allocate your premium payments and Contract Value. When you participate in one of the approved programs all your premium payments and Contract Value will be allocated to the investment options in accordance with your selected program and, if applicable, the option within that program. You should consult with your registered representative when you initially select a program and periodically review your program with your registered representative to determine if you need to change programs or options. You may, at any time, switch your current program or option to another approved program and may elect any modified or new programs or options the Company may make available subject to our rules and rates then in effect. Changing programs or options may change the fee for the Optional Guaranteed Benefit on your contract. See the table of “Optional Benefit Fees” for more information.
Although you may cancel your participation in a program, you should consult your registered representative before doing so, as canceling the program will cause your Optional Guaranteed Benefit to terminate without value. You may later re-enroll in a program but re-enrollment will not reinstate an Optional Guaranteed Benefit. If a program is eliminated, we will notify you of the elimination and you should consult with your registered representative to choose among the other programs available at that time. To enroll in a program, you must properly complete the election form we require and return it to our Annuity Operations Division at the address shown on the first page of your prospectus.
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Program Availability
When you elect an Optional Benefit rider other than the Phoenix Income Protector you must allocate all premium to one program or program option that is available at the time of your election. (To simplify this discussion, the term “program” refers to both a program and a program option for those programs offering more than one investment option.) Contract value and premium may never be allocated to more than one program. Transfers of partial contract value are not permitted. Different programs have been offered with different Optional Benefits during various time periods. We may discontinue, modify, or amend programs and we may make different programs available in the future. For all time periods, regardless of program availability changes, you will be permitted to remain in the program in which you are invested and to allocate additional premium to that program. You may not transfer into a program that is not available on the date of the requested transfer. However, prior to June 22, 2009, you are permitted to transfer back into a program in which you were previously invested, even if it is not listed as generally available on the date of the transfer request. You should note that, beginning with the June 22, 2009 program availability changes, if you transfer out of a program, you will not be able to transfer back into that program if it is not available on the date of the requested transfer. The table below shows program availability during various time periods by Optional Benefit rider:
 
Phoenix Retirement
Protector 		Phoenix Flexible
Withdrawal Protector 		Phoenix
Principal Protector 		GMWB 2007
GMWB 5/7
Lifetime GMWB
Beginning 11/19/10 Ibbotson Portfolio:
• Ibbotson Income and Growth ETF 		Ibbotson Portfolio:
• Ibbotson Income and Growth ETF
• Ibbotson Balanced ETF
• Ibbotson Growth ETF
Franklin Templeton Perspectives
Alliance Balanced Wealth 		Ibbotson Portfolio:
• Ibbotson Income and Growth ETF
• Ibbotson Balanced ETF 		Ibbotson Portfolio:
• Ibbotson Income and Growth ETF
• Ibbotson Balanced ETF
Alliance Balanced Wealth
6/22/09 – 11/18/10 Phoenix Dynamic:
• Moderate 		Phoenix Dynamic:
• Moderate
• Moderate Growth
• Growth
Franklin Templeton Perspectives
Alliance Balanced Wealth 		Phoenix Dynamic:
• Moderate
• Moderate Growth 		Phoenix Dynamic:
• Moderate
• Moderate Growth
Alliance Balanced Wealth
3/9/09 – 6/21/09 Phoenix-Ibbotson Strategic:
• Conservative
• Moderately Conservative
Phoenix Dynamic:
• Moderate 		Phoenix-Ibbotson Strategic:
• Conservative
• Moderately Conservative
• Moderate
• Moderately Aggressive
Phoenix Dynamic:
• Moderate
• Moderate Growth
Franklin Founding
Franklin Templeton Perspectives
Alliance Balanced Wealth 		Phoenix-Ibbotson Strategic:
• Conservative
• Moderately Conservative
Phoenix Dynamic:
• Moderate 		Phoenix-Ibbotson Strategic:
• Conservative
• Moderately Conservative
• Moderate
• Moderately Aggressive
• Aggressive
Phoenix Dynamic:
• Moderate
• Moderate Growth
• Growth
• Aggressive Growth
Franklin Founding
Franklin Templeton Perspectives
Alliance Balanced Wealth
 
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Phoenix Retirement
Protector 		Phoenix Flexible
Withdrawal Protector 		Phoenix
Principal Protector 		GMWB 2007
GMWB 5/7
Lifetime GMWB
11/17/08 – 3/8/09 Phoenix-Ibbotson Strategic:
• Conservative
• Moderately Conservative
• Moderate
• Moderately Aggressive
• Aggressive
Phoenix Dynamic:
• Moderate
• Moderate Growth
• Growth
• Aggressive Growth
Franklin Founding
Franklin Templeton Perspectives
Alliance Balanced Wealth
Alliance Wealth Appreciation 		Phoenix-Ibbotson Strategic:
• Conservative
• Moderately Conservative
• Moderate
• Moderately Aggressive
• Aggressive
Phoenix Dynamic:
• Moderate
• Moderate Growth
• Growth
• Aggressive Growth
Franklin Founding
Franklin Templeton Perspectives
Alliance Balanced Wealth
Alliance Wealth Appreciation 		Phoenix-Ibbotson Strategic:
• Conservative
• Moderately Conservative
• Moderate
• Moderately Aggressive
Phoenix Dynamic:
• Moderate
• Moderate Growth
• Growth
Franklin Founding
Franklin Templeton Perspectives
Alliance Balanced Wealth 		Same as above
Prior to 11/17/08 Same as above Same as above Phoenix-Ibbotson Strategic:
• Conservative
• Moderately Conservative
• Moderate
• Moderately Aggressive
• Aggressive
Phoenix Dynamic:
• Moderate
• Moderate Growth
• Growth
• Aggressive Growth
Franklin Founding
Franklin Templeton Perspectives
Alliance Balanced Wealth 		Same as above
A brief description of each program follows.
❖    AllianceBernstein VPS Wealth Appreciation Strategy Portfolio
The AllianceBernstein VPS Wealth Appreciation Strategy portfolio invests in an equity portfolio that is designed as a solution for investors who seek equity returns but also want broad diversification of the related risks across styles, capitalization ranges and geographic regions. In managing the portfolio, the adviser efficiently diversifies between growth and value equity investment styles, and between U.S. and non-U.S. markets. Normally, the adviser’s targeted blend for the equity portion of the portfolio is an equal weighting of growth and value stocks (50% each). The portfolio may also invest in real estate investment trusts, or REITs. This asset allocation option is rebalanced as necessary in response to markets.
❖   AllianceBernstein VPS Balanced Wealth Strategy Portfolio
The AllianceBernstein VPS Balanced Wealth Strategy portfolio targets a weighting of 60% equity securities and 40% debt securities with a goal of providing moderate upside potential without excessive volatility. Investments in real estate investment trusts, or REITs, are deemed to be 50% equity and 50% fixed-income for purposes of the overall target blend of the portfolio. The targeted blend for the non-REIT portion of the equity component is an equal weighting of growth and value stocks. This asset allocation option is rebalanced as necessary in response to markets.
❖   Franklin Templeton Founding Investment Strategy
Through the Franklin Templeton Founding Investment Strategy, premium payments and Contract Value are allocated to the three investment options as listed below. On a monthly basis, we will rebalance the Contract Value allocated to the three investment options back to the original allocation percentages in each investment option.
• Franklin Income Securities Fund—34%
• Mutual Shares Securities Fund—33%
• Templeton Growth Securities Fund—33%
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❖    Franklin Templeton Perspectives Allocation Model
Through the Franklin Templeton Perspectives Allocation Model, premium payments and Contract Value are allocated to the three investment options as listed below. On a monthly basis, we will rebalance the Contract Value allocated to the three investment options back to the original allocation percentages in each investment option.
• Franklin Flex Cap Growth Securities Fund—34%
• Mutual Shares Securities Fund—33%
• Templeton Growth Securities Fund—33%
❖   Ibbotson Asset Allocation Series
The Ibbotson Asset Allocation Series (“the Series”) are risk-based portfolios (“Portfolios”) that invest in ETFS, which are typically structured as open-end investment companies or unit investment trusts. The Series were designed on established principles of asset allocation and are intended to provide various levels of potential return for a targeted level of risk. The Series’ asset allocation policy is dynamically managed to consider changes in the economy or markets. The Portfolios in the Series are continuously managed to the asset allocation policy. The Portfolio options approved for use are:
• Ibbotson Income and Growth ETF Asset Allocation Portfolio – Class II
• Ibbotson Balanced ETF Asset Allocation Portfolio – Class II
• Ibbotson Growth ETF Asset Allocation Portfolio – Class II
• Ibbotson Aggressive Growth ETF Asset Allocation Portfolio – Class II
If you should elect any of the Portfolios listed above, transfers made under these programs will not be counted toward the 12 transfers per year after which we may impose a transfer fee.
❖    Phoenix-Ibbotson Strategic Asset Allocation—(Closed to new investors effective June 22, 2009)
PHL Variable and Ibbotson Associates have developed five asset allocation options, each comprised of selected combinations of investment options. Except as noted above, the options approved for use are:
• Conservative Portfolio which seeks conservation of capital and has a portfolio allocation more heavily weighted in fixed income investments than in equities.
• Moderately Conservative Portfolio which primarily seeks current income, with capital growth as a secondary objective, and has a portfolio allocation of approximately equal weightings in equities and fixed income investments.
• Moderate Portfolio which seeks long-term capital growth and current income with emphasis on current growth, and has a portfolio allocation more heavily weighted in equities than in fixed income investments.
• Moderately Aggressive Portfolio which seeks long-term capital growth with current income as a secondary objective, and has more than three quarters of the portfolio in equities and less than one quarter in fixed income investments.
• Aggressive Portfolio which seeks long-term capital growth and is invested primarily in equities.
On a periodic basis (typically annually), Ibbotson evaluates the options and updates them to respond to market conditions and to ensure style consistency. If you select one of the Phoenix-Ibbotson options, your premium payments (Contract Value for in force policies), however, will not be allocated in accordance with the updated options unless you specifically request we do so. If you elect to participate in this program on and after September 10, 2007, on an annual basis, we will reallocate the Contract Value allocated to the investment options included in the program so that, following this reallocation, the percentage in each investment option equals the percentage originally used for the program. We will make this reallocation effective on the valuation date immediately preceding each anniversary of your contract date for as long as the asset allocation program is in effect for your contract. You should consult with your registered representative for the most current information on this program and the options within the program.
Asset Rebalancing Program
The Asset Rebalancing Program allows you to specify the percentage levels you would like to maintain among the investment options. Asset Rebalancing does not permit transfers to or from the GIA or the MVA.
We will automatically rebalance contract values among the investment options to maintain your selected allocation percentages. You can choose to have us make these transfers monthly, quarterly, semiannually or annually. These transfers will occur on the date you specify (provided we receive the request in good order), unless the specified date falls on a holiday or weekend, in which case the transfers will occur on the next succeeding Valuation Date. You may start or discontinue this program at any time by submitting a written request or calling our Annuity Operations Division.
The Asset Rebalancing Program does not ensure a profit nor guarantee against a loss in a declining market.
Except as described below, the Asset Rebalancing Program is not available while the Dollar Cost Averaging Program is in effect.
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The Asset Rebalancing Program is not available if you are invested in the Phoenix Dynamic Asset Allocation Series, or the Franklin Templeton Founding Investment Strategy.
Dollar Cost Averaging Program
The Dollar Cost Averaging Program allows you to systematically transfer a set amount to the investment options or GIA on a monthly, quarterly, semiannual or annual basis. Generally, the minimum initial and subsequent transfer amounts are $25 monthly, $75 quarterly, $150 semiannually or $300 annually. Also, premium payments of $1,000,000 or more require our approval before we will accept them for processing. You must have an initial value of $2,000 in the GIA or in the investment option from which funds will be transferred (sending investment option), and if the value in that investment option or the GIA drops below the amount to be transferred, the entire remaining balance will be transferred and no more systematic transfers will be processed. Values may be transferred from only one sending investment option or from the GIA but may be allocated to multiple receiving investment options. Under the Dollar Cost Averaging Program, you may transfer approximately equal amounts from the GIA over a period of 6 months or more. Transfers under the Dollar Cost Averaging Program are not subject to the general restrictions on transfers from the GIA. This program is not available for the MVA. There is no charge for participating in this program.
Upon completion of the Dollar Cost Averaging Program, you must notify us at 800/541-0171 or in writing to our Annuity Operations Division to start another Dollar Cost Averaging Program.
All transfers under the Dollar Cost Averaging Program will be executed on the basis of values as of the first of the month rather than on the basis of values next determined after receipt of the transfer request. If the first of the month falls on a holiday or weekend, then the transfer will be processed on the next succeeding Valuation Date.
Except as described below, the Dollar Cost Averaging Program is not available to individuals who invest via a bank draft program or while the Asset Rebalancing Program is in effect.
The Dollar Cost Averaging Program does not ensure a profit nor guarantee against a loss in a declining market.
Transfers to the GIA under the Dollar Cost Averaging Program are subject to the Maximum GIA Percentage.
We may at different times offer additional or multiple Dollar Cost Averaging Programs, such as an Enhanced Dollar Cost Averaging Program. If elected, an Enhanced Dollar Cost Averaging Program would entitle you to an enhanced GIA interest rate for value, less applicable contract charges, allocated to the GIA (Net Value) for a specified period of time.
You may cancel an Enhanced Dollar Cost Averaging Program at any time. Choosing to cancel an Enhanced Dollar Cost Averaging Program prior to the end of your chosen program period will not change the enhanced GIA interest rate you are being credited.
In the event of an early cancellation the enhanced GIA rate will only be applied to the Net Value allocated to your program from the start date of your program to your cancellation date. The cancellation date is the valuation date we receive your cancellation request in good order at our Annuity Operations Division.
After the cancellation date, you may transfer the Net Value that was invested in the Enhanced Dollar Cost Averaging Program from the GIA to the investment options without being subject to the Maximum GIA Percentage.
We reserve the right to modify, suspend, or terminate any Dollar Cost Averaging Program we offer.
Use of Dollar Cost Averaging with Asset Rebalancing and Allocation Programs
If you elect an Optional Benefit after your contract is issued, you may not participate in any Dollar Cost Averaging or Asset Rebalancing program while the Optional Benefit is in effect. If you are currently in a program of this type, it will terminate on the date the Optional Benefit becomes effective.
If you elect to participate in the Franklin Templeton Perspectives Allocation Model, Franklin Templeton Founding Investment Strategy, or the Phoenix-Ibbotson Strategic Asset Allocation Program then you may also elect to participate in the following programs:
1. Dollar Cost Averaging or Enhanced Dollar Cost Averaging; and
2. Asset Rebalancing with monthly rebalancing in the Franklin Templeton Perspectives Allocation Model or the Franklin Templeton Founding Investment Strategy, or Asset Rebalancing with annual rebalancing in the Phoenix-Ibbotson Strategic Asset Allocation Program.
If you elect both the Enhanced Dollar Cost Averaging and the Asset Rebalancing Program, your entire dollar cost averaging transfer amount must be allocated to the Allocation Program in effect for your policy.
Interest Investment Program
We may at different times offer an Interest Investment Program. Under this program, interest earned on premium allocated to the GIA will automatically be transferred out to any of the investment options under the separate account.
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You may elect to transfer interest earned on premium allocated to the GIA on a monthly, quarterly, semiannual or annual basis. The amount that we transfer under the program will be based on the interest earned for the period you elect. We will process the automatic transfers on the first day of the month for the period that applies following our receipt of your transfer request. Should the first day of the applicable month fall on a holiday or weekend, we will process the transfer on the next business day.
You must have a value of $10,000 in the GIA at all times to keep this program in effect. If the value in the GIA drops below $10,000 for any reason, then no more automatic transfers will be processed under the program. To start or stop the Interest Investment Program, you must notify us at 800/541-0171 or send a written request to our Annuity Operations Division.
Transfers under the Interest Investment Program are not subject to the general restrictions on transfers from the GIA.
The Interest Investment Program is not available to individuals who invest via a bank draft program or while the Dollar Cost Averaging Program or Asset Rebalancing Program are in effect.
The Interest Investment Program does not ensure a profit nor guarantee against a loss in a declining market. There is no charge associated with participating in this program.
Systematic Withdrawal Program
Prior to the Maturity Date, you may partially withdraw amounts automatically on a monthly, quarterly, semiannual or annual basis under the Systematic Withdrawal Program. You may withdraw a specified dollar amount or a specified percentage. The withdrawals are taken from the Contract Value with each investment option, MVA and GIA bearing a pro rata share. Withdrawals from the MVA may be subject to a market value adjustment.
The minimum withdrawal amount is $100. Withdrawals will be processed on the date you specify (provided we receive the request in good order) unless the specified date falls on a holiday or weekend, in which case the transfers will occur on the next succeeding Valuation Date. If no date is specified by you, then withdrawals will be processed on each monthly contract anniversary. Any applicable premium tax and surrender charges will be applied to the withdrawal.
You may start or terminate this program by sending written instructions to our Annuity Operations Division. This program is not available on or after the Maturity Date. There is no charge for participating in this program.
Optional Benefits
There are three Optional Benefits currently available with this annuity: A guaranteed minimum accumulation benefit rider (“GMAB”), Phoenix Flexible Withdrawal Protector (a guaranteed minimum withdrawal benefit rider), and Phoenix Retirement Protector (a rider that provides several guarantee options). GMAB is designed for people who want to ensure the preservation of their premium deposits over a long time horizon (10 years). Phoenix Flexible Withdrawal Protector is designed for people who want to ensure guaranteed withdrawals, designed to provide the most favorable guaranteed withdrawal benefit after the Benefit Eligibility Date. Phoenix Retirement Protector provides a GMAB benefit, a guaranteed minimum withdrawal benefit, and an optional guaranteed minimum death benefit. Phoenix Retirement Protector is designed for people who are looking for flexibility in exercising a variety of guarantees. However, the trade off for this flexibility is that this rider may cost more than buying a stand alone optional living benefit rider and the design of these combination benefits tend to be more restrictive than the design of an optional living benefit rider providing a single guaranteed benefit.
For an additional charge, you may elect one of the optional benefits described below. You may elect an available Optional Benefit at the time you purchase your contract and you may elect certain Optional Benefits after this date. Currently we allow you to elect the following Optional Benefits on or after the date you purchase your contract: Phoenix Principal Protector, Phoenix Flexible Withdrawal Protector and Phoenix Retirement Protector. However: (1) the Extended Care Enhancement feature is not available with Phoenix Flexible Withdrawal Protector when it is purchased after the contract is issued and (2) the Guaranteed Minimum Death Benefit feature is not available with Phoenix Retirement Protector when it is purchased after the contract is issued. If we allow you to elect a benefit after the Contract Date, the effective date of the benefit will be the next contract anniversary immediately following your election. Some benefit elections are irrevocable; others can be cancelled at any time after the Contract Date.
Your ability to elect one of the optional benefits may be restricted by minimum and maximum issue age requirements, ownership and beneficiary limitations, and is subject to state availability and regulation. More details are included in the form of a rider to your Contract if any of these benefits are chosen.
If you decide to elect any of the optional benefits, you should carefully review their provisions to be sure the benefit is something that you want. You may wish to review these with your financial advisor.
Adding an Optional Benefit After Contract Issue
Currently, we allow you to elect the following Optional Benefits after contract issue: Phoenix Principal Protector, Phoenix Flexible Withdrawal Protector and Phoenix Retirement Protector. To elect an Optional Benefit rider after contract issue, you, with your registered representative, must complete a rider election form and allocate your Contract Value to one approved asset allocation model. You must select an asset allocation model that is available on the date you elect the Optional Benefit rider (see “Program Availability”). Once your rider election form is accepted by us, we will issue your Optional Benefit rider. The effective date of the Optional Benefit and your asset allocation model selection will be the next contract anniversary immediately following your election. If you decide you want to cancel
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your rider election or change your asset allocation model prior to the date your rider is issued you must contact us at our Annuity Operations Division at the address or telephone number shown on the first page of your prospectus. You must pay off any outstanding loans prior to purchasing an Optional Benefit.
Definition of “Spouse” under Optional Benefits
 
Certain Optional Benefits under the contract offer the election of a spousal life option. An election of the spousal life option may not provide any economic benefit if the Covered Persons under the option do not meet the definition of two legal spouses under federal law. See “Spousal Definition” for further discussion of spousal qualifications. This is due to the interaction between the federal definition of “spouse” and the Internal Revenue Code, which requires distributions upon the death of an Owner except for certain spousal continuation benefits. State laws and regulations may determine whether the spousal life option under an Optional Benefit must be offered to spouses as defined by state law, registered domestic partners, civil union partners or two people who share a reasonable economic or familial relationship. However, even if state laws require the offer of this benefit, it may not be in your best interest to purchase the spousal life option if the Covered Persons are not two legal spouses under federal law, since the spousal benefit relies, in part, on spousal continuation provisions of the Internal Revenue Code. The federal definition of spouse provided differs from the laws of certain states and does not include same-sex partners, registered domestic partners, civil union partners or two people who share a reasonable economic or familial relationship.
 
Guaranteed Minimum Accumulation Benefit (GMAB) (Phoenix Principal Protector).
Phoenix Principal Protector is available with contracts issued after October 11, 2004 and provides a guaranteed minimum return if funds remain invested according to a designated asset allocation model for a 10-year term. This rider may be elected at the time the contract is purchased or after the contract is issued and may be terminated at any time by request.
A fee for this benefit is deducted on each contract anniversary during the term of the benefit. See “Deductions and Charges” above.
The benefit is available if each owner and Annuitant are less than 81 years old on the date that this rider is added to the Contract (the “rider date”).
Phoenix Principal Protector is available only if you allocate your premiums to an approved asset allocation or strategic program, and if you remain fully invested in the program for the term of the benefit. See “Asset Allocation and Strategic Programs” above.
The GMAB is also available to you if you have purchased this contract in order to receive your mandatory after-death distributions using an Inherited/Stretch Annuity. An Inherited/Stretch Annuity is available to an individual or trust beneficiary of an Individual Retirement Account (IRA), (including a Roth IRA), or Qualified Plan or to an individual beneficiary of a Non-Qualified contract issued by PHL Variable or its affiliates or issued by a company unaffiliated with PHL Variable. If the beneficiary of a contract issued by a company unaffiliated with PHL Variable purchases this Phoenix Dimensions Contract, then the GMAB will be available to the beneficiary. However, the beneficiary of this Phoenix Dimensions Contract cannot elect the GMAB because a beneficiary does not retain the same rights under this Contract as the deceased owner. Certain limitations, considerations and tax implications apply to this Feature and may differ depending upon whether you have a IRA/Qualified or Non-Qualified Plan and whether the beneficiary is an individual or a trust.
If you have purchased this contract in order to receive your mandatory after-death distributions using an Inherited/Stretch Annuity, election of the GMAB may not be in your best interest. Once inherited proceeds are in an Inherited/Stretch Annuity, mandatory annual distributions must be made based on the life expectancy of the original beneficiary of the proceeds. Mandatory annual distributions may diminish the attractiveness of electing the GMAB because withdrawals made during the ten-year term of the rider decrease the amount of the benefit available. Consult your financial professional and tax adviser to determine whether this feature is right for you. See the section of this prospectus entitled “Inherited/Stretch Annuity Feature” for more details.
Guaranteed Amount
The guaranteed amount is equal to the guaranteed amount base multiplied by Guaranteed Amount Factor 1. The guaranteed amount base is equal to (A) plus (B) minus (C), where:
A = the Contract Value on the rider date.
B = 100% of each subsequent premium payment paid to the contract during the first year of the 10-year period beginning on the rider date (the “term”).
C = pro rata adjustment for withdrawals from the contract during the term. The adjustment for each withdrawal is calculated by multiplying the guaranteed amount base prior to the withdrawal by the ratio of the amount withdrawn (including any applicable withdrawal fees) to the Contract Value immediately prior to the withdrawal.
Currently, Guaranteed Amount Factors 1 and 2 are equal to 1.00. For Contracts issued between October 11, 2004 and August 17, 2008, the Guaranteed Amount Factors 1 and 2 were 1.05.
Additional Amount
If on the last day of the term:
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❖   the Contract Value is less than the guaranteed amount base, we will add an additional amount to the Contract Value equal to the difference between the Contract Value and the guaranteed amount.
❖   the Contract Value is greater than or equal to the guaranteed amount base, we will add an additional amount to the Contract Value equal to the guaranteed amount base multiplied by the difference between the Guaranteed Amount Factor 2 and 1.00.
❖   the contract annuitizes, the death of an owner or Annuitant occurs or a full surrender is made, the Contract Value will reflect any additional amount prior to the payment of any annuity, death or full surrender benefits. Note: no additional amount will be paid if any of the above occurs prior to the end of the term.
If on any day following the rider date, any portion of the Contract Value is no longer invested according to an asset allocation or strategic program established and maintained by us for this benefit, the benefit will terminate and no additional amount will be added to the Contract Value.
Benefit Termination
This benefit will terminate at the end of the term or upon the occurrence of any of the following:
❖   the date that any portion of the contract value is not invested according to an asset allocation model established and maintained by us for the benefit;
❖   the date that a full surrender is made;
❖   the date of the first death of an owner unless the surviving spouse elects spousal continuation of the contract and benefit;
❖   the contract annuitizes; or
❖   the termination of the contract.
If the benefit terminates for any of the above reasons prior to the end of the term, an additional amount will not be paid.
Guaranteed Minimum Income Benefit (GMIB) (called Phoenix Income Protector—this Rider is not available beginning March 9, 2009).
This optional rider provides a benefit that guarantees minimum monthly fixed annuity payments. The minimum monthly fixed annuity payment amount is calculated by multiplying the guaranteed annuitization value by the Annuity Payment Option rate for the Annuity Payment Option selected under the rider.
The benefit provided by this rider will not be available until the later of 7 years after the rider is added to the contract (“rider date”) or the contract anniversary following the older Annuitant’s 60th birthday. For example, if you were age 40 when you bought the contract with the rider, the earliest you could exercise the benefit under the rider would be when you reached age 60. While the benefit is available, you can only exercise it, upon written notice, within 30 days following any contract anniversary. This benefit will not be available 30 days after the contract anniversary following the older Annuitant’s 90th birthday.
A fee for this benefit is deducted on each contract anniversary only if the benefit is selected. See “Deductions and Charges” above. Once your benefit is exercised, the fee will no longer be deducted. Currently, we only allow you to elect this rider on the Contract Date, but reserve the option to remove this restriction in the future. Election of this benefit rider is irrevocable. You should consult with a qualified financial advisor before you make your decision.
Phoenix Income Protector is also available to you if you are the beneficiary of a deceased Owner’s Contract issued to the Owner by another company and you are utilizing this Contract as an Inherited/Stretch Annuity. This benefit is also available to you if you are the beneficiary of a deceased Owner’s annuity contract, other than a Phoenix DimensionsSM Contract, the contract was issued to the Owner by Us, and you are utilizing this Contract as an Inherited/Stretch Annuity. This benefit is not available to you if you are the beneficiary of a deceased Owner’s Phoenix DimensionsSM Contract issued to the Owner by Us and are utilizing this Contract as an Inherited/Stretch Annuity.
Guaranteed Annuitization Value
On and before the contract anniversary following the older Annuitant’s 80th birthday, the guaranteed annuitization value shall be equal to the lesser of (i) the sum of (A plus B) minus (C plus D), or (ii) 200% of all premium payments minus the sum of the guaranteed annuitization value reductions and any tax that may be due, where:
A = the Contract Value on the rider date accumulated at an effective annual rate (as determined below in the provision entitled “Effective Annual Rate”) starting on the rider date and ending on the date the guaranteed annuitization value is calculated.
B = the sum of premium payments made after rider date minus any taxes paid, accumulated at an effective annual rate starting on the date each premium payment is applied to the contract and ending on the date the guaranteed annuitization value is calculated.
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C = the sum of the guaranteed annuitization value reductions, accumulated at an effective annual rate starting on the date each withdrawal occurs and ending on the date the guaranteed annuitization value is calculated.
D = any tax that may be due.
Assume the contract owner makes an initial payment of $100,000 (at age 68) and an additional deposit of $200,000 on the 3rd contract anniversary.
On the 7th contract anniversary (age 75), the Guaranteed Annuitization Value is the lesser of (i) or (ii) where (i) is equal to $383,311 (($100,000 x 1.053) + $200,000) x 1.054) and (ii) is equal to $600,000 (200% x ($100,000 + $200,000)). The Guaranteed Annuitization Value is $383,311. This assumes there were no additional payments, withdrawals, or transfers.
After the contract anniversary following the older Annuitant’s 80th birthday, the guaranteed annuitization value shall equal the lesser of (i) (A plus B) minus (C plus D), or (ii) 200% of all premium payments minus the sum of the guaranteed annuitization value reductions and any tax that may be due, where:
A = the guaranteed annuitization value on the contract anniversary following the older Annuitant’s 80th birthday.
B = the sum of premium payments made after the contract anniversary following the older Annuitant’s 80th birthday.
C = the sum of the guaranteed annuitization value reductions determined for withdrawals occurring after the contract anniversary following the older Annuitant’s 80th birthday.
D = any tax that may be due.
Assume the contract owner makes an initial payment of $100,000 (at age 79) and an additional deposit of $200,000 on the 3rd contract anniversary (at age 82).
The Guaranteed Annuitization Value at age 80 is equal to $105,000 ($100,000 x 1.05). On the 7th contract anniversary (age 87), the Guaranteed Annuitization Value is equal to $305,000 ($105,000 + $200,000). This assumes there were no additional payments, withdrawals, or transfers.
You should know that the Effective Annual Rate, the percentage used to increase your annuitization value as described above, will be reset to 0% depending on whether or not the value in the GIA is greater than 40% of the total Contract Value on certain dates. Please refer to the following section entitled “Effective Annual Rate” for a full description of the Effective Annual Rate.
Guaranteed Annuitization Value Reduction
A Guaranteed Annuitization Value Reduction is an amount determined for each withdrawal that occurs on or after initial election of the Phoenix Income Protector rider. In summary, if withdrawals in a rider year do not exceed a maximum annual amount, then the Guaranteed Annuitization Value Reduction for those withdrawals is equal to the sum of the withdrawals. To the extent that withdrawals in a rider year exceed a maximum annual amount, then the Guaranteed Annuitization Value Reduction for those excess withdrawals will reduce the Guaranteed Annuitization Value by the ratio of each withdrawal to the Contract Value prior to the withdrawal. On each rider anniversary, a maximum annual amount is calculated equal to the effective annual rate on the rider anniversary multiplied by the Guaranteed Annuitization Value on the rider anniversary. The maximum annual amount during the first rider year is equal to 5% multiplied by the Contract Value on the rider date. Withdrawals during a rider year will reduce the maximum annual amount by the same amount that your Contract Value is reduced as a result of the withdrawal.
The Guaranteed Annuitization Value Reduction is equal to the sum of A and B where:
A = the lesser of the remaining maximum annual amount (prior to the withdrawal) and the withdrawal amount; and
B = (a) multiplied by (b), where:
(a) = the Guaranteed Annuitization Value immediately prior to the withdrawal less the value determined in “A” above;
(b) = 1 minus the result of (c) divided by (d), where:
(c) = the Contract Value after the withdrawal, and
(d) = the Contract Value before the withdrawal less the value determined in “A” above.
Effective Annual Rate
On the rider date, we will set the effective annual rate of accumulation to 5%. After the first contract year, this rate may be adjusted based on the value of the Guaranteed Interest Account (GIA) in relation to the total Contract Value as described below.
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After the first contract year, we will reset the effective annual rate to 0% if the value of the GIA is greater than 40% of the total Contract Value on any of the following dates:
1. each date we process a premium payment.
2. each date we process a transfer.
3. each date we process a withdrawal.
Subsequently, we will raise the effective annual rate to 5% if the current effective annual rate is equal to 0% and the value of the GIA is less than or equal to 40% of the total Contract Value on any of the following dates:
1. each date we process a premium payment.
2. each date we process a transfer.
3. each date we process a withdrawal.
4. each rider anniversary.
Termination of This Rider
You may not terminate this rider by request. This rider will terminate on the first of any of the following events to occur:
1. the 30th day following the last contract anniversary that occurs after the older Annuitant’s 90th birthday;
2. the termination of the contract to which this rider is attached;
3. the date a death benefit becomes payable under the contract to which this rider is attached;
4. the date annuity payments commence under the contract to which this rider is attached; and
5. the death of the last surviving Annuitant or Joint Annuitant named under this rider.
Phoenix Income Protector Annuity Payment Options
Under this rider, you may only elect one of the following Annuity Payment Options:
GMIB Option A — Life Annuity with Specified Period Certain: a fixed annuity payable monthly while the Annuitant named under this rider is living or, if later, until the end of the specified period certain. The period certain may be specified as 5, 10 or 20 years. The period certain must be specified on the date the benefit is exercised. If the Annuitant dies prior to the end of the period certain, the remaining period certain annuity payments will continue. No monthly payment, death benefit or refund is payable if any Annuitant dies after the end of the period certain. This option is not available if the life expectancy of the Annuitant is less than the period certain on the date the benefit is exercised.
GMIB Option B — Non-Refund Life Annuity: a fixed annuity payable monthly while any Annuitant named under this rider is living. No monthly payment, death benefit or refund is payable after the death of the Annuitant.
GMIB Option D — Joint and Survivorship Life Annuity: a fixed annuity payable monthly while either the Annuitant or joint Annuitant named under this rider is living. This option is only available if the Annuitant and Joint Annuitant named under this rider are both alive on the date the benefit is exercised. No monthly payment, death benefit or refund is payable after the death of the surviving Annuitant.
GMIB Option F — Joint and Survivorship Life Annuity with 10-Year Period Certain: a fixed annuity payable monthly while either the Annuitant or Joint Annuitant named under this rider is living, or if later, the end of 10 years. This option is only available if the Annuitant and Joint Annuitant named under this rider are both alive on the date the benefit is exercised. If the surviving Annuitant dies prior to the end of the 10-year period certain, the remaining period certain annuity payments will continue. No monthly payment, death benefit or refund is payable if the surviving Annuitant dies after the end of the 10-year period certain. This option is not available if the life expectancy of the older Annuitant is less than 10 years on the date the benefit is exercised.
Payment Upon Death After Maturity Date
If an owner dies on or after the Maturity Date and there is no surviving owner, any remaining certain period annuity payments will be paid to the beneficiary under the Annuity Payment Option in effect on the date of death. Generally, payments may not be deferred or otherwise extended. (For information regarding the Inherited/Stretch Annuity feature of this Contract, see the section of this prospectus entitled “Inherited/Stretch Annuity Feature.”) If there is a surviving owner, the payments continue as if there had been no death.
 
If the Annuitant and Joint Annuitant, if any, die and are survived by any owner, any remaining certain period annuity payments will be paid to such owner. Payments will continue under the Annuity Payment Option in effect at the date of death and may not be deferred or otherwise extended. Payments to the beneficiary must be made at least as rapidly as the payments were being made to the owner. At all times, the death benefit under this contract will be paid as required by section 72(s) or 401(a) of the Internal Revenue Code, as applicable.
 
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Important Information regarding Phoenix Income Protector
While Phoenix Income Protector does provide guaranteed minimum fixed annuity payments, it may not be appropriate for all investors and should be understood completely before you elect it.
❖   Phoenix Income Protector does not provide Contract Value or in any way guarantee the investment performance of any investment option available under the contract.
❖   Phoenix Income Protector is irrevocable once elected.
❖   You may not change any Annuitant or Joint Annuitant while Phoenix Income Protector is in effect.
❖   Phoenix Income Protector does not restrict or limit your right to annuitize at other times permitted under the contract, but doing so will terminate the rider.
❖   You should consult with a qualified financial advisor if you are considering Phoenix Income Protector.
❖   Phoenix Income Protector is only available if approved in your state and if we offer it for use with the contract.
❖   The minimum monthly fixed annuity payment amount under the Phoenix Income Protector may be less than the annuity payment amount under the Contract even if the guaranteed annuitization value is greater than contract value.
Phoenix Flexible Withdrawal ProtectorSM:
A Guaranteed Minimum Withdrawal Benefit (GMWB)
Summary of Benefit
The Phoenix Flexible Withdrawal Protector rider may be elected by you for an additional charge at the time you purchase your contract or after your contract is issued, if it has been made available in your applicable state by us. You may also elect the optional Extended Care Enhancement with the rider, also for an additional charge. You must elect the Extended Care Enhancement, a feature only available for election when the contract is first issued, to be included as part of the rider at the time you purchase the rider. You may only purchase one Optional Guaranteed Benefit with the contract. The Phoenix Flexible Withdrawal Protector guarantees a minimum payment or withdrawal amount from the contract once a specified date is reached if certain restrictions and limitations are met. The rider provides a lifetime benefit for one person or two spouses depending upon the option selected. The rider does not provide access to the benefit prior to the date the youngest Covered Person reaches age 60 for the single life option and the younger spouse’s age 65 for the spousal life option. The date on which this occurs is called the Benefit Eligibility Date. See “Important Terms and Conditions Related to Phoenix Flexible Withdrawal Protector” below for the definition of “Covered Person” and other important terms. Prior to the Benefit Eligibility Date, the benefit’s value can increase due to increases in the Benefit Base. See “Events and features causing recalculation of the Benefit Base” below for details.
The annual amount of the rider’s lifetime benefit is called the Annual Benefit Amount. The Annual Benefit Amount represents two distinct values depending on whether your Contract Value is zero or greater than zero. The Annual Benefit Amount is calculated on the later of your first withdrawal date or the Benefit Eligibility Date. The Annual Benefit Amount (on the date it is calculated) equals a percentage called the Annual Benefit Percentage, multiplied by a value called the Benefit Base. The Annual Benefit Percentage ranges from 0%-6% (0% to 7% for riders issued prior to March 9, 2009) based on the attained age of the youngest Covered Person on your first withdrawal date. If you take a withdrawal before the Benefit Eligibility Date, the Annual Benefit Percentage will be zero and then will be permanently set to 4% (5% for riders issued prior to March 9, 2009) on the Benefit Eligibility Date. The Benefit Base is a value calculated to determine the Annual Benefit Amount. The Benefit Base can increase or decrease due to certain transactions and events under the contract. As a result, the Annual Benefit Amount may increase or decrease and affect what you receive in payments or withdrawals under the rider. Further definition of these terms, calculation of values, and how various contract transactions and events affect these values are described below.
Annual Benefit Amount when Contract Value is greater than zero: Guaranteed Withdrawals
Phoenix Flexible Withdrawal Protector guarantees a minimum amount of withdrawals you may take from the contract each year after the Benefit Eligibility Date, provided no withdrawals have been made from the contract prior to that Date (the youngest Covered Person’s 60th birthday for the single life option and 65th birthday for the spousal life option). This amount is the Annual Benefit Amount. You must reach the Benefit Eligibility Date before the Annual Benefit Amount becomes available for guaranteed withdrawals. You may still take withdrawals prior to the Benefit Eligibility Date, but this may significantly reduce or eliminate the value of the rider benefit. Please see the chart of “Special Risks Associated with Withdrawals” at the end of this section for details.
If you take withdrawals from the contract prior to the Benefit Eligibility Date, the Benefit Base will be reduced by the withdrawal in the same proportion as the Contract Value is reduced by the withdrawal. See “Taking Withdrawals.” So long as your remaining Benefit Base is greater than zero when you reach that Date, the Annual Benefit Amount that becomes available to you at that time will be calculated. On that Date, the Annual Benefit Amount will be equal to the Annual Benefit Percentage multiplied by the Benefit Base. However, if you take withdrawals before that Date and these withdrawals cause both your Contract Value and Benefit Base to become zero, your rider will
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terminate without value. Since this is a lifetime benefit, postponing withdrawals too long may limit the value of this rider because your remaining life expectancy shortens as you age. You should carefully consider your plans for taking withdrawals from the contract in considering whether this benefit is appropriate for your goals.
After the Benefit Eligibility Date, withdrawals reduce the future value of this benefit if they exceed the Annual Benefit Amount. We will reduce the Benefit Base if cumulative withdrawals in a rider year exceed the Annual Benefit Amount. This reduction affects the amount available for future guaranteed withdrawals when the Contract Value is greater than zero and for guaranteed payments when the Contract Value is zero. See the chart of “Special Risks Associated with Withdrawals” at the end of this section for details. Withdrawals in excess of the contract’s free withdrawal amount are subject to any surrender charges imposed under the contract.
Annual Benefit Amount when Contract Value is zero: Guaranteed Payments
If your Contract Value goes to zero on or after the Benefit Eligibility Date (the youngest Covered Person’s 60th birthday for the single life option and 65th birthday for the spousal life option), and you have met the conditions of the benefit, the contract and all rights under the contract and rider terminate but we will pay you the Annual Benefit Amount each year until the first death of a Covered Person under the single life option or until the death of the surviving spouse under the spousal life option. You must reach the Benefit Eligibility Date before the Annual Benefit Amount becomes available for guaranteed payments.
Asset Allocation or Strategic Program Requirement
You must select one of the approved asset allocation programs when allocating your premium payments and Contract Value if you purchase Phoenix Flexible Withdrawal Protector. Consult with your registered representative before you select a program. Review your selected program periodically with your registered representative to determine if it needs to be changed. You may switch your current program at any time to another the Company has approved and made available. However, the rider fee may vary based upon the program or option you choose and the fee may increase under certain circumstances. See the table of “Optional Benefit Fees” for details. We reserve the right to restrict availability of investment options and programs.
Canceling out of programs altogether will cause the rider to terminate without value. Consult your registered representative before you cancel out. Later re-enrollment is allowed. However, once you cancel out, later re-enrollment in a program will not reinstate the rider. If a program is eliminated while the rider is in effect, we will provide you notice and you must choose among the other approved programs available. Consult with your registered representative to make an appropriate selection and return the form we require to the Annuity Operations Division. Descriptions of the programs are found in “Asset Allocation and Strategic Programs” above.
Important Terms and Conditions Related to Phoenix Flexible Withdrawal Protector
If you purchased your rider at the time you purchased your contract the rider date is the same as the contract date and rider years are measured the same as contract years. If you purchased your rider after your contract was issued, your rider date is the contract anniversary immediately following the date you elect the rider and your rider years are measured from your rider date.
“Annual Benefit Percentage” is the percentage we use to determine the Annual Benefit Amount. The percentage varies by age as shown below and is established on the date you make the first withdrawal from the contract. If your first withdrawal is prior to the Benefit Eligibility Date (the youngest Covered Person’s 60th birthday for the single life option or 65th birthday for the spousal life option) this percentage is reset to 4% on the Benefit Eligibility Date.
Single Life
Attained Age 		Annual Benefit
Percentage 		Spousal Life
Attained Age 		Annual Benefit
Percentage
<60 0% <65 0%
60-74 4% 65-74 4%
75-84 5% 75-84 5%
85+ 6% 85+ 6%
See your rider’s specification page for percentages applicable prior to March 9, 2009.
“Benefit Eligibility Date” is the date the benefit provided by the rider is first available to you.
• For the single life option, the Benefit Eligibility Date is the later of the rider date or the date the youngest Covered Person attains age 60.
• For the spousal life option, the Benefit Eligibility Date is the later of the rider date or the date the youngest Covered Person attains age 65. If either spouse dies prior to the Benefit Eligibility Date, we will reset the Benefit Eligibility Date to the later of the date of the first spousal death or the date the surviving spouse attains age 65.
“Covered Person(s)” means the person(s) whose life is used to determine the duration of the lifetime Annual Benefit Amount payments. A Covered Person must be a natural person.
• For the single life option, the Covered Person can be one or more lives. If there is one natural person owner, the owner is the Covered Person. If there are multiple natural person owners, all owners are Covered Persons. If the owner is a non-natural person, all annuitants named in the contract become Covered Persons.
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• Generally, for the spousal life option, Covered Persons must be two legal spouses under federal law to receive any economic benefit from the election of this option (See “Definition of Spouse” under Optional Benefits” for more information). For contracts issued in New Jersey and Oregon, Covered Persons must be either two legal spouses under federal law or domestic partners under state law. If there is one natural person owner, the owner and the owner’s spouse must be the Covered Persons. The spouse must be the sole beneficiary. If there are two spousal owners, the Covered Persons are the spousal owners, and they must both be each other’s beneficiary. If there are multiple non-spousal owners, or if the owner is a non-natural person, the spousal life option is not allowed.
Benefit Base
The Benefit Base determines the Annual Benefit Amount. The Annual Benefit Amount represents two distinct values depending upon whether or not your Contract Value is greater than zero. It is the amount available for withdrawals provided you have reached the Benefit Eligibility Date and the Contract Value is greater than zero. It is also the amount we will pay to you each year provided you have reached the Benefit Eligibility Date and the Contract Value has gone to zero.
Assuming the Phoenix Flexible Withdrawal Protector rider was issued on the date the contract was issued, the Benefit Base on that date equals the initial premium payment. Thereafter, the Benefit Base is re-calculated whenever certain triggering events occur. If your rider is issued after the contract issue date, your Benefit Base equals the Contract Value on the date the rider is issued. At any time while the rider is in effect, we will reduce the Benefit Base if cumulative withdrawals in a rider year exceed the Annual Benefit Amount. Generally speaking, assuming no withdrawals have been taken, the Benefit Base will be increased by additional premium payments, and may be increased as a result of the roll-up and step-up features. The Benefit Base may also be increased at a particular rider anniversary following the end of the roll-up period by an aspect of the roll-up feature we call the Benefit Base Multiplier. Events and features causing recalculation of the Benefit Base are described below. The Benefit Base will never exceed a maximum amount. This maximum amount is the sum of the Maximum Benefit Base Percentage (currently 500%), multiplied by the initial premium plus the Maximum Benefit Base Percentage multiplied by the sum of subsequent premiums in the first rider year, plus 100% of other subsequent premiums.
Sample calculation of the Maximum Benefit Base
Assume that the initial premium (or if applicable, Contract Value) on the rider date was $100,000 and that the Maximum Benefit Base Percentage was 500%. On the rider date, your Maximum Benefit Base is $500,000 (500% times $100,000).
Now assume that you make an additional premium payment of $20,000 during the first rider year. Your Maximum Benefit Base would be increased to $600,000 [500,000 + (500% times $20,000)].
Then assume that you make another premium payment of $15,000, but that this premium payment was made in the third rider year. Your Maximum Benefit Base would be increased to $615,000 [$600,000 + (100% times $15,000)].
Events and features causing recalculation of the Benefit Base
❖   Premium Payments Received After the Rider Date
If we receive premium payments after the rider date, and no withdrawals have been made from the contract, then we will increase the Benefit Base. The Benefit Base will be increased by the dollar amount of each premium payment on the date we receive it. However, if you then take withdrawals from the contract in excess of your Annual Benefit Amount, we will reduce the Benefit Base as described in “Taking Withdrawals” below.
Withdrawals also stop increases in your Benefit Base that would have occurred when additional premiums are received by us. If any withdrawal has been made from the contract on or prior to our receipt of an additional premium, we will not increase the Benefit Base as a result of premium payments made after such withdrawal.
❖   Roll-up Feature
The rider includes a roll-up feature. This feature allows for an increase, or “roll-up,” in the Benefit Base during a specified period of time, called the roll-up period. The roll-up feature is only available to you if no withdrawals have been taken from the contract. Currently, the roll-up period continues until the 10th rider anniversary following the later of the rider date or the last rider anniversary on which an automatic step-up, described below, occurs. The roll-up period will never extend beyond the time the younger Covered Person attains a maximum age. This maximum age is the greater of age 95 or the younger Covered Person’s age on the rider date plus 10 years. The increase in Benefit Base resulting from a roll-up is based upon a comparison of different values on each rider anniversary, as specified below. For calculation of the increase in Benefit Base provided by the roll-up feature, “subsequent premium payments” means premium payments received after the rider date, excluding premium payments received on any rider anniversary. The roll-up amount is determined by multiplying the Benefit Base after the most recent prior automatic step-up or, for the roll-up at the end of the first rider year or if there were no prior automatic step-ups, the Benefit Base on the last valuation date of the first rider year by a percentage, currently 6.5%. (For riders issued prior to March 9, 2009, the roll-up amount is determined by multiplying the Benefit Base as of the prior rider anniversary or, for the roll-up amount at the end of the first rider year, the Benefit Base on the last valuation date of the first rider year by 6.5%.)
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If you have not taken withdrawals from the contract and therefore are eligible for the roll-up feature of the rider, we will use an additional value in recalculating the Benefit Base on the rider anniversary at or following the end of the roll-up period on which the youngest Covered Person has attained age 70. This additional value applies the Benefit Base Multiplier, currently 200%, to the sum of the Benefit Base on the rider date plus subsequent premium received in the first rider year. The recalculation of the Benefit Base under the various situations that can exist at the end of the roll-up period is described below.
❖  
Rider Anniversaries During the Roll-up Period
On each rider anniversary during the roll-up period, if no withdrawals have been made, the Benefit Base will be re-calculated on that rider anniversary. The re-calculated Benefit Base will equal the greater of the following, but if the automatic step-up feature has been suspended, it will be set to the second of the two values described below:
•
the Contract Value then in effect, (after all fees have been deducted, and provided the automatic step-up feature has not been suspended);
•
the sum of (i) the Benefit Base on the prior rider anniversary plus any premium payments since the prior rider anniversary and (ii) the roll-up amount for the prior rider year, if any.
Example 1—Basic application of a roll-up amount.
Assume that you have reached your first rider anniversary and have not made any withdrawals. Assume further that your Benefit Base on your rider’s effective date was $100,000, your Contract Value is $105,000, you have not made any subsequent premium payments during the prior rider year and the automatic step-up has not been suspended.
Your Benefit Base will be re-calculated on your rider anniversary to be the greater of the following:
• Contract Value = $105,000
• Sum of (i) and (ii) = $106,500
(i) Benefit Base on prior rider anniversary = $100,000
(ii) The Roll-Up Amount of $6,500 which equals the Benefit base at the end of the first rider year ($100,000) times 6.5%
Your Benefit Base will be $106,500.
Example 2—Application of the roll-up amount when there is a prior automatic step-up.
Assume that you have reached the second rider anniversary and have not made any withdrawals. Assume further that your Benefit Base as of the last rider anniversary was $108,000 due to an automatic step-up, your contract value is $110,000, you have not made any subsequent premium payments during the prior rider year and the automatic step-up has not been suspended.
Your Benefit Base will be re-calculated on your rider anniversary to be the greater of the following:
• Contract Value = $110,000
• Sum of (i) and (ii) = $115,020
(i) Benefit Base on prior rider anniversary = $108,000
(ii) The Roll-Up Amount of $7,020, which equals the Benefit Base on the rider anniversary of the last automatic step-up ($108,000) times 6.5%
Your Benefit Base will be $115,020.
Example 3—Application of the roll-up amount when several rider years have elapsed with no prior automatic step-up.
Assume the Benefit Base on the first rider anniversary prior to any roll-up calculation was $100,000. Assume that you have reached the fourth rider anniversary without making any withdrawals and without having an automatic step-up. The Benefit Bases are increased by the Roll-Up Amounts at the end of each of the first 3 rider years and equal:
Year 1: $106,500 = $100,000 + $6,500
Year 2: $113,000 = $106,500 + $6,500
Year 3: $119,500 = $113,000 + $6,500
The above Roll-Up Amounts are each equal to 6.5% of the Benefit Base at the end of the first rider year.
Assume that, on the 4th rider anniversary, your contract value is $115,000 and you have not made any subsequent premium payments.
Your Benefit Base will be re-calculated on your rider anniversary to be the greater of the following:
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• Contract Value = $115,000
• Sum of (i) and (ii) = $126,000
(i) Benefit Base on prior rider anniversary = $119,500
(ii) The Roll-Up Amount of $6,500 which equals the Benefit base at the end of the first rider year ($100,000) times 6.5%.
Your Benefit Base will be $126,000.
Example 4—Impact of a Subsequent Premium Payment on the Benefit Base.
Assume the Benefit Base on your rider’s effective date was $100,000. Assume there is no automatic step-up at the end of the first rider year and you have not taken any withdrawals. The Benefit Base at the end of the 1st rider year is increased by the Roll-Up Amount and equals $106,500 = $100,000 + $6,500.
Assume that 3 months into the 2nd rider year you make a Subsequent Premium Payment of $50,000. The Benefit Base is increased to $156,500 ($106,500 + $50,000) due to the premium payment.
Assume that, on the 2nd rider anniversary, your contract value is $140,000.
Your Benefit Base will be recalculated on your 2nd rider anniversary to be the greatest of the following:
• Contract Value = $140,000
• Benefit Base in Effect = $156,500
• Sum of (i), (ii), and (ii) = $163,000
(i) Benefit Base on prior rider anniversary = $106,500
(ii) The Roll-Up Amount of $6,500 which equals the Benefit base at the end of the first rider year ($100,000) times 6.5%.
(iii) Subsequent Premium Payments during the recently completed rider year = $50,000
Your Benefit Base will be $163,000.
❖   The Rider Anniversary Following the End of the Roll-Up Period
If the roll-up period has ended, and no withdrawals have been made from the contract, we will re-calculate the Benefit Base on the rider anniversary following the end of the roll-up period.
When we recalculate the Benefit Base on the rider anniversary following the end of the roll-up period, the amount of the recalculated Benefit Base will depend on whether the youngest Covered Person has attained the Benefit Base Multiplier Age, currently age 70, by that rider anniversary. If the youngest Covered Person has not attained age 70 by the rider anniversary immediately following the end of the roll-up period, then we will recalculate the Benefit Base again on the rider anniversary next following the date the youngest Covered Person attains age 70. For each situation, the recalculated Benefit Base is determined as described below.
1. Assuming the youngest Covered Person has not attained age 70 by the rider anniversary immediately following the end of the roll-up period, then on that rider anniversary, the Benefit Base will be set equal to the greater of the following, unless the automatic step-up feature has been suspended in which case, it will be set to the latter of the two values described below:
• the Contract Value then in effect, (after all fees have been deducted, provided the automatic step-up feature has not been suspended);
• the sum of (i) the Benefit Base on the prior rider anniversary plus any premium payments since the prior rider anniversary and (ii) the roll-up amount for the prior rider year, if any.
Assume the Benefit Base on the first rider anniversary prior to any roll-up calculation was $100,000 and that you have reached the rider anniversary following the end of the roll-up period, the youngest Covered Person has not yet attained age 70 and you have not made any withdrawals. Assume further that your contract has never had an automatic step-up, your Benefit Base as of your prior rider anniversary was $158,500, your Contract Value is $105,000, you have not made any subsequent premium payments during the prior rider year and the automatic step-up has not been suspended. Your Benefit Base will be re-calculated on your rider anniversary to be the greater of the following:
• Contract Value = $105,000
• Sum of (i) and (ii) = $165,000
(i) Benefit Base on prior rider anniversary = $158,500
(ii) Roll-Up Amount for prior rider year = $100,000 x 6.5% = $6,500
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Your Benefit Base will be $165,000.
2. Assuming the youngest Covered Person has attained age 70 by the rider anniversary immediately following the end of the roll-up period, then on that rider anniversary, the Benefit Base will be set equal to the greatest of the following, unless the automatic step-up feature has been suspended in which case, it will be set to the greater of the latter two values described below:
• the Contract Value then in effect, (after all fees have been deducted, provided the automatic step-up feature has not been suspended);
• the Benefit Base Multiplier, currently 200%, multiplied by the sum of (i) the Benefit Base on the rider date,and (ii) all subsequent premium payments received during the first rider year;
• the sum of (i) the Benefit Base on the prior rider anniversary plus any premium payments since the prior rider anniversary and (ii) the roll-up amount for the prior rider year, if any.
Assume that you have reached the rider anniversary following the end of the roll-up period, the youngest Covered Person has attained age 70 and you have not made any withdrawals. Assume further that your contract has never had an automatic step-up, your Benefit Base as of your prior rider anniversary was $158,500, your Benefit Base on the rider date was $100,000, your Contract Value is $105,000, you have not made any subsequent premium payments after the rider date and the automatic step-up has not been suspended.
Your Benefit Base will be re-calculated on your rider anniversary to be the greatest of the following:
• Contract Value = $105,000
• 200% x Sum of (i) and (ii) = $200,000
(i) Benefit Base on the rider date = $100,000
(ii) Subsequent premium payments = $0
• Sum of (i) and (ii) = $165,000
(i) Benefit Base on prior rider anniversary = $158,500
(ii) Roll-Up Amount for prior rider year = $100,000 x 6.5% = $6,500
Your Benefit Base will be $200,000.
❖   Rider Anniversary Next Following Youngest Covered Person’s 70th Birthday Occurring after the Rider Anniversary Immediately Following the End of the Roll-Up Period
Assuming no withdrawals have been taken and the youngest Covered Person attained age 70 after the rider anniversary immediately following the end of the roll-up-period, then, on the next rider anniversary following the date the youngest Covered Person attains age 70, the Benefit Base will be set equal to the greatest of the following, unless the automatic step-up feature has been suspended in which case, it will be set to the greater of the latter two values described below:
• the Contract Value then in effect, after all fees have been deducted, (provided the automatic step-up feature has not been suspended);
• the Benefit Base on the prior rider anniversary plus any premium payments since the prior rider anniversary;
• the Benefit Base Multiplier, currently 200%, multiplied by the sum of (i) the Benefit Base on the rider date and (ii) all subsequent premium payments received during the first rider year.
Example
Assume that you reached the rider anniversary following the end of the roll-up period several years ago, but still have not made any withdrawals from the contract. However, the youngest Covered Person celebrated his 70th birthday during the prior rider year. Assume further, your Benefit Base on the prior rider anniversary was $180,000, your Benefit Base on the rider date was $100,000, your Contract Value is $105,000, you have not made any subsequent premium payments after the rider date and the automatic step-up has not been suspended.
Your Benefit Base will be re-calculated on your rider anniversary to be the greatest of the following:
• Contract Value = $105,000
• Benefit Base on prior rider anniversary = $180,000
• 200% x Sum of (i) and (ii) = $200,000
(i) Benefit Base on the rider date = $100,000
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(ii) Subsequent premium payments = $0
Your Benefit Base will be $200,000.
❖   Each Rider Anniversary After the Earlier of the First Withdrawal and the Rider Anniversary Following the End of the Roll-Up Period (except Rider Anniversary next following youngest Covered Person’s 70th birthday occurring after the Rider Anniversary immediately following the end of the Roll-Up Period)
On each rider anniversary after the earlier of the first withdrawal and the rider anniversary following the end of the roll-up period, we will re-calculate the Benefit Base. The Benefit Base will be set equal to the greater of the following unless the automatic step-up feature has been suspended, in which case it will be set to the second of the two values described below:
• the Contract Value then in effect, after all fees have been deducted, (provided the automatic step-up feature, described below, has not been suspended); and
• the Benefit Base on the prior rider anniversary adjusted for any withdrawals taken since the prior rider anniversary plus, if no withdrawals have been made, any premium payments made since the prior rider anniversary.
Example
Assume that you made a withdrawal from the contract. Assume further, your Benefit Base on prior rider anniversary was $106,500, your Contract Value is $110,000 and the automatic step-up has not been suspended.
Your Benefit Base will be re-calculated on your rider anniversary to be the greater of the following:
• Contract Value = $110,000
• Benefit Base on prior rider anniversary = $106,500
Your Benefit Base will be $110,000.
❖   Automatic Step-Up Feature
The rider includes an automatic step-up feature. Like the roll-up feature, the automatic step-up feature allows for an increase in the Benefit Base. At set intervals, currently on each anniversary of the rider date, we will automatically compare the Contract Value, after deduction of all fees, to the Benefit Base then in effect; that is, the Benefit Base on the prior rider anniversary plus any premium payments made since the prior rider anniversary. If the Contract Value, after deduction of all fees, is greater than such Benefit Base, we will automatically increase, or “step-up” the Benefit Base to equal the Contract Value. Any step-up occurs after any roll-up as described above. You should know the fee percentage for the rider may be increased if we step-up the Benefit Base. If you do not decline the automatic step-up, you will pay the current rider fee then in effect beginning on the date of any automatic step-up of the Benefit Base. You can decline the step up and any associated fee increase by contacting us no later than seven days prior to the rider anniversary. If you decline the step-up, the automatic step-up will not occur and the automatic step-up feature will be suspended immediately. If you decline an automatic step-up in the Benefit Base, we will continue to calculate any roll-ups as described above. Assuming your rider is still in effect at the next step-up interval, you may reactivate the automatic step-up option by contacting us at the phone number or address provided on the first page of the prospectus.
❖   Taking Withdrawals
The following section describes how taking withdrawals may impact the Benefit Base. Prior to the Benefit Eligibility Date, all withdrawals are considered excess withdrawals. Withdrawals will reduce the Benefit Base by the same proportion as Contract Value is reduced by the withdrawal. If the Benefit Base is greater than the Contract Value at the time of the withdrawal, the withdrawal will reduce the Benefit Base by more than the withdrawal amount as shown in the example below. Then, on the Benefit Eligibility Date, which is generally the date the youngest Covered Person attains age 60, if the single life option is in effect or the date the younger spouse attains age 65, if the spousal life option is in effect, we will calculate the Annual Benefit Amount using the reduced Benefit Base.
Example
Assume the Contract Value is $50,000 and the Benefit Base is $75,000. A withdrawal of $5,000 is made prior to the Benefit Eligibility Date. The Contract Value is reduced by 10% ($5,000 / $50,000) as a result of the withdrawal. Therefore, the Benefit Base is reduced by 10% or $7,500. The new Benefit Base is
$75,000 - $7,500 = $67,500.
After you reach the Benefit Eligibility Date, whether withdrawals will reduce the Benefit Base depends on whether cumulative withdrawals in any rider year exceed the Annual Benefit Amount as described below. The Annual Benefit Amount is not available to you for withdrawals or payments unless you have reached the Benefit Eligibility Date.
• If cumulative withdrawals in any rider year after the Benefit Eligibility Date do not exceed the Annual Benefit Amount then in effect, the Benefit Base will not be reduced.
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• If a withdrawal causes the cumulative withdrawals in any rider year after the Benefit Eligibility Date to exceed the Annual Benefit Amount, the amount withdrawn in excess of the Annual Benefit Amount and any subsequent withdrawals in that rider year are all considered excess withdrawals. Each excess withdrawal will reduce the Benefit Base in the same proportion as the Contract Value is reduced by the excess withdrawal. This reduction in the Benefit Base reduces the amount of future permitted withdrawals and may also reduce any amount available for guaranteed payments if the Contract Value goes to zero.
 
• Currently, withdrawals taken after the Benefit Eligibility Date to meet RMDs are not considered to exceed the Annual Benefit Amount and therefore do not reduce the Benefit Base. However, we may change this rule at our discretion in which case such withdrawals taken following this change may be considered excess withdrawals as described below.
 
For IRA and qualified plan contracts, cumulative withdrawals in a rider year after the Benefit Eligibility Date will be considered excess withdrawals only if they exceed the greatest of (a), (b) and (c), where:
(a) = the current Annual Benefit Amount;
(b) = the RMD for the 1st calendar year during the rider year; and
(c) = the RMD for the 2nd calendar year during the same rider year.
Sample calculations showing the effect of a withdrawal that is equal to the Annual Benefit Amount and then a withdrawal that is more than the Annual Benefit Amount
Assume that your Contract Value is $100,000 and your Benefit Base is $120,000. Assume you are making your first withdrawal and that you have already reached the Benefit Eligibility Date.
Since this is your first withdrawal (and it is occurring after the Benefit Eligibility Date), the Annual Benefit Percentage is determined by the youngest Covered Person’s attained age on the date of first withdrawal.
Assume this Annual Benefit Percentage is 5%. The Annual Benefit Amount therefore is $6,000, which is 5% multiplied by the Benefit Base (5% times $120,000). Now assume that the withdrawal amount is $6,000. Since your cumulative withdrawals during the rider year have not exceeded the Annual Benefit Amount, the amount withdrawn is not considered to be an excess withdrawal and there is no adjustment to your Benefit Base. So your Contract Value will decrease to $94,000 as a result of your withdrawal, but your Benefit Base will remain at $120,000.
Assume that later that rider year, you withdraw an additional $10,000 and that the Contract Value prior to the withdrawal was $96,000. Your Contract Value would reduce to $86,000 as a result of the second withdrawal. Your cumulative withdrawals for the year are now $16,000, which exceeds your Annual Benefit Amount by $10,000. The excess withdrawal reduced your Contract Value by 10.42% ($10,000 divided by $96,000), and accordingly, your Benefit Base is reduced by 10.42%, from $120,000 to $107,500. Your Annual Benefit Amount would be recalculated as 5% of $107,500 or $5,375.
 
Withdrawals from the contract have other potential consequences, including potential imposition of surrender charges and premium taxes, and federal income tax consequences. Withdrawals, including withdrawals taken to meet RMDs requirements that do not exceed the Annual Benefit Amount are considered to be within the contract’s free withdrawal amount. However, withdrawals above the Annual Benefit Amount, not including RMDs are subject to any surrender charges imposed under the contract. Please see “Surrender of Contract and Withdrawals” and “Federal Income Taxes” for more information.
 
Extended Care Enhancement
The Extended Care Enhancement is an optional feature available with the Phoenix Flexible Withdrawal Protector rider that allows for an increase in the Annual Benefit Amount when the Covered Person is confined to a nursing home, and meets the conditions specified below. As with other benefits provided by the rider, this benefit is available only on and after the Benefit Eligibility Date. This feature is not available after the contract issue date and is subject to state availability.
Conditions
We will increase the Annual Benefit Amount when the Covered Person has been confined to a nursing home as defined below for a least one day of the rider year, and has met the elimination period and waiting period requirements. This increase in the Annual Benefit Amount lasts for the same amount of time the Covered Person is confined and is calculated as described below. To meet the elimination period requirements, the Covered Person must have been confined to a nursing home for at least 180 consecutive days within the last 365 days. To meet the waiting period requirements, the Covered Person must not have been confined to a nursing home 12 months before the rider date and twelve months following the rider date. If you are confined to a nursing home during the waiting period, you will never be eligible for benefits under the Extended Care Enhancement.
• A nursing home is a facility that is licensed to operate pursuant to the laws and regulations of the state in which is it located as a nursing home to provide 24-hour convalescent and related nursing care services 7 days a week by an on-site registered nurse on
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a continuing inpatient basis for persons who are chronically ill or who otherwise require assistance in performing the basic activities of daily living. The facility must provide care prescribed by a physician and performed or supervised by a registered graduate nurse. In addition the facility must have a planned program of policies and procedures developed with the advice of, and periodically reviewed by, at least one physician.
•
A nursing home does not include a hospital (acute care), a rehabilitation hospital, an assisted living facility, a facility for the treatment of alcoholism, drug addiction, mental illness, or nervous disorders, a rest home (a home for the aged or a retirement home), a residential care facility, or any other facility which does not, as its primary function, provide assistance in performing the basic activities of daily living.
No benefits under the Extended Care Enhancement feature will be provided if other similar benefits have been purchased through the Company, or any of its subsidiaries or affiliates.
If the Extended Care Enhancement feature is in effect, and you have met the above conditions, we will determine the Annual Benefit Amount by multiplying the Benefit Base by a specified percentage, currently 200%, multiplied by the Annual Benefit Amount Percentage. When the Covered Person is no longer confined to a nursing home, we will reduce the Annual Benefit Amount to that which is ordinarily provided under the Phoenix Flexible Withdrawal Benefit.
Payment of the Annual Benefit Amount when the Contract Value is greater than zero
The Annual Benefit Amount is not available to you before the Benefit Eligibility Date. After you reach the Benefit Eligibility Date, you may take withdrawals equal to the Annual Benefit Amount each year the Contract Value is greater than zero. You can establish a Systematic Withdrawal Program for payments equal to a specified amount or can request payments according to your own schedule. See “Systematic Withdrawal Program” for additional details about how to use this program and the program’s restrictions.
Payment of the Annual Benefit Amount when the Contract Value is zero
The Annual Benefit Amount is not available to you before the Benefit Eligibility Date. If, when the Contract Value goes to zero, the Benefit Base is greater than zero, then, one month after the later of the date the Contract Value goes to zero and the Benefit Eligibility Date, we will begin to pay you equal monthly payments of an amount that will equal the Annual Benefit Amount divided by twelve. We will make these payments under the single life option or spousal life option, whichever you selected at the time you purchased the rider. For the single life option, all Covered Persons must be living on the date we make the first payment, and for the spousal life option, at least one spouse must be living. Payments will continue until the first death of any Covered Person(s) for the single life option, or until the death of the surviving spouse for the spousal life option. We may change the payment frequency to annual if a monthly payment would be otherwise less than any minimum payment requirement.
Maximum Maturity Date Benefit
If your Contract Value is greater than zero and you cannot extend the maturity date of the contract any later, this rider allows you to exchange the Contract Value for lifetime payments equal to the Annual Benefit Amount in lieu of applying the Contract Value to one of the annuity payment options offered under the contract. Otherwise, your contract will enter the annuity period and you may choose any of the annuity options then available. See “The Annuity Period”
Termination of Phoenix Flexible Withdrawal Benefit
The rider will terminate without value on the date the first of any of the following events occur:
1.
any Covered Person is changed;
2.
annuity payments begin under an annuity payment option as described in the contract;
3.
the contract, to which the rider is attached, terminates;
4.
the owner elects to terminate the rider;
5.
when any portion of the Contract Value is no longer invested in one of the approved asset allocation programs;
6.
the Contract Value and Benefit Base are both reduced to zero;
7.
any Covered Person under the single life option, or the surviving Covered Person under the spousal life option dies; or
8.
you assign any rights or interest in the rider.
Once the rider is terminated it cannot be reinstated and the pro rata portion of the rider fee will be deducted from the Contract Value on the date the rider terminates.
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Special Risks Associated with Withdrawals
The following chart demonstrates special risks that are associated with taking withdrawals when the Phoenix Flexible Withdrawal Protector is attached to a contract when the Contract Value and Benefit Base are both greater than zero. Whether or not a withdrawal is considered “permitted” or “excess” is described in the section “Taking Withdrawals”, in the description of the Benefit Base. When the Contract Value is reduced to zero, lifetime payments will begin and withdrawals are no longer allowed from the contract.
Scenario No Withdrawals Permitted
Withdrawals 		Excess
Withdrawals
Automatic Contract Value reduction
 X X
Reduction to Benefit Base
 X
Gives you the highest potential Annual Benefit Amount available under the rider1
 X
Cancels your ability to have subsequent premium payments automatically increase the Benefit Base
 X X
Cancels your ability to “roll-up” and increase your Benefit Base
 X X
Reduces the likelihood of an automatic step-up2
 X X
Premium payments increase the Benefit Base
 X
Potential to terminate the rider without value if reduces the Contract Value to zero
 X
Permanently sets the Annual Benefit Percentage
 X X
Permanently sets the Annual Benefit Amount if the Contract Value is reduced to zero and the Benefit Base is greater than zero
 X
Potential surrender charges
 X
Potential premium taxes and/or federal income tax consequences
 X X
1 The potential Annual Benefit Amount is greatest if at the end of the roll-up period, no withdrawals have been made and the youngest Covered Person has attained the Benefit Base Multiplier Age.
2 In order to obtain an automatic step-up, your Contract Value must be greater than your Benefit Base on the rider anniversary. If you make withdrawals, your Contract Value will automatically decline, therefore reducing the likelihood that your Contract Value will be greater than your Benefit Base on your next rider anniversary, thus also reducing the likelihood that you will be able to step-up your Benefit Base.
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GMWB 2007 and earlier versions (available only if Phoenix Flexible Withdrawal Protector is not available in your applicable state).
This optional rider provides a Guaranteed Minimum Withdrawal Benefit that guarantees a minimum amount that you will be able to withdraw from your contract, regardless of investment performance. GMWB is intended to help protect you against poor market performance if you make withdrawals within the limits described below. GMWB does not establish or guarantee a Contract Value or in any way guarantee the investment performance of any investment option available under the contract. You may begin taking withdrawals immediately or at a later time. You will not lose the guarantee if you don’t make withdrawals or if you withdraw less than the limit allowed as specified below. If you do make withdrawals, income taxes, tax penalties and surrender charges may apply. A fee for this benefit is deducted on each contract anniversary. See the “Optional Benefit Fees” chart and refer to “Deductions and Charges” above.
Currently we allow you to elect GMWB only on the Contract Date. We may remove this restriction in the future.
This benefit is not available to you if you are the beneficiary of a deceased Owner’s Contract and are utilizing this Contract as an Inherited/Stretch Annuity.
Asset Allocation or Strategic Program Requirement
If you purchase GMWB, you must select one of the approved programs through which to allocate your premium payments and Contract Values. You should consult with your registered representative when you initially select a program and periodically review your program with your registered representative to determine if you need to change programs. You may, at any time, switch your current program or option to another, as well as to any modified or new programs or options the Company may make available. We reserve the right to restrict availability of investment options.
Although you may cancel your participation in a program, you should consult your registered representative before doing so, as canceling the program will cause GMWB to terminate without value. You may later re-enroll in a program but re-enrollment will not reinstate GMWB if it has terminated. If a program is eliminated while GMWB is in effect, you will receive notice and you must choose, in consultation with your registered representative, among the other programs and options available.
Descriptions of the programs are found in “Asset Allocation and Strategic Programs” above.
GMWB 2007 (issued on or after January 16, 2007 and before Phoenix Flexible Withdrawal Protector becomes available in your applicable state)
GMWB 2007, guarantees that each contract year after the Benefit Eligibility Date, you may take withdrawals up to the annual benefit amount until the first death of any Covered Person, if the Single Life Option is in effect, or until the last death of any Covered Person if the Spousal Life Option is in effect even if your Contract Value reduces to zero.
Benefit Eligibility Date
The Benefit Eligibility Date represents the date when your lifetime Annual Benefit Amount is available to you.
The Benefit Eligibility Date when the Single Life Option is in effect is the later of the date that this rider is added to the contract (the “rider date”) and the contract anniversary on or following the date the youngest Covered Person attains age 60.
The Benefit Eligibility Date when the Spousal Life Option is in effect is the later of the rider date or the contract anniversary on or following the date the youngest Covered Person attains age 65. If either spouse dies prior to the Benefit Eligibility Date, the Benefit Eligibility Date will be reset to the later of (a)the contract anniversary following the spouse’s date of death, and (b)the contract anniversary on or following the surviving spouse attaining age 65.
Covered Person
The Covered Person is the person whose life is used to determine the duration of lifetime Annual Benefit Amount payments. The Covered Person must be a natural person; the owner, however, can be a non-natural person, e.g., a trust or corporation can be designated.
Single Life Option
Covered Person(s) can be one or more lives. If there is only one designated owner, that owner is the Covered Person. If there are multiple owners, all owners are Covered Persons. If none of the owners are a natural person, all annuitants become the Covered Persons. The rider terminates upon the first death of the Covered Person(s).
Spousal Life Option
Generally, Covered Persons must be two legal spouses under Federal law to receive any economic benefit from the election of this option (see “Spousal Definition” for further discussion of spousal qualifications).
For contracts issued in New Jersey and Oregon, Covered Persons must be either two legal spouses under federal law or domestic partners under state law. If there is only one designated owner, the Covered Persons must be the owner and the owner’s spouse, and the spouse must be the sole beneficiary. If there are spousal owners, the Covered Persons must be the spousal owners, and they must both be the beneficiaries. You cannot elect the Spousal Life Option if you wish to designate multiple non-spousal owners, or ownership by a non-natural person. The rider terminates upon the last death of the Covered Persons.
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Annual Benefit Amount
If your Contract Value is greater than zero, the Annual Benefit Amount represents the maximum amount you can withdraw each Contract Year after the Benefit Eligibility Date without reducing the Benefit Base. If your Contract Value reduces to zero, the Annual Benefit Amount represents the annual lifetime amount we will pay.
Prior to the Benefit Eligibility Date, the Annual Benefit Amount is set equal to zero. On and after the Benefit Eligibility Date, the Annual Benefit Amount equals 5% of the Benefit Base. The Annual Benefit Amount is recalculated whenever the Benefit Base is recalculated, as specified below. The Annual Benefit Amount may never be less than zero.
Benefit Base
The Benefit Base is the amount established for the sole purpose of determining the Annual Benefit Amount. On the rider date, the Benefit Base is equal to the Contract Value. Thereafter, the Benefit Base may be increased by an applicable Roll-Up, or Automatic Step-Up, or subsequent premium payments. The Benefit Base may be reduced by withdrawals. The Benefit Base may never exceed $5,000,000.
Subsequent Premium Payments
When a subsequent premium is received, the Benefit Base equals the current Benefit Base plus the premium payment amount.
Withdrawals Prior to Benefit Eligibility Date
 
Prior to the Benefit Eligibility Date, withdrawals, including withdrawals taken to meet RMDs (as defined by the Internal Revenue Code), will reduce the Benefit Base in the same proportion as the Contract Value is reduced. Surrender charges may also be assessed if the withdrawal is made within the surrender charge period.
 
Withdrawals On or After Benefit Eligibility Date
On or after the Benefit Eligibility Date, withdrawals may cause the Benefit Base to be reduced, depending on the amount of the withdrawal.
• If cumulative withdrawals in any Contract Year are less than or equal to the Annual Benefit Amount then in effect, the Benefit Base will not be reduced.
• If a withdrawal causes the cumulative withdrawals during a Contract Year to exceed the Annual Benefit Amount, the amount withdrawn in excess of the Annual Benefit Amount and any subsequent withdrawals are all considered excess withdrawals. Each excess withdrawal will reduce the Benefit Base in the same proportion as the Contract Value is reduced by the excess withdrawal.
• Withdrawals taken to meet the Required Minimum Distribution requirement will be deemed to be within the Annual Benefit Amount and will not cause the Benefit Base to be reduced.
Roll-Up
On each contract anniversary during the first 10 Contract Years following the rider date, if no withdrawals have been taken since the rider date, the Benefit Base will be increased by a percentage of the Benefit Base as of the prior contract anniversary, or, for the Roll-Up at the end of the first contract year, a percentage of the Benefit Base on the last valuation date of the first contract year, prior to any Step-Up. The percentage applied is determined when your contract is issued and is shown on the rider specifications page for your rider. Any Roll-Up occurs prior to any applicable Automatic Step-Up, as described below.
Automatic Step-Up
On each contract anniversary after the rider date, the Contract Value and Benefit Base are compared. If the Contract Value is greater than the current Benefit Base, we will automatically step-up the Benefit Base to equal the Contract Value. If, however, the Automatic Step-Up has been suspended, as described below, no Automatic Step-Up will occur.
We may prospectively increase the fee percentage on the effective date of any Automatic Step-Up, subject to the maximum fee percentage of 1.50%. If there is an increase in the fee percentage, we will notify you at least 30 days prior to the contract anniversary. You can decline the increase by contacting us no later than seven days prior to the contract anniversary. If you decline the fee increase, the Automatic Step-up feature will be suspended immediately and your fee percentage will remain unchanged. Once your Automatic Step-up is suspended, you will no longer be eligible for any future Automatic Step-up unless you later request in writing to reactivate it. After we receive your request for reactivation, the Automatic Step-up will resume on the following contract anniversary and the fee percentage effective at that time will apply.
Contract Value Reduced to Zero
When the Contract Value is reduced to zero, the contract terminates and all rights under the contract and the rider terminate other than as described below.
We will pay you an amount per year equal to the Annual Benefit Amount, until the first death of the Covered Person(s) for the Single Life Option, or until the last death of the Covered Persons for the Spousal Life Option. We will automatically make monthly payments equal to one-twelfth of the Annual Benefit Amount. We may change the payment frequency to annual if a monthly payment would be otherwise less than any minimum payment requirement.
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If the Contract Value is reduced to zero before the Benefit Eligibility Date, we will calculate the Annual Benefit Amount. The new Annual Benefit Amount is equal to 5% of the Benefit Base at the time the Contract Value reduces to zero. Monthly Payments, however, will not commence until one month after the Benefit Eligibility Date.
If the Contract Value is reduced to zero on or after the Benefit Eligibility Date, monthly payments will commence one month after the Contract Value reduces to zero.
Payments under the Single Life Option cover only one life, and will continue until the first death of the Covered Person(s). All Covered Persons must be living on the date we make the first payment.
Payments under the Spousal Life Option cover two spousal lives, and will continue until the last death of the Covered Persons. Under the Spousal Life Option at least one of the Covered Persons must be living on the date we make the first payment.
Cancellation
You may cancel this rider at anytime in writing in a form acceptable to us. Once cancelled, all rights and benefits under the rider terminate. We will assess the current year rider fee at time of cancellation prorated by the time elapsed for the contract year. Past rider fees will not be refunded.
Termination of Benefit
This benefit will terminate without value on the occurrence of any of the following dates
❖   the date of first death of the Covered Person(s) for the Single Life Option, or the date of last death of the Covered Persons for the Spousal Life Option.
❖   the date there is a change of contract Owner(s) (or Covered Person if the contract Owner is a non-natural person);
❖   the date annuity payments commence under an Annuity Payment Option as described in the contract;
❖   the date the contract to which this benefit is attached terminates;
❖   the date any investment restriction is violated;
❖   the date both the Contract Value and Benefit Base have been reduced to zero; or
❖   the date the contract Owners elect in writing to terminate the benefit.
Version I (issued prior to January 16, 2007),
Version I, issued prior to January 16, 2007, provides a Guaranteed Minimum Withdrawal Benefit that guarantees at least the return of your Contract Value on the date that this rider is added to the contract) plus the sum of all premium payments made after the rider date, multiplied by the Benefit Amount Percentage. The Benefit Amount Percentage is currently 105%. If your rider was issued on or after November 16, 2005 in states where the rider has been approved, you must annuitize your contract under one of the GMWB Annuity Payment Options described below to receive the benefits provided by this rider.
Version I offers four options: GMWB 5, GMWB 7, Lifetime GMWB and Lifetime GMWB for 2—Spousal Continuation (“Lifetime GMWB for 2”). GMWB 5 and GMWB 7 are non-lifetime withdrawal benefits; Lifetime GMWB and Lifetime GMWB for 2 are lifetime withdrawal benefits. Version I guarantees withdrawals or payments each year equal to the Withdrawal Limit until we have returned your Contract Value on the rider date plus the sum of all premium payments made after the rider date, multiplied by the Benefit Amount Percentage. In addition, if you elect Lifetime GMWB and the owner is alive after we have returned your Contract Value on the rider date plus the sum of all premium payments made after the rider date, multiplied by the Benefit Amount Percentage, we will continue to make payments each year equal to the Withdrawal Limit until the death of the owner. If you elect Lifetime GMWB for 2 and the owner and/or beneficiary is alive after we have returned your Contract Value on the rider date plus the sum of all premium payments made after the rider date, multiplied by the Benefit Amount Percentage, we will continue to make payments each year equal to the Withdrawal Limit until the later of the death of the owner and beneficiary.
You elect one option of the GMWB on the rider date and this election is irrevocable except as provided in the Optional Reset provision described below. Currently, we only allow you to elect this rider on the Contract Date. The GMWB can not be terminated except as described below.
This rider is subject to the following issue age, ownership, and beneficiary limitations, subject to state regulations.
For the GMWB 5 and GMWB 7 options, for nonqualified plans, the base contract minimum and maximum issue ages apply to this rider. For qualified plans, the base contract minimum issue age applies to this rider and the maximum issue age is 80.
For the Lifetime GMWB option, there can be only one owner, and the owner must be a natural person. For nonqualified plans, the base contract maximum issue age applies to this rider and the minimum issue age is 60. For qualified plans, the minimum issue age is 60 and the maximum issue age is 80.
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For the Lifetime GMWB for 2 option, there may be one or two owners and both must be natural persons. If there is one owner, the spouse must be sole beneficiary and eligible for spousal continuation of contract. If there are two owners, they must be spouses and eligible for spousal continuation of contract; the same two individuals must be the beneficiaries. For nonqualified plans, the minimum issue age is 65 for the owner and beneficiary and the base contract maximum issue age applies to this rider. For qualified plans, the minimum issue age is 65 for the owner and beneficiary and the maximum issue age is 80 for the owner and beneficiary.
Benefit Amount
The Benefit Amount is the amount available for withdrawals or payments and is established for the sole purpose of determining the Withdrawal Limit, Benefit Payment and Benefit Payment Duration. It is not used in calculating the surrender value or other values or benefits.
The Benefit Amount is calculated on the rider date. If the rider is not issued as a result of an Optional Reset, the Benefit Amount is equal to the Contract Value on the rider date multiplied by the Benefit Amount. The Benefit Amount will change as a result of subsequent premium payments, withdrawals or an Optional Reset as described below.
The Benefit Amount is recalculated after each subsequent premium payment. The new Benefit Amount is equal to the current Benefit Amount plus Benefit Amount Percentage multiplied by the subsequent premium payment. If your rider was issued on or after November 16, 2005 in states where the rider has been approved, the new Benefit Amount (calculated as a result of a subsequent premium payment) will never be greater than the Contract Value on the rider date plus total subsequent premium payments less total withdrawals made after the rider date, multiplied by the Benefit Amount Percentage.
The Benefit Amount is recalculated after each withdrawal. If the Contract Value before the withdrawal is greater than or equal to the Benefit Amount before the withdrawal, the new Benefit Amount is equal to the Benefit Amount before the withdrawal less the amount of the withdrawal. If the sum of all withdrawals in any given rider year exceeds the Withdrawal Limit and if the Contract Value before the withdrawal is less than the Benefit Amount before the withdrawal, then the new Benefit Amount is equal to the Contract Value after the withdrawal. The Benefit Amount may never be less than zero.
 
Withdrawals taken to meet RMDs with respect to this contract will be deemed to be within the Withdrawal Limit for purposes of the GMWB benefit.
 
Withdrawal Limit
The Withdrawal Limit is calculated on the rider date and is equal to the initial Benefit Amount multiplied by the Withdrawal Limit Percentage, currently 7% for GMWB 7 and 5% for GMWB 5, Lifetime GMWB and Lifetime GMWB for 2. The Withdrawal Limit will change as a result of subsequent premium payments, withdrawals or an Optional Reset as described below.
If the sum of all withdrawals in any given rider year does not exceed the Withdrawal Limit, no surrender charge will be deducted, even if such withdrawals exceed the free withdrawal amount. If the free withdrawal amount is less than the Withdrawal Limit, withdrawals in excess of the Withdrawal Limit will be subject to a surrender charge.
 
Withdrawals taken to meet RMDs with respect to this contract will be deemed to be within the Withdrawal Limit for purposes of the GMWB benefit.
 
If your rider was issued before November 16, 2005 or in states where the rider has not been approved:
The Withdrawal Limit is recalculated after each subsequent premium payment. The new Withdrawal Limit is equal to (A) multiplied by (B), added to (C), where:
(A) = Withdrawal Limit Percentage;
(B) = Benefit Amount Percentage multiplied by the premium payment; and
(C) = current Withdrawal Limit.
The Withdrawal Limit is recalculated after each withdrawal if the sum of all withdrawals in any given rider year exceeds the Withdrawal Limit and if the Contract Value before the withdrawal is less than the Benefit Amount before the withdrawal. The new Withdrawal Limit will be equal to the Withdrawal Limit Percentage multiplied by the Contract Value after the withdrawal. The Withdrawal Limit may never be less than zero. If the Benefit Amount is reduced to zero, then the Withdrawal Limit is equal to zero.
If your rider was issued on or after November 16, 2005 in states where the rider has been approved:
The Withdrawal Limit is recalculated after each subsequent premium payment. The new Withdrawal Limit is equal to the greater of the current Withdrawal Limit and the Withdrawal Limit Percentage multiplied by the Benefit Amount after the subsequent premium payment.
The Withdrawal Limit is recalculated after each withdrawal if the sum of all withdrawals in any given rider year exceeds the Withdrawal Limit. The new Withdrawal Limit will be equal to the Withdrawal Limit Percentage multiplied by the Contract Value after the withdrawal. The Withdrawal Limit may never be less than zero.
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Optional Reset
The purpose of an Optional Reset is to lock in a higher Benefit Amount, which may increase the Withdrawal Limit and lengthen the period of time over which withdrawals and payments can be taken. Locking in a higher Benefit Amount increases your total future guaranteed withdrawals or payments.
If you have Lifetime GMWB or Lifetime GMWB for 2, you may elect an Optional Reset on the first rider anniversary or any subsequent rider anniversary where the Contract Value is greater than the Benefit Amount. If you have GMWB 5 or GMWB 7, you may elect an Optional Reset on the fifth rider anniversary or any rider anniversary thereafter where the Contract Value is greater than the Benefit Amount.
If you elect the Optional Reset, we will terminate the existing rider and issue a new rider. At that time, you will be given the opportunity to change to a different version of the GMWB if you meet all of the issue age, ownership and beneficiary requirements. You must notify us within 30 days after the rider anniversary that you wish to elect the Optional Reset.
As a result of an Optional Reset, we will set the Benefit Amount equal to the Contract Value on the date of the reset. In addition, we will set the Withdrawal Limit equal to the Withdrawal Limit Percentage (under the new rider) multiplied by the Benefit Amount. We will also reset the Benefit Amount Percentage and the GMWB Fee Percentage to the then current percentages we are offering for new issues of the rider on the date of the reset. The GMWB Fee Percentage will never exceed the maximum charge of shown in the table of “Optional Benefit Fees.”
We reserve the right to prohibit the Optional Reset if we no longer offer GMWB as an additional option on new issues of the contract.
Contract Value Reduced to Zero
If the Contract Value is reduced to zero, you will begin receiving monthly payments one month following the date the Contract Value is reduced to zero as described below. Subsequent payments will be made on the same date each month as the first payment. Payments may not be commuted or accelerated. Once you begin receiving monthly payments you will be prohibited from making any further premium payments, withdrawals, transfers, surrenders, or commencing annuity payments under an Annuity Payment Option as described in the contract. In addition, you will be prohibited from electing the Optional Reset or any other optional riders previously available under your contract.
The Benefit Payment is the amount of each monthly payment we will make to you after your Contract Value has been reduced to zero. The Benefit Payment is calculated on the date the Contract Value is reduced to zero. The Benefit Payment is equal to one twelfth of the Withdrawal Limit on the date the Contract Value is reduced to zero.
The Benefit Payment Duration is the number of months it will take for us to return the Benefit Amount remaining on the date the Contract Value is reduced to zero. The Benefit Payment Duration is equal to (A) divided by (B), rounded to the next highest whole number, where:
A = the Benefit Amount on the date the Contract Value is reduced to zero; and
B = the amount of the Benefit Payment.
The Benefit Payment Duration may be zero, if (A) above is equal to zero.
If your rider was issued before November 16, 2005 or in states where the rider has not been approved:
You will receive monthly payments equal to the Benefit Payment for the Benefit Payment Duration. We reserve the right to make a lump sum payment equal to the Benefit Amount in lieu of monthly payments. Except to the extent required under Federal income tax laws, the total annual payments will not exceed the Withdrawal Limit on the date the Contract Value was reduced to zero. Monthly payments made under this rider shall be considered withdrawals from the contract under Federal income tax law, and shall be subject to the same requirements as any other withdrawal. Similarly for qualified contracts, we will apply the non-annuity rules for determining minimum required distributions, meaning that a percentage of the value of all benefits under the contract may need to be withdrawn each year. The value may have to include the value of enhanced death benefits and other optional contract provisions such as the GMWB rider itself.
If your rider was issued on or after November 16, 2005 in states where the rider has been approved:
❖   We will set the Maturity Date equal to the date the Contract Value is reduced to zero.
❖   If you have GMWB 5 or GMWB 7 and the Benefit Amount is greater than zero, you will receive fixed annuity payments under the GMWB Specified Period Certain Payment Option described below.
❖   If you have Lifetime GMWB and the original owner is alive, you will receive fixed annuity payments under the GMWB Life with Period Certain Payment Option described below.
❖   If you have Lifetime GMWB and the original owner is not alive (but the beneficiary has elected to continue the contract under spousal continuation) and the Benefit Amount is greater than zero, you will receive fixed annuity payments under the GMWB Specified Period Certain Payment Option described below.
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❖   If you have Lifetime GMWB for 2, you will receive fixed annuity payments under the GMWB Joint Life with Period Certain Payment Option described below.
GMWB Annuity Payment Options
This section describes the GMWB Annuity Payment Options available if your rider was issued on or after November 16, 2005 in states where the rider has been approved.
GMWB Specified Period Certain Payment Option: We will make monthly fixed annuity payments equal to the Benefit Payment for the number of months defined by the Benefit Payment Duration. Upon the death of the last surviving owner (or annuitant, if the owner is a non-natural person), annuity payments, if any remain, will continue to the beneficiary. We reserve the right to make a lump sum payment equal to the Benefit Amount in lieu of monthly fixed annuity payments under this option.
GMWB Life with Period Certain Payment Option: We will make monthly fixed annuity payments equal to the Benefit Payment for the number of months defined by the Benefit Payment Duration. If the owner is still alive after the Benefit Payment Duration, we will continue to make payments until the death of the original owner, subject to proof of survivorship. Upon the death of the owner, annuity payments, if any remain, will continue to the beneficiary.
GMWB Joint Life with Period Certain Payment Option: We will make monthly fixed annuity payments equal to the Benefit Payment for the number of months defined by the Benefit Payment Duration. If the owner is still alive after the Benefit Payment Duration, we will continue to make payments until the later of the death of the original owner and the beneficiary, subject to proof of survivorship. Upon the death of the owner and beneficiary, annuity payments, if any remain, will continue to the beneficiary.
Benefit Termination
This benefit will terminate without value on the occurrence of any of the following events:
❖   the change of ownership of the contract for any reason; or
❖   the commencement of annuity payments under an Annuity Payment Option as described in the contract; or
❖   termination of the contract to which this benefit is attached; or
❖   the election of the Optional Reset, if available; or
❖   the surrender of the contract; or
❖   the death of the owner (or annuitant, if the owner is a non-natural person) unless the contract is continued by a surviving spouse; or
❖   any portion of the Contract Value is no longer invested in accordance with the requirements of an asset allocation program; or
❖   if you have GMWB 5 or GMWB 7, when the Contract Value and Benefit Amount have been reduced to zero; or
❖   if you have Lifetime GMWB, when the Contract Value and Benefit Amount have been reduced to zero and upon death of the original owner; or
❖   if you have Lifetime GMWB for 2, when the Contract Value and Benefit Amount have been reduced to zero and upon the later of the death of the original owner and the beneficiary.
Phoenix Retirement Protector:
A Flexible Combination (GMAB/GMWB) Benefit
Summary of Benefit
The Phoenix Retirement Protector rider may be elected by you for an additional charge at the time you purchase your contract or after your contract is issued, if it has been made available in your applicable state by us. You may only purchase one Optional Guaranteed Benefit with the contract. Phoenix Retirement Protector combines two different guarantees into one rider: (i) a guaranteed minimum accumulation benefit (“GMAB”), and (ii) a guaranteed minimum withdrawal benefit (“GMWB”). You may also elect an optional guaranteed minimum death benefit (“GMDB”) with the Phoenix Retirement Protector, also for an additional charge. When you elect the Phoenix Retirement Protector, the GMAB and GMWB components are automatically included. You must elect the GMDB component, a feature only available for election when the contract is first issued, to be included as part of the rider at the time you purchase the contract. By purchasing this rider, you are able to obtain a GMAB and a GMWB through the same contract. This may be appropriate if you want to be able to use the contract either for maximum accumulation or for maximum ability to provide payments at the time you purchase your contract. However, certain actions which have a positive impact on one component of the benefit may have a negative impact on another component of the benefit. As a result, you should carefully consider the impacts of various events and transactions on each benefit component.
Some of the terms and features of the GMAB and GMWB components of this benefit are different from the individually offered GMAB and GMWB riders.
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❖   For example, the GMAB component offered under Phoenix Retirement Protector provides for a step-up of the GMAB Benefit Base and a new 10-year GMAB waiting period at the end of each GMAB waiting period; the stand-alone GMAB rider does not provide for a step-up and only provides the initial 10-year waiting period. You should consider the GMAB component offered under Phoenix Retirement Protector if you want the opportunity to lock-in market gains or if you have a longer investment horizon and could potentially benefit from multiple waiting periods. However, if you simply want a return of first-year premium at the end of the initial 10-year waiting period, then you should consider the individually offered GMAB.
❖   For example, the GMWB component offered under Phoenix Retirement Protector provides for a lifetime and a non-lifetime Annual Benefit Amount and allows you to choose between lifetime and non-lifetime payments when the contract value is reduced to zero; the stand-alone GMWB rider only provides a lifetime Annual Benefit Amount. You should consider the GMWB component offered under Phoenix Retirement Protector if you want the flexibility to guarantee lifetime income payments or income payments over a specified period of time or if you want the flexibility to defer the decision between lifetime and non-lifetime payments to the date the Contract Value is reduced to zero. However, if you know that you won't have a need for non-lifetime income payments, then the individually offered GMWB may be more appropriate for you.
❖   For example, if you don’t know what your future accumulation and/or income needs may be on the date your contract is issued, then you should consider the Phoenix Retirement Protector because it provides a GMAB and GMWB through the same contract and allows you to defer the decision between accumulation and income. However, if you know what your future accumulation or income needs will be on the contract issue date (and you know you won't have a need for both accumulation and income benefits), then you should consider the individually offered GMWB or GMAB.
❖   Finally, the fees for the Phoenix Retirement Protector differ from the individually offered GMWB and GMAB rider fees.
The basic benefits and risks of each component of Phoenix Retirement Protector and more detailed descriptions of how the benefits are calculated are described below.
The GMAB Component
The GMAB component of Phoenix Retirement Protector guarantees a return of a specified percentage of premium after a waiting period regardless of the performance of the asset allocation program(s) in which your premiums and Contract Value have been invested. This feature may be important to you if you are interested in maximizing your Contract Value during the accumulation period. The GMAB does not guarantee the performance of any investment option offered under the contract. The GMAB may have limited usefulness if you need to take withdrawals pursuant to the IRS minimum distribution requirements because of the potential negative effects withdrawals have on the GMAB’s benefits. As a result, you should consult with your tax adviser before selecting a rider with a GMAB feature.
The GMWB Component
The GMWB component guarantees a minimum amount in payments or withdrawals from the contract provided you remain within certain restrictions and limitations described below. When you elect this benefit you choose whether to take withdrawals and payments under the single life option or the spousal life option. Once you make this election, you cannot change it. This choice affects the amount of benefit you may be entitled to receive at various ages and, once your Contract Value goes to zero, the life for which benefit payments will be made.
Contract Value is greater than zero: Guaranteed Withdrawals
While the Contract Value is greater than zero the GMWB component guarantees that you can make withdrawals from the contract each year up to the Non-Lifetime Annual Benefit Amount, or the Lifetime Annual Benefit Amount, if you have met the GMWB’s terms and conditions. The Non-Lifetime Annual Benefit Amount becomes available for withdrawals on the rider date. The Lifetime Annual Benefit Amount is not available for withdrawals until the date the youngest Covered Person covered by the rider reaches a particular age, which is currently age 60 for the single life option and age 65 for the spousal life option. This is called the GMWB Benefit Eligibility Date. The Non-Lifetime Annual Benefit Amount equals a percentage shown on your rider specifications page multiplied by the “GMWB Benefit Base.” The Lifetime Annual Benefit Amount is a percentage called the “Lifetime Annual Benefit Percentage” multiplied by the GMWB Benefit Base or, if the first withdrawal occurs prior to the GMWB Benefit Eligibility Date, by the lesser of the GMWB Benefit Base or the Contract Value. The Lifetime Annual Benefit Percentage is shown on your rider specifications page and varies based on the attained age of the youngest Covered Person on the date of the first withdrawal.
Withdrawals from the contract affect the Non-Lifetime Annual Benefit Amount, the Lifetime Annual Benefit Amount, and the GMWB Benefit Base differently. A brief summary is provided below. A more detailed description of the impact of withdrawals is provided in the “Taking Withdrawals” section.
❖   Certain types of withdrawals will not impact the Non-Lifetime Annual Benefit Amount. This includes cumulative withdrawals in any rider year within the Non-Lifetime Benefit Amount taken before or after the GMWB Benefit Eligibility Date.
❖   Certain types of withdrawals will not impact the Lifetime Annual Benefit Amount. This includes cumulative withdrawals in any rider year within the Lifetime Annual Benefit Amount, once you have reached the GMWB Benefit Eligibility Date.
❖   Certain types of withdrawals will impact the Non-Lifetime Annual Benefit Amount.
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• Cumulative withdrawals in any rider year taken before or after the GMWB Benefit Eligibility Date in excess of the Non-Lifetime Annual Benefit Amount reduce the Non-Lifetime Annual Benefit Amount in the same proportion as the Contract Value is reduced by the excess amount of the withdrawals.
❖   Certain types of withdrawals will impact the Lifetime Annual Benefit Amount.
• Withdrawals taken prior to the GMWB Benefit Eligibility Date affect the Lifetime Annual Benefit Amount in several ways. If you take a withdrawal from the Contract prior to the GMWB Eligibility Date we will permanently set the Lifetime Annual Benefit Percentage to 5% on the GMWB Benefit Eligibility Date. You may also reduce the Lifetime Annual Benefit Amount that becomes available to you on the GMWB Benefit Eligibility Date because we will use a different calculation to determine the Lifetime Annual Benefit Amount than we would have used had a withdrawal not been taken. Additionally, withdrawals taken prior to the GMWB Benefit Eligibility Date will reduce your GMWB Benefit Base and we will use the lesser of this reduced GMWB Benefit Base and the Contract Value in calculating the Lifetime Annual Benefit Amount on the GMWB Benefit Eligibility Date.
• Cumulative withdrawals in any rider year taken after the GMWB Benefit Eligibility Date in excess of the Lifetime Annual Benefit Amount reduce the Lifetime Annual Benefit Amount in the same proportion as the Contract Value is reduced by the excess amount of the withdrawals.
Withdrawals reduce the GMWB Benefit Base either by the dollar amount of the withdrawal or by the same proportion as the Contract Value is reduced by the withdrawal regardless of when the withdrawal is taken. (See the “Taking Withdrawals” section in the description of the GMWB Component.)
The GMWB Benefit Base, and ultimately the Non-Lifetime and Lifetime Annual Benefit Amounts, may be increased by premium payments and certain features of the GMWB.
 
You may still take withdrawals prior to the GMWB Benefit Eligibility Date or in excess of the Lifetime Annual Benefit Amount, but these withdrawals may significantly reduce or eliminate the value of the lifetime guarantees provided by the GMWB component of Phoenix Retirement Protector. See the chart of “Special Risks Associated with Withdrawals” at the end of this section. Withdrawals from the contract have other potential consequences, including potential imposition of surrender charges and premium taxes, and federal income tax consequences. Withdrawals that do not exceed the greater of the Non-Lifetime and Lifetime Annual Benefit Amounts, including withdrawals taken to meet RMDs, are considered to be within the contract’s free withdrawal amount and are not subject to surrender charges under the contract. However, withdrawals, including withdrawals taken to meet RMDs that exceed the greater of the Non-Lifetime and Lifetime Annual Benefit Amounts, as defined below and the contract’s free withdrawal amount are subject to any surrender charges imposed under the contract. See “Surrender of Contract and Withdrawals” and “Federal Income Taxes” for more information.
 
Contract Value is reduced to zero: Guaranteed Payments
If your Contract Value goes to zero and you have met the conditions of the benefit, the contract and all rights under the contract and rider terminate, and you must choose between lifetime or non-lifetime payments. The GMWB component does not provide a lifetime benefit amount prior to the GMWB Benefit Eligibility Date.
If both the lifetime and non-lifetime options are available to you and you choose lifetime payments, we will pay you the Lifetime Annual Benefit Amount each year until the first death of a Covered Person under the single life option or until the death of the surviving spouse under the spousal life options. If you choose non-lifetime payments, we will pay you the Non-Lifetime Annual Benefit Amount until the GMWB Benefit Base is reduced to zero.
GMDB Component
The Phoenix Retirement Protector offers a guaranteed minimum death benefit (GMDB) component which you can elect for an additional fee. The benefit provides a higher GMDB than is provided under the contract provided the GMDB Benefit Base under the rider exceeds the GMDB under the contract. You should consider this benefit if your goal is to provide a higher death benefit.
Asset Allocation or Strategic Program Requirement
You must select one of the approved asset allocation programs when allocating your premium payments and Contract Value if you purchase Phoenix Retirement Protector. Consult with your registered representative before you select a program. Review your selected program periodically with your registered representative to determine if it needs to be changed. You may switch your current program at any time to another the Company has approved and made available. However, the rider fee may vary based upon the program or option you choose and the fee may increase under certain circumstances. See the table of “Optional Benefit Fees” and “Important Information on Current Fees for Optional Benefit Riders” for details. We reserve the right to restrict availability of investment options and programs.
Canceling out of programs altogether will cause the rider to terminate without value. Consult your registered representative before you cancel out. Later re-enrollment is allowed. However, once you cancel out, later re-enrollment in a program will not reinstate the rider. If a program is eliminated while the rider is in effect, we will provide you notice and you must choose among the other approved programs available. Consult with your registered representative to make an appropriate selection and return the form we require to the Annuity Operations Division. Descriptions of the programs are found in “Asset Allocation and Strategic Programs” above.
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Important Terms and Conditions related to Phoenix Retirement Protector
If you purchased your rider at the time you purchased your contract the rider date is the same as the contract date and rider years are measured the same as contract years. If you purchased your rider after your contract was issued, your rider date is the contract anniversary immediately following the date you elect the rider and your rider years are measured from your rider date.
(i) Guaranteed Minimum Accumulation Benefit (“GMAB”) Component
The rider’s GMAB component guarantees a return of a specified percentage of premiums after each GMAB Waiting Period. A GMAB Waiting Period is the period of time that must elapse before you qualify for benefits under the rider’s GMAB component. Currently, the GMAB Waiting Period is 10 years, measured from the rider date. The benefit amount available after the waiting period depends on the relationship of the Contract Value to a value called the “GMAB Benefit Base”described below. After the initial GMAB Waiting Period, we will automatically compare the GMAB Benefit Base to the Contract Value after all fees have been deducted. If the GMAB Benefit Base is greater than the Contract Value after all fees have been deducted, we will add an additional amount to your Contract Value and your new Contract Value will then equal the GMAB Benefit Base. Whenever such addition occurs, a new GMAB Waiting Period begins. In addition, you may elect to increase, or “step-up” the GMAB Benefit Base as specified below. A new GMAB Waiting Period also begins when you step-up the GMAB Benefit Base. Each new GMAB Waiting Period supersedes any GMAB Waiting Period already in progress and delays the time when we will determine if an additional amount will be added to the Contract Value.
GMAB Benefit Base
As noted above, we compare the Contract Value to the GMAB Benefit Base to determine if an additional amount will be added to the Contract Value at the end of each GMAB Waiting Period. Assuming the rider was issued on the date the contract was issued, the GMAB Benefit Base is equal to the initial premium payment. If your rider is issued after the contract issue date, your GMAB Benefit Base equals the Contract Value on the date the rider is issued. Thereafter, the GMAB Benefit Base is re-calculated whenever certain triggering events occur. Generally speaking, the GMAB Benefit Base will be increased by a percentage of subsequent premium payments, and may be increased by the elective step up feature. The GMAB Benefit Base will never exceed a maximum amount. This maximum amount is 500% of subsequent premiums in the first rider year, plus 100% of other subsequent premiums. The GMAB Benefit Base will be set equal to zero on the date the Contract Value is reduced to zero.
Events and features causing recalculation of the GMAB Benefit Base
❖   Premium Payments Received After the Rider Date
The GMAB Benefit Base will be increased by 100% of any premium payment received after the rider date and within the first rider year in each GMAB Waiting Period. Premiums received following the first rider anniversary within each GMAB Waiting Period do not increase the GMAB Benefit Base.
Example showing the effect of subsequent premium payments on GMAB Benefit Base
Assume the rider date is June 12, 2009 and that your initial premium payment (or if applicable, Contract Value) on the rider date is $100,000. Your GMAB Benefit Base is set equal to $100,000.
Assume that you make an additional premium payment of $10,000 on August 24, 2009. Since this premium payment was made in the first year during the GMAB Waiting Period, 100% of the premium payment is added to the GMAB Benefit Base. Thus the GMAB Benefit Base is increased to $110,000.
Assume that you make another premium payment of $10,000 on April 5, 2012. Also assume that you have not made an elective GMAB Step-Up since the rider date. Since this premium payment was made in the third year during the GMAB Waiting Period, the GMAB Benefit Base is not increased.
❖   Elective GMAB Step-Up
You may elect to increase, or “step up” the GMAB Benefit Base each rider year when the Contract Value is greater than the GMAB Benefit Base. To elect to step up the GMAB Benefit Base, you must notify us of this election at least 7 days before the end of the rider year. Then we will increase the GMAB Benefit Base to equal the Contract Value on the rider anniversary and a new GMAB Waiting Period will begin. If the GMWB automatic step-up has been suspended (see “Automatic Step-Up Feature” under Guaranteed Minimum Withdrawal Benefit Component below), you may not elect the GMAB step-up until you have reactivated the GMWB automatic step-up.
Example showing the effect of the elective GMAB Step-Up
Assume the rider date is June 12, 2009 and that your initial premium payment (or if applicable, Contract Value) on the rider date is $100,000. Your GMAB Benefit Base is set equal to $100,000.
Assume that as you approach your June 12, 2015 rider anniversary, you wish to make an elective GMAB Step-Up because your Contract Value has increased since the rider date. Assume that you provide notice more than seven days prior to this anniversary of your request to step up and that you have not opted out of the GMWB step-ups.
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Assume that on June 12, 2015 that Contract Value is $170,000. Since you have elected a GMAB step-up, your GMAB Benefit Base is increased to $170,000 and you begin a new GMAB Waiting Period.
Assume that you make an additional premium payment of $10,000 on August 24, 2015. Since this premium payment was made in the first rider year of the current GMAB Waiting Period, the GMAB Benefit Base is increased by the amount of the premium payment. Thus the GMAB Benefit Base is increased to $180,000
❖   First Day Following the End of Each GMAB Waiting Period
On the first day following the end of each GMAB Waiting Period, if the GMAB Benefit Base is less than the Contract Value, the GMAB Benefit Base will be set equal to the Contract Value, after all fees have been deducted.
❖   Withdrawals from the Contract
On the date of any withdrawal from the contract, the GMAB Benefit Base will be reduced in the same proportion as the Contract Value is reduced by the withdrawal.
Example showing the effect of withdrawals on the GMAB Benefit Base
Assume the rider date is June 12, 2009 and that your initial premium payment (or if applicable, Contract Value) on the rider date is $100,000. Your GMAB Benefit Base is set equal to $100,000.
Assume you make a withdrawal of $14,000 on September 7, 2015 and that your Contract Value on that date was $140,000. In this case, the reduction in Contract Value is 10% ($14,000 divided by $140,000), and accordingly, your GMAB Benefit Base is reduced by 10% to $90,000 ($100,000 * 10% = $10,000 and $100,000-$10,000 = $90,000).
Important Considerations Regarding These Events
If would like to obtain the GMAB component’s benefit at the earliest possible date, you need to complete the initial GMAB Waiting Period (currently ten years). This means that: (1) your initial premium plus subsequent premium payments made in the first rider year is the amount that you wish to guarantee; and (2) you should not make subsequent premium payments after the first rider year or elect to step up your GMAB Benefit Base in the first ten rider years. Although making additional premium payments after the first rider year may reduce the benefit that could be paid at the end of the initial GMAB waiting period, they have the potential to increase the GMAB Benefit Base (elective GMAB Step-Up) and the GMWB Benefit Base. Work with your registered representative to determine what decision best suits your financial needs.
(ii) Guaranteed Minimum Withdrawal Benefit (“GMWB”) Component
The rider’s GMWB component provides for a lifetime and non-lifetime guaranteed minimum withdrawal benefit. On the rider date, you must choose between the single life option and the spousal life option and you cannot change your election. On the date the Contract Value is reduced to zero, you must choose between lifetime and non-lifetime payments.
The following terms are important to an understanding of this component.
“Annual Benefit Percentage” is a percentage we use to determine the Annual Benefit Amount. The Non-Lifetime Annual Benefit Percentage is currently 7%. For the Lifetime Annual Benefit Percentage, the percentage varies by age as shown below and is established on the date you make the first withdrawal from the contract. If your first withdrawal is prior to the GMWB Benefit Eligibility Date (youngest Covered Person’s 60th birthday for the single life option or 65th birthday for the spousal life option), this percentage is permanently set to 4% on the GMWB Benefit Eligibility Date (5% for riders issued prior to March 9, 2009).
Single Life
Attained Age 		Lifetime
Annual Benefit
Percentage 		Spousal Life
Attained Age 		Lifetime
Annual Benefit
Percentage
< 60 0% <65 0%
60-74 4% 65-74 4%
75-84 5% 75-84 5%
85+ 6% 85+ 6%
See your rider’s specification page for percentages applicable prior to March 9, 2009.
“Covered Person(s)” means the person(s) whose life is used to determine the duration of lifetime payments. A Covered Person must be a natural person.
For the single life option, the Covered Person can be one or more lives. If there is one natural person owner, the owner is the Covered Person. If there are multiple natural person owners, all owners are Covered Persons. If the owner is a non-natural person, all annuitants named in the contract become the Covered Persons.
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For the spousal life option, Covered Persons must be two legal spouses under federal law. For contracts issued in New Jersey and Oregon, Covered Persons must be either two legal spouses under federal law or domestic partners under state law. If there is one natural person owner, the owner and the owner’s spouse must be the Covered Persons. The spouse must be the sole beneficiary. If there are two spousal owners, the Covered Persons are the spousal owners, and they must both be each other’s beneficiary. If there are multiple non-spousal owners, or if the owner is a non-natural person, the spousal life option is not allowed.
“GMWB Benefit Base” is the amount established for the sole purpose of determining the Lifetime and Non-Lifetime Annual Benefit Amount. As noted above, while the Contract Value is greater than zero, the Lifetime or Non-Lifetime Annual Benefit Amount is the amount available for withdrawals. When the Contract Value goes to zero the Lifetime or Non-Lifetime Annual Benefit Amount is the amount we will pay to you each year.
If you purchased your rider at the time you purchased your contract, on the rider date the GMWB Benefit Base is equal to the initial premium. If you purchased your rider after your contract was issued, the GMWB Benefit Base is equal to the Contract Value on the rider date. Thereafter, the GMWB Benefit Base is recalculated whenever certain triggering events occur. Generally speaking, assuming no withdrawals have been taken, the GMWB Benefit Base will be increased by additional premium payments, and may be increased as a result of the roll-up and step-up features. Additionally, the GMWB Benefit Base may be increased at a particular rider anniversary following the end of the roll-up period by an aspect of the roll-up feature we call the Benefit Base Multiplier. We describe events and features causing recalculation of the GMWB Benefit Base below. Under no circumstances will the GMWB Benefit Base ever exceed a maximum amount. This maximum amount is the sum of 500% of the initial premium (or if applicable, Contract Value) plus 500% of subsequent premiums in the first rider year, plus 100% of other subsequent premiums. We will reduce the GMWB Benefit Base for any withdrawals from the contract. The amount of the reduction depends on whether cumulative withdrawals in a rider year exceed the Non-Lifetime Annual Benefit Amount. If they do not exceed this amount, we will reduce the GMWB Benefit Base by the dollar amount of each withdrawal. If they do exceed the Non-Lifetime Annual Benefit Amount, we will reduce the GMWB Benefit Base by the same proportion as the Contract Value is reduced by the amount of the withdrawal in excess of the Non-Lifetime Annual Benefit Amount.
“GMWB Benefit Eligibility Date” means the date your Lifetime Annual Benefit Amount becomes available to you.
• For the single life option, the GMWB Benefit Eligibility Date is the later of the rider date and the date the youngest Covered Person, as defined below, attains age 60.
• For the spousal life option, the GMWB Benefit Eligibility Date is the later of the rider date and the date the youngest Covered Person attains age 65. For the spousal life option, if either spouse dies prior to the GMWB Benefit Eligibility Date, we will reset the GMWB Benefit Eligibility Date to the later of the date of the first spousal death, and the date the surviving spouse attains age 65.
The Non-Lifetime Annual Benefit Amount
The Non-Lifetime Annual Benefit Amount represents two distinct values, depending on whether your Contract Value is greater than zero, or whether it has reduced to zero. While your Contract Value is greater than zero, the Non-Lifetime Annual Benefit Amount represents the maximum amount you can withdraw each year without reducing your Non-Lifetime Annual Benefit Amount. If your Contract Value is reduced to zero, and non-lifetime payments are elected, the Non-Lifetime Annual Benefit Amount represents the annual amount we will pay you until the GMWB Benefit Base is reduced to zero.
On the rider date, the Non-Lifetime Annual Benefit Amount is equal to a percentage of the GMWB Benefit Base. We call this percentage the “Non-Lifetime Annual Benefit Percentage”. The percentage for your rider is shown on the rider specification page and is currently 7%. We may change this percentage in the future and this change would affect riders issued beginning on the date we make the change. After the rider date, the Non-Lifetime Annual Benefit Amount is recalculated whenever any of the following triggering events occur.
Events causing recalculation of the Non-Lifetime Annual Benefit Amount
❖   GMWB Automatic Step-Ups or GMWB Roll-Ups
Each year when a GMWB automatic step-up or GMWB roll-up occurs, the Non-Lifetime Annual Benefit Amount will be equal to the greater of the Non-Lifetime Annual Benefit Amount in effect prior to the GMWB automatic step-up; and the Non-Lifetime Annual Benefit Percentage multiplied by the GMWB Benefit Base after any step-up or roll-up calculation.
❖   Premium Payments Received After the Rider Date
If we receive premium payments after the rider date, and no withdrawals have been made from the contract, then we will increase the Non-Lifetime Annual Benefit Amount on the date we apply premium payments. The amount of this increase is determined by multiplying the Non-Lifetime Annual Benefit Percentage by the amount of the premium payment. However, if you then take withdrawals from the contract in excess of the Non-Lifetime Annual Benefit Amount, we will reduce the Non-Lifetime Annual Benefit Amount as described in “Taking Withdrawals” below.
Withdrawals also stop increases in your GMWB Benefit Base that would have occurred when additional premiums are received by us. If any withdrawals have been made from the contract on or prior to our receipt of an additional premium, we will not increase the GMWB Benefit Base as a result of premium payments made after such withdrawal.
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❖   Taking Withdrawals
The following section describes how taking withdrawals will impact the Non-Lifetime Annual Benefit Amount. The Non-Lifetime Annual Benefit Amount may be the only benefit amount available to you under the GMWB component unless you have reached the GMWB Benefit Eligibility Date, which is generally the date the youngest Covered Person attains age 60 if the single life option is in effect, or the date the younger spouse attains age 65, if the spousal life option is in effect.
• Taking withdrawals from the contract may impact the Non-Lifetime Annual Benefit Amount depending on whether they exceed the Non-Lifetime Annual Benefit Amount. If cumulative withdrawals in any rider year do not exceed the Non-Lifetime Annual Benefit Amount in that year, the Non-Lifetime Annual Benefit Amount will not be reduced.
• If a withdrawal causes the cumulative withdrawals in any rider year to exceed the Non-Lifetime Annual Benefit Amount, the amount withdrawn in excess of the Non-Lifetime Annual Benefit Amount and any subsequent withdrawals in that rider year are all considered Non-Lifetime excess withdrawals. Each non-lifetime excess withdrawal will reduce the Non-Lifetime Annual Benefit Amount in the same proportion as the Contract Value is reduced by the non-lifetime excess withdrawal.
 
• Withdrawals taken at any time to meet RMDs do not reduce the Non-Lifetime Annual Benefit Amount. However, we may change this rule at our discretion in which case such withdrawals taken following this change may be considered excess withdrawals as described below.
 
For IRA and qualified plan contracts, cumulative withdrawals during a rider year will be considered non-lifetime excess withdrawals only if they exceed the greatest of (a), (b) and (c), where:
(a) = the current Non-Lifetime Annual Benefit Amount;
(b) = the RMD for the 1st calendar year during the rider year; and
(c) = the RMD for the 2nd calendar year during the same rider year.
 
Withdrawals from the contract have other potential consequences, including potential imposition of surrender charges and premium taxes, and federal income tax consequences. Withdrawals, including withdrawals taken to meet RMDs that do not exceed the greater of the Non-Lifetime and Lifetime Annual Benefit Amounts are considered to be within the contract’s free withdrawal amount. However, withdrawals that exceed the greater of the Non-Lifetime and Lifetime Annual Benefit Amounts, including withdrawals taken to meet RMDs are subject to any surrender charges imposed under the contract. Please see “Surrender of Contract and Withdrawals” and “Federal Income Taxes” for more information.
 
The Lifetime Annual Benefit Amount
The Lifetime Annual Benefit Amount is not available until you reach the GMWB Benefit Eligibility Date which is generally the date the youngest Covered Person attains age 60 if the single life option is in effect, or the date the younger spouse attains age 65, if the spousal life option is in effect. Like the Non-Lifetime Annual Benefit Amount, the Lifetime Annual Benefit Amount represents two distinct values, depending on whether your Contract Value is greater than zero, or whether it has reduced to zero. While your Contract Value is greater than zero, the Lifetime Annual Benefit Amount represents the maximum amount you can withdraw each year after the GMWB Benefit Eligibility Date without reducing your Lifetime Annual Benefit Amount. If your Contract Value is reduced to zero, and lifetime payments are elected, the Lifetime Annual Benefit Amount represents the annual lifetime amount we will pay after the GMWB Benefit Eligibility Date.
We first calculate the Lifetime Annual Benefit Amount on the later of the date of the first withdrawal and the GMWB Benefit Eligibility Date as described below. As a result, if you take a withdrawal before the GMWB Benefit Eligibility Date, we will calculate the Lifetime Annual Benefit Amount on the GMWB Benefit Eligibility Date.
❖   Lifetime Annual Benefit Amount calculated on the GMWB Benefit Eligibility Date (withdrawal made prior to the GMWB Benefit Eligibility Date): the Lifetime Annual Benefit Amount equals the Lifetime Annual Benefit Percentage, as shown above, multiplied by the lesser of the GMWB Benefit Base and the Contract Value.
❖   Lifetime Annual Benefit Amount calculated on the date of the first withdrawal following the GMWB Benefit Eligibility Date: the Lifetime Annual Benefit Amount equals the Lifetime Annual Benefit Percentage multiplied by the GMWB Benefit Base after any GMWB step-up or roll-up calculations.
The Lifetime Annual Benefit Amount is recalculated whenever any of the following triggering events occur.
Events causing recalculation of the Lifetime Annual Benefit Amount
❖   GMWB Automatic Step-Up
Each year when a GMWB Automatic Step-Up occurs, the Lifetime Annual Benefit Amount will be equal to the greater of the Lifetime Annual Benefit Amount in effect prior to the GMWB automatic step-up; and the Lifetime Annual Benefit Percentage multiplied by the GMWB Benefit Base after the step-up calculation.
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❖   Taking Withdrawals
The following section describes how taking withdrawals after the GMWB Benefit Eligibility Date affects the Lifetime Annual Benefit Amount after it is first calculated. Whether withdrawals will change the Lifetime Annual Benefit Amount depends on whether they exceed the Lifetime Annual Benefit Amount.
• If cumulative withdrawals in any rider year following the GMWB Benefit Eligibility Date do not exceed the Lifetime Annual Benefit Amount in that year, the Lifetime Annual Benefit Amount will not be reduced.
• If a withdrawal causes the cumulative withdrawals in any rider year following the GMWB Benefit Eligibility Date to exceed the Lifetime Annual Benefit Amount, the amount withdrawn in excess of the Lifetime Annual Benefit Amount and any subsequent withdrawals in that rider year are all considered lifetime excess withdrawals. Each lifetime excess withdrawal will reduce the Lifetime Annual Benefit Amount in the same proportion as the Contract Value is reduced by the lifetime excess withdrawal.
 
• Withdrawals taken after the GMWB Benefit Eligibility Date to meet RMDs as defined by the Internal Revenue Code do not reduce the Lifetime Annual Benefit Amount. However, we may change this rule at our discretion in which case such withdrawals taken following this change may be considered lifetime excess withdrawals and reduce the Lifetime Annual Benefit Amount as described below.
 
For IRA and qualified plan contracts, cumulative withdrawals in a rider year after the GMWB Benefit Eligibility Date will be considered excess withdrawals only if they exceed the greatest of (a), (b) and (c), where:
(a) = the current Lifetime Annual Benefit Amount;
(b) = the RMD for the 1st calendar year during the rider year; and
(c) = the RMD for the 2nd calendar year during the same rider year.
 
Withdrawals from the contract have other potential consequences, including potential imposition of surrender charges and premium taxes, and federal income tax consequences. Withdrawals, including withdrawals taken to meet RMDs that do not exceed the greater of the Non-Lifetime and Lifetime Annual Benefit Amounts are considered to be within the contract’s free withdrawal amount. However, withdrawals that exceed the greater of the Non-Lifetime and Lifetime Annual Benefit Amounts, including withdrawals taken to meet RMDs, are subject to any surrender charges imposed under the contract. Please see “Surrender of Contract and Withdrawals” and “Federal Income Taxes” for more information.
 
Events causing recalculation of the GMWB Benefit Base
❖   Premium Payments Received After the Rider Date
If we receive premium payments after the rider date, and no withdrawals have been made from the contract, then we will increase the GMWB Benefit Base. The GMWB Benefit Base will be increased by the dollar amount of each premium payment on the date we receive it. However, if you then take withdrawals from the contract, we will reduce the GMWB Benefit Base as described in “Taking Withdrawals” below. If any withdrawal has been made from the contract on or prior to our receipt of additional premium, we will not increase the GMWB Benefit Base as a result of premium payments made after such withdrawal.
❖   Roll-up Feature
The GMWB roll-up feature allows for an increase, or “roll-up,” in the GMWB Benefit Base during a specified period of time, called the GMWB roll-up period. The roll-up feature is only available to you if no withdrawals have been taken from the contract. Currently, the GMWB roll-up period continues until the 10th rider anniversary following the later of the rider date and the last rider anniversary on which a GMWB automatic step-up, described below, occurs. In no event can the GMWB roll-up period extend beyond the time the younger Covered Person attains a maximum age. This maximum age is the greater of age 95 or the younger Covered Person’s age on the rider date plus 10 years. The increase in GMWB Benefit Base resulting from the roll-up is based upon a comparison of the following three values on each rider anniversary: (i) Contract Value, (ii) GMWB Benefit Base, and (iii) the sum of the GMWB Benefit Base on the prior rider anniversary plus the roll-up amount for the prior rider year, plus subsequent premium payments received during the prior rider year. For calculation of the increase in GMWB Benefit Base provided by the roll-up feature, “subsequent premium payments” means premiums received after the rider date, excluding premium payments received on any rider anniversary. The roll-up amount is determined by multiplying the GMWB Benefit Base after the most recent prior automatic step-up or, for the roll-up at the end of first rider year or if there were no prior automatic step-ups, the GMWB Benefit Base on the last valuation date of the first rider year by a percentage, currently 6.5%. (For riders issued prior to March 9, 2009, the roll-up amount is determined by multiplying the Benefit Base as of the prior rider anniversary or, for the roll-up amount at the end of the first rider year, the Benefit Base on the last valuation date of the first rider year by 6.5%.)
If you have not taken withdrawals from the contract and therefore are eligible for the roll-up feature of the rider, we will consider an additional value in recalculating GMWB Benefit Base on the rider anniversary at or following the end of the GMWB roll-up period on which the youngest Covered Person has attained age 70. This additional value applies the Benefit Base Multiplier, currently 200%, to the sum of the GMWB Benefit Base on the rider date plus subsequent premium received in the first rider year.
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The recalculation of the GMWB Benefit Base under the various situations that can exist at the end of the GMWB roll-up period is described below.
❖   Each Rider Anniversary During the GMWB Roll-Up Period
On each rider anniversary, if no withdrawals have been made, the re-calculated GMWB Benefit Base will be set equal to the greater of the following, unless the GMWB automatic step-up feature has been suspended in which case, it will be set to the second of the two values described below:
• the Contract Value then in effect, (after all fees have been deducted, and provided the GMWB automatic step-up feature has not been suspended);
• the sum of (i) the GMWB Benefit Base on the prior rider anniversary plus any premium payments since the prior rider anniversary and (ii) the roll-up amount for the prior rider year, if any.
Example 1—Basic application of a roll-up amount.
Assume that you have reached your first rider anniversary and have not made any withdrawals. Assume further that your GMWB Benefit Base on your rider’s effective date was $100,000, your Contract Value is $105,000, you have not made any subsequent premium payments during the prior rider year and the GMWB automatic step-up has not been suspended.
Your GMWB Benefit Base will be re-calculated on your rider anniversary to be the greater of the following:
• Contract Value = $105,000
• Sum of (i) and (ii) = $106,500
(i) GMWB Benefit Base on prior rider anniversary = $100,000
(ii) Roll-Up Amount for prior rider year = $100,000 x 6.5% = $6,500
Your GMWB Benefit Base will be $106,500.
Example 2—Application of the roll-up amount when there is a prior automatic step-up.
Assume that you have reached the second rider anniversary and have not made any withdrawals. Assume further that your GMWB Benefit Base as of the last rider anniversary was $108,000 due to an GMWB automatic step-up, your contract value is $110,000, you have not made any subsequent premium payments during the prior rider year and the GMWB automatic step-up has not been suspended.
Your GMWB Benefit Base will be re-calculated on your rider anniversary to be the greater of the following:
• Contract Value = $110,000
• Sum of (i) and (ii) = $115,020
(i) GMWB Benefit Base on prior rider anniversary = $108,000
(ii) Roll-Up Amount for prior rider year = $108,000 x 6.5% = $7,020
Your GMWB Benefit Base will be $115,020.
Example 3—Application of the roll-up amount when several rider years have elapsed with no prior automatic step-up.
Assume the GMWB Benefit Base on the first rider anniversary prior to any roll-up calculation was $100,000. Assume that you have reached the fourth rider anniversary without making any withdrawals and without having an automatic step-up. The GMWB Benefit Bases are increased by the Roll-Up Amounts at the end of each of the first 3 rider years and equal:
Year 1: $106,500 = $100,000 + $6,500
Year 2: $113,000 = $106,500 + $6,500
Year 3: $119,500 = $113,000 + $6,500
Assume that, on the 4th rider anniversary, your contract value is $115,000 and you have not made any subsequent premium payments.
Your GMWB Benefit Base will be re-calculated on your rider anniversary to be the greater of the following:
• Contract Value = $115,000
• Sum of (i) and (ii) = $126,000
(i) GMWB Benefit Base on prior rider anniversary = $119,500
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(ii) Roll-Up Amount for the recently completed rider year = $100,000 x 6.5% = $6,500
Your GMWB Benefit Base will be $126,000.
Example 4—Impact of a Subsequent Premium Payment on the GMWB Benefit Base.
Assume the GMWB Benefit Base on your rider’s effective date was $100,000. Assume there is no automatic step-up at the end of the first rider year and you have not taken any withdrawals. The GMWB Benefit Base at the end of the 1st rider year is increased by the Roll-Up Amount and equals $106,500 = $100,000 + $6,500.
Assume that 3 months in to the 2nd rider year you make a Subsequent Premium Payment of $50,000. The GMWB Benefit Base is increased to $156,500 ($106,500 = $50,000) due to the premium payment.
Assume that, on the 2nd rider anniversary, your contract value is $140,000.
Your GMWB Benefit Base will be recalculated on your 2nd rider anniversary to be the greatest of the following:
• Contract Value = $140,000
• GMWB Benefit Base in Effect = $156,500
• Sum of (i), (ii), and (ii) = $163,000
(iv) GMWB Benefit Base on prior rider anniversary = $106,500
(v) Roll-Up Amount for the recently completed rider year = $100,000 x 6.5% = $6,500
(vi) Subsequent Premium Payments during the recently completed rider year = $50,000
Your GMWB Benefit Base will be $163,000.
❖   The Rider Anniversary Following the End of the GMWB Roll-Up Period
If the GMWB roll-up period has ended, and no withdrawals have been made from the contract, we will re-calculate the GMWB Benefit Base on the rider anniversary following the end of the GMWB roll-up period.
When we recalculate the GMWB Benefit Base on the rider anniversary following the end of the roll-up period, the amount of the recalculated GMWB Benefit Base will depend on whether the youngest Covered Person has attained the Benefit Base Multiplier Age, currently age 70, by that rider anniversary. If the youngest Covered Person has not attained age 70 by the rider anniversary immediately following the end of the roll-up period, then we will re-calculate the Benefit Base again on the rider anniversary next following the date the youngest Covered Person attains age 70. For each situation, the recalculated GMWB Benefit Base is determined as described below.
1. Assuming the youngest Covered Person has not yet attained age 70 by the rider anniversary immediately following the end of the GMWB roll-up period, then, on that rider anniversary, the GMWB Benefit Base will be set equal to the greater of the following, unless the GMWB automatic step-up feature has been suspended in which case, it will be set to the second of the two values described below:
• the Contract Value then in effect, (after all fees have been deducted, provided the GMWB automatic step-up feature has not been suspended);
• the sum of (i) the GMWB Benefit Base on the prior rider anniversary plus any premium payments since the prior rider anniversary and (ii) the roll-up amount for the prior rider year, if any.
Assume the GMWB Benefit Base on the first rider anniversary prior to any roll-up calculation was $100,000 and that you have reached the rider anniversary following the end of the roll-up period, the youngest Covered Person has not yet attained age 70 and you have not made any withdrawals. Assume further that your contract has never had an automatic step-up, your GMWB Benefit Base as of your prior rider anniversary was $158,500, your Contract Value is $105,000, you have not made any subsequent premium payments during the prior rider year and the automatic step-up has not been suspended.
Your GMWB Benefit Base will be re-calculated on your rider anniversary to be the greater of the following:
• Contract Value = $105,000
• Sum of (i) and (ii) = $165,000
(i) GMWB Benefit Base on prior rider anniversary = $158,500
(ii) Roll-Up Amount for prior rider year = $100,000 x 6.5% = $6,500
Your GMWB Benefit Base will be $165,000.
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2. Assuming the youngest Covered Person has attained age 70 by the rider anniversary immediately following the end of the GMWB roll-up period, then, on that rider anniversary, the GMWB Benefit Base will be set equal to the greatest of the following, unless the GMWB automatic step-up feature has been suspended in which case, it will be set to the greater of the latter two values described below:
• the Contract Value then in effect, (after all fees have been deducted, provided the GMWB automatic step-up feature has not been suspended);
• the Benefit Base Multiplier, currently 200%, multiplied by the sum of (i) the GMWB Benefit Base on the rider date, plus (ii) all subsequent premium payments received during the first rider year;
• the sum of (i) the GMWB Benefit Base on the prior rider anniversary plus any premium payments since the prior rider anniversary and (ii) the roll-up amount for the prior rider year, if any.
Example
Assume that you have reached the rider anniversary following the end of the roll-up period, the youngest Covered Person has attained age 70 and you have not made any withdrawals. Assume further that your contract has never had a GMWB automatic step-up, your GMWB Benefit Base as of your prior rider anniversary was $158,500, your GMWB Benefit Base on the rider date was $100,000, your Contract Value is $105,000, you have not made any subsequent premium payments after the rider date and the automatic step-up has not been suspended.
Your GMWB Benefit Base will be re-calculated on your rider anniversary to be the greatest of the following:
• Contract Value = $105,000
• 200% x Sum of (i) and (ii) = $200,000
(i) GMWB Benefit Base on the rider date = $100,000
(ii) Subsequent premium payments = $0
• Sum of (i) and (ii) = $165,000
(i) GMWB Benefit Base on prior rider anniversary = $158,500
(ii) Roll-Up Amount for prior rider year = $100,000 x 6.5% = $6,500
Your GMWB Benefit Base will be $200,000
❖   Rider Anniversary Next Following Youngest Covered Person’s 70th Birthday Occurring After the Rider Anniversary Immediately Following the End of the GMWB Roll-Up Period
Assuming no withdrawals have been taken and the youngest Covered Person attains age 70 after the rider anniversary immediately following the end of the roll-up period, then on the next rider anniversary following the date the youngest Covered Person attains age 70, the GMWB Benefit Base will be set equal to the greatest of the following, unless the GMWB automatic step-up feature has been suspended in which case, it will be set to the greater of the latter two values described below:
• the Contract Value then in effect, after all fees have been deducted, (provided the GMWB automatic step-up feature has not been suspended);
• the GMWB Benefit Base on the prior rider anniversary plus any premium payments since the prior rider anniversary;
• the Benefit Base Multiplier, currently 200%, multiplied by sum of the GMWB Benefit Base on the rider date plus all subsequent premium payments received during the first rider year.
Example
Assume that you reached the rider anniversary following the end of the GMWB roll-up period several years ago, but still have not made any withdrawals from the contract. However, the youngest Covered Person celebrated his 70th birthday during the prior rider year. Assume further, your GMWB Benefit Base on the prior rider anniversary was $180,000, your GMWB Benefit Base on the rider date was $100,000, your Contract Value is $105,000, you have not made any subsequent premium payments after the rider date and the GMWB automatic step-up has not been suspended.
Your GMWB Benefit Base will be re-calculated on your rider anniversary to be the greatest of the following:
• Contract Value = $105,000
• GMWB Benefit Base on prior rider anniversary = $180,000
• 200% x Sum of (i) and (ii) = $200,000
(i) GMWB Benefit Base on the rider date = $100,000
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(ii) Subsequent premium payments = $0
Your GMWB Benefit Base will be $200,000.
❖   Each Rider Anniversary After the Earlier of the First Withdrawal and the Rider Anniversary Following the End of the GMWB Roll-Up Period (except Rider Anniversary next following youngest Covered Person’s 70th birthday after the end of the GMWB Roll-Up Period)
On each rider anniversary after the earlier of the first withdrawal and the rider anniversary following the end of the GMWB roll-up period, we will re-calculate the GMWB Benefit Base. The GMWB Benefit Base will be set equal to the greater of the following, unless the GMWB automatic step-up feature has been suspended, in which case, it will be set to the second of the two values described below:
• the Contract Value then in effect, after all fees have been deducted, (provided the GMWB automatic step-up feature, described below, has not been suspended); and
• the GMWB Benefit Base on the prior rider anniversary adjusted for any withdrawals taken since the prior rider anniversary plus, if no withdrawals have been made, any premium payments made since the prior rider anniversary.
Example
Assume that you are out of the GMWB roll-up period. Assume further, your GMWB Benefit Base on the prior rider anniversary is $106,500, your Contract Value is $110,000 and the GMWB automatic step-up has not been suspended. Your GMWB Benefit Base will be re-calculated on your rider anniversary to be the greater of the following:
• Contract Value = $110,000
• GMWB Benefit Base on prior rider anniversary = $106,500
Your GMWB Benefit Base will be $110,000.
❖   GMWB Automatic Step-Up Feature
The GMWB component of Phoenix Retirement Protector includes an automatic step-up feature. Like the GMWB roll-up feature, the GMWB automatic step-up feature allows for an increase in the GMWB Benefit Base. At set intervals, currently on each anniversary of the rider date, we will automatically compare the Contract Value, after deduction of all fees, to the GMWB Benefit Base then in effect; that is, the GMWB Benefit Base on the prior rider anniversary plus any premium payments made since the prior rider anniversary. If the Contract Value, after deduction of all fees, is greater than such GMWB Benefit Base, we will automatically increase, or “step-up” the GMWB Benefit Base to equal the Contract Value. You should know that the fee percentage for the rider may be increased if we step-up the GMWB Benefit Base. If you do not decline the automatic step-up, you will pay the current rider fee then in effect beginning on the date of any automatic step-up of the GMWB Benefit Base. You can decline the increase by contacting us no later than seven days prior to the rider anniversary. If you decline the step-up, the GMWB automatic step-up will not occur, and the automatic GMWB step-up feature will be suspended immediately and GMAB step-ups provided under the GMAB component of the rider cannot be elected. If you decline a GMWB automatic step-up in the GMWB Benefit Base, we will continue to calculate any roll-ups as described above. Assuming your rider is still in effect at the next step-up interval, you may reactivate the automatic GMWB step-up option by contacting us at the phone number or address provided on the first page of the prospectus.
❖   Taking Withdrawals
The GMWB Benefit Base is reduced for all withdrawals regardless of whether they occur before or after the GMWB Benefit Eligibility Date. The amount by which the GMWB Benefit Base is reduced for withdrawals depends on whether and by how much the withdrawals taken in a rider year exceed the Non-Lifetime Annual Benefit Amount. Cumulative withdrawals in any rider year that do not exceed the Non-Lifetime Annual Benefit Amount reduce the GMWB Benefit Base by the amount of the withdrawals. Cumulative withdrawals in any rider year that exceed the Non-Lifetime Annual Benefit Amount (Non-Lifetime excess withdrawals) reduce the GMWB Benefit Base by the same proportion as the Contract Value is reduced by Non-Lifetime excess withdrawal.
Payment of the Lifetime or Non-Lifetime Annual Benefit Amount when the Contract Value is greater than zero
Each year when the Contract Value is greater than zero, you may take withdrawals equal to the Lifetime Annual Benefit Amount so long as you have reached the GMWB Benefit Eligibility Date. You may take withdrawals equal to the Non-Lifetime Annual Benefit Amount then in effect at any time when the Contract Value is greater than zero. You can establish a Systematic Withdrawal Program for payments of a specified amount or can request payments according to your own schedule. See “Systematic Withdrawal Program” for additional details about how to use this program and the program’s restrictions.
Payment of the Lifetime or Non-Lifetime Annual Benefit Amount when the Contract Value goes to zero
If, when the Contract Value goes to zero, the GMWB Benefit Base is greater than zero, you must choose between receiving non-lifetime and lifetime monthly payments. The Lifetime Annual Benefit Amount is not available to you before the GMWB Benefit Eligibility Date.
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We may, at our discretion, permit or require other payment frequencies subject only to our minimum amount per payment requirement.
• Non-Lifetime Payments
If the GMWB Benefit Base is greater than zero you may choose to receive monthly non-lifetime payments. The non-lifetime payments will be equal to one twelfth of Non-Lifetime Annual Benefit Amount. Payments will begin one month after the Contract Value is reduced to zero and will end when the GMWB Benefit Base is reduced to zero. The GMWB Benefit Base is reduced by each non-lifetime payment.
• Lifetime Payments
If the GMWB Benefit Base is greater than zero, you may choose to receive monthly lifetime payments. The lifetime benefit payments will be equal to one twelfth of Lifetime Annual Benefit Amount. Payments will begin one month following later of the date the Contract Value goes to zero and the GMWB Benefit Eligibility Date. We will make these payments under the single life option or spousal life option, whichever you selected at the time you purchased the rider. For the single life option, all Covered Persons must be living on the date we make the first payment, and for the spousal life option, at least one spouse must be living. Payments will continue until the first death of any Covered Person(s) for the single life option, or until the death of the surviving spouse for the spousal life option.
Maximum Maturity Date Benefit
If your Contract Value is greater than zero and you cannot extend the maturity date of the contract any later, this rider allows you to exchange the Contract Value for lifetime payments equal to the Lifetime Annual Benefit Amount or non-lifetime payments equal to the Non-Lifetime Annual Benefit Amount in lieu of applying the Contract Value to one of the annuity payment options offered under the contract. Otherwise, your contract will enter the annuity period and you may choose any of the annuity options then available. See “The Annuity Period”
(iii) Optional Guaranteed Minimum Death Benefit (“GMDB”) Component – not available after contract issue date
The GMDB component of the Phoenix Retirement Protector rider is optional. The GMDB component guarantees a minimum death benefit if the GMDB Benefit Base, which is the same as the GMWB Benefit Base prior to the GMDB Maximum Age, is greater than the death benefit payable under the contract when any Covered Person dies prior to the earliest of the following dates:
1. the maturity date of the contract,
2. the date the Contract Value is reduced to zero,
3. the rider anniversary following the date the oldest Covered Person attains a particular age specified in rider. We call this the GMDB Maximum Age. Currently, this age is 85.
If the GMDB Benefit Base is greater than the death benefit payable under the contract, this optional GMDB guarantees an additional death benefit amount. This guaranteed amount is the difference between the contract’s death benefit and the GMDB Benefit Base. You should know that this optional component does not provide any value once the Contract Value goes to zero or the oldest Covered Person attains age the GMDB Maximum Age.
Sample calculation showing the value of the GMDB component before and after the GMDB Maximum Age
Death Prior to Age 85
Assume you die prior to attaining age 85. Assume the death benefit available under your contract is equal $125,000 on the date of death. Further assume that the GMDB Benefit Base is equal to $130,000 on the date of death. The optional GMDB will pay you an additional death benefit amount equal to $5,000.
Death After Age 85
Assume you die after attaining age 85. Assume the death benefit available under your contract is equal $95,000 on the date of death. The GMDB Death Benefit Base is equal to your contract value or $80,000 on the date of death. The optional GMDB will not pay you an additional death benefit amount. You will receive the $95,000 death benefit available under your base contract.
Termination of Phoenix Retirement Protector Rider
The rider will terminate without value on the date the first of any of the following events occur:
• any Covered Person is changed;
• annuity payments begin under an annuity payment option as described in the base contract;
• the contract, to which the rider is attached, terminates;
• the owner elects to terminate the rider;
• when any portion of the Contract Value is no longer invested in one of the approved asset allocation programs;
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• the Contract Value and GMWB Benefit Base are both reduced to zero;
• if the Contract Value has been reduced to zero and lifetime payments have been elected, if any Covered Person under the Single Life Option, or the surviving Covered Person under the Spousal Life Option dies;
• you assign any rights or interest in this rider.
Once the rider is terminated, it cannot be reinstated.
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Special Risks Associated with Withdrawals
The following chart demonstrates special risks associated with taking withdrawals when the Phoenix Retirement Protector Rider is attached to a contract when the Contract Value and Benefit Base are both greater than zero. Whether or not a withdrawal is considered “permitted” or “excess” is described in the section “Taking Withdrawals”, in the description of the GMWB Benefit Base. When the Contract Value is reduced to zero, non-lifetime or lifetime payments (whichever selected) will begin and withdrawals are no longer allowed from the contract.
Scenario No Withdrawals PermittedWithdrawals ExcessWithdrawals
Automatic Contract Value reduction
 X X
Reduction to GMWB Benefit Base and GMAB Benefit Base
 X X
Reduction to current Non-Lifetime Annual Benefit Amount
 X
Reduction to current Lifetime Annual Benefit Amount
 X
Gives you the highest potential Annual Benefit Amount available under the rider1
 X
Cancels your ability to have subsequent premium payments automatically increase the GMWB Benefit Base
 X X
Cancels your ability to “roll-up” and increase your GMWB Benefit Base
 X X
Reduces the likelihood of a GMWB automatic step-up2
 X X
Premium payments increase the GMWB Benefit Base
 X
Potential to terminate the rider without value if reduces the Contract Value to zero
 X
Permanently sets the Lifetime Annual Benefit Percentage
 X X
Permanently sets the Lifetime and Non-Lifetime Annual Benefit Amounts if the Contract Value is reduced to zero and the GMWB Benefit Base is greater than zero
 X
Potential surrender charges
 X
Potential premium taxes and/or federal income tax consequences
 X X
1 The potential Annual Benefit Amount is greatest if at the end of the GMWB roll-up period, no withdrawals have been made and the youngest Covered Person has attained the Benefit Base Multiplier Age.
2 In order to obtain a GMWB automatic step-up, your Contract Value must be greater than your GMWB Benefit Base on the rider anniversary. If you make withdrawals, your Contract Value will automatically decline, therefore reducing the likelihood that your Contract Value will be greater than your Benefit Base on your next rider anniversary, thus also reducing the likelihood that you will be able to step-up your Benefit Base.
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Surrender of Contract and Withdrawals
If the owner is living, amounts held under the contract may be withdrawn in whole or in part prior to the Maturity Date, or after the Maturity Date under Variable Annuity Payment Options K or L.
 
Prior to the Maturity Date, you may withdraw up to 10% of the Contract Value in a contract year, either in a lump sum or by multiple scheduled or unscheduled withdrawals, without the imposition of a surrender charge. In addition, withdrawals in the amount of the RMD may also be made without the imposition of a surrender charge. During the first contract year, the 10% withdrawal without a surrender charge will be determined based on the Contract Value at the time of the first partial withdrawal. In all subsequent years, the 10% will be based on the previous contract anniversary value. Withdrawals are subject to income tax on any gain plus a 10% penalty tax if the policyholder is under age 59 ½. See “Federal Income Taxes.”
 
The appropriate number of Accumulation Units of an investment option will be redeemed at their value next determined after the receipt by our Annuity Operations Division of a written notice in a form satisfactory to us. Accumulation units redeemed in a withdrawal from multiple investment options will be redeemed on a pro rata basis unless you designate otherwise. Contract Values in the GIA or MVA will also be withdrawn on a pro rata basis unless you designate otherwise. Withdrawals from the MVA may be subject to the market value adjustment. See the MVA prospectus. The resulting cash payment will be made in a single sum, ordinarily within seven days after receipt of such notice. However, redemption and payment may be delayed under certain circumstances. See “Payment Deferral.” There may be adverse tax consequences to certain surrenders and partial withdrawals. See “Surrenders or Withdrawals Prior to the Contract Maturity Date.” Certain restrictions on redemptions are imposed on contracts used in connection with Internal Revenue Code Section 403(b) plans. A deduction for surrender charges may be imposed on partial withdrawals from, and complete surrender of, a contract. See “Surrender Charges.” Any surrender charge imposed is deducted from amounts withdrawn. The surrender charge is calculated on a first-in, first-out basis. In other words, we calculate your surrender charge by assuming your withdrawal is applied to premium payments in the order your premium payments were received.
If you elect GMWB, no surrender charge will be deducted if cumulative withdrawals in a rider year do not exceed the Withdrawal Limit, even if cumulative withdrawals exceed the free withdrawal amount.
You must sign a form satisfactory to us to take a withdrawal, surrender, or replace your contract. For your protection, the form must be requested from our Operations Division by you or your agent. The form requested and sent to you for that particular transaction must be returned to the address specified on the form, in order to process the transaction. For your protection, we require a signature guarantee for surrenders, partial withdrawals, or loans (if your contract provides for loans) over $100,000.
Contract Termination
The contract will terminate without value, if on any valuation date the Contract Value is zero, unless you elected the Guaranteed Minimum Withdrawal Benefit rider and the Benefit Amount is greater than zero. PHL Variable will notify you in writing that the contract has terminated.
Payment Upon Death Before Maturity Date
When is the Death Benefit Payable?
 
A death benefit is payable when the owner (or primary Annuitant when the contract is owned by a non-natural person) dies. If there is more than one owner, a death benefit is payable upon the first owner to die. At all times, the death benefit under this contract will be paid as required by section 72(s) or 401(a) of the Internal Revenue Code, as applicable.
 
Who Receives Payment?
❖    Death of an Owner/Annuitant
If the owner/annuitant dies before the contract Maturity Date, the death benefit will be paid to the owner/annuitant’s beneficiary. If the spouse is the beneficiary, see “Spousal Beneficiary Contract Continuance.”
❖   Death of an Owner—Multiple Owners
If one of the owners dies prior to the Maturity Date, the death benefit will be paid to the surviving owner(s), if any, who will be deemed to be the designated beneficiary(s).
❖   Death of an Annuitant who is not the Owner
If the owner and the Annuitant are not the same individual and the Annuitant dies prior to the Maturity Date, the owner becomes the Annuitant and the contract continues, unless the owner appoints a new Annuitant. If a Joint Annuitant dies prior to the Maturity Date, the owner may appoint a new Joint Annuitant. The death of the Annuitant or Joint Annuitant will not cause the death benefit to be paid.
❖   Death of Owner who is not the Annuitant
If the owner who is not the annuitant dies before the contract maturity date, the death benefit will be paid under the contract to the owner’s beneficiary, unless the beneficiary is the spouse. The survival of the annuitant does not affect this payment. If the spouse is the beneficiary, see “Spousal Beneficiary Contract Continuance.”
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❖    Spousal Beneficiary Contract Continuance
If the owner/annuitant or owner non-annuitant dies and the spouse of the owner is the named contract beneficiary, the spousal beneficiary can continue the contract as the owner.
❖   Ownership of the Contract by a Non-Natural Person
If the owner is not an individual, and the primary Annuitant dies before the Maturity Date, we will pay the death benefit to the owner.
What is the Death Benefit Amount?
The owner shall elect any of the available Death Benefit Options at the time of the initial premium payment. If no option is elected, Death Benefit Option 1 will apply. If we grant your request to change ownership, Death Benefit Option 1 shall apply, unless we agree otherwise.
❖    Death Benefit Option 1—Return of Premium
Upon the death of the owner (or if there is more than one owner, on the death of the owner who dies first), the death benefit is the greater of:
a) the sum of all of premium payments, less adjusted partial withdrawals (as defined below); or
b) the Contract Value on the Claim Date.
❖    Death Benefit Option 2—Annual Step-Up
This death benefit is based on the age of the owner. If there is more than one owner, it is based upon the age of the eldest owner at issue.
Upon the death of the owner who has not attained age 81, the death benefit is the greatest of:
a) the sum of all premium payments, less adjusted partial withdrawals (as defined below); or
b) the Contract Value on the Claim Date; or
c) the annual step-up amount (as defined below).
Upon the death of the owner who has attained age 81, the death benefit is the greater of:
a) the death benefit amount at the end of the contract year prior to the owner attaining age 81, plus the sum of all premium payments less adjusted partial withdrawals (as defined below) made since the end of the contract year prior to the owner attaining age 81; or
b) the Contract Value on the Claim Date.
If the owner is not an individual, the age of the primary Annuitant will be used to calculate the death benefit amount. If the spouse elects to continue the contract under Death Benefit Option 2, the death benefit will be calculated using the surviving spouse’s attained age.
❖    Death Benefit Option 3—Earnings Enhancement Benefit
The availability of this option is subject to state approval.
This death benefit is based on the age of the owner. If there is more than one owner, it is based upon the age of the eldest owner at issue. This option is available only for owners less than age 76 on the Contract Date.
Upon the death of the owner who has not attained age 70 on the Contract Date, the death benefit is the greater of:
a) the sum of all of premium payments, less adjusted partial withdrawals (as defined below); or
b) the Contract Value on the Claim Date plus 40% of the relief amount (as defined below).
Upon death of the owner who has attained age 70, but is less than 76 on the Contract Date, the death benefit is the greater of:
a) the sum of all of premium payments, less adjusted partial withdrawals (as defined below); or
b) the Contract Value on the Claim Date plus 25% of the relief amount (as defined below).
If the owner is not an individual, the age of the primary Annuitant will be used to calculate the death benefit amount. If the spouse elects to continue the contract under Death Benefit Option 3, the death benefit will be calculated using the surviving spouse’s attained age. The spouse's attained age at the death of the deceased owner will be used to determine the percentage of Relief Amount, if any.
❖    Death Benefit Option 4—Greater of Annual Step-Up or Annual Roll-Up
The availability of this option is subject to state approval.
This death benefit is based on the age of the owner. If there is more than one owner, it is based upon the age of the eldest owner at issue. This option is available only for owners less than age 81 on the Contract Date.
Upon the death of the owner who has not attained age 81 on the Contract Date, the death benefit is the greater of:
a) the sum of all of premium payments, less Adjusted Partial Withdrawals (as defined below); or
b) the Contract Value on the Claim Date; or
c) the Annual Step-up Amount (as defined below) on the Claim Date; and
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d) the Annual Roll-up Amount (as defined below) on the Claim Date.
On the contract anniversary following the oldest owner's attained age 81, the death benefit is the greater of:
a) the death benefit calculated at the end of the contract year prior to the oldest owner's attained age 81, plus the sum of all premium payments, less adjusted partial withdrawals (as defined below); and
b) the Contract Value on the Claim Date.
If the owner is not an individual, the age of the primary Annuitant will be used to calculate the death benefit amount. If the spouse elects to continue the contract under Death Benefit Option 4, the death benefit will be calculated using the surviving spouse’s attained age.
 
Adjusted Partial Withdrawal: The result of multiplying the ratio of the partial withdrawal to the Contract Value and the death benefit (prior to the withdrawal) on the withdrawal date.
 
Annual Roll-Up Amount: In the first contract year the Annual Roll-up Amount is equal to the sum of all premium payments, less adjusted partial withdrawals. At the beginning of the second contract year or any subsequent contract year, the Annual Roll-up Amount is equal to the Annual Roll-up Amount at the end of the previous contract year multiplied by a factor of 1.05, plus 100% of premium payments, less Adjusted Partial Withdrawals made since the end of the previous contract year. The Annual Roll-up Amount may not exceed 200% of total premium payments less Adjusted Partial Withdrawals.
Annual Step-up Amount: In the first contract year the Annual Step-Up Amount is equal to the sum of all premium payments less adjusted partial withdrawals. After that, in any following contract year the Annual Step-Up Amount equals the greater of (1) the Annual Step-Up amount at the end of the prior contract year, plus any premium payments made since the end of the prior contract year, less any adjusted partial withdrawals made since the end of the prior year; or (2) the Contract Value.
Modified Premium Payments: Modified Premium Payments equal the sum of all premium payments made less any withdrawals of premiums. If there are no withdrawals or the withdrawal does not exceed the difference between the Contract Value and cumulative premiums made, the value is zero.
Relief Amount: the Relief Amount is equal to the Contract Value less modified premium payments, not to exceed the following maximum amount:
• When the age of the eldest owner on the Contract Date is less than 70, the maximum relief amount equals 200% multiplied by:
1) the sum of modified premium payments (made prior to the date of the death benefit calculation) minus
2) the sum of premium payments (made during the prior 12 months of the death benefit calculation date).
• When the eldest owner on the Contract Date has attained age 70 but has not attained age 76, the maximum relief amount equals 100% multiplied by:
1) the sum of modified premium payments (made prior to the date of the death benefit calculation) minus
2) the sum of premium payments (made during the 12 months prior to the death benefit calculation date).
There are a number of options for payment of the death benefit, including lump sum, systematic withdrawals and annuity. If the death benefit amount to be paid is less than $2,000, it will be paid in a single lump sum (see “Annuity Options”). Depending upon state law, the death benefit payment to the beneficiary may be subject to state inheritance or estate taxes and we may be required to pay such taxes prior to distribution. There are specific Internal Revenue Code requirements regarding payment of the death benefits, see “Federal Income Taxes—Distribution at Death.” A recipient should consult a legal or tax adviser in selecting among the death benefit payment options.
Retained Asset Account
 
Death benefit proceeds will be payable in a single lump sum. At the time of payment you may elect to have the full death benefit amount sent to you. Unless otherwise provided for under state law, if you do not elect a single lump sum, the proceeds of the death benefit payable to an individual, trust or estate will be applied to the Phoenix Concierge Account (“PCA”), an interest bearing draft account with check writing privileges. The PCA is generally not offered to corporations or similar entities. You may opt out of the PCA at any time by writing a check from the PCA for the full amount of your balance or by calling our Annuity Service Center. A supplementary contract may be issued when death benefit proceeds are paid through the PCA.
 
The PCA is part of our general account. It is not a checking or bank account and is not insured by the FDIC, National Credit Union Share Insurance Fund (“NCUSIF”), or any other state or federal agency which insures deposits. No additional amounts aside from the death benefit may be deposited into the PCA. As part of our general account, it is subject to the claims of our creditors. We may receive a financial benefit from earnings on amounts left in the PCA. The guarantee of principal is based on the claims-paying ability of the company and principal is covered by the state guarantee association. Interest paid on amounts in the PCA is taxable as ordinary income in the year such interest is credited. Please consult a tax advisor.
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Internet, Interactive Voice Response and Telephone Transfers
You may transfer your Contract Value among the available investment options and make changes to your premium payment allocations by Internet, Interactive Voice Response (“IVR”) or telephone. The Company may discontinue any of these options and may provide other options at any time.
PHL Variable and 1851 Securities, Inc., our national distributor, will use reasonable procedures to confirm that transfer instructions are genuine. We require verification of account information and will record telephone instructions on tape. You will receive written confirmation of all transfers. PHL Variable and 1851 may be liable for following unauthorized instructions if we fail to follow our established security procedures. However, you will bear the risk of a loss resulting from instructions entered by an unauthorized third party that PHL Variable and 1851 reasonably believe to be genuine.
We may modify or terminate your transfer and allocation privileges. You may find it difficult to exercise these privileges during times of extreme market volatility. In such a case, you should submit your request in writing.
Prior to the Maturity Date of your contract, you may elect to transfer all or any part of the Contract Value among one or more investment options, the GIA or MVA subject to the limitations established for the GIA and MVA. A transfer from an investment option will result in the redemption of Accumulation Units and, if another investment option is selected, in the purchase of Accumulation Units. The exchange will be based on the values of the Accumulation Units next determined after the receipt by our Annuity Operations Division of notice of election in a form satisfactory to us. A transfer among investment options, the GIA or MVA does not automatically change the premium payment allocation schedule of your contract.
You may also request transfers and changes in premium payment allocations among available investment options, the GIA or MVA by Internet, Interactive Voice Response and telephone by calling us at 800/541-0171 between the hours of 8:30 a.m. and 4:00 p.m. Eastern Time on any Valuation Date, or by writing to the address listed on the first page of this prospectus. You may permit your registered representative to submit transfer requests on your behalf. If you have authorized your registered representative to make transfers on your behalf, he or she may submit your transfer request in a batch of requests for multiple policy owners. Like an individual transfer request, the transfer request must be submitted in good order to be processed. We will employ reasonable procedures to confirm that transfer instructions are genuine. We will require verification of account information and will record telephone instructions on tape. All transfers and allocation changes will be confirmed in writing to you. To the extent that procedures reasonably designed to prevent unauthorized transfers are not followed, we may be liable for following transfer instructions for transfers that prove to be fraudulent. However, you will bear the risk of loss resulting from instructions entered by an unauthorized third party we reasonably believe to be genuine. These transfer and allocation change privileges may be modified or terminated at any time on a case-by-case basis. In particular, during times of extreme market volatility, transfer privileges may be difficult to exercise. In such cases you should submit written instructions.
Unless we otherwise agree or unless the Dollar Cost Averaging Program has been elected, (see below), you may make only one transfer per contract year from the GIA. Nonsystematic transfers from the GIA and MVA will be made on the date of receipt by our Annuity Operations Division except as you may otherwise request. For nonsystematic transfers, the amount that may be transferred from the GIA at any one time cannot exceed the greatest of $1,000 or 25% of the Contract Value in the GIA at the time of transfer. For nonsystematic transfers from the MVA, the market value adjustment may be applied. See the MVA prospectus for more information.
No surrender charge will be assessed when a transfer is made. The date a premium payment was originally credited for the purpose of calculating the surrender charge will remain the same. We do not charge for transfers at this time. However, we reserve the right to charge a fee of $20 for each transfer after your first 12 transfers in a policy year. Should we begin imposing this charge, we would not count transfers made under a Systematic Transfer Program toward the 12 transfer limit.
Transfers to the GIA are not permitted during the first Contract Year. After the first Contract Year, a transfer into the GIA will not be permitted if such transfer would cause the percentage of the Contract Value in the GIA to exceed the Maximum GIA Percentage shown on the schedule page.
Market Timing and Other Disruptive Trading
We discourage market timing activity, frequent transfers of contract value among investment options and other activity determined to be “Disruptive Trading”, as described below. Your ability to make transfers among investment options under the contract is subject to modification if we determine, in our sole opinion, that your exercise of the transfer privilege constitutes “Disruptive Trading” that may disadvantage or potentially harm the rights or interests of other contract owners.
“Disruptive Trading” includes, but is not limited to: frequent purchases, redemptions and transfers; transfers into and then out of an investment option in a short period of time; and transfers of large amounts at one time. The risks and harmful effects of Disruptive Trading include:
❖   dilution of the interests of long-term investors in an investment option, if market timers or others transfer into or out of the investment option rapidly in order to take advantage of market price fluctuations;
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❖   an adverse affect on portfolio management, as determined by portfolio management in its sole discretion, such as causing the underlying fund to maintain a higher level of cash than would otherwise be the case, or causing the underlying fund to liquidate investments prematurely; and
❖   increased brokerage and administrative expenses.
To protect our contract owners and the underlying funds from Disruptive Trading, we have adopted certain policies and procedures.
Under our Disruptive Trading policy, we can modify your transfer privileges for some or all of the investment options. Modifications include, but are not limited to, not accepting a transfer request from you or from any person, asset allocation service, and/or market timing service made on your behalf. We may also limit the amount that may be transferred into or out of any investment option at any one time. Unless prohibited by the terms of your contract, we may (but are not obligated to):
❖   limit the dollar amount and frequency of transfers (e.g., prohibit more than one transfer a week, or more than two a month, etc.),
❖   restrict the method of making a transfer (e.g., require that all transfers into a particular investment option be sent to our Service Center by first class U.S. mail and/or rescind telephone, internet, IVR or fax transfer privileges),
❖   require a holding period for some investment options (e.g., prohibit transfers into a particular investment option within a specified period of time after a transfer out of that investment option),
❖   or implement and administer redemption fees imposed by one or more of the underlying funds, or
❖   impose other limitations or restrictions.
Currently we attempt to detect Disruptive Trading by monitoring both the dollar amount of individual transfers and the frequency of a contract owner’s transfers. With respect to both dollar amount and frequency, we may consider an individual transfer alone or when combined with transfers from other policies owned by or under the control or influence of the same individual or entity. If you have authorized your registered representative to make transfers on your behalf, he or she may submit your transfer request in a batch of requests for multiple policy owners. We monitor these transfers on an individual basis, rather than on a batch basis. We currently review transfer activity on a regular basis. We also consider any concerns brought to our attention by the managers of the underlying funds. We may change our monitoring procedures at any time without notice.
Because we reserve discretion in applying these policies, they may not be applied uniformly. However, we will to the best of our ability apply these policies uniformly. Consequently, there is a risk that some contract owners could engage in Disruptive Trading while others will bear the effects of their activity.
Currently we attempt to detect Disruptive Trading by monitoring activity for all policies. Possible Disruptive Trading activity may result in our sending a warning letter advising the owner of our concern. Regardless of whether a warning letter is sent, once we determine that Disruptive Trading activity has occurred, we may revoke the owner’s right to make Internet and IVR transfers. We will notify contract owners in writing (by mail to their address of record on file with us) if we limit their trading.
 
We have adopted these policies and procedures as a preventative measure to protect all contract owners from the potential effects of Disruptive Trading, while recognizing the need for contract holders to have available reasonable and convenient methods of making transfers that do not have the potential to harm other contract owners.
 
We currently do not make any exceptions to the policies and procedures discussed above to detect and deter Disruptive Trading. We may reinstate Internet, IVR, telephone and fax transfer privileges after they are revoked, but we will not reinstate these privileges if we have reason to believe that they might be used thereafter for Disruptive Trading.
We cannot guarantee that our monitoring will be 100% successful in detecting and restricting all transfer activity that constitutes Disruptive Trading. Moreover, we cannot guarantee that revoking or limiting a contract owner’s Internet, IVR, telephone and fax transfer privileges will successfully deter all Disruptive Trading. In addition, some of the underlying funds are available to insurance companies other than Phoenix and we do not know whether those other insurance companies have adopted any policies and procedures to detect and deter Disruptive Trading, or if so what those policies and procedures might be. Because we may not be able to detect or deter all Disruptive Trading and because some of these funds are available through other insurance companies, some contract owners may be treated differently than others, resulting in the risk that some contract owners could engage in Disruptive Trading while others will bear the effects of their activity.
Orders for the purchase of underlying fund shares are subject to acceptance by the relevant fund. Phoenix has entered into information sharing agreements with the underlying funds of this variable product as required by Rule 22c-2 of the Investment Company Act of 1940. The purpose of the information sharing is to provide information to the underlying funds so that they can monitor, warn, and restrict policyholders who may be engaging in disruptive trading practices as determined by the underlying funds. We reserve the right to reject, without prior notice, any transfer request into any investment option if the purchase of shares in the corresponding underlying fund is not accepted for any reason. We may, without prior notice, take whatever action we deem appropriate to comply with or take advantage of any state or federal regulatory requirement.
We do not include transfers made pursuant to the Dollar Cost Averaging, Automatic Asset Rebalancing or other similar programs when applying our Disruptive Trading policy.
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The Annuity Period
The annuity period begins after the accumulation period of the contract, when annuity payments are made to you.
Annuity Payments
Annuity payments will begin on the contract’s maturity date if the owner is alive and the contract is still in force. Beginning on the maturity date, investment in the Separate Account is continued unless a Fixed Payment Annuity is selected.
Surrender charges will also be waived when you begin taking annuity payments, provided your contract has been in effect for five years. If you have not selected an Annuity Payment Option by the Maturity Date, the default is Annuity Payment Option I—Variable Life Annuity with 10-Year Period Certain. For more information, see “Annuity Payment Options.”
If the amount to be applied on the Maturity Date is less than $2,000, we may pay such amount in one lump sum in lieu of providing an annuity. If the initial monthly annuity payment under an Annuity Payment Option would be less than $20, we may make a single sum payment equal to the total Contract Value on the date the initial annuity payment would be payable, or make periodic annuity payments quarterly, semiannually or annually in place of monthly annuity payments.
 
Your contract specifies a Maturity Date at the time of its issuance. However, you may subsequently elect a different Maturity Date. The Maturity Date may not be earlier than the fifth contract anniversary. The latest Maturity Date is the contract anniversary nearest the Annuitant’s 95th birthday or ten years from the Contract Date, unless agreed otherwise. Generally, under qualified plans or IRAs, the Maturity Date must be such that distributions begin no later than April 1st of the calendar year following the later of: (a) the year in which the employee attains age 70½ or (b) the calendar year in which the employee retires. The date set forth in (b) does not apply to an IRA. A policyholder can defer the maturity date to the contract anniversary nearest the annuitant’s 95th birthday if we receive documentation concerning the policyholder’s satisfaction of RMD provisions, See “Federal Income Taxes”.
 
The Maturity Date election must be made by written notice and must be received by our Annuity Operations Division 30 days before the provisional Maturity Date. If you do not elect a Maturity Date, which is different from the provisional Maturity Date, the provisional Maturity Date becomes the Maturity Date.
Annuity Payment Options
Unless an alternative annuity payment option is elected on or before the maturity date, the amounts held under a contract on the maturity date will be applied to provide a Variable Life Annuity with 10-Year Period Certain (Option I) as described below. Instead of Option I, you may, by sending a written request to our Annuity Operations Division on or before the maturity date of the contract, elect any of the other annuity payment options described below.
After the first annuity payment, you may not change the elected annuity payment option
No surrender charge will be assessed under any annuity payment option, unless unscheduled withdrawals are made under Variable Annuity Payment Options K or L. The MVA will apply to any amounts held in the MVA that we applied to any annuity payment option. See the MVA prospectus for more information.
With the exception of the Fixed Annuity Payment Options and Annuity Payment Option L, each annuity payment will be based upon the value of the annuity units credited to the contract. The number of annuity units in each investment option to be credited is based on the value of the accumulation units in that investment option and the applicable annuity payment rate. The contract is issued with guaranteed minimum annuity payment rates, however, if the current rate is higher, we’ll apply the higher rate. The annuity payment rate differs according to the annuity payment option selected and the age of the annuitant(s). The annuity payment rate is applied and will determine all annuity payments for the fixed annuity payment options and the first annuity payment for the variable annuity payment options. The value of the annuity units will vary with the investment performance of each investment option to which annuity units are credited.
The initial payment will be calculated based on an assumed investment return of 4.5% per year. This rate is a fulcrum return around which variable annuity payments will vary to reflect whether actual investment experience of the investment option is better or worse than the assumed investment return. The assumed investment return is set at the time of your first annuity payment. If investment performance is higher than the assumed investment return, your subsequent annuity payments will be larger than your first annuity payment. However, if investment performance is lower than the assumed investment rate, your subsequent annuity payments will be less than the first annuity payment. If the assumed and actual investment performances are the same, your annuity payments will be level. The assumed investment return and the calculation of variable annuity payments for a 10-year period certain variable payment life annuity and for Annuity Payment Options J and K described below are described in more detail in the contract and in the SAI.
The level of annuity payments payable under the following annuity payment options is based upon the option selected. In addition, factors such as the age at which annuity payments begin, the form of annuity, annuity payment rates, assumed investment rate (for variable annuity payments) and the frequency of annuity payments will affect the level of annuity payments. The longer the duration and more frequent the payments, the lower the annuity payment amount. The assumed investment rate is 4.5% per year. We use this rate to
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determine the first annuity payment under Variable Annuity Payment Options I, J, K, M and N. Under Option L, we determine the amount of the annual distribution by dividing the amount of Contract Value as of the payment calculation date by the life expectancy of the Annuitant or the joint life expectancy of the Annuitant and Joint Annuitant at that time.
We deduct a daily charge for mortality and expense risks and a daily administrative fee from Contract Values held in the investment options. For more information, see “Charges for Mortality and Expense Risks” and “Charges for Administrative Services.” Therefore, electing Option K will result in a deduction being made even though we assume no mortality risk under that option.
The following are descriptions of the annuity payment options available under a contract. These descriptions should allow you to understand the basic differences between the options; however, you should contact our Annuity Operations Division well in advance of the date you wish to elect an option to obtain estimates of annuity payments under each option.
Option A—Life Annuity with Specified Period
A fixed payout annuity payable monthly while the annuitant is living or, if later, the end of the specified period certain. The period certain may be specified as 5, 10, or 20 years. The period certain must be specified at the time this option is elected.
Option B—Non-Refund Life Annuity
A fixed payout annuity payable monthly while the annuitant is living. No monthly payment, death benefit or refund is payable after the death of the annuitant.
Option C—[Reserved]
Option D—Joint and Survivor Life Annuity
A fixed payout annuity payable monthly while either the annuitant or joint annuitant is living. You must designate the joint annuitant at the time you elect this option. The joint annuitant must be at least age 40 on the first payment calculation date.
Option E—Installment Refund Life Annuity
A fixed payout annuity payable monthly while the annuitant is living. If the annuitant dies before the annuity payments made under this option total an amount which refunds the entire amount applied under this option, we will make a lump sum payment equal to the entire amount applied under this option less the sum of payments already made.
Option F—Joint and Survivor Life Annuity with 10-Year Period Certain
A fixed payout annuity payable monthly while either the annuitant or joint annuitant is living, or if later, the end of 10 years. You must designate the joint annuitant at the time you elect this option. The joint annuitant must be at least age 40 on the first payment calculation date.
Option G—Payments for Specified Period
A fixed payout annuity payable monthly over a specified period of time. Payments continue whether the annuitant lives or dies. The specified period must be in whole numbers of years from 5 to 30, but cannot be greater than 100 minus the age of the annuitant. However, if the beneficiary of any death benefits payable under this contract elects this payment option, the period selected by the beneficiary may not extend beyond the life expectancy of such beneficiary.
Option H—Payments of Specified Amount
Equal income installments of a specified amount are paid until the principal sum remaining under this option from the amount applied is less than the amount of the installment. When that happens, the principal sum remaining will be paid as a final payment. The amount specified must provide for payments for a period of at least 5 years.
Option I—Variable Life Annuity with 10-Year Period Certain
A variable payout annuity payable monthly while the Annuitant is living or, if later, for ten years. If the beneficiary of any death benefits payable under this contract elects this option, the period certain will equal the shorter of 10 years or the life expectancy of such beneficiary.
Option J—Joint Survivor Variable Life Annuity with 10-Year Period Certain
A variable payout annuity payable monthly while either the annuitant or joint annuitant is living, or if later, the end of 10 years. You must designate the joint annuitant at the time you elect this option. The joint annuitant must be at least age 40 on the first payment calculation date. This option is not available for the payment of any death benefit under this contract.
Option K—Variable Annuity for a Specified Period
A variable payout annuity payable monthly over a specified period of time. Payments continue whether the annuitant lives or dies. The specified period must be in whole numbers of years from 5 to 30, but cannot be greater than 100 minus the age of the annuitant. However, if the beneficiary of any death benefits payable under this contract elects this payment option, the period selected by the beneficiary may not extend beyond the life expectancy of such beneficiary. This option also provides for unscheduled withdrawals. An unscheduled withdrawal will reduce the number of fixed annuity units in each investment option and affect the amount of future payments. For details, see “Variable Annuity Payments” and “Calculation of Annuity Payments” in the SAI.
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Option L—Variable Life Expectancy Annuity
This option provides a variable income which is payable over the annuitant’s annually recalculated life expectancy or the annually recalculated life expectancy of the annuitant and joint annuitant. This option also provides for unscheduled withdrawals. An unscheduled withdrawal will reduce the Contract Value and affect the amount of future payments. Upon the death of the annuitant (and joint annuitant, if applicable), any remaining Contract Value will be paid in a lump sum to the beneficiary. For details, see “Variable Annuity Payments” and “Calculation of Annuity Payments” in the SAI.
Option M—Unit Refund Variable Life Annuity
This option provides variable monthly payments as long as the annuitant lives. In the event of the death of the annuitant, the monthly payments will stop and the beneficiary will receive a lump sum payment equal to the value of the remaining annuity units. This value is equal to the sum of the number of remaining annuity units for each investment option multiplied by the current annuity unit value for that investment option. The number of remaining annuity units for each investment option will be calculated as follows:
1. the net amount in the investment option applied under this option on the first payment calculation date divided by the corresponding annuity unit value on that date, minus
2. the sum of the annuity units released from the investment option to make the payments under this option.
You may not transfer any assets under Annuity Payment Option M, unless we agree otherwise.
Option N—Variable Non-Refund Life Annuity
A variable payout annuity payable monthly while the annuitant is living. No monthly payment, death benefit or refund is payable after the death of the annuitant.
Other Options and Rates
We may offer other annuity payment options at the time a contract reaches its maturity date. In addition, in the event that annuity payment rates for contracts are at that time more favorable than the applicable rates guaranteed under the contract, the then current settlement rates shall be used in determining the amount of any annuity payment under the Annuity Payment Options above.
Other Conditions
Federal income tax requirements currently applicable to most qualified plans provide that the period of years guaranteed under joint and survivorship annuities with specified periods certain (see “Option F” and “Option J” above) cannot be any greater than the joint life expectancies of the payee and his or her spouse.
Federal income tax requirements also provide that participants in IRAs must begin required minimum distributions (“RMDs”) by April 1 of the year following the year in which they attain age 70½. Minimum distribution requirements do not apply to Roth IRAs. Distributions from qualified plans generally must begin by the later of actual retirement or April 1 of the year following the year participants attain age 70½. We will assist policyholders with compliance with the RMD requirements.
 
Amounts up to the RMD may be withdrawn without a deduction for surrender charges, even if the minimum distribution exceeds the 10% allowable amount. See “Surrender Charges.” Any amounts withdrawn that have not been held under a contract for at least six years and are in excess of both the minimum distribution and the 10% free available amount will be subject to any applicable surrender charge.
 
If the initial monthly annuity payment under an annuity payment option would be less than $20, we may make a single sum payment equal to the contract value on the date the initial payment would be payable, in place of all other benefits provided by the contract, or, may make periodic payments quarterly, semiannually or annually in place of monthly payments.
Currently, transfers between investment options are available for amounts allocated to any of the variable Annuity Payment Options except Annuity Payment Option M.
Payment Upon Death After Maturity Date
If an owner dies on or after the maturity date and there is no surviving owner, any remaining certain period annuity payments will be paid to the beneficiary under the annuity payment option in effect on the date of death. Generally, payments may not be deferred or otherwise extended.
(For information regarding the Inherited/Stretch Annuity feature of this Contract, see the section of this prospectus entitled “Inherited/Stretch Annuity Feature.”)
If there is a surviving owner, the payments continue as if there had been no death.
If the annuitant and joint annuitant, if any, die and are survived by any owner(s), any remaining certain period annuity payments will be paid to such owner(s). Payments will continue under the annuity payment option in effect at the date of death and may not be deferred or otherwise extended.
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Variable Account Valuation Procedures
Valuation Date
A Valuation Date is every day the New York Stock Exchange (“NYSE”) is open for trading and we are open for business. However, transaction processing may be postponed for the following reasons:
1. the NYSE is closed or may have closed early;
2. the SEC has determined that a state of emergency exists; or
3. on days when a certain market is closed (e.g., the U.S. Government bond market is closed on Columbus Day and Veteran’s Day).
The NYSE Board of Directors reserves the right to change the NYSE schedule as conditions warrant. On each Valuation Date, the value of the Separate Account is determined at the close of the NYSE (usually 4:00 p.m. eastern time).
Valuation Period
Valuation period is that period of time from the beginning of the day following a valuation date to the end of the next following valuation date.
Accumulation Unit Value
The value of one Accumulation Unit was set at $1.000 on the date assets were first allocated to an investment option. The value of one Accumulation Unit on any subsequent Valuation Date is determined by multiplying the immediately preceding Accumulation Unit Value by the applicable net investment factor for the valuation period ending on such Valuation Date. After the first valuation period, the Accumulation Unit Value reflects the cumulative investment experience of that investment option.
Net Investment Factor
The net investment factor for any valuation period is equal to 1.000 plus the applicable net investment rate for such valuation period. A net investment factor may be more or less than 1.000 depending on whether the assets gained or lost value that day. To determine the net investment rate for any valuation period for the funds allocated to each investment option, the following steps are taken: (a) the aggregate accrued investment income and capital gains and losses, whether realized or unrealized, of the investment option for such valuation period is computed, (b) the amount in (a) is then adjusted by the sum of the charges and credits for any applicable income taxes and the deductions at the beginning of the valuation period for mortality and expense risk charges and daily administration fee, and (c) the results of (a) as adjusted by (b) are divided by the aggregate unit values in the investment option at the beginning of the valuation period.
Miscellaneous Provisions
Assignment
Owners of contracts issued in connection with non-tax qualified plans may assign their interest in the contract to a spouse or a grantor trust. This assignment may result in taxable income to the Contract Owner. We will not be on notice of such an assignment unless we receive written notice of such assignment filed with our Annuity Operations Division.
A pledge or assignment of a contract is treated as payment received on account of a partial surrender of a contract. For more information, see “Surrenders or Withdrawals Prior to the Contract Maturity Date.” Transfer of ownership will nullify the original death benefit option and the death benefit option will become Death Benefit Option 1.
In order to qualify for favorable tax treatment, contracts issued in connection with tax qualified plans may not be sold, assigned, discounted or pledged as collateral for a loan or as security for the performance of an obligation, or for any other purpose, to any person other than to us.
Payment of surrender, withdrawal or death proceeds usually will be made in one lump sum within seven days after receipt of the written request by our Annuity Operations Division in good order unless another payment option has been agreed upon by you and us.
Payment Deferral
Payment of the Contract Value, attributable to the Separate Account, in a single sum upon a death claim, withdrawal or full surrender of the contract will ordinarily be made within at least 7 days after receipt of the written documentation in good order. However, we may postpone payment of the value of any Accumulation Units at times (a) when the NYSE is closed, other than customary weekend and holiday closings, (b) when trading on the NYSE is restricted, (c) when an emergency exists as a result of which disposal of securities in the Series is not reasonably practicable or it is not reasonably practicable to determine the Contract Value or (d) when a governmental body having jurisdiction over us by order permits such suspension. Rules and regulations of the SEC, if any, are applicable and will govern as to whether conditions described in (b), (c) or (d) exist.
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Payment of the Contract Value attributable to the GIA may be deferred for 6 months from the date of receipt of a withdrawal or surrender request at our Annuity Operations Division. If payment is delayed for more than 10 days, we will credit additional interest at a rate equal to that paid under Annuity Options G and H.
Federal laws designed to counter terrorism and prevent money laundering might, in certain circumstances require us to block a contract owner’s ability to make certain transactions and, as a result, we may refuse to accept requests for transfers, withdrawals, surrenders or death benefits, until we are so instructed by the appropriate regulator. We may also be required to provide additional information about you and your contract to government regulators.
Amendments to Contracts
Contracts may be amended to conform to changes in applicable law or interpretations of applicable law, or to accommodate design changes including changes required in order to maintain tax status as an IRA or qualified plan. Except for changes related to tax status, changes in the contract may need to be approved by contract owners and state insurance departments. A change in the contract which necessitates a corresponding change in the prospectus or the SAI must be filed with the SEC.
Substitution of Fund Shares
 
If, in the judgment of PHL Variable’s management, one or more of the funds becomes unsuitable for investment by Contract Owners, we reserve the right to substitute Accumulation Units of another investment option for Accumulation Units already purchased or to be purchased in the future by premium payments under this contract. Any substitution will be subject to approval by the SEC, if required and, where required, one or more state insurance departments.
 
Ownership of the Contract
Ordinarily, the purchaser of a contract is both the owner and the Annuitant and is entitled to exercise all the rights under the contract. However, the owner may be an individual or entity other than the Annuitant. More than one owner may own a contract as joint owner. Transfer of the ownership of a contract may involve federal income tax consequences, and a qualified advisor should be consulted before any such transfer is attempted.
Inherited/Stretch Annuity Feature
This Contract provides for an Inherited/Stretch Annuity Feature that may be requested by the beneficiary of a deceased Contract Owner’s interest. Under this Feature we will administer the Contract to accommodate an inherited or “stretch” payout. A stretch payout is a method in which the death benefit is paid out over a period of time, which is generally based upon the life expectancy of the beneficiary. By electing a stretch payout, a death benefit beneficiary can “stretch” payments over his or her life expectancy rather than receive the entire death benefit in one lump sum or within five years of the Contract Owner’s death. The amount of each stretch payment will be at least the required minimum distribution (“RMD”) required under the Internal Revenue Code and its accompanying rules and regulations (see “Federal Income Taxes”). Electing a “stretch” payout may provide tax advantages to the beneficiary.
This Feature is available to an individual or trust beneficiary of an IRA, (including a Roth IRA), or qualified plan or to an individual beneficiary of a non-qualified contract issued by PHL Variable (or its affiliates) or issued by a company unaffiliated with PHL Variable. If the beneficiary of a contract issued by a company unaffiliated with PHL Variable purchases this Phoenix Dimensions® Contract for this Feature, then to the extent not in conflict with the Internal Revenue Code, all contract rights will be available to the purchaser. However, if a beneficiary of this Phoenix Dimensions® Contract elects this Feature, only certain rights will remain with the beneficiary because a beneficiary does not retain the same rights under this Contract as the deceased owner. Certain limitations, considerations and tax implications apply to this Feature and may differ depending upon whether you have an IRA/qualified or non-qualified contract and whether the beneficiary is an individual or a trust. In no event may additional premiums be added to the deceased Contract Owner’s interest.
If this Feature is elected, we will assist with the calculation of the RMD and will distribute this calculated amount to the beneficiary. However, it is the responsibility of the beneficiary to ensure that the correct RMD is actually withdrawn from the contract each year.
The following guidelines will apply when we administer this Feature:
❖   We will assist with the calculation of the RMD each year in accordance with the Code using the Fair Market Value (year-end account value, plus any actuarial value assigned to living benefits) of the account. Fair Market Value is determined using specific Code requirements and the amount may be different than the year-end account value.
❖   With certain limitations, a beneficiary’s share of the death benefit will be distributed over his or her life expectancy, based on IRS tables. If there are multiple beneficiaries and a separate beneficiary account is not established by December 31st of the calendar year following the year of death, the death benefit will be distributed over the life expectancy of the oldest beneficiary.
❖   For a non-qualified contract, if the deceased Owner had begun receiving annuitization proceeds, the RMD payments will be based on the life expectancy of the deceased Owner at the time of death.
❖   If the beneficiary is a non-natural person under an IRA/qualified plan, and the deceased Owner died after his or her required beginning distribution date, we will use the remaining life expectancy of the deceased to compute remaining payments.
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❖   The annual RMD must be withdrawn each year. For a non-qualified contract, the first RMD must be distributed no later than the anniversary of the deceased Owner’s date of death. For IRAs/qualified plans, the first RMD must be distributed on or before December 31st of the calendar year following the year of the deceased’s death.
❖   For an IRA/qualified plan, if the beneficiary is a surviving spouse, the surviving spouse beneficiary can postpone RMDs until the year the deceased spouse would have turned 70 and 1/2. In the alternative, the spouse can also add the IRA/qualified plan proceeds to his or her own IRA after which the RMDs must begin when the surviving spouse attains age 70 ½.
❖   For a non-qualified contract, if the beneficiary is a surviving spouse, the surviving spouse can continue the contract; in this event, RMDs are not required until the death of the surviving spouse. See “Spousal Definition” for further discussion of spousal qualifications.
❖   The RMD may be paid on an installment basis with the payment frequency chosen by the beneficiary; in all cases, the RMDs must be paid at least annually.
❖   In addition to RMD amounts, additional funds may be withdrawn from the Contract. Any withdrawal in excess of the RMD may be subject to a surrender charge (see the sections of this prospectus entitled “Summary of Expenses” and “Surrender of Contracts and Withdrawals”).
❖   The beneficiary who elects this Feature may continue or change the Investment Options from those that the deceased Owner selected.
Additional information regarding our administration of this feature is provided in a “Required Minimum Distribution (RMD) Request and Acknowledgment Form,” available upon request. This feature may not be suitable for some beneficiaries. We are not providing tax, financial or legal advice. You should consult with your financial professional and tax adviser to determine whether this feature is right for you. This feature may not be available in all states.
 
Please note that federal legislation has been proposed which would limit the ability of non-spousal beneficiaries to elect the inherited/stretch annuity feature. Should any such legislation be enacted, we would only offer the benefits permitted under federal law.
 
Community and Marital Property States
If the Contract Owner resides in a community property or marital property state and has not named his or her spouse as the sole beneficiary, the spouse may need to consent to the non-spouse beneficiary designation. The Contract Owner should consult with legal counsel regarding this designation. Should spousal consent be required, We will not be liable for any consequences resulting from the failure of the Contract Owner to obtain proper consent.
Federal Income Taxes
Introduction
The contracts are designed for use with retirement plans, including non-qualified plans and qualified plans or Individual Retirement Annuities (IRAs) under the provisions of the Internal Revenue Code of 1986, (within this section, referred to as the “Code”). The ultimate impact of federal income taxes on the amounts held under a contract, premiums paid for the contract, payments received under the contract and on the economic benefits to the policyholder, annuitant or beneficiary depends on our income tax status, on the type of retirement plan (if any) for which the contract is purchased, and upon the income tax and employment status of the individual concerned.
 
The following discussion is general in nature and is not intended as individual tax advice. The income tax rules are complicated and this discussion is intended only to make you aware of the issues. Each person should consult an independent tax or legal advisor. No attempt is made to consider any estate, gift or inheritance taxes or any applicable state, local or other tax laws. Because this discussion is based upon our understanding of the federal income tax laws as they are currently interpreted, we cannot guarantee the income tax status of any contract either currently or in the future. No representation is made regarding the likelihood of continuation of the federal income tax laws or the current interpretations by the Internal Revenue Service (the “IRS”). From time to time, there are regulatory or legislation proposals or changes that do or could impact the taxation of annuity contracts, IRAs and qualified plans; if enacted, these changes could be retroactive. In particular, please note that federal legislation has been proposed which would limit the options available to specified contract beneficiaries relative to after-death distributions. Should any such legislation be enacted, we would only offer the benefits permitted under federal law. We reserve the right to make changes to the contract to assure that it continues to qualify as an annuity, IRA and/or qualified plan for federal income tax purposes. For a discussion of federal income taxes as they relate to any underlying account investment options, please see the prospectuses for these investments.
 
Note on Terminology: The Code uses the term “policyholder”, in describing the owner of an Annuity. This section will follow the Code terminology in describing specific provisions of the Code.
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Income Tax Status
We are taxed as a life insurance company under the Code. For federal income tax purposes, neither the Separate Account nor the Guaranteed Interest Account is a separate entity from Phoenix Life Insurance Company, PHL Variable Insurance Company or Phoenix Life and Annuity Company and neither account will be taxed separately under the “regulated investment company” provisions (Subchapter M) of the Code.
Investment income and realized capital gains on the assets of the Separate Account are reinvested and taken into account in determining the value of the Separate Account and each Contract. No charge currently will be made to any contract or to the Separate Account for our federal income taxes which may be attributable to the Separate Account. We reserve the right to make a deduction for taxes with respect to such items in the future. If imposed, such charge would be equal to the federal income taxes attributable to the investment results of the Separate Account.
Taxation of Annuities in General—Non-qualified Plans
Code section 72 governs taxation of annuities. In general, a policyholder (Contract owner) is not taxed on increases in the value of an annuity contract until a distribution is made. However, in certain cases, the increase in value may be subject to tax currently. See “Contracts Owned by Non-Natural Persons,” “Owner Control” and “Diversification Standards” below.
The policyholder may elect one of the available death benefit guarantees under the contract. One or more of the options available may, in some cases, exceed the greater of the sum of premium payments or the Contract Value. The IRS may take the position with respect to these death benefit guarantees that they are not part of the annuity contract. In such a case, the charges against the cash value of the annuity contract or charges withheld from a rollover for the benefits would be considered distributions subject to tax, including penalty taxes, and charges withheld from purchase payments for the contract would not be deductible. If the IRS were to take this position, we would take all reasonable steps to avoid this result, which would include the right to amend the contract, with appropriate notice to you. You should consult with your tax advisor before electing a death benefit guarantee under this contract or any amendments, benefits or endorsements to the contract.
Surrenders or Withdrawals Prior to the Annuity Starting Date or Contract Maturity Date
Code section 72 provides that a withdrawal or surrender of the contract prior to the annuity starting date or contract Maturity Date will be treated as taxable income to the extent the amounts held under the contract exceeds the “investment in the contract.” The “investment in the contract” is that portion, if any, of contract purchase payments (premiums) that have not been excluded from the policyholder’s gross income (“after-tax monies”). The taxable portion is taxed as ordinary income in an amount equal to the value of the amount received in excess of the “investment in the contract” on account of a withdrawal or surrender of a contract. This taxable portion is referred to as “gain” or “contract gain”. For purposes of this rule, a pledge, loan or assignment of a contract is treated as a payment received on account of a withdrawal from a contract and the amount of the pledge, loan or assignment will be taxed as if received in cash by the policyholder.
Surrenders, Withdrawals, or Annuity Payments On or After the Annuity Starting Date or Contract Maturity Date
Upon receipt of a lump sum payment under the contract, the policyholder is taxed on the portion of the payment that exceeds the investment in the contract. Ordinarily, such taxable portion is taxed as ordinary income.
For amounts received as an annuity, which are amounts payable at regular intervals over a period of more than one full year from the date on which they are deemed to begin, the taxable portion of each payment is determined by using a formula known as the “exclusion ratio,” which establishes the ratio that the investment in the contract bears to the total expected amount of annuity payments for the term of the contract. That ratio is then applied to each fixed payment to determine the non-taxable portion of the payment. The remaining portion of each payment is taxed as ordinary income. For variable payments, the taxable portion is determined by a formula that establishes a specific dollar amount of each payment that is not taxed. The dollar amount is determined by dividing the investment in the contract by the total number of expected periodic payments. The remaining portion of each payment is taxed as ordinary income. A variable contract may have annuity distribution options under which the payments are fixed or variable.
Once the excludable portion of annuity payments equals the investment in the contract, the balance of the annuity payments will be fully taxable. For certain types of qualified plans or IRAs, there may be no investment in the contract resulting in the full amount of the payments being taxable. For annuities issued in connection with qualified employer retirement plans, a simplified method of determining the exclusion ratio applies. This simplified method does not apply to IRAs.
Withholding of federal income taxes on all distributions may be required unless the policyholder properly elects not to have any amounts withheld and notifies our Operations Division of that election on the required forms and under the required certifications. Certain policyholders cannot make this election.
Partial Annuitization
If permitted by contract, a policyholder can elect to only designate a portion of the annuity contract as paid as an amount received as an annuity. To qualify, the payments must be paid out over a period of 10 years or more. The portion so designated will be treated as a separate contract for annuity taxation purposes. For purposes of applying the rules for the calculation of the exclusion ratio for annuity distributions, the definitions of “investment in the contract,” “expected return,” and “annuity starting date”, and the provisions for the
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taxation of distributions from the annuity for amounts received before the contract maturity date, the investment in the contract will be allocated pro rata between each portion of the contract from which amounts are received as an annuity, and the portion of the contract from which amounts are not received as an annuity.
Surrenders or Withdrawals Prior to the Contract Maturity Date
Code section 72 provides that a withdrawal or surrender of the contract prior to the contract Maturity Date will be treated as taxable income to the extent the amounts held under the contract exceeds the “investment in the contract.” The “investment in the contract” is that portion, if any, of contract purchase payments (premiums) that have not been excluded from the policyholder’s gross income (“after-tax monies”). The taxable portion is taxed as ordinary income in an amount equal to the value of the amount received in excess of the “investment in the contract” on account of a withdrawal or surrender of a contract. For purposes of this rule, a pledge, loan or assignment of a contract is treated as a payment received on account of a withdrawal from a contract.
Surrenders or Withdrawals On or After the Contract Maturity Date
Upon receipt of a lump sum payment under the contract, the policyholder is taxed on the portion of the payment that exceeds the investment in the contract. Ordinarily, such taxable portion is taxed as ordinary income.
For amounts received as an annuity, which are amounts payable at regular intervals over a period of more than one full year from the date on which they are deemed to begin, the taxable portion of each payment is determined by using a formula known as the “exclusion ratio,” which establishes the ratio that the investment in the contract bears to the total expected amount of annuity payments for the term of the contract. That ratio is then applied to each payment to determine the non-taxable portion of the payment. The remaining portion of each payment is taxed as ordinary income. For variable annuity payments, the taxable portion is determined by a formula that establishes a specific dollar amount of each payment that is not taxed. The dollar amount is determined by dividing the investment in the contract by the total number of expected periodic payments. The remaining portion of each payment is taxed as ordinary income.
Once the excludable portion of annuity payments equals the investment in the contract, the balance of the annuity payments will be fully taxable. For certain types of qualified plans, there may be no investment in the contract resulting in the full amount of the payments being taxable. For annuities issued in connection with qualified employer retirement plans, a simplified method of determining the exclusion ratio applies. This simplified method does not apply to IRAs.
Withholding of federal income taxes on all distributions may be required unless the policyholder properly elects not to have any amounts withheld and notifies our Operations Division of that election on the required forms and under the required certifications. Certain policyholders cannot make this election.
Penalty Tax on Certain Surrenders and Withdrawals—Non-qualified Contracts (Contracts not issued in connection with qualified plans or IRAs)
Amounts surrendered, withdrawn or distributed before the policyholder/taxpayer reaches age 59½ are subject to a penalty tax equal to ten percent (10%) of the portion of such amount that is includable in gross income. However, the penalty tax will not apply to withdrawals: (i) made on or after the death of the policyholder (or where the holder is not an individual, the death of the “primary Annuitant,” defined as the individual the events in whose life are of primary importance in affecting the timing and amount of the payout under the contract); (ii) attributable to the taxpayer’s becoming totally disabled within the meaning of Code section 72(m)(7); (iii) which are part of a Series of substantially equal periodic payments made (not less frequently than annually) for the life (or life expectancy) of the taxpayer, or the joint lives (or joint life expectancies) of the taxpayer and his or her beneficiary; (iv) from certain qualified plans (such distributions may, however, be subject to a similar penalty under Code section 72(t) relating to distributions from qualified retirement plans and to a special penalty of 25% applicable specifically to SIMPLE IRAs or other special penalties applicable to Roth IRAs); (v) allocable to investment in the contract before August 14, 1982; (vi) under a qualified funding asset (as defined in Code section 130(d)); (vii) under an immediate annuity contract (as defined in Code section 72(u)(4)); or (viii) that are purchased by an employer on termination of certain types of qualified plans and which are held by the employer until the employee separates from service. Please note that future legislation or regulations may modify the conditions under which distributions may be received without tax penalty.
Separate tax withdrawal penalties apply to qualified plans and IRAs. See “Penalty Tax on Certain Surrenders and Withdrawals from Qualified Plans and IRAs.”
Additional Considerations
Distribution-at-Death Rules
For a contract issued other than in connection with a qualified plan or an IRA, in order to be treated as an annuity contract for federal income tax purposes, a contract must provide the following two distribution rules: (a) if the policyholder dies on or after the contract Maturity Date, and before the entire interest in the contract has been distributed, the remainder of the policyholder’s interest will be distributed at least as rapidly as the method in effect on the policyholder’s death; and (b) if a policyholder dies before the contract Maturity Date, the policyholder’s entire interest generally must be distributed within five (5) years after the date of death, or if payable to a designated beneficiary, may be annuitized over the life or life expectancy of that beneficiary and payments must begin within one (1) year after the policyholder’s date of death. If the beneficiary is the spouse of the holder, the contract may be continued in the name of the spouse as holder. Similar distribution requirements apply to annuity contracts under qualified plans and IRAs.
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If the primary Annuitant, which is not the policyholder, dies before the Maturity Date, the owner will become the Annuitant unless the owner appoints another Annuitant. If the policyholder is not an individual, the death of the primary Annuitant is treated as the death of the holder. When the holder is not an individual, a change in the primary Annuitant is treated as the death of the holder.
If the policyholder dies on or after the Maturity Date, the remaining payments, if any, under an Annuity Payment Option must be made at least as rapidly as under the method of distribution in effect at the time of death.
Any death benefits paid under the contract are taxable to the beneficiary at ordinary rates to the extent amounts exceed investment in the contract. The rules governing the taxation of payments from an annuity contract, as discussed above, generally apply whether the death benefits are paid as lump sum or annuity payments. Estate taxes and state income taxes may also apply.
Each beneficiary will need to select the death benefit option from among those set forth in the contract which are applicable to the named beneficiary. If an option is not selected, the death benefit, if any, will be paid pursuant to the default death benefit payment option set forth in the contract. No beneficiary will be defaulted to any spousal continuance option.
Transfer of Annuity Contracts
Transfers of contracts for less than full and adequate consideration at the time of such transfer will trigger taxable income on the gain in the contract, with the transferee getting a step-up in basis for the amount included in the policyholder’s income. This provision does not apply to transfers between spouses or transfers incident to a divorce.
Contracts Owned by Non-Natural Persons
If a non-natural person (for example, a corporation) holds the contract, the income on that contract (generally the increase in the net surrender value less the premium payments paid) is includable in income each year. The rule does not apply where the non-natural person is an agent for a natural person, such as a trust in which the beneficial owner is a natural person. The rule also does not apply where the annuity contract is acquired by the estate of a decedent, where the contract is held under a qualified plan or an IRA, where the contract is a qualified funding asset for structured settlements, or where the contract is purchased on behalf of an employee upon termination of a qualified plan.
Section 1035 Exchanges
 
Code section 1035 provides, in general, that gain or loss is deferred upon the exchange of one annuity contract for another or the exchange of one annuity contract for a long-term care contract. Any such gain or loss is later recognized upon a recognition event (including withdrawal, death, surrender or annuitization). For non-qualified contracts, the contract proceeds must be transferred directly from one insurer to another insurer; they cannot be sent to the policyholder by the original insurer and then transmitted from the policyholder to the new insurer.
Exchanges are permitted of the entire contract or a portion of the contract. A partial exchange will qualify for tax deferral under section 1035 if no amount, other than an amount received as an annuity for 10 years or more during one or more lives, is received under either the original contract or new contract during 180 days beginning on date of transfer. Policyholders contemplating exchanges should consult their tax and/or legal advisors.
 
Multiple Contracts
Code section 72(e)(12)(A)(ii) provides that for purposes of determining the amount of any distribution under Code section 72(e) (amounts not received as annuities) that is includable in gross income, all annuity contracts issued by the same insurer (or affiliate) to the same policyholder during any calendar year are to be aggregated and treated as one contract. Thus, any amount received under any such contract prior to the contract Maturity Date, such as a withdrawal will be taxable (and possibly subject to the 10% penalty tax) to the extent of the combined income in all such contracts.
Additional Tax on Net Investment Income
In addition to income tax and any penalty tax, beginning for tax years after December 31, 2012, income from annuities is included in the definition of “net investment income” for purposes of new section 1411 of the Code and may be subject to an additional tax of 3.8 percent. Section 1411 applies to individual whose modified adjusted gross income exceeds the threshold amount. The threshold amount is $250,000 in the case of a joint return or surviving spouse, $125,000 in the case of a married individual filing a separate return, and $200,000 in any other case. The threshold amount is subject to modification. Further information regarding this additional tax may be forthcoming from the IRS prior to the effective date.
Diversification Standards
Diversification Regulations
Code section 817(h) requires that all contracts be adequately diversified. Treasury regulations define the requirements and generally permit these requirements to be satisfied using separate accounts with separate funds or series of a fund, each of which meets the requirements. The regulations generally require that, on the last day of each calendar quarter the assets of the separate accounts or series be invested in no more than:
❖   55% in any 1 investment
❖   70% in any 2 investments
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❖   80% in any 3 investments
❖   90% in any 4 investments
A “look-through” rule applies to treat a pro rata portion of each asset of a Series as an asset of the Separate Account, and each Series of the funds are tested for compliance with the percentage limitations. For purposes of these diversification rules, all securities of the same issuer are treated as a single investment, but each United States government agency or instrumentality is treated as a separate issuer.
We represent that we intend to comply with the Diversification Regulations to assure that the contracts continue to be treated as annuity contracts for federal income tax purposes.
Owner Control (Investor Control)
The Treasury Department has indicated that the Diversification Regulations do not provide exclusive guidance regarding the circumstances under which policyholder control of the investments of the Separate Account will cause the policyholder to be treated as the owner of the assets of the Separate Account. It is also critical that the insurance company and not the policyholder have control of the assets held in the separate accounts. A policyholder can allocate Account Values from one fund of the separate account to another but cannot direct the investments each fund makes. If a policyholder has too much “investor control” of the assets supporting the separate account funds, then the policyholder may be taxed on the gain in the contract as it is earned.
In 2003, the IRS issued formal guidance that indicated that if the number of underlying mutual funds available in a variable insurance contract does not exceed 20, the number of underlying mutual funds alone would not cause the contract to not qualify for the desired tax treatment. This guidance also states that exceeding 20 investment options may be considered a factor, along with other factors, including the number of transfer opportunities available under the contract, when determining whether the contract qualifies for the desired tax treatment. The Revenue Ruling did not indicate any specific number of underlying mutual funds that would cause the contract to not provide the desired tax treatment but stated that whether the owner of a variable contract is to be treated as the owner of the assets held by the insurance company under the contract will depend on all of the facts and circumstances.
The Revenue Ruling considered certain variable annuity and variable life insurance contracts and held that the types of actual and potential control that the policyholder could exercise over the investment assets held by the insurance company under the variable contracts was not sufficient to cause the policyholder to be treated as the owner of those assets and thus to be subject to current income tax on the income and gains produced by those assets. Under this contract, like the contracts described in the Revenue Ruling, there is no arrangement, plan, contract, or agreement between the policyholder and us regarding the availability of a particular investment option and, other than the policyholder’s right to allocate premium payments and transfer funds among the available investment options, all investment decisions concerning the investment options will be made by us or an advisor in its sole and absolute discretion. Please note that this contract may offer more than 20 investment options; however, we believe that this fact alone does not indicate that the investor control requirements have been violated.
At this time, it cannot be determined whether additional guidance will be provided on this issue and what standards may be contained in such guidance. Should there been additional rules or regulations on this issue, including limitations on the number of underlying funds, transfers between or among underlying funds, exchanges of underlying funds or changes in investment objectives of underlying funds such that the contract would no longer qualify as an annuity for tax purposes, we reserve the right to modify the contract to the extent required to maintain annuity tax treatment.
Diversification Regulations and IRA/Qualified Plans
Code section 817(h) applies to a variable annuity contract other than a pension plan contract. Qualified plans and IRAs, are defined as pension plan contracts for these purposes. Notwithstanding the exception of IRA/qualified plan contracts from application of the diversification rules, all available investments will be structured to comply with the diversification regulations and investor control limitations because the investments serve as the investment vehicle for non-qualified contracts as well as qualified plan and IRA contracts.
Taxation of Annuities in General—Qualified Plans and IRAs
 
The contracts may be used with several types of IRAs and qualified plans including: Section 403(b) contracts (also referred to as Tax-Sheltered Annuities (TSAs) or Tax-Deferred Annuities (TDAs)), Traditional IRAs, SEP IRAs, SIMPLE IRAs, SARSEP IRAs, Roth IRAs, Corporate Pension and Profit-sharing Plans and State Deferred Compensation Plans. For purposes of this discussion, all will be treated as qualified plans. The specific tax rules applicable to participants in such qualified plans vary according to the type of plan and the terms and conditions of the plan itself. No attempt is made here to provide more than general information about the use of the contracts with the various types of qualified plans. We reserve the right at any time to discontinue the availability of this contract for use with some of all of these qualified plans. Participants under such qualified plans as well as policyholders, annuitants and beneficiaries, are reminded that the rights of any person to any benefits under such qualified plans may be subject to the terms and conditions of the plans themselves or limited by applicable law, regardless of the terms and conditions of the contract issued in connection therewith. Federal or state requirements, including ERISA, may impact the person entitled to death benefits under the contract. Consequently, a policyholder’s named beneficiary designation or elected annuity payment option may not be enforceable.
 
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The owner of the contract may elect one of the available death benefit guarantees under the contract. We are of the opinion that the death benefit guarantees available under the contract are part of the annuity contract. One or more of the death benefit guarantees available may exceed the greater of the sum of premium payments or the Contract Value. The contract and its amendments, benefits or endorsements (together referred to herein as the “contract”) have not been reviewed by the IRS for qualification as an IRA or any other qualified plan. Moreover, the IRS has not issued formal guidance concerning whether any particular death benefit option such as those available under the contract complies with the qualification requirements for an IRA or any other qualified plan.
There is a risk that the IRS would take the position that one or more of the death benefit guarantees are not part of the annuity contract. In such a case, charges against the cash value of the annuity contract or charges withheld from a rollover for the benefits would be considered distributions subject to tax, including penalty taxes. While we regard the death benefit guarantees available under the contract as a permissible benefit under an IRA, the IRS may take a contrary position regarding tax qualification resulting in deemed distributions. If the IRS were to take this position, we would take all reasonable steps to avoid this result, which would include the right to amend the contract, with appropriate notice to you. You should consult with your tax advisor before electing a death benefit option under this contract for an IRA or other qualified plan.
Certain death benefit guarantees may be purchased under the contract. IRAs and other qualified contracts generally may not invest in life insurance contracts. There is a risk that IRS may consider these death benefit guarantees “incidental death benefits.” There is a limit on the amount of the incidental death benefits allowable for qualified contracts. If the death benefit(s) selected are considered to exceed these limits, the benefit(s) could result in taxable income to the owner of the IRA or qualified contract. Furthermore, the Code provides that the assets of an IRA may not be invested in life insurance, but may provide, in the case of death during the accumulation phase, for a death benefit payment equal to the greater of sum of premium payments (less withdrawals) or Contract Value. This contract offers death benefits, which may exceed the greater of sum of premium payments (less withdrawals) or Contract Value. If the IRS determines that these benefits are providing life insurance, the contract may not qualify as an IRA or other qualified contract. That determination could result in the immediate taxation of amounts held in the contract and the imposition of penalty taxes. You should consult your tax advisor regarding these features and benefits prior to purchasing a contract.
 
Distributions from qualified plans eligible to be rolled over to new contracts but which are paid to the policyholder directly generally will be subject to 20 percent income tax withholding. These distributions are “Eligible Rollover Distributions.” Mandatory withholding can be avoided if the policyholder arranges for a direct rollover or trustee-to-trustee transfer to another IRA/qualified plan. These mandatory withholding rules apply to all taxable distributions from qualified plans except (a) distributions required under the Code, such as required minimum distributions, (b) substantially equal distributions made over the life (or life expectancy) of the employee, or for a term certain of 10 years or more and (c) the portion of distributions not includable in gross income (i.e., return of after-tax contributions). The mandatory withholding rules do not apply to IRAs, however, a distribution from an IRA is taxable unless the IRA funds are reinvested in another IRA within a statutory time of 60 days.
 
The contracts sold by us in connection with certain qualified plans will utilize annuity tables that do not differentiate on the basis of sex. Such annuity tables also will be available for use in connection with certain non-qualified deferred compensation plans.
There are numerous income tax rules governing qualified plans, including rules with respect to: coverage, participation, maximum contributions, required distributions, penalty taxes on early or insufficient distributions and income tax withholding on distributions. This discussion does not address these plan requirements in detail. The following are general descriptions of the various types of qualified plans and of the use of the contracts in connection therewith. Individuals are urged to consult with their own tax or legal advisors.
Tax Sheltered Annuities (“TSAs”), Tax Deferred Annuities (“TDAs”), Section 403(b)
Code section 403(b) permits public school systems and certain types of charitable, educational and scientific organizations, generally specified in Code section 501(c)(3), to purchase annuity contracts on behalf of their employees and, subject to certain limitations, allows employees of those organizations to exclude the amount of payments from gross income for federal income tax purposes. These annuity contracts are commonly referred to as TSAs, TDAs, or 403(b)s.
Code section 403(b)(11) imposes certain restrictions on a policyholder’s ability to make withdrawals from, or surrenders of, section 403(b) contracts. Specifically, section 403(b)(11) allows a surrender or withdrawal only (a) when the employee attains age 59½, separates from service, dies or becomes disabled (as defined in the Code), or (b) in the case of hardship. In the case of hardship, the distribution amount cannot include any income earned under the contract. Section 403(b)(11), applies only with respect to distributions from section 403(b) contracts which are attributable to assets other than assets held as of the close of the last year beginning before January 1, 1989. Thus, the distribution restrictions do not apply to assets held as of December 31, 1988.
In addition, in order for certain types of contributions under a section 403(b) contract to be excluded from taxable income, the employer must comply with certain nondiscrimination requirements. The responsibility for compliance is with the employer and not with the issuer of the underlying annuity contract.
If a policyholder requests a distribution due to attaining age 59 ½, separation from service or becoming disabled, the policyholder must follow specific written documentation requirements, in a form acceptable to us, before we can process the distribution.
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If a policyholder requests a distribution as a result of hardship, the employer must specifically authorize the distribution. It is not the responsibility of the contract issuer to monitor compliance with IRS regulations relating to hardship distributions. If a hardship distribution is desired, the policyholder must follow the requirements set forth by the employer and we must receive consent by the employer, in a form acceptable to us, to process the distribution.
If certain contractual requirements are met, loans may be made available under section 403(b) contracts. A loan from a participant’s Contract Value may be requested only if the contract provides for loans and if the employer specifically permits and authorizes each specific loan. There are specific limits in the Code on the amount of the loan and the term of the loan. It is not the responsibility of the contract issuer to monitor compliance with these requirements. If a loan is desired, the policyholder must follow the requirements set forth by the employer and we must receive consent by the employer, in form acceptable to us, to process the loan.
If we are directed by the participant, the loan may be taken from specific investment options. Otherwise, the loan is taken proportionately from all investment options. The loan must be at least $1,000 and the maximum loan amount is the greater of: (a) 90% of the first $10,000 of Contract Value minus any withdrawal charge; and (b) 50% of the Contract Value minus any withdrawal charge. The maximum loan amount is $50,000. If loans are outstanding from any other tax-qualified plan, then the maximum loan amount of the contract may be reduced from the amount stated above in order to comply with the maximum loan amount requirements under section 72(p) of the Code. Amounts borrowed from a Market Value Adjustment (“MVA”) account are subject to the same market value adjustment as applies to transfers from the MVA.
Interest will be charged on the loan, in the amount set forth in the contract. This interest is payable to us.
Loan repayments will first pay any accrued loan interest. The balance will be applied to reduce the outstanding loan balance and will also reduce the amount of the Loan Security Account by the same amount that the outstanding loan balance is reduced. The Loan Security Account is part of the general account and is the sole security for the loan. It is increased with all loan amounts taken and reduced by all repayments of loan principal. The balance of loan repayments, after payment of accrued loan interest, will be credited to the investment options of the Separate Account or the GIA in accordance with the participant’s most recent premium payments allocation on file with us, except that no amount will be transferred to the MVA.
Under section 72(p), if a loan payment is not paid within 90 days after the payment was due, then the entire loan balance plus accrued interest will be in default. In the case of default, the outstanding loan balance plus accrued interest will be deemed a distribution for income tax purposes, and will be reported as such pursuant to Code requirements. At the time of such deemed distribution, interest will continue to accrue until such time as an actual distribution occurs under the contract.
As of January 1, 2009, there are new Income Tax Regulations impacting section 403(b) plans, including the requirement that the employer have a written Plan and that the Plan indicate the identity of the providers permitted under the Plan. We are not administrators of section 403(b) Plans; we are providers of annuity contracts authorized under specific Plans. We will exchange required information with the employer and/or authorized plan administrator, upon request. As a result of these regulations and requirements set forth by the employer, we may require additional documentation prior to executing transactions involving contracts issued in connection with section 403(b) plans. These documentation requirements may change from time to time.
Keogh Plans
The Self-Employed Individual Tax Retirement Act of 1962, as amended permitted self-employed individuals to establish “Keoghs” or qualified plans for themselves and their employees. The tax consequences to participants under such a plan depend upon the terms of the plan. In addition, such plans are limited by law with respect to the maximum permissible contributions, distribution dates, nonforfeitability of interests, and tax rates applicable to distributions. In order to establish such a plan, a plan document must be adopted and implemented by the employer, as well as approved by the IRS. Annuity contracts may be funding vehicles under a Keogh plan. We may issue such a contract but specifically are not a plan administrator or plan trustee.
Individual Retirement Annuities
Various sections of the Code permit eligible individuals to contribute to individual retirement programs known as “Traditional IRAs”, “Roth IRAs”, “SEP IRA”, “SARSEP IRA”, “SIMPLE IRA”, and “Deemed IRAs”. Each of these different types of IRAs is subject to limitations on the amount that may be contributed, the timing of contributions, the persons who may be eligible and on the time when distributions shall commence. In addition, distributions from certain other types of qualified plans may be transferred into an IRA. Participant loans are not allowed under IRA contracts. Details about each of these different types of IRAs are included in the respective contract endorsements.
Corporate Pension and Profit-Sharing Plans
Code section 401(a) permits corporate employers to establish various types of retirement plans for employees.
These retirement plans may permit the purchase of the contracts to provide benefits under the Plan. Contributions to the Plan for the benefit of employees will not be includable in the gross income of the employee until distributed from the Plan. The tax consequences to participants may vary depending upon the particular Plan design. However, the Code places limitations and restrictions on all Plans, including on such items as: amount of allowable contributions; form, manner and timing of distributions; transferability of benefits; vesting and nonforfeitability of interests; nondiscrimination in eligibility and participation; and the tax treatment of distributions,
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withdrawals and surrenders. Purchasers of contracts for use with Corporate Pension or Profit-sharing Plans should obtain independent tax advice as to the tax treatment and suitability of such an investment. Annuity contracts may be funding vehicles under these plans. We may issue such a contract but specifically are not a plan administrator or plan trustee.
Deferred Compensation Plans With Respect to Service for State and Local Governments and Tax Exempt Organizations
Code section 457 provides for certain deferred compensation plans with respect to service for state and local governments and certain other entities. The contracts may be used in connection with these plans; however, under these plans if issued to tax exempt organizations, the policyholder is the plan sponsor, and the individual participants in the plans are the Annuitants. Under such contracts, the rights of individual plan participants are governed solely by their agreements with the plan sponsor and not by the terms of the contracts. Annuity contracts may be funding vehicles under these plans. We may issue such a contract but specifically are not a plan administrator or plan trustee.
Tax on Surrenders and Withdrawals from Qualified Plans and IRAs
In the case of a withdrawal under a qualified plan or IRA, a ratable portion of the amount received is taxable, generally based on the ratio of the individual’s after-tax cost basis to the individual’s total accrued benefit under the retirement plan. Special tax rules may be available for certain distributions from a qualified plan. For many qualified plans and IRAs, the individual may have no after-tax contributions and the entire amount received will be taxable. For Roth IRAs, if certain conditions are met regarding holding periods and age of the policyholder, lifetime withdrawals are received without tax.
 
Code section 72(t) imposes a 10% penalty tax on the taxable portion of any distribution from qualified retirement plans and IRAs other than Roth IRAs. The penalty is increased to 25% instead of 10% for SIMPLE IRAs if distribution occurs within the first two years of the participation in the SIMPLE IRA. These penalty taxes are in addition to any income tax due on the distribution. To the extent amounts distributed are not includable in gross income no tax penalty will be imposed.
 
The tax penalty will not apply to the following distributions: (a) if distribution is made on or after the date on which the policyholder or Annuitant (as applicable) reaches age 59½; (b) distributions following the death the policyholder or Annuitant (as applicable); (c) distributions attributable to the policyholder or Annuitant (as applicable) being disabled within the meaning of section 72(m)(7), (d) after separation from service, distributions that are part of substantially equal periodic payments made not less frequently than annually for the life (or life expectancy) of the policyholder or Annuitant (as applicable) or the joint lives (or joint life expectancies) of such policyholder or Annuitant (as applicable) and his or her designated beneficiary; (e) distributions to a policyholder or Annuitant (as applicable) who has separated from service after he has attained age 55; (f) distributions made on account of an IRS levy on the IRA or plan, (g) distributions made to the policyholder or Annuitant (as applicable) to the extent such distributions do not exceed the amount allowable as a deduction under Code section 213 to the policyholder or Annuitant (as applicable) for amounts paid during the taxable year for medical care; (h) distributions made to an alternate payee pursuant to a qualified domestic relations order; (i) distributions from an IRA for the purchase of medical insurance (as described in section 213(d)(1)(D) of the Code) for the policyholder and spouse and dependents if the certain conditions are met; (j) distributions from IRAs for certain qualified educational expenses of the policyholder, spouse, children or grandchildren; (k) distributions from IRA for qualified first-time home purchase expenses; (l) distributions from retirement plans to individuals called to active military. The exceptions stated in items (e) and (h) above do not apply in the case of an IRA. The exception stated in item (d) applies to an IRA without the requirement that there be a separation from service. Please note that future legislation or regulations may modify the conditions under which distributions may be received from a qualified plan or IRA without tax penalty.
Generally, distributions from a qualified plan or IRA must commence no later than April 1 of the calendar year following the later of: (a) the year in which the employee attains age 70½ or (b) the calendar year in which the employee retires. The date set forth in (b) does not apply to an IRA. The required distribution rules do not apply to Roth IRAs. This commencement date is referred to as the “required beginning date.” Required distributions must be over a period not exceeding the life expectancy of the individual or the joint lives or life expectancies of the individual and his or her designated beneficiary. If the required minimum distributions are not made, a 50% penalty tax is imposed as to the required amount not distributed.
The amount that must be distributed is based on Code rules relating to “Required Minimum Distributions.” This RMD takes into consideration the individual’s age, marital status, and account balance, as well as the actuarial value of additional benefits under the contract. The individual will have options regarding computation of the RMD amount; these options are selected at the time that the payments begin.
An individual is required to take distributions from all of his or her retirement accounts; however, if the individual has two or more accounts, the total amount of RMDs can be taken from one of the multiple accounts. For example, if the individual has a traditional IRA and a section 403(b) contract, the individual will have an RMD amount relating to each of these retirement vehicles. The individual can take the total of two RMDs from either or both of the two contracts.
 
We are required to file an information return with the IRS, with a copy to the participant, of the total account value of each account. This information return will also indicate if RMDs are required to be taken. We will provide information to each policyholder concerning the RMD computations for his or her annuity contract.
 
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In addition to RMDs during the life of the individual, there are also required after-death distributions. These after-death RMDs apply to all qualified plans and IRAs, including Roth IRAs. The beneficiary of the contract may take payments earlier than provided under these after-death RMD rules, such as immediately after death, but cannot delay receipt of payments after the dates specified under these rules.
Under the after-death RMD rules, if the original policyholder died prior to the required beginning date, and designated a contract beneficiary, then the full account value must be distributed either by the end of the fifth calendar year after the year of the owner’s death or over a period of no longer than the life expectancy of the oldest individual beneficiary. If the payments are to be over the life expectancy, the first payment must be received by December 31st of the year following the year of death. If the owner did not name a contract beneficiary or if the beneficiary was a non-natural person (such as an entity or the owner’s estate), then the life expectancy payouts are not permitted and only the five-year rule is permitted.
If the policyholder died after the required beginning date and designed a contract beneficiary, then the maximum payout period is the longer of the life expectancy of the named beneficiary or the remaining life expectancy of the original policyholder. If there was no named contract beneficiary or if the beneficiary was a non-natural person (such as an entity or the owner’s estate), then the only payment permitted is based on the remaining life expectancy of the original policyholder.
In all cases, if the beneficiary is the surviving spouse, there are special spousal continuation rules under which the spouse can treat the contract as his or her own and delay receiving payments until the spouse attains his or her own required beginning date. Each beneficiary will need to select the death benefit option from among those set forth in the contract which are applicable to the named beneficiary. If an option is not selected, the death benefit, if any, will be paid pursuant to the default death benefit payment option set forth in the contract. No beneficiary will be defaulted to any spousal continuance option.
Withholding and Information Reporting
We are required to file information returns with the IRS and state taxation authorities in the event that there is a distribution from your contract that may have tax consequences and in certain other circumstances. In order to comply with our requirements, from time to time, we request that the policyholder or beneficiary provide certain information, including social security number or tax identification number and current address.
In addition to information reporting, we are also required to withhold federal income taxes on the taxable portion of any amounts received under the contract unless a valid election is made to not have any withholding or in certain other circumstances. An election of no withholding is not permitted if a correct social security number or other taxpayer identification number is not provided or if the IRS advises that withholding is required. Special withholding rules apply to payments made to nonresident aliens.
You are liable for payment of federal income taxes on the taxable portion of any amounts received under the policy. You may be subject to penalties if your withholding or estimated tax payments are insufficient. Certain states also require withholding of state income taxes on the taxable portion of amounts received. State laws differ regarding the procedure by which these amounts are computed and the extent to which a policyholder can elect out of withholding.
In 2004, the Department of Treasury ruled that income received by residents of Puerto Rico under a life insurance policy issued by a United States company is U.S.-source income that is subject to United States Federal income tax. This ruling is also understood to apply to other nonresident alien policyholders. Although the ruling was directed at a life insurance policy, it may also apply to an annuity contract.
Spousal Definition
Federal law requires that under the Internal Revenue Code, the special provisions relating to a “spouse” relate only to persons considered as spouses under the Defense of Marriage Act (DOMA), Pub. L. 104-199. Under this Act, same-sex marriages, civil union partners, domestic partners or others in like status currently are not recognized as spouses for purposes of federal law. Therefore, any options afforded by federal tax law to a “spouse “under the Code are currently not available to a same-sex spouse, domestic partner, civil union partner or other in like status. Same-sex spouses, civil union partners, domestic partners and others who own or are considering the purchase of annuity products that provide benefits based upon status as a spouse should consult a tax advisor. In the event that federal law is changed concerning treatment of same-sex spouses, civil union partners, domestic partners or other in like status, we will modify our processing accordingly.
Seek Tax Advice
 
The above description of federal income tax consequences of the different types of qualified plans and IRAs which may be funded by the contracts offered by this prospectus is only a brief summary meant to alert you to the issues and is not intended as tax advice. The rules governing the provisions of qualified plans and IRAs are extremely complex and often difficult to comprehend. Anything less than full compliance with the applicable rules, all of which are subject to change, may have adverse tax consequences. A prospective Policyholder considering adoption of a qualified plan and purchase of a contract in connection therewith should first consult a qualified tax advisor, with regard to the suitability of the contract as an investment vehicle for the qualified plan or IRA.
 
84
Sales of Variable Accumulation Contracts
PHL Variable has designated 1851 Securities, Inc. (“1851”) to serve as the principal underwriter and distributor of the securities offered through this Prospectus, pursuant to the terms of a distribution agreement. 1851, an affiliate of the PHL Variable, also acts as the principal underwriter and distributor of other variable annuity contracts and variable life insurance policies issued by the PHL Variable and its affiliated companies. PHL Variable or an affiliate reimburses 1851 for expenses 1851 incurs in distributing the Contracts (e.g. commissions payable to retail broker-dealers who sell the Contracts). 1851 does not retain any fees under the Contracts; however, 1851 may receive 12b-1 fees from the underlying funds.
 
1851’s principal executive offices are located at One American Row, PO Box 5056, Hartford, CT 06102-5056. 1851 is registered as a broker-dealer with the Securities and Exchange Commission (“SEC”) under the Securities Exchange Act of 1934, as well as the securities commissions in the states in which it operates, and is a member of the Financial Industry Regulatory Authority (“FINRA”).
 
1851 and PHL Variable enter into selling agreements with broker-dealers who are registered with the SEC and are members of FINRA, and with entities that may offer the Contracts but are exempt from registration. Applications for the Contract are solicited by registered representatives who are associated persons of such broker-dealer firms. Such representatives act as appointed agents of PHL Variable under applicable state insurance law and must be licensed to sell variable insurance products. PHL Variable intends to offer the Contract in all jurisdictions where it is licensed to do business and where the Contract is approved. The Contracts are offered on a continuous basis.
On September 15, 2010, 1851 became the principal underwriter and distributor for the SEC registered products.
Compensation
Broker-dealers who have selling agreements with 1851 and PHL Variable are paid compensation for the promotion and sale of the Contracts. Registered representatives who solicit sales of the Contract typically receive a portion of the compensation payable to the broker-dealer firm, depending on the agreement between the firm and the registered representative. A broker-dealer firm or registered representative of a firm may receive different compensation for selling one product over another and/or may be inclined to favor or disfavor one product provider over another product provider due to differing compensation rates.
We generally pay compensation as a percentage of purchase payments invested in the Contract. Alternatively, we may pay lower compensation on purchase payments but pay periodic asset-based compensation in all or some years based on all or a portion of the Contract Value. The amount and timing of compensation may vary depending on the selling agreement and the payment option selected by the broker- dealer and/or the registered representative but is not expected to exceed 8.0% of purchase payments if up-front compensation is paid to registered representatives and up to 2.5% annually of contract value (if asset based compensation is paid).
To the extent permitted by FINRA rules, overrides and promotional incentives or cash and non-cash payments also may be provided to such broker-dealers based on sales volumes, the assumption of wholesaling functions, or other sales-related criteria. Additional payments may be made for other services not directly related to the sale of the contract, including the recruitment and training of personnel, production of promotional literature and similar services.
This Contract does not assess a front-end sales charge, so you do not directly pay for sales and distribution expenses. Instead, you indirectly pay for sales and distribution expenses through the overall charges and fees assessed under the Contract. For example, any profits PHL Variable may realize through assessing the mortality and expense risk charge under your Contract may be used to pay for sales and distribution expenses. PHL Variable may also pay for sales and distribution expenses out of any payments PHL Variable or 1851 may receive from the underlying funds for providing administrative, marketing and other support and services to the underlying funds. If your Contract assesses a surrender charge, proceeds from this charge may be used to reimburse PHL Variable for sales and distribution expenses. No additional sales compensation is paid if you select any optional benefits under your Contract.
We have unique arrangements for compensation with select broker-dealer firms based on the firm’s aggregate or anticipated sales of contracts or other factors. We enter into such arrangements at our discretion and we may negotiate customized arrangements with firms based on various criteria. As such, special compensation arrangements are not offered to all broker-dealer firms. Compensation payments made under such arrangements will not result in any additional charge to you.
State Regulation
We are subject to the provisions of the Connecticut insurance laws applicable to life insurance companies and to regulation and supervision by the Connecticut Superintendent of Insurance. We also are subject to the applicable insurance laws of all the other states and jurisdictions in which it does an insurance business.
State regulation of PHL Variable includes certain limitations on the investments, which may be made for its General Account and separate accounts, including the Separate Account. It does not include, however, any supervision over the investment policies of the Separate Account.
85
Reports
Reports showing the contract value will be furnished to you at least annually.
Voting Rights
As stated above, all of the assets held in an available investment option will be invested in shares of a corresponding series of the funds. We are the legal owner of those shares and, as such, have the right to vote to elect the Board of Trustees of the funds, to vote upon certain matters that are required by the 1940 Act to be approved or ratified by the shareholders of a mutual fund and to vote upon any other matter that may be voted upon at a shareholders’ meeting.
We will send you or, if permitted by law, make available electronically, proxy material, reports and other materials relevant to the investment options in which you have a voting interest. In order to vote you must complete the proxy form and return it with your voting instructions. You may also be able to vote your interest by telephone or over the Internet if such instructions are included in the proxy material. We will vote all of the shares we own on your behalf, in accordance with your instructions. We will vote the shares for which we do not receive instructions, and any other shares we own, in the same proportion as the shares for which we do receive instructions. This process may result in a small number of contract owners controlling the vote.
In the future, to the extent applicable federal securities laws or regulations permit us to vote some or all shares of the fund in its own right, we may elect to do so.
Matters on which owners may give voting instructions may include the following: (1) election or removal of the Board of Trustees of a fund; (2) ratification of the independent accountant for a fund; (3) approval or amendment of the investment advisory agreement for the series of the fund corresponding to the owner’s selected investment option(s); (4) any change in the fundamental investment policies or restrictions of each such series; and (5) any other matter requiring a vote of the shareholders of a fund. With respect to amendment of any investment advisory agreement or any change in a series’ fundamental investment policy, owners participating in such series will vote separately on the matter. The number of votes that you have the right to cast will be determined by applying your percentage interest in an investment option to the total number of votes attributable to the investment option. In determining the number of votes, fractional shares will be recognized. The number of votes for which you may give us instructions will be determined as of the record date for fund shareholders chosen by the Board of Trustees of a fund.
PHL Variable – Legal Proceedings
We are regularly involved in litigation and arbitration, both as a defendant and as a plaintiff. The litigation and arbitration naming us as a defendant ordinarily involves our activities as an insurer, employer, investor or investment advisor. It is not feasible to predict or determine the ultimate outcome of all legal or arbitration proceedings or to provide reasonable ranges of potential losses. Based on current information, we believe that the outcomes of our litigation and arbitration matters are not likely, either individually or in the aggregate, to have a material adverse effect on our financial condition. However, given the large or indeterminate amounts sought in certain of these matters and the inherent unpredictability of litigation and arbitration, it is possible that an adverse outcome in certain matters could, from time to time, have a material adverse effect on our results of operations or cash flows in particular quarterly or annual periods.
State regulatory bodies, the SEC, the Financial Industry Regulatory Authority (“FINRA”), the IRS and other regulatory bodies regularly make inquiries of us and, from time to time, conduct examinations or investigations concerning our compliance with laws and regulations related to, among other things, our insurance and broker-dealer subsidiaries, securities offerings and registered products. We endeavor to respond to such inquiries in an appropriate way and to take corrective action if warranted.
Regulatory actions may be difficult to assess or quantify, may seek recovery of indeterminate amounts, including punitive and treble damages, and the nature and magnitude of their outcomes may remain unknown for substantial periods of time. It is not feasible to predict or determine the ultimate outcome of all pending inquiries, investigations, legal proceedings and other regulatory actions, or to provide reasonable ranges of potential losses. Based on current information, we believe that the outcomes of our regulatory matters are not likely, either individually or in the aggregate, to have a material adverse effect on our financial condition. However, given the large or indeterminate amounts sought in certain of these actions and 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 results of operation or cash flows in particular quarterly or annual periods.
 
On July 5, 2011, the State of New York Insurance Department issued a letter (“308 Letter”) requiring life insurers doing business in New York to use data available on the U.S. Social Security Administration’s Death Master File or a similar database to identify instances where death benefits under life insurance policies, annuities, and retained asset accounts are payable, to locate and pay beneficiaries under such contracts, and to report the results of the use of the data. Additionally, the insurers are required to report on their success in
 
86
 
finding and making payments to beneficiaries or escheatment of funds deemed abandoned under state laws. We have completed our investigation and analysis and estimate the amount of claim and interest payments to beneficiaries or state(s) to be $546 thousand ($190 thousand after deferred policy acquisition cost offsets).
 
SAI Table of Contents
The SAI contains more specific information and financial statements relating to the Separate Account and PHL Variable Insurance Company. The Table of Contents of the SAI is set forth below:
❖   PHL Variable Insurance Company
❖   Underwriter
❖   Services
❖   Information Sharing Agreements
❖   Performance History/Calculation of Yield and Return
❖   Calculation of Annuity Payments
❖   Experts
❖   Separate Account Financial Statements
❖   Company Financial Statements
Contract owner inquiries and requests for an SAI should be directed, in writing, to our Annuity Operations Division, or by calling us at 800/541-0171.
87
APPENDIX A – Investment Options
Please note: This information is intended to provide a brief summary of each fund’s investment objective and advisor information. For more detailed information regarding each fund you should consult the fund prospectus which can be found on our website, www.phoenixwm.com, or requested by writing to us at PO Box 8027, Boston, MA 02266-8027 or calling 1-800-541-0171. Not all funds listed here may be currently offered or available with your product. Please refer to the footnotes below and page one of your product prospectus for a list of the funds available with your product.
 
Fund Name Investment Objective Investment Advisor / Subadvisor
Alger Capital Appreciation Portfolio1,2 Long term capital appreciation Fred Alger Management, Inc.
AllianceBernstein VPS Balanced Wealth Strategy Portfolio To maximize total return consistent with the Adviser’s determination of reasonable risk AllianceBernstein L.P.
Calvert VP S&P MidCap 400 Index Portfolio Seeks investment results that correspond to the total return performance of U.S. common stocks, as represented by the S&P MidCap 400 Index Calvert Investment Management, Inc.
Subadvisor: Summit Investment Advisors, Inc.
DWS Equity 500 Index VIP Seeks to replicate, as closely as possible, before the deduction of expenses, the performance of the Standard & Poor’s 500 Composite Stock Price Index, which emphasizes stocks of large US companies Deutsche Investment Management Americas Inc.
Subadvisor: Northern Trust Investments,
Inc.
DWS Small Cap Index VIP Seeks to replicate, as closely as possible, before the deduction of expenses, the performance of the Russell 2000® Index, which emphasizes stocks of small US companies Deutsche Investment Management Americas Inc.
Subadvisor: Northern Trust Investments, Inc.
Federated Fund for U.S. Government Securities II Current income by investing primarily in U.S. government and government agency securities and mortgage-backed securities. Federated Investment Management Company
Federated High Income Bond Fund II High current income by investing in high yield, lower rated corporate bonds Federated Investment Management Company
Federated Prime Money Fund II Current income consistent with stability of principal and liquidity Federated Investment Management Company
Fidelity ® VIP Contrafund® Portfolio Long-term capital appreciation Fidelity Management & Research Company
Subadvisor: FMR Co., Inc.
Fidelity ® VIP Growth Opportunities Portfolio Capital growth Fidelity Management & Research Company
Subadvisor: FMR Co., Inc.
Fidelity ® VIP Growth Portfolio Capital appreciation Fidelity Management & Research Company
Subadvisor: FMR Co., Inc.
Fidelity ® VIP Investment Grade Bond Portfolio As high a level of current income as is consistent with the preservation of capital Fidelity Management & Research Company
Subadvisor: Fidelity Investments Money Management, Inc.
Franklin Flex Cap Growth Securities Fund Capital appreciation Franklin Advisers, Inc.
Franklin Income Securities Fund Maximize income while maintaining prospects for capital appreciation Franklin Advisers, Inc.
Ibbotson Aggressive Growth ETF Asset Allocation Portfolio Capital appreciation ALPS Advisors, Inc.
Subadvisor: Ibbotson Associates, Inc.
Ibbotson Balanced ETF Asset Allocation Portfolio Capital appreciation and some current income ALPS Advisors, Inc.
Subadvisor: Ibbotson Associates, Inc.
Ibbotson Growth ETF Asset Allocation Portfolio Capital appreciation ALPS Advisors, Inc.
Subadvisor: Ibbotson Associates, Inc.
Ibbotson Income and Growth ETF Asset Allocation Portfolio Current income and capital appreciation ALPS Advisors, Inc.
Subadvisor: Ibbotson Associates, Inc.
Invesco V.I. Core Equity Fund1,2 Long term growth of capital Invesco Advisers, Inc.
Invesco V.I. Mid Cap Core Equity Fund1,2 Long term growth of capital Invesco Advisers, Inc.
Invesco Van Kampen V.I. American Franchise Fund3 Capital growth Invesco Advisers, Inc.
Invesco Van Kampen V.I. Equity and Income Fund Capital appreciation and current income Invesco Advisers, Inc.
Lazard Retirement U.S. Small-Mid Cap Equity Portfolio1,2 Long term capital appreciation Lazard Asset Management LLC
Lord Abbett Series Fund Bond Debenture Portfolio High current income and the opportunity for capital appreciation to produce a high total return Lord, Abbett & Co. LLC
Lord Abbett Series Fund Growth and Income Portfolio Long-term growth of capital and income without excessive fluctuations in market value Lord, Abbett & Co. LLC
Lord Abbett Series Fund Mid Cap Stock Portfolio4 Capital appreciation through investments, primarily in equity securities, which are believed to be undervalued in the marketplace Lord, Abbett & Co. LLC
Mutual Shares Securities Fund Capital appreciation with income as a secondary goal Franklin Mutual Advisers, LLC
 
A-1
 
Fund Name Investment Objective Investment Advisor / Subadvisor
Neuberger Berman Advisors Management Trust Guardian Portfolio Long term growth of capital; current income is a secondary goal Neuberger Berman Management LLC
Subadvisor: Neuberger Berman LLC
Neuberger Berman Advisors Management Trust Small Cap Growth Portfolio Long term capital growth; the Portfolio Manager also may consider a company’s potential for current income prior to selecting it for the Fund. Neuberger Berman Management LLC
Subadvisor: Neuberger Berman LLC
Oppenheimer Capital Appreciation Fund/VA Seeks capital appreciation by investing in securities of well-known, established companies OppenheimerFunds, Inc.
Oppenheimer Global Securities Fund/VA Seeks long-term capital appreciation by investing a substantial portion of assets in securities of foreign issuers, “growth-type” companies, cyclical industries and special situations that are considered to have appreciation possibilities OppenheimerFunds, Inc.
Oppenheimer Main Street Small- & Mid-Cap Fund® / VA Capital appreciation OppenheimerFunds, Inc.
PIMCO VIT CommodityRealReturn® Strategy Portfolio Seeks maximum real return consistent with prudent investment management. The Portfolio seeks to achieve its investment objective by investing under normal circumstances in commodity-linked derivative instruments backed by a portfolio of inflation-indexed securities and other fixed income instruments. Pacific Investment Management Company LLC
PIMCO VIT Real Return Portfolio Seeks maximum real return, consistent with preservation of real capital and prudent investment management. The Portfolio seeks to achieve its investment objective by investing under normal circumstances at least 80% of its net assets in inflation-indexed bonds of varying maturities issued by the US and no-US governments, their agencies or instrumentalities and corporations, which may be represented by forwards or derivatives such as options, futures contracts or swap agreements. Pacific Investment Management Company LLC
PIMCO VIT Total Return Portfolio Seeks maximum total return, consistent with preservation of capital and prudent investment management. The Portfolio seeks to achieve its investment objective by investing under normal circumstances at least 65% of its total assets in a diversified portfolio of fixed income instruments of varying maturities. Pacific Investment Management Company LLC
Guggenheim VT U.S. Long Short Momentum Fund1,2,5 Seeks long-term capital appreciation. Guggenheim Investments6
Rydex VT Inverse Government Long Bond Strategy Fund1,2 Seeks to provide total returns that inversely correlate to the price movements of a benchmark for U.S. Treasury debt instruments or futures contracts on a specified debt instrument on a daily basis. The Fund’s current benchmark is the daily price movement of the Long Treasury Bond. Guggenheim Investments6
Rydex VT Nova Fund1,2 Seeks to provide investment results that match the performance of its benchmark on a daily basis. The Fund’s current benchmark is 150% of the performance of the S&P 500 Index. Guggenheim Investments6
Sentinel Variable Products Balanced Fund Seeks a combination of growth of capital and current income, with relatively low risk and relatively low fluctuations in value Sentinel Asset Management, Inc.
Sentinel Variable Products Bond Fund Seeks high current income while seeking to control risk Sentinel Asset Management, Inc.
Sentinel Variable Products Common Stock Fund Seeks a combination of growth of capital, current income, growth of income and relatively low risk as compared with the stock market as a whole Sentinel Asset Management, Inc.
Sentinel Variable Products Mid Cap Fund Seeks growth of capital Sentinel Asset Management, Inc.
Sentinel Variable Products Small Company Fund Seeks growth of capital Sentinel Asset Management, Inc.
Templeton Developing Markets Securities Fund Long-term capital appreciation Templeton Asset Management Ltd.
Templeton Foreign Securities Fund Long-term capital growth Templeton Investment Counsel, LLC
Templeton Growth Securities Fund Long-term capital growth Templeton Global Advisors Limited
Virtus Capital Growth Series Long-term growth of capital. Virtus Investment Advisers, Inc.
Subadvisor: New Fleet Asset Management LLC7
Virtus Growth & Income Series Capital appreciation and current income Virtus Investment Advisers, Inc.
Virtus Multi-Sector Fixed Income Series Long-term total return Virtus Investment Advisers, Inc.
Subadvisor: New Fleet Asset Management LLC8
 
A-2
 
Fund Name Investment Objective Investment Advisor / Subadvisor
Virtus Small-Cap Growth Series Long-term capital growth Virtus Investment Advisers, Inc.
Subadvisor: Kayne Anderson Rudnick Investment Management LLC
Virtus Small-Cap Value Series Long-term capital appreciation. Virtus Investment Advisers, Inc.
Subadvisor: Kayne Anderson Rudnick Investment Management LLC
Virtus Strategic Allocation Series High total return over an extended period of time consistent with prudent investment risk Virtus Investment Advisers, Inc.
Subadvisor(s): New Fleet Asset Management LLC (fixed income portion)8
Virtus International Series High total return consistent with reasonable risk Virtus Investment Advisers, Inc.
Subadvisor: Aberdeen Asset Management Inc.
Virtus Real Estate Securities Series Capital appreciation and income with approximately equal emphasis Virtus Investment Advisers, Inc.
Subadvisor: Duff & Phelps Investment Management Company
Wanger International Long-term growth of capital Columbia Wanger Asset Management, LLC
Wanger International Select Long-term growth of capital Columbia Wanger Asset Management, LLC
Wanger Select Long-term growth of capital Columbia Wanger Asset Management, LLC
Wanger USA Long-term growth of capital Columbia Wanger Asset Management, LLC
 
1 This fund was closed to new investors on May 1, 2006.
2 Contract/policy owners who had value allocated to a fund before its applicable closure date, the following restrictions apply: (1) only regular premium payments are allowed into the fund; (2) no transfers from other funds are allowed into the fund; (3) existing allocation percentages may only be reduced and the fund may not be added to an allocation schedule; (4) existing DCA percentages may only be reduced and the fund may not be added to a DCA allocation schedule; and (5) existing rebalancing percentages may only be reduced and the fund may not be added to the rebalancing allocation schedule.
 
3 Effective April 30, 2012, Invesco V.I. Capital Appreciation Fund merged into Invesco Van Kampen V.I. Capital Growth Fund and was renamed Invesco Van Kampen V.I. American Franchise Fund.
4 Name change effective May 1, 2012. Previously known as Lord Abbett Series Fund Mid Cap Value Portfolio.
5 Name change effective May 1, 2012. Previously known as Rydex|SGI VT U.S. Long Short Momentum Fund.
6 Advisor change effective May 1, 2012 from Security Global Investors to Guggenheim Investments.
7 Subadviser change effective June 2, 2011 from SCM Advisors, LLC to New Fleet Asset Management LLC.
8 New subadviser, effective June 17, 2011.
 
A-3
APPENDIX B – Deductions for Taxes – Qualified and Non-qualified Annuity Contracts
State Upon
Premium Payment 		Upon
Annuitization 		Non-qualified Qualified
California
 X 2.35% 0.50%
Florida3
 X 1.00 1.00
Maine
 X 2.00
Nevada
 X 3.50
South Dakota
 X 1.251
Texas
 X 0.042 0.04
West Virginia
 X 1.00 1.00
Wyoming
 X 1.00
Commonwealth of Puerto Rico
 X 1.00 1.00
 
NOTE: The above tax deduction rates are as of January 1, 2012. No tax deductions are made for states not listed above. However, tax statutes are subject to amendment by legislative act and to judicial and administrative interpretation, which may affect both the above lists of states and the applicable tax rates. Consequently, we reserve the right to deduct tax when necessary to reflect changes in state tax laws or interpretation.
For a more detailed explanation of the assessment of taxes, see “Deductions and Charges—Tax.”
 
1 South Dakota law exempts premiums received on qualified contracts from premium tax. Additionally, South Dakota law provides a lower rate of 0.8% that applies to premium payments received in excess of $500,000 in a single calendar year.
2 Texas charges an insurance department “maintenance fee” of .04% on annuity considerations, but the department allows this to be paid upon annuitization.
3 Florida, while imposing a tax, grants exemption from the tax if the insurer can show the savings from the exemption is passed on to Florida policy owners.
B-1
APPENDIX C – Financial Highlights
The following tables give the historical unit values for a single share of each of the available subaccounts. More information can be obtained in the Statement of Additional Information (“SAI”). You may obtain a copy of the SAI free of charge by calling 800/541-0171 or by writing to:
PHL Variable Insurance Company
Annuity Operations Division
PO Box 8027
Boston, MA 02266-8027
Death Benefit Option 1 Contracts
 
Subaccount Subaccount
Unit Value
Beginning
of Period 		Subaccount
Unit Value
End
of Period 		Units
Outstanding at
End of Period
(Thousands)
AllianceBernstein VPS Balanced Wealth Strategy Portfolio – Class B
From 3/24/2008* To 12/31/2008 $1.000 $0.747 1,285
From 1/1/2009 To 12/31/2009 $0.747 $0.918 278
From 1/1/2010 To 12/31/2010 $0.918 $1.000 1,573
From 1/1/2011 To 12/31/2011 $1.000 $0.957 1,478
Calvert VP S&P MidCap 400 Index Portfolio – Class I Shares
From 12/31/2010* To 12/31/2010 $1.169 $1.169 4
From 1/1/2011 To 12/31/2011 $1.169 $1.129 18
DWS Equity 500 Index VIP – Class A
From 8/2/2005* To 12/31/2005 $1.038 $1.044 247
From 1/1/2006 To 12/31/2006 $1.044 $1.191 963
From 1/1/2007 To 12/31/2007 $1.191 $1.238 1,084
From 1/1/2008 To 12/31/2008 $1.238 $0.769 935
From 1/1/2009 To 12/31/2009 $0.769 $0.959 24
From 1/1/2010 To 12/31/2010 $0.959 $1.086 631
From 1/1/2011 To 12/31/2011 $1.086 $1.092 515
DWS Small Cap Index VIP – Class A
From 3/24/2008* To 12/31/2008 $1.000 $0.734 3
From 1/1/2009 To 12/31/2009 $0.734 $0.917 33
From 1/1/2010 To 12/31/2010 $0.917 $1.145 2
From 1/1/2011 To 12/31/2011 $1.145 $1.080 2
Federated Fund for U.S. Government Securities II
From 8/2/2005* To 12/31/2005 $0.994 $0.997 531
From 1/1/2006 To 12/31/2006 $0.997 $1.026 2,362
From 1/1/2007 To 12/31/2007 $1.026 $1.077 2,909
From 1/1/2008 To 12/31/2008 $1.077 $1.109 2,184
From 1/1/2009 To 12/31/2009 $1.109 $1.152 59
From 1/1/2010 To 12/31/2010 $1.152 $1.196 1,669
From 1/1/2011 To 12/31/2011 $1.196 $1.250 1,341
Federated High Income Bond Fund II – Primary Shares
From 10/24/2005* To 12/31/2005 $1.014 $1.028 76
From 1/1/2006 To 12/31/2006 $1.028 $1.124 135
From 1/1/2007 To 12/31/2007 $1.124 $1.148 148
From 1/1/2008 To 12/31/2008 $1.148 $0.839 118
From 1/1/2009 To 12/31/2009 $0.839 $1.267 67
From 1/1/2010 To 12/31/2010 $1.267 $1.435 703
From 1/1/2011 To 12/31/2011 $1.435 $1.491 884
Federated Prime Money Fund II
From 12/31/2010* To 12/31/2010 $0.988 $0.988 2,145
From 1/1/2011 To 12/31/2011 $0.988 $0.976 1,792
 
C-1
 
Subaccount Subaccount
Unit Value
Beginning
of Period 		Subaccount
Unit Value
End
of Period 		Units
Outstanding at
End of Period
(Thousands)
Fidelity ® VIP Contrafund® Portfolio – Service Class
From 8/26/2005* To 12/31/2005 $1.038 $1.128 96
From 1/1/2006 To 12/31/2006 $1.128 $1.243 534
From 1/1/2007 To 12/31/2007 $1.243 $1.443 1,302
From 1/1/2008 To 12/31/2008 $1.443 $0.818 1,350
From 1/1/2009 To 12/31/2009 $0.818 $1.095 68
From 1/1/2010 To 12/31/2010 $1.095 $1.267 918
From 1/1/2011 To 12/31/2011 $1.267 $1.218 774
Fidelity ® VIP Growth Opportunities Portfolio – Service Class
From 8/2/2005* To 12/31/2005 $1.033 $1.084 136
From 1/1/2006 To 12/31/2006 $1.084 $1.127 732
From 1/1/2007 To 12/31/2007 $1.127 $1.369 2,207
From 1/1/2008 To 12/31/2008 $1.369 $0.608 5,129
From 1/1/2009 To 12/31/2009 $0.608 $0.874 102
From 1/1/2010 To 12/31/2010 $0.874 $1.068 4,800
From 1/1/2011 To 12/31/2011 $1.068 $1.077 4,137
Fidelity ® VIP Growth Portfolio – Service Class
From 11/4/2005* To 12/31/2005 $1.040 $1.067 14
From 1/1/2006 To 12/31/2006 $1.067 $1.124 8
From 1/1/2007 To 12/31/2007 $1.124 $1.409 14
From 1/1/2008 To 12/31/2008 $1.409 $0.734 36
From 1/1/2009 To 12/31/2009 $0.734 $0.929 99
From 1/1/2010 To 12/31/2010 $0.929 $1.138 35
From 1/1/2011 To 12/31/2011 $1.138 $1.125 35
Fidelity ® VIP Investment Grade Bond Portfolio – Service Class
From 1/26/2007* To 12/31/2007 $1.000 $1.033 1,508
From 1/1/2008 To 12/31/2008 $1.033 $0.986 2,824
From 1/1/2009 To 12/31/2009 $0.986 $1.127 264
From 1/1/2010 To 12/31/2010 $1.127 $1.198 2,757
From 1/1/2011 To 12/31/2011 $1.198 $1.268 2,636
Franklin Flex Cap Growth Securities Fund – Class 2
From 3/24/2008* To 12/31/2008 $1.000 $0.727 5
From 1/1/2009 To 12/31/2009 $0.727 $0.955 135
From 1/1/2010 To 12/31/2010 $0.955 $1.096 1
From 1/1/2011 To 12/31/2011 $1.096 $1.030 4
Franklin Income Securities Fund – Class 2
From 4/28/2006* To 12/31/2006 $1.000 $1.111 1,093
From 1/1/2007 To 12/31/2007 $1.111 $1.138 4,948
From 1/1/2008 To 12/31/2008 $1.138 $0.791 5,015
From 1/1/2009 To 12/31/2009 $0.791 $1.059 217
From 1/1/2010 To 12/31/2010 $1.059 $1.178 3,658
From 1/1/2011 To 12/31/2011 $1.178 $1.191 3,023
Ibbotson Aggressive Growth ETF Asset Allocation Portfolio – Class II
From 12/31/2010* To 12/31/2010 $1.047 $1.047 436
From 1/1/2011 To 12/31/2011 $1.047 $0.982 297
Ibbotson Balanced ETF Asset Allocation Portfolio – Class II
From 12/31/2010* To 12/31/2010 $1.025 $1.025 3,968
From 1/1/2011 To 12/31/2011 $1.025 $1.003 3,885
Ibbotson Growth ETF Asset Allocation Portfolio – Class II
From 12/31/2010* To 12/31/2010 $1.040 $1.040 1,682
From 1/1/2011 To 12/31/2011 $1.040 $0.989 1,051
 
C-2
 
Subaccount Subaccount
Unit Value
Beginning
of Period 		Subaccount
Unit Value
End
of Period 		Units
Outstanding at
End of Period
(Thousands)
Ibbotson Income and Growth ETF Asset Allocation Portfolio – Class II
From 12/31/2010* To 12/31/2010 $1.011 $1.011 3,368
From 1/1/2011 To 12/31/2011 $1.011 $1.009 3,198
Invesco V.I. Capital Appreciation Fund – Series I Shares
From 8/2/2005* To 12/31/2005 $1.057 $1.102 125
From 1/1/2006 To 12/31/2006 $1.102 $1.156 563
From 1/1/2007 To 12/31/2007 $1.156 $1.279 801
From 1/1/2008 To 12/31/2008 $1.279 $0.726 651
From 1/1/2009 To 12/31/2009 $0.726 $0.869 1,094
From 1/1/2010 To 12/31/2010 $0.869 $0.991 479
From 1/1/2011 To 12/31/2011 $0.991 $0.901 386
Invesco Van Kampen V.I. Equity and Income Fund – Class II
From 1/1/2007 To 12/31/2007 $1.074 $1.095 15
From 1/1/2008 To 12/31/2008 $1.095 $0.836 10
From 1/1/2009 To 12/31/2009 $0.836 $1.011 1,120
From 1/1/2010 To 12/31/2010 $1.011 $1.118 18
From 1/1/2011 To 12/31/2011 $1.118 $1.090 11
Lord Abbett Series Fund Bond Debenture Portfolio – Class VC Shares
From 1/1/2006 To 12/31/2006 $1.019 $1.100 5
From 1/1/2007 To 12/31/2007 $1.100 $1.153 44
From 1/1/2008 To 12/31/2008 $1.153 $0.939 28
From 1/1/2009 To 12/31/2009 $0.939 $1.246 117
From 1/1/2010 To 12/31/2010 $1.246 $1.382 96
From 1/1/2011 To 12/31/2011 $1.382 $1.424 106
Lord Abbett Series Fund Growth and Income Portfolio – Class VC Shares
From 8/2/2005* To 12/31/2005 $1.030 $1.051 212
From 1/1/2006 To 12/31/2006 $1.051 $1.217 946
From 1/1/2007 To 12/31/2007 $1.217 $1.243 2,561
From 1/1/2008 To 12/31/2008 $1.243 $0.780 2,369
From 1/1/2009 To 12/31/2009 $0.780 $0.916 0†
From 1/1/2010 To 12/31/2010 $0.916 $1.062 1,729
From 1/1/2011 To 12/31/2011 $1.062 $0.985 1,558
Lord Abbett Series Fund Mid Cap Value Portfolio – Class VC Shares
From 12/6/2005* To 12/31/2005 $1.075 $1.067 2
From 1/1/2006 To 12/31/2006 $1.067 $1.183 9
From 1/1/2007 To 12/31/2007 $1.183 $1.174 56
From 1/1/2008 To 12/31/2008 $1.174 $0.703 59
From 1/1/2009 To 12/31/2009 $0.703 $0.879 41
From 1/1/2010 To 12/31/2010 $0.879 $1.089 54
From 1/1/2011 To 12/31/2011 $1.089 $1.033 50
Mutual Shares Securities Fund – Class 2
From 8/26/2005* To 12/31/2005 $1.023 $1.077 96
From 1/1/2006 To 12/31/2006 $1.077 $1.259 1,220
From 1/1/2007 To 12/31/2007 $1.259 $1.287 4,526
From 1/1/2008 To 12/31/2008 $1.287 $0.799 4,905
From 1/1/2009 To 12/31/2009 $0.799 $0.995 169
From 1/1/2010 To 12/31/2010 $0.995 $1.092 3,579
From 1/1/2011 To 12/31/2011 $1.092 $1.067 3,159
 
C-3
 
Subaccount Subaccount
Unit Value
Beginning
of Period 		Subaccount
Unit Value
End
of Period 		Units
Outstanding at
End of Period
(Thousands)
Neuberger Berman AMT Guardian Portfolio – S Class
From 1/1/2007 To 12/31/2007 $1.081 $1.117 946
From 1/1/2008 To 12/31/2008 $1.117 $0.691 3,123
From 1/1/2009 To 12/31/2009 $0.691 $0.884 381
From 1/1/2010 To 12/31/2010 $0.884 $1.038 3,190
From 1/1/2011 To 12/31/2011 $1.038 $0.994 2,966
Oppenheimer Capital Appreciation Fund/VA – Service Shares
From 12/31/2010* To 12/31/2010 $0.941 $0.941 42
From 1/1/2011 To 12/31/2011 $0.941 $0.916 40
Oppenheimer Global Securities Fund/VA – Service Shares
From 4/28/2006* To 12/31/2006 $1.000 $1.064 25
From 1/1/2007 To 12/31/2007 $1.064 $1.114 32
From 1/1/2008 To 12/31/2008 $1.114 $0.656 78
From 1/1/2009 To 12/31/2009 $0.656 $0.903 114
From 1/1/2010 To 12/31/2010 $0.903 $1.032 142
From 1/1/2011 To 12/31/2011 $1.032 $0.932 116
Oppenheimer Main Street Small- & Mid- Cap Fund®/VA – Service Shares
From 1/1/2007 To 12/31/2007 $1.012 $0.972 839
From 1/1/2008 To 12/31/2008 $0.972 $0.595 2,536
From 1/1/2009 To 12/31/2009 $0.595 $0.805 45
From 1/1/2010 To 12/31/2010 $0.805 $0.978 2,369
From 1/1/2011 To 12/31/2011 $0.978 $0.942 2,188
PIMCO CommodityRealReturn® Strategy Portfolio – Advisor Class
From 4/28/2006* To 12/31/2006 $1.000 $0.952 14
From 1/1/2007 To 12/31/2007 $0.952 $1.158 572
From 1/1/2008 To 12/31/2008 $1.158 $0.642 1,631
From 1/1/2009 To 12/31/2009 $0.642 $0.897 576
From 1/1/2010 To 12/31/2010 $0.897 $1.101 1,973
From 1/1/2011 To 12/31/2011 $1.101 $1.005 1,766
PIMCO Real Return Portfolio – Advisor Class
From 4/28/2006* To 12/31/2006 $1.000 $1.015 5
From 1/1/2007 To 12/31/2007 $1.015 $1.108 5
From 1/1/2008 To 12/31/2008 $1.108 $1.016 63
From 1/1/2009 To 12/31/2009 $1.016 $1.186 804
From 1/1/2010 To 12/31/2010 $1.186 $1.265 117
From 1/1/2011 To 12/31/2011 $1.265 $1.394 168
PIMCO Total Return Portfolio – Advisor Class
From 4/28/2006* To 12/31/2006 $1.000 $1.033 5
From 1/1/2007 To 12/31/2007 $1.033 $1.108 40
From 1/1/2008 To 12/31/2008 $1.108 $1.146 115
From 1/1/2009 To 12/31/2009 $1.146 $1.289 627
From 1/1/2010 To 12/31/2010 $1.289 $1.375 435
From 1/1/2011 To 12/31/2011 $1.375 $1.405 411
Sentinel Variable Products Balanced Fund
From 1/1/2009 To 12/31/2009 $0.691 $0.884 2
From 1/1/2010 To 12/31/2010 $0.884 $1.015 1
From 1/1/2011 To 12/31/2011 $1.015 $1.043 1
 
C-4
 
Subaccount Subaccount
Unit Value
Beginning
of Period 		Subaccount
Unit Value
End
of Period 		Units
Outstanding at
End of Period
(Thousands)
Sentinel Variable Products Bond Fund
From 9/7/2007* To 12/31/2007 $1.000 $1.020 150
From 1/1/2008 To 12/31/2008 $1.020 $1.042 1,919
From 1/1/2009 To 12/31/2009 $1.042 $1.143 3
From 1/1/2010 To 12/31/2010 $1.143 $1.211 2,066
From 1/1/2011 To 12/31/2011 $1.211 $1.280 1,941
Sentinel Variable Products Common Stock Fund
From 9/7/2007* To 12/31/2007 $1.000 $1.023 642
From 1/1/2008 To 12/31/2008 $1.023 $0.676 7,386
From 1/1/2009 To 12/31/2009 $0.676 $0.853 17
From 1/1/2010 To 12/31/2010 $0.853 $0.976 8,070
From 1/1/2011 To 12/31/2011 $0.976 $0.984 7,408
Sentinel Variable Products Mid Cap Fund
From 12/31/2010* To 12/31/2010 $0.903 $0.903 0
From 1/1/2011 To 12/31/2011 $0.903 $0.924 1
Sentinel Variable Products Small Company Fund
From 9/7/2007* To 12/31/2007 $1.000 $1.005 95
From 1/1/2008 To 12/31/2008 $1.005 $0.672 955
From 1/1/2009 To 12/31/2009 $0.672 $0.844 5
From 1/1/2010 To 12/31/2010 $0.844 $1.031 1,006
From 1/1/2011 To 12/31/2011 $1.031 $1.049 905
Templeton Developing Markets Securities Fund – Class 2
From 1/1/2007 To 12/31/2007 $1.086 $1.358 33
From 1/1/2008 To 12/31/2008 $1.358 $0.634 107
From 1/1/2009 To 12/31/2009 $0.634 $1.081 118
From 1/1/2010 To 12/31/2010 $1.081 $1.256 107
From 1/1/2011 To 12/31/2011 $1.256 $1.043 108
Templeton Foreign Securities Fund – Class 2
From 11/4/2005* To 12/31/2005 $1.061 $1.112 15
From 1/1/2006 To 12/31/2006 $1.112 $1.333 93
From 1/1/2007 To 12/31/2007 $1.333 $1.520 92
From 1/1/2008 To 12/31/2008 $1.520 $0.895 114
From 1/1/2009 To 12/31/2009 $0.895 $1.211 133
From 1/1/2010 To 12/31/2010 $1.211 $1.297 89
From 1/1/2011 To 12/31/2011 $1.297 $1.144 50
Templeton Growth Securities Fund – Class 2
From 1/1/2006 To 12/31/2006 $1.085 $1.306 990
From 1/1/2007 To 12/31/2007 $1.306 $1.319 4,141
From 1/1/2008 To 12/31/2008 $1.319 $0.751 4,880
From 1/1/2009 To 12/31/2009 $0.751 $0.973 152
From 1/1/2010 To 12/31/2010 $0.973 $1.032 3,527
From 1/1/2011 To 12/31/2011 $1.032 $0.948 3,251
Virtus Capital Growth Series
From 1/1/2006 To 12/31/2006 $1.051 $1.071 13
From 1/1/2007 To 12/31/2007 $1.071 $1.171 64
From 1/1/2008 To 12/31/2008 $1.171 $0.685 63
From 1/1/2009 To 12/31/2009 $0.685 $0.879 1,998
From 1/1/2010 To 12/31/2010 $0.879 $0.997 50
From 1/1/2011 To 12/31/2011 $0.997 $0.939 46
 
C-5
 
Subaccount Subaccount
Unit Value
Beginning
of Period 		Subaccount
Unit Value
End
of Period 		Units
Outstanding at
End of Period
(Thousands)
Virtus Growth and Income Series
From 8/2/2005* To 12/31/2005 $1.040 $1.036 116
From 1/1/2006 To 12/31/2006 $1.036 $1.199 500
From 1/1/2007 To 12/31/2007 $1.199 $1.263 541
From 1/1/2008 To 12/31/2008 $1.263 $0.811 466
From 1/1/2009 To 12/31/2009 $0.811 $0.990 1,899
From 1/1/2010 To 12/31/2010 $0.990 $1.103 337
From 1/1/2011 To 12/31/2011 $1.103 $1.071 269
Virtus International Series
From 8/8/2005* To 12/31/2005 $1.068 $1.194 100
From 1/1/2006 To 12/31/2006 $1.194 $1.501 1,663
From 1/1/2007 To 12/31/2007 $1.501 $1.704 3,132
From 1/1/2008 To 12/31/2008 $1.704 $1.027 6,139
From 1/1/2009 To 12/31/2009 $1.027 $1.418 2,185
From 1/1/2010 To 12/31/2010 $1.418 $1.589 5,426
From 1/1/2011 To 12/31/2011 $1.589 $1.498 5,011
Virtus Multi-Sector Fixed Income Series
From 8/2/2005* To 12/31/2005 $1.003 $1.011 155
From 1/1/2006 To 12/31/2006 $1.011 $1.067 396
From 1/1/2007 To 12/31/2007 $1.067 $1.093 1,708
From 1/1/2008 To 12/31/2008 $1.093 $0.886 4,061
From 1/1/2009 To 12/31/2009 $0.886 $1.226 2,294
From 1/1/2010 To 12/31/2010 $1.226 $1.384 3,730
From 1/1/2011 To 12/31/2011 $1.384 $1.408 3,487
Virtus Real Estate Securities Series
From 8/2/2005* To 12/31/2005 $1.099 $1.100 151
From 1/1/2006 To 12/31/2006 $1.100 $1.489 430
From 1/1/2007 To 12/31/2007 $1.489 $1.239 916
From 1/1/2008 To 12/31/2008 $1.239 $0.772 1,971
From 1/1/2009 To 12/31/2009 $0.772 $0.985 2,153
From 1/1/2010 To 12/31/2010 $0.985 $1.245 1,779
From 1/1/2011 To 12/31/2011 $1.245 $1.350 1,579
Virtus Small-Cap Growth Series
From 12/6/2005* To 12/31/2005 $1.188 $1.161 2
From 1/1/2006 To 12/31/2006 $1.161 $1.370 89
From 1/1/2007 To 12/31/2007 $1.370 $1.571 67
From 1/1/2008 To 12/31/2008 $1.571 $0.854 46
From 1/1/2009 To 12/31/2009 $0.854 $1.032 4,073
From 1/1/2010 To 12/31/2010 $1.032 $1.157 125
From 1/1/2011 To 12/31/2011 $1.157 $1.333 115
Virtus Small-Cap Value Series
From 8/8/2005* To 12/31/2005 $1.068 $1.074 79
From 1/1/2006 To 12/31/2006 $1.074 $1.239 258
From 1/1/2007 To 12/31/2007 $1.239 $1.198 302
From 1/1/2008 To 12/31/2008 $1.198 $0.734 309
From 1/1/2009 To 12/31/2009 $0.734 $0.877 3,905
From 1/1/2010 To 12/31/2010 $0.877 $1.016 2,900
From 1/1/2011 To 12/31/2011 $1.016 $1.049 2,516
 
C-6
 
Subaccount Subaccount
Unit Value
Beginning
of Period 		Subaccount
Unit Value
End
of Period 		Units
Outstanding at
End of Period
(Thousands)
Virtus Strategic Allocation Series
From 1/1/2008 To 12/31/2008 $1.177 $0.866 57
From 1/1/2009 To 12/31/2009 $0.866 $1.065 4,279
From 1/1/2010 To 12/31/2010 $1.065 $1.191 110
From 1/1/2011 To 12/31/2011 $1.191 $1.199 110
Wanger International
From 8/2/2005* To 12/31/2005 $1.075 $1.171 70
From 1/1/2006 To 12/31/2006 $1.171 $1.586 301
From 1/1/2007 To 12/31/2007 $1.586 $1.822 591
From 1/1/2008 To 12/31/2008 $1.822 $0.979 1,305
From 1/1/2009 To 12/31/2009 $0.979 $1.448 6,365
From 1/1/2010 To 12/31/2010 $1.448 $1.786 1,117
From 1/1/2011 To 12/31/2011 $1.786 $1.506 1,054
Wanger International Select
From 10/24/2005* To 12/31/2005 $1.065 $1.161 50
From 1/1/2006 To 12/31/2006 $1.161 $1.559 54
From 1/1/2007 To 12/31/2007 $1.559 $1.875 127
From 1/1/2008 To 12/31/2008 $1.875 $1.031 127
From 1/1/2009 To 12/31/2009 $1.031 $1.353 4,330
From 1/1/2010 To 12/31/2010 $1.353 $1.631 114
From 1/1/2011 To 12/31/2011 $1.631 $1.448 105
Wanger Select
From 8/26/2005* To 12/31/2005 $1.028 $1.131 62
From 1/1/2006 To 12/31/2006 $1.131 $1.337 110
From 1/1/2007 To 12/31/2007 $1.337 $1.444 125
From 1/1/2008 To 12/31/2008 $1.444 $0.726 252
From 1/1/2009 To 12/31/2009 $0.726 $1.192 5,806
From 1/1/2010 To 12/31/2010 $1.192 $1.490 120
From 1/1/2011 To 12/31/2011 $1.490 $1.211 116
Wanger USA
From 8/29/2005* To 12/31/2005 $1.038 $1.090 45
From 1/1/2006 To 12/31/2006 $1.090 $1.161 101
From 1/1/2007 To 12/31/2007 $1.161 $1.209 127
From 1/1/2008 To 12/31/2008 $1.209 $0.720 189
From 1/1/2009 To 12/31/2009 $0.720 $1.011 9,180
From 1/1/2010 To 12/31/2010 $1.011 $1.232 180
From 1/1/2011 To 12/31/2011 $1.232 $1.174 192
 
*Date subaccount began operations.
†Amount is less than 500 units.
Death Benefit Option 2 Contracts
 
Subaccount Subaccount
Unit Value
Beginning
of Period 		Subaccount
Unit Value
End
of Period 		Units
Outstanding at
End of Period
(Thousands)
AllianceBernstein VPS Balanced Wealth Strategy Portfolio – Class B
From 3/24/2008* To 12/31/2008 $1.000 $0.746 114
From 1/1/2009 To 12/31/2009 $0.746 $0.914 148
From 1/1/2010 To 12/31/2010 $0.914 $0.993 88
From 1/1/2011 To 12/31/2011 $0.993 $0.948 94
 
C-7
 
Subaccount Subaccount
Unit Value
Beginning
of Period 		Subaccount
Unit Value
End
of Period 		Units
Outstanding at
End of Period
(Thousands)
Calvert VP S&P MidCap 400 Index Portfolio – Class I Shares
From 3/24/2008* To 12/31/2008 $1.000 $0.696 0†
From 1/1/2009 To 12/31/2009 $0.696 $0.936 98
From 1/1/2010 To 12/31/2010 $0.936 $1.161 5
From 1/1/2011 To 12/31/2011 $1.161 $1.118 5
DWS Equity 500 Index VIP – Class A
From 10/10/2005* To 12/31/2005 $0.991 $1.043 77
From 1/1/2006 To 12/31/2006 $1.043 $1.186 193
From 1/1/2007 To 12/31/2007 $1.186 $1.230 206
From 1/1/2008 To 12/31/2008 $1.230 $0.762 287
From 1/1/2009 To 12/31/2009 $0.762 $0.948 9
From 1/1/2010 To 12/31/2010 $0.948 $1.071 162
From 1/1/2011 To 12/31/2011 $1.071 $1.074 125
Federated Fund for U.S. Government Securities II
From 10/10/2005* To 12/31/2005 $0.995 $0.996 52
From 1/1/2006 To 12/31/2006 $0.996 $1.022 489
From 1/1/2007 To 12/31/2007 $1.022 $1.070 543
From 1/1/2008 To 12/31/2008 $1.070 $1.099 352
From 1/1/2009 To 12/31/2009 $1.099 $1.139 15
From 1/1/2010 To 12/31/2010 $1.125 $1.179 325
From 1/1/2011 To 12/31/2011 $1.179 $1.229 258
Federated High Income Bond Fund II – Primary Shares
From 1/1/2006 To 12/31/2006 $1.026 $1.120 11
From 1/1/2007 To 12/31/2007 $1.120 $1.141 13
From 1/1/2008 To 12/31/2008 $1.141 $0.832 11
From 1/1/2009 To 12/31/2009 $0.832 $1.252 15
From 1/1/2010 To 12/31/2010 $1.252 $1.415 245
From 1/1/2011 To 12/31/2011 $1.415 $1.466 68
Federated Prime Money Fund II
From 12/31/2010* To 12/31/2010 $0.986 $0.986 385
From 1/1/2011 To 12/31/2011 $0.986 $0.971 511
Fidelity ® VIP Contrafund® Portfolio – Service Class
From 1/1/2006 To 12/31/2006 $1.127 $1.239 55
From 1/1/2007 To 12/31/2007 $1.239 $1.434 284
From 1/1/2008 To 12/31/2008 $1.434 $0.810 488
From 1/1/2009 To 12/31/2009 $0.810 $1.083 16
From 1/1/2010 To 12/31/2010 $1.083 $1.249 403
From 1/1/2011 To 12/31/2011 $1.249 $1.198 340
Fidelity ® VIP Growth Opportunities Portfolio – Service Class
From 10/10/2005* To 12/31/2005 $0.995 $1.082 13
From 1/1/2006 To 12/31/2006 $1.082 $1.123 165
From 1/1/2007 To 12/31/2007 $1.123 $1.360 566
From 1/1/2008 To 12/31/2008 $1.360 $0.602 1,758
From 1/1/2009 To 12/31/2009 $0.602 $0.864 24
From 1/1/2010 To 12/31/2010 $0.864 $1.053 1,816
From 1/1/2011 To 12/31/2011 $1.053 $1.060 1,652
Fidelity ® VIP Growth Portfolio – Service Class
From 1/1/2009 To 12/31/2009 $0.727 $0.918 23
From 1/1/2010 To 12/31/2010 $0.918 $1.122 2
From 1/1/2011 To 12/31/2011 $1.122 $1.107 0
 
C-8
 
Subaccount Subaccount
Unit Value
Beginning
of Period 		Subaccount
Unit Value
End
of Period 		Units
Outstanding at
End of Period
(Thousands)
Fidelity ® VIP Investment Grade Bond Portfolio – Service Class
From 1/26/2007* To 12/31/2007 $1.000 $1.031 289
From 1/1/2008 To 12/31/2008 $1.031 $0.981 823
From 1/1/2009 To 12/31/2009 $0.981 $1.118 120
From 1/1/2010 To 12/31/2010 $1.118 $1.186 870
From 1/1/2011 To 12/31/2011 $1.186 $1.253 845
Franklin Income Securities Fund – Class 2
From 4/28/2006* To 12/31/2006 $1.000 $1.109 325
From 1/1/2007 To 12/31/2007 $1.109 $1.133 1,478
From 1/1/2008 To 12/31/2008 $1.133 $0.785 1,372
From 1/1/2009 To 12/31/2009 $0.785 $1.049 86
From 1/1/2010 To 12/31/2010 $1.049 $1.164 1,196
From 1/1/2011 To 12/31/2011 $1.164 $1.174 1,018
Ibbotson Aggressive Growth ETF Asset Allocation Portfolio – Class II
From 12/31/2010* To 12/31/2010 $1.046 $1.046 117
From 1/1/2011 To 12/31/2011 $1.046 $0.979 94
Ibbotson Balanced ETF Asset Allocation Portfolio – Class II
From 12/31/2010* To 12/31/2010 $1.024 $1.024 1,597
From 1/1/2011 To 12/31/2011 $1.024 $1.000 858
Ibbotson Growth ETF Asset Allocation Portfolio – Class II
From 12/31/2010* To 12/31/2010 $1.039 $1.039 752
From 1/1/2011 To 12/31/2011 $1.039 $0.986 930
Ibbotson Income and Growth ETF Asset Allocation Portfolio – Class II
From 12/31/2010* To 12/31/2010 $1.011 $1.011 1,180
From 1/1/2011 To 12/31/2011 $1.011 $1.006 1,058
Invesco V.I. Capital Appreciation Fund – Series I Shares
From 10/10/2005* To 12/31/2005 $1.028 $1.100 43
From 1/1/2006 To 12/31/2006 $1.100 $1.152 112
From 1/1/2007 To 12/31/2007 $1.152 $1.271 118
From 1/1/2008 To 12/31/2008 $1.271 $0.720 114
From 1/1/2009 To 12/31/2009 $0.720 $0.859 344
From 1/1/2010 To 12/31/2010 $0.859 $0.977 117
From 1/1/2011 To 12/31/2011 $0.977 $0.886 95
Lord Abbett Series Fund Bond Debenture Portfolio – Class VC Shares
From 1/1/2006 To 12/31/2006 $1.017 $1.096 1
From 1/1/2007 To 12/31/2007 $1.096 $1.146 4
From 1/1/2008 To 12/31/2008 $1.146 $0.931 3
From 1/1/2009 To 12/31/2009 $0.931 $1.231 29
From 1/1/2010 To 12/31/2010 $1.231 $1.362 9
From 1/1/2011 To 12/31/2011 $1.362 $1.401 9
Lord Abbett Series Fund Growth and Income Portfolio – Class VC Shares
From 10/10/2005* To 12/31/2005 $0.999 $1.049 51
From 1/1/2006 To 12/31/2006 $1.049 $1.212 179
From 1/1/2007 To 12/31/2007 $1.212 $1.235 557
From 1/1/2008 To 12/31/2008 $1.235 $0.773 562
From 1/1/2010 To 12/31/2010 $0.906 $1.048 551
From 1/1/2011 To 12/31/2011 $1.048 $0.969 474
 
C-9
 
Subaccount Subaccount
Unit Value
Beginning
of Period 		Subaccount
Unit Value
End
of Period 		Units
Outstanding at
End of Period
(Thousands)
Lord Abbett Series Fund Mid Cap Value Portfolio – Class VC Shares
From 1/1/2008 To 12/31/2008 $1.167 $0.697 18
From 1/1/2009 To 12/31/2009 $0.697 $0.869 10
From 1/1/2010 To 12/31/2010 $0.869 $1.074 6
From 1/1/2011 To 12/31/2011 $1.074 $1.016 6
Mutual Shares Securities Fund – Class 2
From 1/1/2006 To 12/31/2006 $1.076 $1.254 317
From 1/1/2007 To 12/31/2007 $1.254 $1.278 1,349
From 1/1/2008 To 12/31/2008 $1.278 $0.792 1,413
From 1/1/2009 To 12/31/2009 $0.792 $0.983 82
From 1/1/2010 To 12/31/2010 $0.983 $1.077 1,271
From 1/1/2011 To 12/31/2011 $1.077 $1.050 1,076
Neuberger Berman AMT Guardian Portfolio – S Class
From 1/1/2007 To 12/31/2007 $1.048 $1.113 285
From 1/1/2008 To 12/31/2008 $1.113 $0.686 1,162
From 1/1/2009 To 12/31/2009 $0.686 $0.876 170
From 1/1/2010 To 12/31/2010 $0.876 $1.026 1,261
From 1/1/2011 To 12/31/2011 $1.026 $0.979 1,175
Neuberger Berman AMT Small Cap Growth Portfolio – S Class
From 1/1/2009 To 12/31/2009 $0.620 $0.687 151
From 1/1/2010 To 12/31/2010 $0.687 $0.809 8
From 1/1/2011 To 12/31/2011 $0.809 $0.789 8
Oppenheimer Capital Appreciation Fund/VA – Service Shares
From 1/1/2008 To 12/31/2008 $1.138 $0.609 15
From 1/1/2009 To 12/31/2009 $0.609 $0.865 35
From 1/1/2010 To 12/31/2010 $0.865 $0.930 16
From 1/1/2011 To 12/31/2011 $0.930 $0.903 16
Oppenheimer Global Securities Fund/VA – Service Shares
From 4/28/2006* To 12/31/2006 $1.000 $1.062 4
From 1/1/2007 To 12/31/2007 $1.062 $1.109 11
From 1/1/2008 To 12/31/2008 $1.109 $0.652 19
From 1/1/2009 To 12/31/2009 $0.652 $0.895 24
From 1/1/2010 To 12/31/2010 $0.895 $1.020 17
From 1/1/2011 To 12/31/2011 $1.020 $0.919 19
Oppenheimer Main Street Small- & Mid- Cap Fund®/VA – Service Shares
From 1/1/2007 To 12/31/2007 $1.018 $0.968 232
From 1/1/2008 To 12/31/2008 $0.968 $0.591 884
From 1/1/2009 To 12/31/2009 $0.591 $0.797 12
From 1/1/2010 To 12/31/2010 $0.797 $0.966 889
From 1/1/2011 To 12/31/2011 $0.966 $0.929 817
PIMCO CommodityRealReturn® Strategy Portfolio – Advisor Class
From 4/28/2006* To 12/31/2006 $1.000 $0.950 0†
From 1/1/2007 To 12/31/2007 $0.950 $1.153 177
From 1/1/2008 To 12/31/2008 $1.153 $0.637 631
From 1/1/2009 To 12/31/2009 $0.637 $0.889 188
From 1/1/2010 To 12/31/2010 $0.889 $1.088 808
From 1/1/2011 To 12/31/2011 $1.088 $0.991 729
 
C-10
 
Subaccount Subaccount
Unit Value
Beginning
of Period 		Subaccount
Unit Value
End
of Period 		Units
Outstanding at
End of Period
(Thousands)
PIMCO Real Return Portfolio – Advisor Class
From 1/1/2008 To 12/31/2008 $1.103 $1.009 19
From 1/1/2009 To 12/31/2009 $1.009 $1.175 340
From 1/1/2010 To 12/31/2010 $1.175 $1.250 9
From 1/1/2011 To 12/31/2011 $1.250 $1.374 26
PIMCO Total Return Portfolio – Advisor Class
From 1/1/2008 To 12/31/2008 $1.104 $1.138 20
From 1/1/2009 To 12/31/2009 $1.138 $1.277 269
From 1/1/2010 To 12/31/2010 $1.277 $1.359 131
From 1/1/2011 To 12/31/2011 $1.359 $1.385 134
Sentinel Variable Products Bond Fund
From 9/7/2007* To 12/31/2007 $1.000 $1.019 35
From 1/1/2008 To 12/31/2008 $1.019 $1.038 561
From 1/1/2009 To 12/31/2009 $1.038 $1.136 1
From 1/1/2010 To 12/31/2010 $1.136 $1.201 629
From 1/1/2011 To 12/31/2011 $1.201 $1.266 616
Sentinel Variable Products Common Stock Fund
From 9/7/2007* To 12/31/2007 $1.000 $1.022 167
From 1/1/2008 To 12/31/2008 $1.022 $0.674 2,656
From 1/1/2009 To 12/31/2009 $0.674 $0.848 8
From 1/1/2010 To 12/31/2010 $0.848 $0.968 2,977
From 1/1/2011 To 12/31/2011 $0.968 $0.973 2,777
Sentinel Variable Products Small Company Fund
From 9/7/2007* To 12/31/2007 $1.000 $1.004 30
From 1/1/2008 To 12/31/2008 $1.004 $0.670 386
From 1/1/2009 To 12/31/2009 $0.670 $0.839 6
From 1/1/2010 To 12/31/2010 $0.839 $1.023 403
From 1/1/2011 To 12/31/2011 $1.023 $1.038 365
Templeton Developing Markets Securities Fund – Class 2
From 1/1/2007 To 12/31/2007 $1.238 $1.353 1
From 1/1/2008 To 12/31/2008 $1.353 $0.630 62
From 1/1/2009 To 12/31/2009 $0.630 $1.071 47
From 1/1/2010 To 12/31/2010 $1.071 $1.241 24
From 1/1/2011 To 12/31/2011 $1.241 $1.028 20
Templeton Foreign Securities Fund – Class 2
From 1/1/2007 To 12/31/2007 $1.336 $1.510 28
From 1/1/2008 To 12/31/2008 $1.510 $0.887 37
From 1/1/2009 To 12/31/2009 $0.887 $1.197 65
From 1/1/2010 To 12/31/2010 $1.197 $1.279 113
From 1/1/2011 To 12/31/2011 $1.279 $1.126 45
Templeton Growth Securities Fund – Class 2
From 1/1/2006 To 12/31/2006 $1.084 $1.300 269
From 1/1/2007 To 12/31/2007 $1.300 $1.311 1,248
From 1/1/2008 To 12/31/2008 $1.311 $0.745 1,404
From 1/1/2009 To 12/31/2009 $0.745 $0.962 81
From 1/1/2010 To 12/31/2010 $0.962 $1.017 1,277
From 1/1/2011 To 12/31/2011 $1.017 $0.932 1,150
 
C-11
 
Subaccount Subaccount
Unit Value
Beginning
of Period 		Subaccount
Unit Value
End
of Period 		Units
Outstanding at
End of Period
(Thousands)
Virtus Growth and Income Series
From 10/10/2005* To 12/31/2005 $0.990 $1.035 10
From 1/1/2006 To 12/31/2006 $1.035 $1.194 94
From 1/1/2007 To 12/31/2007 $1.194 $1.255 100
From 1/1/2008 To 12/31/2008 $1.255 $0.804 89
From 1/1/2009 To 12/31/2009 $0.804 $0.978 549
From 1/1/2010 To 12/31/2010 $0.978 $1.087 122
From 1/1/2011 To 12/31/2011 $1.087 $1.053 69
Virtus International Series
From 10/10/2005* To 12/31/2005 $1.117 $1.192 2
From 1/1/2006 To 12/31/2006 $1.192 $1.496 337
From 1/1/2007 To 12/31/2007 $1.496 $1.693 727
From 1/1/2008 To 12/31/2008 $1.693 $1.018 1,930
From 1/1/2009 To 12/31/2009 $1.018 $1.402 833
From 1/1/2010 To 12/31/2010 $1.402 $1.567 1,939
From 1/1/2011 To 12/31/2011 $1.567 $1.473 1,812
Virtus Multi-Sector Fixed Income Series
From 9/6/2005* To 12/31/2005 $1.014 $1.010 135
From 1/1/2006 To 12/31/2006 $1.010 $1.063 187
From 1/1/2007 To 12/31/2007 $1.063 $1.086 404
From 1/1/2008 To 12/31/2008 $1.086 $0.878 1,195
From 1/1/2009 To 12/31/2009 $0.878 $1.212 922
From 1/1/2010 To 12/31/2010 $1.212 $1.365 1,206
From 1/1/2011 To 12/31/2011 $1.365 $1.385 1,151
Virtus Real Estate Securities Series
From 9/6/2005* To 12/31/2005 $1.075 $1.098 127
From 1/1/2006 To 12/31/2006 $1.098 $1.483 201
From 1/1/2007 To 12/31/2007 $1.483 $1.231 354
From 1/1/2008 To 12/31/2008 $1.231 $0.765 828
From 1/1/2009 To 12/31/2009 $0.765 $0.973 798
From 1/1/2010 To 12/31/2010 $0.973 $1.227 765
From 1/1/2011 To 12/31/2011 $1.227 $1.328 669
Virtus Small-Cap Growth Series
From 1/1/2008 To 12/31/2008 $1.560 $0.846 43
From 1/1/2009 To 12/31/2009 $0.846 $1.020 1,352
From 1/1/2010 To 12/31/2010 $1.020 $1.141 15
From 1/1/2011 To 12/31/2011 $1.141 $1.311 13
Virtus Small-Cap Value Series
From 10/10/2005* To 12/31/2005 $1.022 $1.073 2
From 1/1/2006 To 12/31/2006 $1.073 $1.234 64
From 1/1/2007 To 12/31/2007 $1.234 $1.190 80
From 1/1/2008 To 12/31/2008 $1.190 $0.728 90
From 1/1/2009 To 12/31/2009 $0.728 $0.867 1,302
From 1/1/2010 To 12/31/2010 $0.867 $1.002 1,169
From 1/1/2011 To 12/31/2011 $1.002 $1.032 1,010
Virtus Strategic Allocation Series
From 1/1/2007 To 12/31/2007 $1.166 $1.169 51
From 1/1/2008 To 12/31/2008 $1.169 $0.859 86
From 1/1/2009 To 12/31/2009 $0.859 $1.053 1,421
From 1/1/2010 To 12/31/2010 $1.053 $1.174 110
From 1/1/2011 To 12/31/2011 $1.174 $1.179 98
 
C-12
 
Subaccount Subaccount
Unit Value
Beginning
of Period 		Subaccount
Unit Value
End
of Period 		Units
Outstanding at
End of Period
(Thousands)
Wanger International
From 9/6/2005* To 12/31/2005 $1.115 $1.170 137
From 1/1/2006 To 12/31/2006 $1.170 $1.580 182
From 1/1/2007 To 12/31/2007 $1.580 $1.810 389
From 1/1/2008 To 12/31/2008 $1.810 $0.970 716
From 1/1/2009 To 12/31/2009 $0.970 $1.431 2,089
From 1/1/2010 To 12/31/2010 $1.431 $1.761 733
From 1/1/2011 To 12/31/2011 $1.761 $1.481 642
Wanger International Select
From 1/1/2006 To 12/31/2006 $1.159 $1.553 10
From 1/1/2007 To 12/31/2007 $1.553 $1.863 27
From 1/1/2008 To 12/31/2008 $1.863 $1.021 26
From 1/1/2009 To 12/31/2009 $1.021 $1.337 1,538
From 1/1/2010 To 12/31/2010 $1.337 $1.608 26
From 1/1/2011 To 12/31/2011 $1.608 $1.424 19
Wanger Select
From 1/1/2006 To 12/31/2006 $1.129 $1.331 33
From 1/1/2007 To 12/31/2007 $1.331 $1.435 188
From 1/1/2008 To 12/31/2008 $1.435 $0.720 246
From 1/1/2009 To 12/31/2009 $0.720 $1.178 2,037
From 1/1/2010 To 12/31/2010 $1.178 $1.469 153
From 1/1/2011 To 12/31/2011 $1.469 $1.191 125
Wanger USA
From 1/1/2006 To 12/31/2006 $1.089 $1.157 44
From 1/1/2007 To 12/31/2007 $1.157 $1.201 221
From 1/1/2008 To 12/31/2008 $1.201 $0.713 292
From 1/1/2009 To 12/31/2009 $0.713 $0.999 3,246
From 1/1/2010 To 12/31/2010 $0.999 $1.214 188
From 1/1/2011 To 12/31/2011 $1.214 $1.154 269
 
†Amount is less than 500 units.
*Date subaccount began operations.
Death Benefit Option 3 Contracts
 
Subaccount Subaccount
Unit Value
Beginning
of Period 		Subaccount
Unit Value
End
of Period 		Units
Outstanding at
End of Period
(Thousands)
Fidelity ® VIP Growth Opportunities Portfolio – Service Class
From 1/1/2008 To 12/31/2008 $1.360 $0.602 17
From 1/1/2009 To 12/31/2009 $0.602 $0.864 0†
From 1/1/2010 To 12/31/2010 $0.864 $1.053 19
From 1/1/2011 To 12/31/2011 $1.053 $1.060 19
Fidelity ® VIP Growth Portfolio – Service Class
From 1/1/2008 To 12/31/2008 $1.400 $0.727 0†
From 1/1/2009 To 12/31/2009 $0.727 $0.918 0†
From 1/1/2010 To 12/31/2010 $0.918 $1.122 0
From 1/1/2011 To 12/31/2011 $1.122 $1.107 0
 
C-13
 
Subaccount Subaccount
Unit Value
Beginning
of Period 		Subaccount
Unit Value
End
of Period 		Units
Outstanding at
End of Period
(Thousands)
Franklin Income Securities Fund – Class 2
From 1/1/2007 To 12/31/2007 $1.115 $1.133 0†
From 1/1/2008 To 12/31/2008 $1.133 $0.785 1
From 1/1/2009 To 12/31/2009 $0.785 $1.049 1
From 1/1/2010 To 12/31/2010 $1.049 $1.164 1
From 1/1/2011 To 12/31/2011 $1.164 $1.174 1
Lord Abbett Series Fund Growth and Income Portfolio – Class VC Shares
From 1/1/2008 To 12/31/2008 $1.235 $0.773 0†
From 1/1/2009 To 12/31/2009 $0.773 $0.906 0†
From 1/1/2010 To 12/31/2010 $0.906 $1.048 0
From 1/1/2011 To 12/31/2011 $1.048 $0.969 0
Mutual Shares Securities Fund – Class 2
From 1/1/2007 To 12/31/2007 $1.260 $1.278 0†
From 1/1/2008 To 12/31/2008 $1.278 $0.792 1
From 1/1/2009 To 12/31/2009 $0.792 $0.983 1
From 1/1/2010 To 12/31/2010 $0.983 $1.077 1
From 1/1/2011 To 12/31/2011 $1.077 $1.050 1
Neuberger Berman AMT Guardian Portfolio – S Class
From 1/1/2008 To 12/31/2008 $1.113 $0.686 20
From 1/1/2009 To 12/31/2009 $0.686 $0.876 6
From 1/1/2010 To 12/31/2010 $0.876 $1.026 19
From 1/1/2011 To 12/31/2011 $1.026 $0.979 19
Oppenheimer Capital Appreciation Fund/VA – Service Shares
From 1/1/2008 To 12/31/2008 $1.138 $0.609 0†
From 1/1/2009 To 12/31/2009 $0.609 $0.865 1
From 1/1/2010 To 12/31/2010 $0.865 $0.930 0
From 1/1/2011 To 12/31/2011 $0.930 $0.903 0
Oppenheimer Global Securities Fund/VA – Service Shares
From 1/1/2008 To 12/31/2008 $1.109 $0.652 0†
From 1/1/2009 To 12/31/2009 $0.652 $0.895 0†
From 1/1/2010 To 12/31/2010 $0.895 $1.020 0
From 1/1/2011 To 12/31/2011 $1.020 $0.919 0
Oppenheimer Main Street Small- & Mid- Cap Fund®/VA – Service Shares
From 1/1/2008 To 12/31/2008 $0.968 $0.591 12
From 1/1/2009 To 12/31/2009 $0.591 $0.797 0†
From 1/1/2010 To 12/31/2010 $0.797 $0.966 10
From 1/1/2011 To 12/31/2011 $0.966 $0.929 11
PIMCO CommodityRealReturn® Strategy Portfolio – Advisor Class
From 1/1/2008 To 12/31/2008 $1.153 $0.637 7
From 1/1/2009 To 12/31/2009 $0.637 $0.889 7
From 1/1/2010 To 12/31/2010 $0.889 $1.088 9
From 1/1/2011 To 12/31/2011 $1.088 $0.991 8
PIMCO Total Return Portfolio – Advisor Class
From 1/1/2008 To 12/31/2008 $1.104 $1.138 0†
From 1/1/2009 To 12/31/2009 $1.138 $1.277 8
From 1/1/2010 To 12/31/2010 $1.277 $1.359 0
From 1/1/2011 To 12/31/2011 $1.359 $1.385 0
 
C-14
 
Subaccount Subaccount
Unit Value
Beginning
of Period 		Subaccount
Unit Value
End
of Period 		Units
Outstanding at
End of Period
(Thousands)
Sentinel Variable Products Common Stock Fund
From 1/1/2008 To 12/31/2008 $1.022 $0.674 40
From 1/1/2009 To 12/31/2009 $0.674 $0.848 0†
From 1/1/2010 To 12/31/2010 $0.848 $0.968 37
From 1/1/2011 To 12/31/2011 $0.968 $0.973 38
Sentinel Variable Products Small Company Fund
From 1/1/2008 To 12/31/2008 $1.004 $0.670 8
From 1/1/2009 To 12/31/2009 $0.670 $0.839 0†
From 1/1/2010 To 12/31/2010 $0.839 $1.023 6
From 1/1/2011 To 12/31/2011 $1.023 $1.038 6
Templeton Developing Markets Securities Fund – Class 2
From 1/1/2008 To 12/31/2008 $1.353 $0.630 0†
From 1/1/2009 To 12/31/2009 $0.630 $1.071 1
From 1/1/2010 To 12/31/2010 $1.071 $1.241 0
From 1/1/2011 To 12/31/2011 $1.241 $1.028 0
Templeton Foreign Securities Fund – Class 2
From 1/1/2008 To 12/31/2008 $1.510 $0.887 0†
From 1/1/2009 To 12/31/2009 $0.887 $1.197 1
From 1/1/2010 To 12/31/2010 $1.197 $1.279 0
From 1/1/2011 To 12/31/2011 $1.279 $1.126 0
Templeton Growth Securities Fund – Class 2
From 1/1/2007 To 12/31/2007 $1.288 $1.311 0†
From 1/1/2008 To 12/31/2008 $1.311 $0.745 1
From 1/1/2009 To 12/31/2009 $0.745 $0.962 1
From 1/1/2010 To 12/31/2010 $0.962 $1.017 1
From 1/1/2011 To 12/31/2011 $1.017 $0.932 1
Virtus Growth & Income Series
From 12/31/2010* To 12/31/2010 $1.087 $1.087 1
From 1/1/2011 To 12/31/2011 $1.087 $1.053 1
Virtus International Series
From 1/1/2008 To 12/31/2008 $1.693 $1.018 23
From 1/1/2009 To 12/31/2009 $1.018 $1.402 19
From 1/1/2010 To 12/31/2010 $1.402 $1.567 24
From 1/1/2011 To 12/31/2011 $1.567 $1.473 23
Virtus Real Estate Securities Series
From 1/1/2008 To 12/31/2008 $1.231 $0.765 8
From 1/1/2009 To 12/31/2009 $0.765 $0.973 11
From 1/1/2010 To 12/31/2010 $0.973 $1.227 8
From 1/1/2011 To 12/31/2011 $1.227 $1.328 8
Virtus Small-Cap Value Series
From 12/31/2010* To 12/31/2010 $1.002 $1.002 12
From 1/1/2011 To 12/31/2011 $1.002 $1.032 11
Wanger International
From 1/1/2008 To 12/31/2008 $1.810 $0.970 5
From 1/1/2009 To 12/31/2009 $0.970 $1.431 22
From 1/1/2010 To 12/31/2010 $1.431 $1.761 5
From 1/1/2011 To 12/31/2011 $1.761 $1.481 5
 
C-15
 
Subaccount Subaccount
Unit Value
Beginning
of Period 		Subaccount
Unit Value
End
of Period 		Units
Outstanding at
End of Period
(Thousands)
Wanger USA
From 1/1/2008 To 12/31/2008 $1.201 $0.713 0†
From 1/1/2009 To 12/31/2009 $0.713 $0.999 36
From 1/1/2010 To 12/31/2010 $0.999 $1.214 0
From 1/1/2011 To 12/31/2011 $1.214 $1.154 0
 
*Date subaccount began operations.
†Amount is less than 500 units.
Death Benefit Option 4 Contracts
 
Subaccount Subaccount
Unit Value
Beginning
of Period 		Subaccount
Unit Value
End
of Period 		Units
Outstanding at
End of Period
(Thousands)
AllianceBernstein VPS Balanced Wealth Strategy Portfolio – Class B
From 3/24/2008* To 12/31/2008 $1.000 $0.744 171
From 1/1/2009 To 12/31/2009 $0.744 $0.910 198
From 1/1/2010 To 12/31/2010 $0.910 $0.986 289
From 1/1/2011 To 12/31/2011 $0.986 $0.939 286
Calvert VP S&P MidCap 400 Index Portfolio – Class I Shares
From 1/1/2009 To 12/31/2009 $0.756 $0.931 182
From 1/1/2010 To 12/31/2010 $0.931 $1.153 3
From 1/1/2011 To 12/31/2011 $1.153 $1.107 3
DWS Equity 500 Index VIP – Class A
From 1/1/2006 To 12/31/2006 $1.041 $1.182 246
From 1/1/2007 To 12/31/2007 $1.182 $1.222 242
From 1/1/2008 To 12/31/2008 $1.222 $0.755 235
From 1/1/2009 To 12/31/2009 $0.755 $0.937 9
From 1/1/2010 To 12/31/2010 $0.937 $1.056 197
From 1/1/2011 To 12/31/2011 $1.056 $1.056 192
Federated Fund for U.S. Government Securities II
From 12/31/2010* To 12/31/2010 $1.163 $1.163 631
From 1/1/2011 To 12/31/2011 $1.163 $1.209 617
Federated Prime Money Fund II
From 12/31/2010* To 12/31/2010 $0.983 $0.983 894
From 1/1/2011 To 12/31/2011 $0.983 $0.966 682
Fidelity ® VIP Growth Opportunities Portfolio – Service Class
From 1/1/2006 To 12/31/2006 $1.081 $1.118 173
From 1/1/2007 To 12/31/2007 $1.118 $1.352 739
From 1/1/2008 To 12/31/2008 $1.352 $0.597 1,104
From 1/1/2009 To 12/31/2009 $0.597 $0.854 15
From 1/1/2010 To 12/31/2010 $0.854 $1.038 1,056
From 1/1/2011 To 12/31/2011 $1.038 $1.042 919
Fidelity ® VIP Investment Grade Bond Portfolio – Service Class
From 1/26/2007* To 12/31/2007 $1.015 $1.028 485
From 1/1/2008 To 12/31/2008 $1.028 $0.977 503
From 1/1/2009 To 12/31/2009 $0.977 $1.110 191
From 1/1/2010 To 12/31/2010 $1.110 $1.174 608
From 1/1/2011 To 12/31/2011 $1.174 $1.237 557
 
C-16
 
Subaccount Subaccount
Unit Value
Beginning
of Period 		Subaccount
Unit Value
End
of Period 		Units
Outstanding at
End of Period
(Thousands)
Franklin Income Securities Fund – Class 2
From 4/28/2006* To 12/31/2006 $1.000 $1.107 61
From 1/1/2007 To 12/31/2007 $1.107 $1.128 251
From 1/1/2008 To 12/31/2008 $1.128 $0.780 482
From 1/1/2009 To 12/31/2009 $0.780 $1.039 128
From 1/1/2010 To 12/31/2010 $1.039 $1.150 346
From 1/1/2011 To 12/31/2011 $1.150 $1.157 217
Ibbotson Aggressive Growth ETF Asset Allocation Portfolio – Class II
From 12/31/2010* To 12/31/2010 $1.046 $1.046 526
From 1/1/2011 To 12/31/2011 $1.046 $0.976 515
Ibbotson Balanced ETF Asset Allocation Portfolio – Class II
From 12/31/2010* To 12/31/2010 $1.024 $1.024 273
From 1/1/2011 To 12/31/2011 $1.024 $0.997 294
Ibbotson Growth ETF Asset Allocation Portfolio – Class II
From 12/31/2010* To 12/31/2010 $1.039 $1.039 1,513
From 1/1/2011 To 12/31/2011 $1.039 $0.983 1,475
Ibbotson Income and Growth ETF Asset Allocation Portfolio – Class II
From 12/31/2010* To 12/31/2010 $1.010 $1.010 546
From 1/1/2011 To 12/31/2011 $1.010 $1.003 539
Invesco V.I. Capital Appreciation Fund – Series I Shares
From 1/1/2006 To 12/31/2006 $1.099 $1.147 153
From 1/1/2007 To 12/31/2007 $1.147 $1.263 151
From 1/1/2008 To 12/31/2008 $1.263 $0.713 140
From 1/1/2009 To 12/31/2009 $0.713 $0.849 397
From 1/1/2010 To 12/31/2010 $0.849 $0.963 120
From 1/1/2011 To 12/31/2011 $0.963 $0.871 120
Lord Abbett Series Fund Growth and Income Portfolio – Class VC Shares
From 1/1/2006 To 12/31/2006 $1.048 $1.207 232
From 1/1/2007 To 12/31/2007 $1.207 $1.227 637
From 1/1/2008 To 12/31/2008 $1.227 $0.766 539
From 1/1/2009 To 12/31/2009 $0.766 $0.895 1
From 1/1/2010 To 12/31/2010 $0.895 $1.033 449
From 1/1/2011 To 12/31/2011 $1.033 $0.953 421
Mutual Shares Securities Fund – Class 2
From 1/1/2006 To 12/31/2006 $1.074 $1.249 48
From 1/1/2007 To 12/31/2007 $1.249 $1.270 212
From 1/1/2008 To 12/31/2008 $1.270 $0.785 458
From 1/1/2009 To 12/31/2009 $0.785 $0.972 41
From 1/1/2010 To 12/31/2010 $0.972 $1.062 357
From 1/1/2011 To 12/31/2011 $1.062 $1.032 230
Neuberger Berman AMT Guardian Portfolio – S Class
From 1/1/2007 To 12/31/2007 $1.053 $1.108 377
From 1/1/2008 To 12/31/2008 $1.108 $0.682 649
From 1/1/2009 To 12/31/2009 $0.682 $0.868 251
From 1/1/2010 To 12/31/2010 $0.868 $1.014 645
From 1/1/2011 To 12/31/2011 $1.014 $0.965 598
Neuberger Berman AMT Small Cap Growth Portfolio – S Class
From 1/1/2009 To 12/31/2009 $0.570 $0.680 211
From 1/1/2010 To 12/31/2010 $0.680 $0.800 5
From 1/1/2011 To 12/31/2011 $0.800 $0.777 5
 
C-17
 
Subaccount Subaccount
Unit Value
Beginning
of Period 		Subaccount
Unit Value
End
of Period 		Units
Outstanding at
End of Period
(Thousands)
Oppenheimer Global Securities Fund/VA – Service Shares
From 4/28/2006* To 12/31/2006 $1.000 $1.060 4
From 1/1/2007 To 12/31/2007 $1.060 $1.105 4
From 1/1/2008 To 12/31/2008 $1.105 $0.648 3
From 1/1/2009 To 12/31/2009 $0.648 $0.887 16
From 1/1/2010 To 12/31/2010 $0.887 $1.008 7
From 1/1/2011 To 12/31/2011 $1.008 $0.906 6
Oppenheimer Main Street Small- & Mid- Cap Fund®/VA – Service Shares
From 4/28/2006* To 12/31/2006 $1.000 $0.995 4
From 1/1/2007 To 12/31/2007 $0.995 $0.964 300
From 1/1/2008 To 12/31/2008 $0.964 $0.587 495
From 1/1/2009 To 12/31/2009 $0.587 $0.790 11
From 1/1/2010 To 12/31/2010 $0.790 $0.955 491
From 1/1/2011 To 12/31/2011 $0.955 $0.916 448
PIMCO CommodityRealReturn® Strategy Portfolio – Advisor Class
From 1/1/2007 To 12/31/2007 $0.991 $1.148 227
From 1/1/2008 To 12/31/2008 $1.148 $0.633 336
From 1/1/2009 To 12/31/2009 $0.633 $0.881 284
From 1/1/2010 To 12/31/2010 $0.881 $1.075 367
From 1/1/2011 To 12/31/2011 $1.075 $0.977 325
PIMCO Total Return Portfolio – Advisor Class
From 4/28/2006* To 12/31/2006 $1.000 $1.030 3
From 1/1/2007 To 12/31/2007 $1.030 $1.099 2
From 1/1/2008 To 12/31/2008 $1.099 $1.130 13
From 1/1/2009 To 12/31/2009 $1.130 $1.265 293
From 1/1/2010 To 12/31/2010 $1.265 $1.343 2
From 1/1/2011 To 12/31/2011 $1.343 $1.365 2
Sentinel Variable Products Bond Fund
From 9/7/2007* To 12/31/2007 $1.000 $1.018 59
From 1/1/2008 To 12/31/2008 $1.018 $1.035 231
From 1/1/2009 To 12/31/2009 $1.035 $1.129 3
From 1/1/2010 To 12/31/2010 $1.129 $1.191 387
From 1/1/2011 To 12/31/2011 $1.191 $1.252 362
Sentinel Variable Products Common Stock Fund
From 9/7/2007* To 12/31/2007 $1.000 $1.021 356
From 1/1/2008 To 12/31/2008 $1.021 $0.672 1,256
From 1/1/2009 To 12/31/2009 $0.672 $0.843 7
From 1/1/2010 To 12/31/2010 $0.843 $0.959 1,508
From 1/1/2011 To 12/31/2011 $0.959 $0.962 1,373
Sentinel Variable Products Small Company Fund
From 9/7/2007* To 12/31/2007 $1.000 $1.004 54
From 1/1/2008 To 12/31/2008 $1.004 $0.668 194
From 1/1/2009 To 12/31/2009 $0.668 $0.834 5
From 1/1/2010 To 12/31/2010 $0.834 $1.014 161
From 1/1/2011 To 12/31/2011 $1.014 $1.026 139
Templeton Foreign Securities Fund – Class 2
From 1/1/2006 To 12/31/2006 $1.109 $1.323 28
From 1/1/2007 To 12/31/2007 $1.323 $1.501 20
From 1/1/2008 To 12/31/2008 $1.501 $0.879 5
From 1/1/2009 To 12/31/2009 $0.879 $1.184 29
From 1/1/2010 To 12/31/2010 $1.184 $1.261 7
From 1/1/2011 To 12/31/2011 $1.261 $1.107 7
 
C-18
 
Subaccount Subaccount
Unit Value
Beginning
of Period 		Subaccount
Unit Value
End
of Period 		Units
Outstanding at
End of Period
(Thousands)
Templeton Growth Securities Fund – Class 2
From 1/1/2006 To 12/31/2006 $1.082 $1.295 74
From 1/1/2007 To 12/31/2007 $1.295 $1.302 226
From 1/1/2008 To 12/31/2008 $1.302 $0.738 490
From 1/1/2009 To 12/31/2009 $0.738 $0.951 34
From 1/1/2010 To 12/31/2010 $0.951 $1.003 382
From 1/1/2011 To 12/31/2011 $1.003 $0.917 264
Virtus Growth & Income Series
From 1/1/2006 To 12/31/2006 $1.033 $1.190 127
From 1/1/2007 To 12/31/2007 $1.190 $1.246 124
From 1/1/2008 To 12/31/2008 $1.246 $0.797 121
From 1/1/2009 To 12/31/2009 $0.797 $0.967 406
From 1/1/2010 To 12/31/2010 $0.967 $1.072 208
From 1/1/2011 To 12/31/2011 $1.072 $1.036 119
Virtus International Series
From 1/1/2006 To 12/31/2006 $1.190 $1.490 436
From 1/1/2007 To 12/31/2007 $1.490 $1.682 916
From 1/1/2008 To 12/31/2008 $1.682 $1.008 1,271
From 1/1/2009 To 12/31/2009 $1.008 $1.386 495
From 1/1/2010 To 12/31/2010 $1.386 $1.545 1,216
From 1/1/2011 To 12/31/2011 $1.545 $1.449 1,153
Virtus Multi-Sector Fixed Income Series
From 1/1/2006 To 12/31/2006 $1.009 $1.059 111
From 1/1/2007 To 12/31/2007 $1.059 $1.079 450
From 1/1/2008 To 12/31/2008 $1.079 $0.870 605
From 1/1/2009 To 12/31/2009 $0.870 $1.198 547
From 1/1/2010 To 12/31/2010 $1.198 $1.346 781
From 1/1/2011 To 12/31/2011 $1.346 $1.362 717
Virtus Real Estate Securities Series
From 1/1/2006 To 12/31/2006 $1.097 $1.477 70
From 1/1/2007 To 12/31/2007 $1.477 $1.223 242
From 1/1/2008 To 12/31/2008 $1.223 $0.758 394
From 1/1/2009 To 12/31/2009 $0.758 $0.962 470
From 1/1/2010 To 12/31/2010 $0.962 $1.210 327
From 1/1/2011 To 12/31/2011 $1.210 $1.306 308
Virtus Small-Cap Growth Series
From 1/1/2006 To 12/31/2006 $1.158 $1.359 22
From 1/1/2007 To 12/31/2007 $1.359 $1.550 11
From 1/1/2008 To 12/31/2008 $1.550 $0.839 2
From 1/1/2009 To 12/31/2009 $0.839 $1.009 839
From 1/1/2010 To 12/31/2010 $1.009 $1.125 154
From 1/1/2011 To 12/31/2011 $1.125 $1.289 14
Virtus Small-Cap Value Series
From 1/1/2006 To 12/31/2006 $1.071 $1.229 30
From 1/1/2007 To 12/31/2007 $1.229 $1.182 29
From 1/1/2008 To 12/31/2008 $1.182 $0.721 29
From 1/1/2009 To 12/31/2009 $0.721 $0.857 690
From 1/1/2010 To 12/31/2010 $0.857 $0.988 708
From 1/1/2011 To 12/31/2011 $0.988 $1.015 491
 
C-19
 
Subaccount Subaccount
Unit Value
Beginning
of Period 		Subaccount
Unit Value
End
of Period 		Units
Outstanding at
End of Period
(Thousands)
Wanger International
From 1/1/2006 To 12/31/2006 $1.168 $1.574 77
From 1/1/2007 To 12/31/2007 $1.574 $1.799 190
From 1/1/2008 To 12/31/2008 $1.799 $0.961 270
From 1/1/2009 To 12/31/2009 $0.961 $1.415 1,560
From 1/1/2010 To 12/31/2010 $1.415 $1.736 202
From 1/1/2011 To 12/31/2011 $1.736 $1.457 194
Wanger International Select
From 1/1/2006 To 12/31/2006 $1.158 $1.547 32
From 1/1/2007 To 12/31/2007 $1.547 $1.851 49
From 1/1/2008 To 12/31/2008 $1.851 $1.012 19
From 1/1/2009 To 12/31/2009 $1.012 $1.322 1,219
From 1/1/2010 To 12/31/2010 $1.322 $1.586 7
From 1/1/2011 To 12/31/2011 $1.586 $1.400 7
 
*Date subaccount began operations.
†Amount is less than 500 units.
C-20

Table of Contents
PART B
Phoenix Dimensions®
PHL Variable Accumulation Account (“Separate Account”)
PHL Variable Insurance Company
Variable Accumulation Deferred Annuity Contract
 
STATEMENT OF ADDITIONAL INFORMATION April 30, 2012
 
Home Office:
One American Row
Hartford, Connecticut 06102-5056 		PHL Variable Insurance Company
Annuity Operations Division
PO Box 8027
Boston, Massachusetts 02266-8027
 
This Statement of Additional Information (“SAI”) is not a prospectus and should be read in conjunction with the prospectus, dated April 30, 2012. You may obtain a copy of the prospectus without charge by contacting PHL Variable Insurance Company (“PHL Variable”) at the above address or by calling 800/541-0171 or by visiting our website at www.phoenixwm.com
 
TABLE OF CONTENTS
1
 
PHL Variable Insurance Company
 
PHL Variable Insurance Company (“PHL Variable”) is a Connecticut stock life insurance company incorporated on July 15, 1981. We sell life insurance policies and annuity contracts through our affiliated distribution companies and through brokers. Our executive and main administrative offices are at One American Row in Hartford, Connecticut 06102-5056.
We are a wholly owned subsidiary of Phoenix Life Insurance Company (“Phoenix”) through its holding company, PM Holdings, Inc.
Underwriter
1851 Securities, Inc. (“1851”)is the principal underwriter and national distributor for the policies pursuant to an underwriting agreement dated February 5, 2009. 1851 is a directly wholly owned subsidiary of PFG Holdings, Inc. (“PFG”). PFG is an indirectly owned subsidiary of PNX.
  1851 is an affiliated subsidiary of both the Separate Account and Phoenix. 1851’s business address is One American Row, Hartford, CT 06102-5056. 1851, as underwriter, offers these policies on a continuous basis. 1851 is not compensated for any underwriting commissions.
Services
 
Administrative, Marketing and Support Services
PHL Variable and/or the principal underwriter for the Contracts have entered into agreements with the investment adviser, subadviser, distributor, and/or affiliated companies of most of the underlying funds for providing certain administrative, marketing, or other support services to the underlying funds.
These payments reflect in part service expense savings derived by the funds by having a sole shareholder rather than multiple shareholders in connection with the Separate Account’s investments in the funds. Proceeds of these payments may be used for any corporate purpose, including payment of expenses that PHL Variable and the principal underwriter for the Contracts incur in promoting, issuing, distributing and administering the Contracts.
The payments are generally based on a percentage of the average assets of each underlying fund allocated to the variable investment options under the Contract or other Contracts offered by the PHL Variable. Aggregate fees relating to the different underlying funds vary and may be as much as 0.40% of the average net assets of an underlying fund attributable to the Contracts.
 
Other Service Providers
Under an Administrative and Accounting Services Agreement between BNY Mellon (“BNY Mellon”) (formerly PNC Global Investment Servicing) and the Company, BNY Mellon provides certain services related to the Separate Account. These services include computing investment option unit value for each Investment option of the Separate Account on each valuation date, preparing annual financial statements for the Separate Account, filing the Separate Account annual reports on Form N-SAR with the SEC, and maintaining certain books and records required by law on behalf of the Separate Account. The Company pays BNY Mellon fees for these services. The total fee includes a flat annual charge per investment option, an annual base fee for the company and its affiliates utilizing the services, and license and service fees for certain software used in providing the services. During the last three fiscal years, the Company and insurance company affiliates of the Company have paid BNY Mellon the fees listed below for services provided to the Separate Account, other investment options of the Company, and investment options of insurance company affiliates of the Company.
 
Year Ended December 31, Fee Paid
2009 $547,748.18
2010 $543,217.79
2011 $524,191.40
 
Under a contract with Phoenix Life Insurance Company (“PLIC”), Ibbotson Associates provides certain asset allocation services, including a risk tolerance questionnaire to assist the policy owner, for use in conjunction with the policy. For these services, PLIC pays Ibbotson an annual flat fee. The fees paid for the last three fiscal years follow:
 
Year Ended December 31, Fee Paid
2009 $125,000
2010 $ 0
2011 $ 0
 
Under a contract with PLIC, Tata Consulting Services augments our U.S. based staff in processing premium payments, investment option transfers, asset allocation changes, changes of address, and issuance of new variable annuity business. The fees paid for these services for the last three fiscal years follow:
2
 
Year Ended December 31, Fee Paid
2009 $173,379.90
2010 $ 0
2011 $ 0
 
Phoenix Life Insurance Company, PHL Variable Insurance Company and Phoenix Life and Annuity Company (collectively the “Phoenix Companies”) have entered into an agreement with Alliance-One Services, Inc., 8616 Freeport Parkway, Irving, Texas 75063 (“Alliance-One”) wherein Alliance-One has agreed to provide the Phoenix Companies with claim processing services.
Alliance-One began providing claim processing services to the Phoenix Companies during the 2008 calendar year. The fees below were paid during the last three fiscal years for such services.
 
Year Ended December 31, Fee Paid
2009 $97,504
2010 $50,568
2011 $402,001
 
Information Sharing Agreements
PHL Variable has entered into information sharing agreements with the underlying funds as required by Rule 22c-2 of the Investment Company Act of 1940. The purpose of the information sharing is to monitor and, if necessary, warn and restrict policy owners who may be engaging in disruptive trading practices as determined by PHL Variable or the underlying funds in accordance with their established policies.
Performance History/Calculation of Yield and Return
 
Yield of the Federated Prime Money Fund II Investment Option. We calculate the yield of the Federated Prime Money Fund II for a 7-day “base period” by determining the “net change in value” of a hypothetical pre-existing account. We assume the hypothetical account had an initial balance of one share at the beginning of the base period. We then determine what the value of the hypothetical account would have been at the end of the 7-day base period. The end value minus the initial value gives us the net change in value for the hypothetical account. The net change in value can then be divided by the initial value giving us the base period return (one week’s return). To find the equivalent annual return we multiply the base period return by 365/7. The equivalent effective annual yield differs from the annual return because we assume all returns are reinvested in the investment option. We carry results to the nearest hundredth of one percent.
 
The net change in value of the hypothetical account includes the daily net investment income of the account (after expenses), but does not include realized gains or losses or unrealized appreciation or depreciation on the underlying fund shares.
The yield/return calculations include a mortality and expense risk fee equal to one of the following: 1.075% (7-Years), .375% (5-Years) or 1.525% (3-Years) on an annual basis and a daily administrative fee equal to 0.125% on an annual basis.
The Federated Prime Money Fund II Investment Option return and effective yield will vary in response to fluctuations in interest rates and in the expenses of the investment option.
We do not include the maximum annual administrative fee in calculating the current return and effective yield. Should such a fee apply to your account, current return and/or effective yield for your account could be reduced.
Example Calculations:
 
The following examples of a return/yield calculations for the Federated Prime Money Fund II Investment Option were based on the 7-day period ending December 31, 2011:
 
Death Benefit Option 1 Contracts
 
Value of hypothetical pre-existing account with exactly one Unit at the beginning of the period:
 $ 1.000000
Value of the same account (excluding capital changes) at the end of the 7-day period:
 0.999758
Calculation:
Ending account value
 0.999758
Less beginning account value
 1.000000
Net change in account value
 -0.000242
 
3
 
Base period return:
(net change/beginning account value)
 -0.000242
Current yield = return x (365/7) =
 -1.26%
Effective yield = [(1 + return)365/7 ] – 1 =
 -1.25%
 
Death Benefit Option 2 Contracts
 
Value of hypothetical pre-existing account with exactly one unit at the beginning of the period:
 $ 1.000000
Value of the same account (excluding capital changes) at the end of the 7-day period:
 0.999711
Calculation:
Ending account value
 0.999711
Less beginning account value
 1.000000
Net change in account value
 -0.000289
Base period return:
(net change/beginning account value)
 -0.000289
Current yield = return x (365/7) =
 -1.51%
Effective yield = [(1 + return)365/7 ] – 1 =
 -1.50%
 
Death Benefit Option 3 Contracts
 
Value of hypothetical pre-existing account with exactly one unit at the beginning of the period:
 $ 1.000000
Value of the same account (excluding capital changes) at the end of the 7-day period:
 0.999711
Calculation:
Ending account value
 0.999711
Less beginning account value
 1.000000
Net change in account value
 -0.000289
Base period return:
(net change/beginning account value)
 -0.000289
Current yield = return x (365/7) =
 -1.51%
Effective yield = [(1 + return)365/7 ] – 1 =
 -1.50%
 
Death Benefit Option 4 Contracts
 
Value of hypothetical pre-existing account with exactly one unit at the beginning of the period:
 $ 1.000000
Value of the same account (excluding capital changes) at the end of the 7-day period:
 0.999661
Calculation:
Ending account value
 0.999661
Less beginning account value
 1.000000
Net change in account value
 -0.000339
Base period return:
(net change/beginning account value)
 -0.000339
Current yield = return x (365/7) =
 -1.77%
Effective yield = [(1 + return)365/7 ] – 1 =
 -1.75%
 
Yields and total returns may be higher or lower than in the past and there is no assurance that any historical results will continue.
Calculation of Total Return. Total return measures the change in value of an investment option investment over a stated period. We compute total returns by finding the average annual compounded rates of return over the one-, five- and ten-year periods that would equate the initial amount invested to the ending redeemable value according to a formula. The formula for total return includes the following steps:
(1) We assume a hypothetical $1,000 initial purchase payment in the investment option;
(2) We determine the value the hypothetical initial purchase payment would have were it redeemed at the end of each period. All recurring fees and any applicable withdrawal charge are deducted. This figure is the ending redeemable value (ERV in the formula given below);
(3) We divide this value by the initial $1,000 purchase payment, resulting in ratio of the ending redeemable value to the initial value for that period;
(4) To get the average annual total return we take the nth root of the ratio from step (3), where n equals the number of years in that period (e.g., one, five and 10), and subtract one.
4
The formula in mathematical terms is:
R = ((ERV /II)(1/n) ) – 1
Where:
II = a hypothetical initial payment of $1,000
R = average annual total return for the period
n = number of years in the period
ERV = ending redeemable value of the hypothetical $1,000 for the period [see (2) and (3) above]
We normally calculate total return for one-year, five-year and ten-year periods for each investment option. If a investment option has not been available for at least ten years, we will provide total returns for other relevant periods.
Performance Information
Advertisements, sales literature and other communications may contain information about a series’ or advisor’s current investment strategies and management style. An advisor may alter investment strategies and style in response to changing market and economic conditions. A fund may wish to make known a series’ specific portfolio holdings or holdings in specific industries. A fund may also separately illustrate the income and capital gain portions of a series’ total return. Performance might also be advertised by breaking down returns into equity and debt components. A series may compare its equity or bond return figure to any of a number of well-known benchmarks of market performance, including, but not limited to:
A series may compare its returns to any of a number of well-known benchmarks of market performance; including, but not limited to:
The Dow Jones Industrial AverageSM (“DJIA”)
CS First Boston High Yield Index
Citigroup Corporate Index
Citigroup Government Bond Index
Standard & Poor’s 500 Index® (“S&P 500”)
Each investment option may include its yield and total return in advertisements or communications with current or prospective contract owners. Each investment option may also include in such advertisements, its ranking or comparison to similar mutual funds by such organizations as:
Lipper Analytical Services
Morningstar, Inc.
Thomson Financial
A fund may also compare a series’ performance to other investment or savings vehicles (such as certificates of deposit) and may refer to results published in such publications as:
Barron’s
Business Week
Changing Times
Consumer Reports
Financial Planning
Financial Services Weekly
Forbes
Fortune
Investor’s Business Daily
Money
The New York Times
Personal Investor
Registered Representative
U.S. News and World Report
The Wall Street Journal
A fund may also illustrate the benefits of tax deferral by comparing taxable investments with investments through tax-deferred retirement plans.
The total return and yield may be used to compare the performance of the investment options with certain commonly used standards for stock and bond market performance. Such indices include, but are not limited to:
5
The Dow Jones Industrial AverageSM (“DJIA”)
CS First Boston High Yield Index
Citigroup Corporate Index
Citigroup Government Bond Index
S&P 500
The Dow Jones Industrial AverageSM (“DJIA”) is an unweighted index of 30 industrial “blue chip” U.S. stocks. It is the oldest continuing U.S. market index. The 30 stocks now in the DJIA are both widely-held and a major influence in their respective industries. The average is computed in such a way as to preserve its historical continuity and account for such factors as stock splits and periodic changes in the components of the index. The editors of The Wall Street Journal select the component stocks of the DJIA.
The Standard & Poor’s 500 Index® (“S&P 500”) is a free-float market capitalization weighted index composed of 500 stocks chosen for market size, liquidity, and industry group representation. It is one of the most widely used indicators of U.S. stock market performance. The composition of the S&P 500 changes from time to time. Standard & Poor’s Index Committee makes all decisions about the S&P 500.
Weighted and unweighted indices: A market-value, or capitalization, weighted index uses relative market value (share price multiplied by the number of shares outstanding) to “weight” the influence of a stock’s price on the index. Simply put, larger companies’ stock prices influence the index more than smaller companies’ stock prices. An unweighted index (such as the DJIA) uses stock price alone to determine the index value. A company’s relative size has no bearing on its impact on the index.
 
The funds’ annual reports, available upon request and without charge, contain a discussion of the performance of the funds and a comparison of that performance to a securities market index. You may obtain an Annual Report by contacting your registered representative or PHL Variable at the address and telephone number on page one.
 
Calculation of Annuity Payments
See your prospectus in the section titled “The Annuity Period” for a description of the annuity options.
You may elect an annuity payment option by written request as described in your prospectus. If you do not elect an annuity payment option, amounts held under the contract will be applied to provide a Variable Life Annuity with 10-Year Period Certain (Option I) on the maturity date. You may not change your election after the first annuity payment.
Fixed Annuity Payments
Fixed annuity payments are determined by the total dollar value for all investment options’ accumulation units, all amounts held in the GIA and MVA. For each contract the resulting dollar value is then multiplied by the applicable annuity purchase rate, which reflects the age (and sex for nontax-qualified plans) of the annuitant or annuitants, for the fixed payment annuity option selected.
For certain contracts, including those issued on and after May 1, 2008, under Annuity Payment Options A, B, D, E and F, the applicable annuity payment option rate used to determine the payment amount will not be less than the rate based on the 2000 Individual Annuity Mortality Table with a 10-year age setback and an interest rate of 2.5%. Under Annuity Payment Options G and H the guaranteed interest rate is 1.5%. Please see your contract for the Annuity Mortality Tables that would apply to fixed annuity payments under your contract.
Variable Annuity Payments
Under Annuity Payment Options I, J, K, M and N, the amount of the first payment is equal to the amount held under the selected option in each investment option, divided by $1,000 and then multiplied by the applicable payment option rate. The first payment equals the sum of the amounts provided by each investment option.
In each investment option, the number of fixed annuity units is determined by dividing the amount of the initial payment provided by that investment option by the annuity unit value for that investment option on the first payment calculation date. Thereafter, the number of fixed annuity units in each investment option remains unchanged unless you transfer funds to or from the investment option. If you transfer funds to or from a investment option, the number of fixed annuity units will change in proportion to the change in value of the investment option as a result of the transfer. The number of fixed annuity units will change effective with the transfer, but will remain fixed in number following the transfer.
Second and subsequent payments are determined by multiplying the number of fixed annuity units for each investment option by the annuity unit value for that investment option on the payment calculation date. The total payment will equal the sum of the amounts provided by each investment option. The amount of second and subsequent payments will vary with the investment experience of the investment options and may be either higher or lower than the first payment.
Under Annuity Payment Options I, J, M and N, the applicable annuity payment option rate used to determine the first payment amount will not be less than the rate based on the 1983a Individual Annuity Mortality Table projected with projection scale G to the year 2040, with continued projection thereafter and the assumed investment rate. Under Annuity Payment Option K, the annuity payment option rate will be based on the number of payments to be made during the specified period and the assumed investment rate.
6
We guarantee that neither expenses actually incurred, other than taxes on investment return, nor mortality actually experienced, shall adversely affect the dollar amount of variable annuity payments.
We deduct a daily charge for mortality and expense risks and a daily administrative fee from Contract Values held in the investment options. See your prospectus in the section titled “Deductions and Charges.” Electing Option K will result in a mortality risk deduction being made even though we assume no mortality risk under that option.
Experts
 
The financial statements of PHL Variable Accumulation Account as of December 31, 2011 and the results of its operations and the changes in its net assets for each of the periods indicated and the financial statements of PHL Variable Insurance Company as of December 31, 2011 and 2010, and for each of the three years in the period ended December 31, 2011 included in this Prospectus and in this Statement of Additional Information have been so included in reliance on the reports of PricewaterhouseCoopers LLP, an independent registered public accounting firm, given on the authority of said firm as experts in auditing and accounting.
 
7

Table of Contents

LOGO

 

 

ANNUAL REPORT

PHL VARIABLE

ACCUMULATION ACCOUNT

December 31, 2011

Table of Contents

PHL VARIABLE ACCUMULATION ACCOUNT

STATEMENTS OF ASSETS AND LIABILITIES

December 31, 2011

 

     Alger Capital
Appreciation
Portfolio – Class I-2
Shares		      AllianceBernstein
VPS Balanced
Wealth Strategy
Portfolio – Class B		      Calvert VP S&P
MidCap 400 Index
Portfolio – Class I
Shares		      DWS Equity 500
Index VIP – Class A		  

Assets:

            
           

Investments at fair value

    $ 4,281,207       $ 4,411,535       $ 1,271,551       $ 43,979,066   
           
  

 

 

     

 

 

     

 

 

     

 

 

  

Total assets

    $ 4,281,207       $ 4,411,535       $ 1,271,551       $ 43,979,066   
           

Liabilities:

            

Payable to PHL Variable Insurance Company

    $ -           $ -           $ -           $ 375   
  

 

 

     

 

 

     

 

 

     

 

 

  

Total net assets

    $ 4,281,207       $ 4,411,535       $ 1,271,551       $ 43,978,691   
  

 

 

     

 

 

     

 

 

     

 

 

  

Net assets:

            

Accumulation units

    $ 4,235,081       $ 4,411,535       $ 1,271,551       $ 43,408,560   

Contracts in payout (annuitization) period

    $ 46,126       $ -           $ -           $ 570,131   
           
  

 

 

     

 

 

     

 

 

     

 

 

  

Total net assets

    $ 4,281,207       $ 4,411,535       $ 1,271,551       $ 43,978,691   
  

 

 

     

 

 

     

 

 

     

 

 

  
           

Units outstanding

      2,137,898         4,640,523         1,128,354         19,409,359   
  

 

 

     

 

 

     

 

 

     

 

 

  
           

Investment shares held

      82,410         408,476         19,156         3,331,748   

Investments at cost

    $ 2,161,457       $ 4,253,815       $ 1,256,154       $ 39,771,660   
           

Unit value (accumulation)

            

Asset Manager Option 1

    $ -           $ -           $ -           $ -       

Asset Manager Option 2

    $ -           $ -           $ -           $ -       

Freedom Edge®

    $ -           $ -           $ -           $ 1.28   

Phoenix Dimensions® Option 1

    $ -           $ 0.96       $ 1.13       $ 1.09   

Phoenix Dimensions® Option 2

    $ -           $ 0.95       $ 1.12       $ 1.07   

Phoenix Dimensions® Option 3

    $ -           $ -           $ -           $ -       

Phoenix Dimensions® Option 4

    $ -           $ 0.94       $ 1.11       $ 1.06   

Phoenix Income Choice®

    $ 2.73       $ -           $ -           $ 2.44   

Phoenix Income Choice® with GPAF

             $ 1.09   

Phoenix Investor’s Edge® Option 1

    $ 2.87       $ 0.94       $ 1.11       $ 2.24   

Phoenix Investor’s Edge® Option 2

    $ 2.83       $ 0.94       $ 1.11       $ 2.20   

Phoenix Investor’s Edge® Option 3

    $ 2.79       $ -           $ -           $ 2.17   

Phoenix Investor’s Edge® Option 4

    $ -           $ -           $ -           $ 2.19   

Phoenix Premium Edge®

    $ 1.78       $ 0.94       $ 1.11       $ 2.35   

Phoenix Spectrum Edge® Option 1

    $ 3.04       $ 0.96       $ 1.14       $ 2.37   

Phoenix Spectrum Edge® Option 2

    $ 2.99       $ 0.96       $ 1.13       $ 2.33   

Phoenix Spectrum Edge® Option 3

    $ 2.95       $ 0.95       $ -           $ 2.29   

Phoenix Spectrum Edge® Option 4

    $ -           $ -           $ -           $ 2.32   

Phoenix Spectrum Edge® + Option 1

    $ -           $ -           $ 1.13       $ -       

Phoenix Spectrum Edge® + Option 2

    $ -           $ -           $ 1.12       $ 0.85   

Retirement Planner’s Edge

    $ 1.77       $ 0.95       $ 1.12       $ 2.40   

The Big Edge Choice®

    $ 1.82       $ 0.95       $ 1.12       $ 2.41   

The Phoenix Edge®—VA Option 1

    $ 1.93       $ 0.97       $ 1.14       $ 2.53   

The Phoenix Edge®—VA Option 2

    $ 1.85       $ 0.96       $ 1.13       $ 2.44   

The Phoenix Edge®—VA Option 3

    $ 1.83       $ 0.95       $ 1.12       $ 2.41   

 

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

 

SA - 1

Table of Contents

PHL VARIABLE ACCUMULATION ACCOUNT

STATEMENTS OF ASSETS AND LIABILITIES

December 31, 2011

(Continued)

 

     DWS Small Cap
Index VIP – Class A		      Federated Fund for
U.S. Government
Securities II		      Federated High
Income Bond Fund
II – Primary Shares		      Federated Prime
Money Fund II		  

Assets:

            
           

Investments at fair value

    $ 330,609       $ 125,453,594       $ 12,443,535       $ 55,567,482   
           
  

 

 

     

 

 

     

 

 

     

 

 

  

Total assets

    $ 330,609       $ 125,453,594       $ 12,443,535       $ 55,567,482   
           

Liabilities:

            

Payable to PHL Variable Insurance Company

    $ -           $ 542       $ 1       $ 8   
  

 

 

     

 

 

     

 

 

     

 

 

  

Total net assets

    $ 330,609       $ 125,453,052       $ 12,443,534       $ 55,567,474   
  

 

 

     

 

 

     

 

 

     

 

 

  

Net assets:

            

Accumulation units

    $ 330,609       $ 125,177,539       $ 12,377,733       $ 55,414,016   

Contracts in payout (annuitization) period

    $ -           $ 275,513       $ 65,801       $ 153,458   
           
  

 

 

     

 

 

     

 

 

     

 

 

  

Total net assets

    $ 330,609       $ 125,453,052       $ 12,443,534       $ 55,567,474   
  

 

 

     

 

 

     

 

 

     

 

 

  

Units outstanding

      306,984         45,698,362         4,219,748         57,026,269   
  

 

 

     

 

 

     

 

 

     

 

 

  
           

Investment shares held

      28,090         10,759,312         1,840,760         55,567,481   

Investments at cost

    $ 322,183       $ 123,472,265       $ 13,750,883       $ 55,567,482   
           

Unit value (accumulation)

            

Asset Manager Option 1

    $ -           $ -           $ -           $ -       

Asset Manager Option 2

    $ -           $ -           $ 4.28       $ 0.99   

Freedom Edge®

    $ -           $ 1.27       $ 1.67       $ 0.97   

Phoenix Dimensions® Option 1

    $ 1.08       $ 1.25       $ 1.49       $ 0.98   

Phoenix Dimensions® Option 2

    $ -           $ 1.23       $ 1.47       $ 0.97   

Phoenix Dimensions® Option 3

    $ -           $ -           $ -           $ -       

Phoenix Dimensions® Option 4

    $ -           $ 1.21       $ -           $ 0.97   

Phoenix Income Choice®

    $ -           $ 2.89       $ 3.83       $ 0.98   

Phoenix Income Choice® with GPAF

             $ -       

Phoenix Investor’s Edge® Option 1

    $ -           $ 2.68       $ 3.70       $ 0.97   

Phoenix Investor’s Edge® Option 2

    $ 1.06       $ 2.63       $ 3.65       $ 0.97   

Phoenix Investor’s Edge® Option 3

    $ -           $ 2.59       $ 3.59       $ 0.96   

Phoenix Investor’s Edge® Option 4

    $ -           $ 2.62       $ 3.63       $ -       

Phoenix Premium Edge®

    $ 1.07       $ 3.01       $ 3.40       $ 0.97   

Phoenix Spectrum Edge® Option 1

    $ 1.09       $ 2.83       $ 3.92       $ 0.98   

Phoenix Spectrum Edge® Option 2

    $ 1.08       $ 2.79       $ 3.86       $ 0.98   

Phoenix Spectrum Edge® Option 3

    $ -           $ 2.74       $ 3.80       $ 0.97   

Phoenix Spectrum Edge® Option 4

    $ -           $ 2.77       $ 3.84       $ 0.97   

Phoenix Spectrum Edge® + Option 1

    $ -           $ 1.21       $ 1.28       $ 0.98   

Phoenix Spectrum Edge® + Option 2

    $ -           $ 1.20       $ 1.27       $ 0.97   

Retirement Planner’s Edge

    $ -           $ 3.16       $ 3.46       $ 0.97   

The Big Edge Choice®

    $ 1.08       $ 3.19       $ 3.38       $ 0.97   

The Phoenix Edge®—VA Option 1

    $ 1.09       $ 3.44       $ 3.71       $ 0.98   

The Phoenix Edge®—VA Option 2

    $ -           $ 3.23       $ 3.57       $ 0.98   

The Phoenix Edge®—VA Option 3

    $ 1.08       $ 3.23       $ 3.56       $ 0.97   

 

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

 

SA - 2

Table of Contents

PHL VARIABLE ACCUMULATION ACCOUNT

STATEMENTS OF ASSETS AND LIABILITIES

December 31, 2011

(Continued)

 

     Fidelity® VIP
Contrafund®
Portfolio – Service
Class		      Fidelity® VIP  Growth
Opportunities
Portfolio – Service
Class		      Fidelity® VIP  Growth
Portfolio – Service
Class		      Fidelity® VIP
Investment Grade
Bond Portfolio –
Service Class		  

Assets:

            
           

Investments at fair value

    $ 31,891,000       $ 106,954,543       $ 14,606,252       $ 56,530,868   
           
  

 

 

     

 

 

     

 

 

     

 

 

  

Total assets

    $ 31,891,000       $ 106,954,543       $ 14,606,252       $ 56,530,868   
           

Liabilities:

            

Payable to PHL Variable Insurance Company

    $ 2       $ 114       $ 1       $ 3   
  

 

 

     

 

 

     

 

 

     

 

 

  

Total net assets

    $ 31,890,998       $ 106,954,429       $ 14,606,251       $ 56,530,865   
  

 

 

     

 

 

     

 

 

     

 

 

  

Net assets:

            

Accumulation units

    $ 31,813,672       $ 106,921,594       $ 14,599,616       $ 56,529,141   

Contracts in payout (annuitization) period

    $ 77,326       $ 32,835       $ 6,635       $ 1,724   
           
  

 

 

     

 

 

     

 

 

     

 

 

  

Total net assets

    $ 31,890,998       $ 106,954,429       $ 14,606,251       $ 56,530,865   
  

 

 

     

 

 

     

 

 

     

 

 

  

Units outstanding

      12,772,004         84,269,476         8,090,206         45,049,188   
  

 

 

     

 

 

     

 

 

     

 

 

  
           

Investment shares held

      1,389,586         5,854,105         396,805         4,395,867   

Investments at cost

    $ 30,756,447       $ 100,338,280       $ 11,528,997       $ 53,799,038   
           

Unit value (accumulation)

            

Asset Manager Option 1

    $ -           $ -           $ -           $ -       

Asset Manager Option 2

    $ -           $ -           $ 2.97       $ -       

Freedom Edge®

    $ 1.55       $ 1.22       $ 1.22       $ 1.25   

Phoenix Dimensions® Option 1

    $ 1.22       $ 1.08       $ 1.13       $ 1.27   

Phoenix Dimensions® Option 2

    $ 1.20       $ 1.06       $ 1.11       $ 1.25   

Phoenix Dimensions® Option 3

    $ -           $ 1.06       $ 1.11       $ -       

Phoenix Dimensions® Option 4

    $ -           $ 1.04       $ -           $ 1.24   

Phoenix Income Choice®

    $ 3.11       $ 2.11       $ 1.87       $ 1.27   

Phoenix Investor’s Edge® Option 1

    $ 3.17       $ 2.18       $ 1.97       $ 1.24   

Phoenix Investor’s Edge® Option 2

    $ 3.12       $ 2.14       $ 1.94       $ 1.23   

Phoenix Investor’s Edge® Option 3

    $ 3.07       $ 2.11       $ 1.91       $ 1.22   

Phoenix Investor’s Edge® Option 4

    $ -           $ 2.13       $ -           $ -       

Phoenix Premium Edge®

    $ 2.49       $ 1.52       $ 1.32       $ 1.25   

Phoenix Spectrum Edge® Option 1

    $ 3.35       $ 2.30       $ 2.09       $ 1.28   

Phoenix Spectrum Edge® Option 2

    $ 3.30       $ 2.27       $ 2.05       $ 1.27   

Phoenix Spectrum Edge® Option 3

    $ 3.25       $ 2.23       $ 2.02       $ 1.26   

Phoenix Spectrum Edge® Option 4

    $ 3.28       $ 2.26       $ 2.04       $ 1.27   

Phoenix Spectrum Edge® + Option 1

    $ 0.91       $ 0.87       $ 0.93       $ 1.25   

Phoenix Spectrum Edge® + Option 2

    $ 0.91       $ 0.86       $ 0.92       $ 1.25   

Retirement Planner’s Edge

    $ 2.58       $ 1.80       $ 1.36       $ 1.26   

The Big Edge Choice®

    $ 2.56       $ 1.58       $ 1.39       $ 1.26   

The Phoenix Edge®—VA Option 1

    $ 2.73       $ 1.69       $ 1.46       $ 1.29   

The Phoenix Edge®—VA Option 2

    $ 2.60       $ 1.60       $ 1.42       $ 1.27   

The Phoenix Edge®—VA Option 3

    $ 2.57       $ 1.58       $ 1.36       $ 1.26   

 

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

 

SA - 3

Table of Contents

PHL VARIABLE ACCUMULATION ACCOUNT

STATEMENTS OF ASSETS AND LIABILITIES

December 31, 2011

(Continued)

 

     Franklin Flex Cap
Growth Securities
Fund – Class 2		      Franklin Income
Securities
Fund –
Class 2		      Ibbotson
Aggressive Growth
ETF Asset
Allocation Portfolio
– Class II		      Ibbotson
Balanced
ETF Asset
Allocation
Portfolio
– Class II		  

Assets:

            
           

Investments at fair value

    $ 290,406       $ 45,473,838       $ 14,164,200       $ 26,884,810   
           
  

 

 

     

 

 

     

 

 

     

 

 

  

Total assets

    $ 290,406       $ 45,473,838       $ 14,164,200       $ 26,884,810   
           

Liabilities:

            

Payable to PHL Variable Insurance Company

    $ -           $ -           $ -           $ -       
  

 

 

     

 

 

     

 

 

     

 

 

  

Total net assets

    $ 290,406       $ 45,473,838       $ 14,164,200       $ 26,884,810   
  

 

 

     

 

 

     

 

 

     

 

 

  

Net assets:

            

Accumulation units

    $ 290,406       $ 45,444,830       $ 14,164,200       $ 26,884,810   

Contracts in payout (annuitization) period

    $ -           $ 29,008       $ -           $ -       
           
  

 

 

     

 

 

     

 

 

     

 

 

  

Total net assets

    $ 290,406       $ 45,473,838       $ 14,164,200       $ 26,884,810   
  

 

 

     

 

 

     

 

 

     

 

 

  

Units outstanding

      284,656         41,775,126         14,436,888         26,855,080   
  

 

 

     

 

 

     

 

 

     

 

 

  
           

Investment shares held

      24,022         3,175,548         1,628,071         2,740,550   

Investments at cost

    $ 226,304       $ 53,772,656       $ 14,520,369       $ 27,428,818   
           

Unit value (accumulation)

            

Asset Manager Option 1

    $ -           $ -           $ -           $ -       

Asset Manager Option 2

    $ -           $ -           $ -           $ -       

Freedom Edge®

    $ -           $ 1.17       $ 0.98       $ 1.00   

Phoenix Dimensions® Option 1

    $ 1.03       $ 1.19       $ 0.98       $ 1.00   

Phoenix Dimensions® Option 2

    $ -           $ 1.17       $ 0.98       $ 1.00   

Phoenix Dimensions® Option 3

    $ -           $ 1.17       $ -           $ -       

Phoenix Dimensions® Option 4

    $ -           $ 1.16       $ 0.98       $ 1.00   

Phoenix Income Choice®

    $ -           $ 1.19       $ -           $ -       

Phoenix Investor’s Edge® Option 1

    $ 1.01       $ 1.16       $ 0.98       $ 1.00   

Phoenix Investor’s Edge® Option 2

    $ -           $ 1.15       $ 0.98       $ 1.00   

Phoenix Investor’s Edge® Option 3

    $ -           $ 1.14       $ -           $ -       

Phoenix Investor’s Edge® Option 4

    $ -           $ -           $ -           $ -       

Phoenix Premium Edge®

    $ 1.02       $ 1.17       $ 0.98       $ 1.00   

Phoenix Spectrum Edge® Option 1

    $ 1.04       $ 1.20       $ 0.98       $ 1.00   

Phoenix Spectrum Edge® Option 2

    $ -           $ 1.19       $ 0.98       $ 1.00   

Phoenix Spectrum Edge® Option 3

    $ 1.02       $ 1.18       $ 0.98       $ 1.00   

Phoenix Spectrum Edge® Option 4

    $ -           $ -           $ 0.98       $ -       

Phoenix Spectrum Edge® + Option 1

    $ -           $ 1.00       $ 0.98       $ 1.00   

Phoenix Spectrum Edge® + Option 2

    $ -           $ 1.00       $ 0.98       $ 1.00   

Retirement Planner’s Edge

    $ -           $ 1.18       $ 0.98       $ 1.00   

The Big Edge Choice®

    $ 1.03       $ 1.10       $ 0.98       $ 1.00   

The Phoenix Edge®—VA Option 1

    $ 1.04       $ 1.22       $ 0.99       $ 1.01   

The Phoenix Edge®—VA Option 2

    $ 1.03       $ 1.19       $ 0.98       $ 1.00   

The Phoenix Edge®—VA Option 3

    $ 1.03       $ 1.18       $ 0.98       $ 1.00   

 

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

 

SA - 4

Table of Contents

PHL VARIABLE ACCUMULATION ACCOUNT

STATEMENTS OF ASSETS AND LIABILITIES

December 31, 2011

(Continued)

 

     Ibbotson Growth
ETF Asset
Allocation Portfolio
– Class II		      Ibbotson Income
and Growth ETF
Asset Allocation
Portfolio – Class II		      Invesco
V.I. Capital
Appreciation
Fund –
Series I Shares		      Invesco V.I. Core
Equity Fund –
Series I Shares		  

Assets:

            
           

Investments at fair value

    $ 20,802,017       $ 33,062,140       $ 30,065,916       $ 6,169,357   
           
  

 

 

     

 

 

     

 

 

     

 

 

  

Total assets

    $ 20,802,017       $ 33,062,140       $ 30,065,916       $ 6,169,357   
           

Liabilities:

            

Payable to PHL Variable Insurance Company

    $ 1       $ -           $ 109       $ -       
  

 

 

     

 

 

     

 

 

     

 

 

  

Total net assets

    $ 20,802,016       $ 33,062,140       $ 30,065,807       $ 6,169,357   
  

 

 

     

 

 

     

 

 

     

 

 

  

Net assets:

            

Accumulation units

    $ 19,637,459       $ 33,062,140       $ 30,048,793       $ 6,154,790   

Contracts in payout (annuitization) period

    $ 1,164,557       $ -           $ 17,014       $ 14,567   
           
  

 

 

     

 

 

     

 

 

     

 

 

  

Total net assets

    $ 20,802,016       $ 33,062,140       $ 30,065,807       $ 6,169,357   
  

 

 

     

 

 

     

 

 

     

 

 

  

Units outstanding

      21,059,932         32,806,358         17,088,260         5,707,586   
  

 

 

     

 

 

     

 

 

     

 

 

  
           

Investment shares held

      2,293,496         3,151,777         1,403,638         230,889   

Investments at cost

    $ 21,497,020       $ 33,298,019       $ 29,655,810       $ 5,794,352   
           

Unit value (accumulation)

            

Asset Manager Option 1

    $ -           $ -           $ -           $ -       

Asset Manager Option 2

    $ -           $ -           $ -           $ -       

Freedom Edge®

    $ -           $ 1.01       $ 1.00       $ 1.06   

Phoenix Dimensions® Option 1

    $ 0.99       $ 1.01       $ 0.90       $ -       

Phoenix Dimensions® Option 2

    $ 0.99       $ 1.01       $ 0.89       $ -       

Phoenix Dimensions® Option 3

    $ -           $ -           $ -           $ -       

Phoenix Dimensions® Option 4

    $ 0.98       $ 1.00       $ 0.87       $ -       

Phoenix Income Choice®

    $ 0.99       $ -           $ 1.64       $ 1.08   

Phoenix Investor’s Edge® Option 1

    $ 0.98       $ 1.00       $ 1.74       $ 1.06   

Phoenix Investor’s Edge® Option 2

    $ 0.98       $ 1.00       $ 1.72       $ 1.05   

Phoenix Investor’s Edge® Option 3

    $ 0.98       $ 1.00       $ 1.69       $ 1.04   

Phoenix Investor’s Edge® Option 4

    $ -           $ -           $ 1.71       $ -       

Phoenix Premium Edge®

    $ 0.99       $ 1.01       $ 1.50       $ 1.06   

Phoenix Spectrum Edge® Option 1

    $ 0.99       $ 1.01       $ 1.84       $ 1.09   

Phoenix Spectrum Edge® Option 2

    $ 0.99       $ 1.01       $ 1.82       $ 1.08   

Phoenix Spectrum Edge® Option 3

    $ 0.99       $ 1.01       $ 1.79       $ 1.07   

Phoenix Spectrum Edge® Option 4

    $ -           $ 1.01       $ 1.81       $ 1.08   

Phoenix Spectrum Edge® + Option 1

    $ 0.99       $ 1.01       $ 0.72       $ -       

Phoenix Spectrum Edge® + Option 2

    $ 0.99       $ 1.01       $ 0.71       $ -       

Retirement Planner’s Edge

    $ 0.99       $ 1.01       $ 1.61       $ 1.07   

The Big Edge Choice®

    $ 0.99       $ 1.01       $ 1.63       $ 1.07   

The Phoenix Edge®—VA Option 1

    $ 0.99       $ 1.01       $ 1.63       $ 1.10   

The Phoenix Edge®—VA Option 2

    $ 0.99       $ 1.01       $ 1.56       $ 1.08   

The Phoenix Edge®—VA Option 3

    $ 0.99       $ 1.01       $ 1.62       $ 1.08   

 

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

 

SA - 5

Table of Contents

PHL VARIABLE ACCUMULATION ACCOUNT

STATEMENTS OF ASSETS AND LIABILITIES

December 31, 2011

(Continued)

 

    Invesco V.I. Mid
Cap Core Equity
Fund – Series I
Shares		     Invesco Van
Kampen V.I. Equity
and Income Fund –
Class II		     Lazard Retirement
U.S. Small-Mid Cap
Equity Portfolio –
Service Shares		     Lord Abbett Series
Fund Bond
Debenture Portfolio
– Class VC Shares		  

Assets:

        
       

Investments at fair value

   $ 2,232,032      $ 758,721      $ 953,476      $ 6,725,044   
       
 

 

 

    

 

 

    

 

 

    

 

 

  

Total assets

   $ 2,232,032      $ 758,721      $ 953,476      $ 6,725,044   
       

Liabilities:

        

Payable to PHL Variable Insurance Company

   $ -          $ -          $ -          $ 1   
 

 

 

    

 

 

    

 

 

    

 

 

  

Total net assets

   $ 2,232,032      $ 758,721      $ 953,476      $ 6,725,043   
 

 

 

    

 

 

    

 

 

    

 

 

  

Net assets:

        

Accumulation units

   $ 2,161,632      $ 758,721      $ 953,476      $ 6,637,901   

Contracts in payout (annuitization) period

   $ 70,400      $ -          $ -          $ 87,142   
       
 

 

 

    

 

 

    

 

 

    

 

 

  

Total net assets

   $ 2,232,032      $ 758,721      $ 953,476      $ 6,725,043   
 

 

 

    

 

 

    

 

 

    

 

 

  

Units outstanding

     1,854,922        708,463        803,721        4,784,978   
 

 

 

    

 

 

    

 

 

    

 

 

  
       

Investment shares held

     193,083        55,664        102,967        577,753   

Investments at cost

   $ 2,597,217      $ 761,586      $ 1,553,415      $ 6,730,074   
       

Unit value (accumulation)

        

Asset Manager Option 1

   $ -          $ -          $ -          $ -       

Asset Manager Option 2

   $ -          $ -          $ -          $ -       

Freedom Edge®

   $ -          $ -          $ 1.16      $ 1.39   

Phoenix Dimensions® Option 1

   $ -          $ 1.09      $ -          $ 1.42   

Phoenix Dimensions® Option 2

   $ -          $ -          $ -          $ 1.40   

Phoenix Dimensions® Option 3

   $ -          $ -          $ -          $ -       

Phoenix Dimensions® Option 4

   $ -          $ -          $ -          $ -       

Phoenix Income Choice®

   $ 1.21      $ -          $ -          $ 1.43   

Phoenix Investor’s Edge® Option 1

   $ 1.18      $ 1.07      $ 1.16      $ 1.39   

Phoenix Investor’s Edge® Option 2

   $ 1.17      $ 1.06      $ 1.15      $ 1.38   

Phoenix Investor’s Edge® Option 3

   $ 1.15      $ -          $ -          $ 1.36   

Phoenix Investor’s Edge® Option 4

   $ 1.16      $ -          $ 1.14      $ 1.37   

Phoenix Premium Edge®

   $ 1.18      $ 1.07      $ 1.16      $ 1.39   

Phoenix Spectrum Edge® Option 1

   $ 1.23      $ 1.10      $ 1.20      $ 1.44   

Phoenix Spectrum Edge® Option 2

   $ 1.21      $ 1.09      $ 1.19      $ 1.43   

Phoenix Spectrum Edge® Option 3

   $ 1.20      $ 1.08      $ 1.18      $ 1.41   

Phoenix Spectrum Edge® Option 4

   $ -          $ -          $ -          $ 1.42   

Phoenix Spectrum Edge® + Option 1

   $ -          $ -          $ -          $ 1.24   

Phoenix Spectrum Edge® + Option 2

   $ -          $ 0.95      $ -          $ 1.23   

Retirement Planner’s Edge

   $ 1.20      $ 1.08      $ 1.18      $ 1.41   

The Big Edge Choice®

   $ 1.20      $ 1.04      $ 1.18      $ 1.42   

The Phoenix Edge® —VA Option 1

   $ 1.24      $ 1.11      $ 1.22      $ 1.46   

The Phoenix Edge® —VA Option 2

   $ 1.21      $ 1.09      $ 1.19      $ 1.43   

The Phoenix Edge® —VA Option 3

   $ -          $ 1.08      $ 1.18      $ 1.42   

 

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

 

SA - 6

Table of Contents

PHL VARIABLE ACCUMULATION ACCOUNT

STATEMENTS OF ASSETS AND LIABILITIES

December 31, 2011

(Continued)

 

    Lord Abbett Series
Fund Growth and
Income Portfolio –
Class VC Shares		     Lord Abbett Series
Fund Mid Cap Value
Portfolio – Class VC
Shares		     Mutual Shares
Securities Fund –
Class 2		     Neuberger Berman
AMT Guardian
Portfolio – S Class		  

Assets:

        
       

Investments at fair value

   $ 79,037,306      $ 5,205,940      $ 52,741,604      $ 57,667,527   
       
 

 

 

    

 

 

    

 

 

    

 

 

  

Total assets

   $ 79,037,306      $ 5,205,940      $ 52,741,604      $ 57,667,527   
       

Liabilities:

        

Payable to PHL Variable Insurance Company

   $ 176      $ 1      $ 2      $ 3   
 

 

 

    

 

 

    

 

 

    

 

 

  

Total net assets

   $ 79,037,130      $ 5,205,939      $ 52,741,602      $ 57,667,524   
 

 

 

    

 

 

    

 

 

    

 

 

  

Net assets:

        

Accumulation units

   $ 78,976,918      $ 5,187,349      $ 52,717,742      $ 57,663,453   

Contracts in payout (annuitization) period

   $ 60,212      $ 18,590      $ 23,860      $ 4,071   
       
 

 

 

    

 

 

    

 

 

    

 

 

  

Total net assets

   $ 79,037,130      $ 5,205,939      $ 52,741,602      $ 57,667,524   
 

 

 

    

 

 

    

 

 

    

 

 

  

Units outstanding

     81,049,392        5,055,646        41,035,367        63,327,867   
 

 

 

    

 

 

    

 

 

    

 

 

  
       

Investment shares held

     3,568,276        328,244        3,429,233        3,170,288   

Investments at cost

   $ 95,408,285      $ 6,455,632      $ 59,917,362      $ 59,351,666   
       

Unit value (accumulation)

        

Asset Manager Option 1

   $ -          $ -          $ -          $ -       

Asset Manager Option 2

   $ -          $ -          $ -          $ -       

Freedom Edge®

   $ 0.96      $ 1.02      $ 1.31      $ 0.97   

Phoenix Dimensions® Option 1

   $ 0.99      $ 1.03      $ 1.07      $ 0.99   

Phoenix Dimensions® Option 2

   $ 0.97      $ 1.02      $ 1.05      $ 0.98   

Phoenix Dimensions® Option 3

   $ 0.97      $ -          $ 1.05      $ 0.98   

Phoenix Dimensions® Option 4

   $ 0.95      $ -          $ 1.03      $ 0.97   

Phoenix Income Choice®

   $ 0.98      $ 1.05      $ 2.53      $ 0.99   

Phoenix Investor’s Edge® Option 1

   $ 0.96      $ 1.02      $ 2.56      $ 0.97   

Phoenix Investor’s Edge® Option 2

   $ 0.95      $ 1.01      $ 2.52      $ 0.96   

Phoenix Investor’s Edge® Option 3

   $ 0.94      $ 1.00      $ 2.48      $ 0.95   

Phoenix Investor’s Edge® Option 4

   $ 0.94      $ 1.01      $ -          $ -       

Phoenix Premium Edge®

   $ 0.96      $ 1.02      $ 2.73      $ 0.97   

Phoenix Spectrum Edge® Option 1

   $ 0.99      $ 1.06      $ 2.71      $ 1.00   

Phoenix Spectrum Edge® Option 2

   $ 0.98      $ 1.05      $ 2.67      $ 0.99   

Phoenix Spectrum Edge® Option 3

   $ 0.97      $ 1.04      $ 2.63      $ 0.99   

Phoenix Spectrum Edge® Option 4

   $ 0.98      $ 1.04      $ -          $ 0.99   

Phoenix Spectrum Edge® + Option 1

   $ 0.77      $ 0.79      $ 0.78      $ 0.87   

Phoenix Spectrum Edge® + Option 2

   $ 0.76      $ 0.78      $ 0.78      $ 0.87   

Retirement Planner’s Edge

   $ 0.97      $ 1.04      $ 3.05      $ 0.99   

The Big Edge Choice®

   $ 0.98      $ 1.04      $ 1.64      $ 0.98   

The Phoenix Edge®—VA Option 1

   $ 1.01      $ 1.07      $ 3.20      $ 1.01   

The Phoenix Edge®—VA Option 2

   $ 0.98      $ 1.05      $ 3.03      $ 0.99   

The Phoenix Edge®—VA Option 3

   $ 0.98      $ 1.04      $ 3.08      $ 0.99   

 

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

 

SA - 7

Table of Contents

PHL VARIABLE ACCUMULATION ACCOUNT

STATEMENTS OF ASSETS AND LIABILITIES

December 31, 2011

(Continued)

 

    Neuberger Berman
AMT Small Cap
Growth Portfolio –
S Class		     Oppenheimer
Capital
Appreciation
Fund/VA –
Service
Shares		     Oppenheimer
Global Securities
Fund/VA – Service
Shares		     Oppenheimer
Main
Street Small- &
Mid-
Cap Fund®/VA –
Service Shares		  

Assets:

        
       

Investments at fair value

   $ 147,238      $ 935,419      $ 1,983,343      $ 38,808,979   
       
 

 

 

    

 

 

    

 

 

    

 

 

  

Total assets

   $ 147,238      $ 935,419      $ 1,983,343      $ 38,808,979   
       

Liabilities:

        

Payable to PHL Variable Insurance Company

   $ -          $ -          $ -          $ 3   
 

 

 

    

 

 

    

 

 

    

 

 

  

Total net assets

   $ 147,238      $ 935,419      $ 1,983,343      $ 38,808,976   
 

 

 

    

 

 

    

 

 

    

 

 

  

Net assets:

        

Accumulation units

   $ 147,238      $ 935,419      $ 1,983,343      $ 38,805,975   

Contracts in payout (annuitization) period

   $ -          $ -          $ -          $ 3,001   
       
 

 

 

    

 

 

    

 

 

    

 

 

  

Total net assets

   $ 147,238      $ 935,419      $ 1,983,343      $ 38,808,976   
 

 

 

    

 

 

    

 

 

    

 

 

  

Units outstanding

     183,722        1,035,199        2,168,522        43,377,086   
 

 

 

    

 

 

    

 

 

    

 

 

  
       

Investment shares held

     12,137        23,741        72,890        2,280,199   

Investments at cost

   $ 133,624      $ 927,183      $ 2,438,221      $ 38,074,565   
       

Unit value (accumulation)

        

Asset Manager Option 1

   $ -          $ -          $ -          $ -       

Asset Manager Option 2

   $ -          $ -          $ -          $ -       

Freedom Edge®

   $ -          $ -          $ -          $ 0.92   

Phoenix Dimensions® Option 1

   $ -          $ 0.92      $ 0.93      $ 0.94   

Phoenix Dimensions® Option 2

   $ 0.79      $ 0.90      $ 0.92      $ 0.93   

Phoenix Dimensions® Option 3

   $ -          $ 0.90      $ 0.92      $ 0.93   

Phoenix Dimensions® Option 4

   $ 0.78      $ -          $ 0.91      $ 0.92   

Phoenix Income Choice®

   $ -          $ -          $ -          $ 0.94   

Phoenix Investor’s Edge® Option 1

   $ 0.78      $ 0.90      $ 0.91      $ 0.92   

Phoenix Investor’s Edge® Option 2

   $ 0.78      $ 0.89      $ 0.90      $ 0.91   

Phoenix Investor’s Edge® Option 3

   $ -          $ -          $ 0.90      $ 0.91   

Phoenix Investor’s Edge® Option 4

   $ -          $ -          $ -          $ -       

Phoenix Premium Edge®

   $ 0.78      $ 0.90      $ 0.91      $ 0.92   

Phoenix Spectrum Edge® Option 1

   $ 0.81      $ 0.92      $ 0.94      $ 0.95   

Phoenix Spectrum Edge® Option 2

   $ 0.80      $ 0.92      $ 0.93      $ 0.94   

Phoenix Spectrum Edge® Option 3

   $ -          $ -          $ -          $ 0.93   

Phoenix Spectrum Edge® Option 4

   $ -          $ -          $ 0.93      $ 0.94   

Phoenix Spectrum Edge® + Option 1

   $ -          $ 0.84      $ 0.82      $ 0.87   

Phoenix Spectrum Edge® + Option 2

   $ -          $ 0.83      $ 0.81      $ 0.86   

Retirement Planner’s Edge

   $ 0.79      $ 0.91      $ 0.92      $ 0.93   

The Big Edge Choice®

   $ 0.84      $ 0.92      $ 0.92      $ 0.97   

The Phoenix Edge®—VA Option 1

   $ 0.82      $ 0.93      $ 0.95      $ 0.96   

The Phoenix Edge®—VA Option 2

   $ 0.80      $ 0.92      $ 0.93      $ 0.94   

The Phoenix Edge®—VA Option 3

   $ -          $ 0.91      $ 0.93      $ 0.94   

 

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

 

SA - 8

Table of Contents

PHL VARIABLE ACCUMULATION ACCOUNT

STATEMENTS OF ASSETS AND LIABILITIES

December 31, 2011

(Continued)

 

    PIMCO
CommodityReal
Return® Strategy
Portfolio –
Advisor
Class		     PIMCO Real
Return
Portfolio –
Advisor
Class		     PIMCO Total
Return
Portfolio –
Advisor
Class		     Rydex VT Inverse
Government Long
Bond Strategy Fund		  

Assets:

        
       

Investments at fair value

   $ 32,965,494      $ 10,040,458      $ 13,724,091      $ 733,229   
       
 

 

 

    

 

 

    

 

 

    

 

 

  

Total assets

   $ 32,965,494      $ 10,040,458      $ 13,724,091      $ 733,229   
       

Liabilities:

        

Payable to PHL Variable Insurance Company

   $ 2      $ -          $ -          $ -       
 

 

 

    

 

 

    

 

 

    

 

 

  

Total net assets

   $ 32,965,492      $ 10,040,458      $ 13,724,091      $ 733,229   
 

 

 

    

 

 

    

 

 

    

 

 

  

Net assets:

        

Accumulation units

   $ 32,963,254      $ 10,040,458      $ 13,724,091      $ 733,229   

Contracts in payout (annuitization) period

   $ 2,238      $ -          $ -          $ -       
       
 

 

 

    

 

 

    

 

 

    

 

 

  

Total net assets

   $ 32,965,492      $ 10,040,458      $ 13,724,091      $ 733,229   
 

 

 

    

 

 

    

 

 

    

 

 

  
       

Units outstanding

     32,868,738        7,250,080        9,870,164        1,767,258   
 

 

 

    

 

 

    

 

 

    

 

 

  
       

Investment shares held

     4,534,455        719,747        1,245,379        74,440   

Investments at cost

   $ 47,746,060      $ 9,540,580      $ 13,058,126      $ 1,747,184   
       

Unit value (accumulation)

        

Asset Manager Option 1

   $ -          $ -          $ -          $ -       

Asset Manager Option 2

   $ -          $ -          $ -          $ -       

Freedom Edge®

   $ 0.99      $ 1.37      $ 1.38      $ 0.37   

Phoenix Dimensions® Option 1

   $ 1.01      $ 1.39      $ 1.41      $ -       

Phoenix Dimensions® Option 2

   $ 0.99      $ 1.37      $ 1.39      $ -       

Phoenix Dimensions® Option 3

   $ 0.99      $ -          $ 1.39      $ -       

Phoenix Dimensions® Option 4

   $ 0.98      $ -          $ 1.37      $ -       

Phoenix Income Choice®

   $ 1.01      $ -          $ -          $ -       

Phoenix Investor’s Edge® Option 1

   $ 0.98      $ 1.36      $ 1.37      $ 0.41   

Phoenix Investor’s Edge® Option 2

   $ 0.97      $ 1.35      $ 1.36      $ 0.40   

Phoenix Investor’s Edge® Option 3

   $ 0.97      $ -          $ 1.35      $ 0.40   

Phoenix Investor’s Edge® Option 4

   $ -          $ -          $ -          $ -       

Phoenix Premium Edge®

   $ 0.99      $ 1.37      $ 1.38      $ 0.41   

Phoenix Spectrum Edge® Option 1

   $ 1.01      $ 1.41      $ 1.42      $ 0.43   

Phoenix Spectrum Edge® Option 2

   $ 1.01      $ 1.39      $ 1.41      $ 0.42   

Phoenix Spectrum Edge® Option 3

   $ 1.00      $ 1.38      $ 1.39      $ -       

Phoenix Spectrum Edge® Option 4

   $ 1.00      $ -          $ -          $ 0.42   

Phoenix Spectrum Edge® + Option 1

   $ 1.01      $ 1.36      $ 1.36      $ -       

Phoenix Spectrum Edge® + Option 2

   $ 1.00      $ 1.35      $ 1.35      $ -       

Retirement Planner’s Edge

   $ 1.00      $ 1.38      $ 1.39      $ -       

The Big Edge Choice®

   $ 1.05      $ 1.37      $ 1.37      $ -       

The Phoenix Edge®—VA Option 1

   $ 1.03      $ 1.42      $ 1.43      $ 0.43   

The Phoenix Edge®—VA Option 2

   $ 1.01      $ 1.39      $ 1.41      $ 0.42   

The Phoenix Edge®—VA Option 3

   $ 1.00      $ 1.39      $ 1.40      $ -       

 

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

 

SA - 9

Table of Contents

PHL VARIABLE ACCUMULATION ACCOUNT

STATEMENTS OF ASSETS AND LIABILITIES

December 31, 2011

(Continued)

 

     Rydex VT Nova
Fund		      Rydex|SGI VT U.S.
Long Short
Momentum Fund		      Sentinel Variable
Products Balanced
Fund		      Sentinel Variable
Products Bond
Fund		  

Assets:

            
           

Investments at fair value

    $ 696,169       $ 948,589       $ 1,957,047       $ 39,293,299   
           
  

 

 

     

 

 

     

 

 

     

 

 

  

Total assets

    $ 696,169       $ 948,589       $ 1,957,047       $ 39,293,299   
           

Liabilities:

            

Payable to PHL Variable Insurance Company

    $ -           $ -           $ -           $ -       
  

 

 

     

 

 

     

 

 

     

 

 

  

Total net assets

    $ 696,169       $ 948,589       $ 1,957,047       $ 39,293,299   
  

 

 

     

 

 

     

 

 

     

 

 

  

Net assets:

            

Accumulation units

    $ 696,169       $ 948,589       $ 1,957,047       $ 39,291,865   

Contracts in payout (annuitization) period

    $ -           $ -           $ -           $ 1,434   
           
  

 

 

     

 

 

     

 

 

     

 

 

  

Total net assets

    $ 696,169       $ 948,589       $ 1,957,047       $ 39,293,299   
  

 

 

     

 

 

     

 

 

     

 

 

  
           

Units outstanding

      616,011         681,912         1,880,912         30,820,813   
  

 

 

     

 

 

     

 

 

     

 

 

  
           

Investment shares held

      9,625         79,314         165,573         3,905,896   

Investments at cost

    $ 631,024       $ 832,206       $ 1,773,615       $ 39,600,044   
           

Unit value (accumulation)

            

Asset Manager Option 1

    $ -           $ -           $ -           $ -       

Asset Manager Option 2

    $ -           $ -           $ -           $ -       

Freedom Edge®

    $ -           $ 1.31       $ -           $ 1.26   

Phoenix Dimensions® Option 1

    $ -           $ -           $ 1.04       $ 1.28   

Phoenix Dimensions® Option 2

    $ -           $ -           $ -           $ 1.27   

Phoenix Dimensions® Option 3

    $ -           $ -           $ -           $ -       

Phoenix Dimensions® Option 4

    $ -           $ -           $ -           $ 1.25   

Phoenix Income Choice®

    $ -           $ -           $ -           $ 1.28   

Phoenix Investor’s Edge® Option 1

    $ 1.12       $ 1.36       $ 1.02       $ 1.26   

Phoenix Investor’s Edge® Option 2

    $ 1.10       $ 1.34       $ 1.02       $ 1.25   

Phoenix Investor’s Edge® Option 3

    $ 1.09       $ 1.32       $ -           $ 1.24   

Phoenix Investor’s Edge® Option 4

    $ -           $ -           $ -           $ -       

Phoenix Premium Edge®

    $ 1.12       $ 1.36       $ 1.03       $ 1.26   

Phoenix Spectrum Edge® Option 1

    $ 1.17       $ 1.43       $ 1.05       $ 1.29   

Phoenix Spectrum Edge® Option 2

    $ 1.16       $ 1.41       $ 1.04       $ 1.28   

Phoenix Spectrum Edge® Option 3

    $ 1.14       $ 1.39       $ 1.04       $ 1.27   

Phoenix Spectrum Edge® Option 4

    $ 1.15       $ 1.40       $ 1.04       $ 1.28   

Phoenix Spectrum Edge® + Option 1

    $ -           $ -           $ 1.04       $ 1.28   

Phoenix Spectrum Edge® + Option 2

    $ -           $ -           $ 1.04       $ 1.27   

Retirement Planner’s Edge

    $ -           $ 1.39       $ 1.04       $ 1.27   

The Big Edge Choice®

    $ -           $ 1.39       $ 1.04       $ 1.27   

The Phoenix Edge®—VA Option 1

    $ 1.19       $ 1.45       $ 1.06       $ 1.30   

The Phoenix Edge®—VA Option 2

    $ 1.16       $ 1.41       $ 1.04       $ 1.28   

The Phoenix Edge®—VA Option 3

    $ -           $ 1.39       $ 1.04       $ 1.27   

 

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

 

SA - 10

Table of Contents

PHL VARIABLE ACCUMULATION ACCOUNT

STATEMENTS OF ASSETS AND LIABILITIES

December 31, 2011

(Continued)

 

     Sentinel Variable
Products Common
Stock Fund		      Sentinel Variable
Products Mid Cap
Fund		      Sentinel Variable
Products Small
Company Fund		      Templeton
Developing Markets
Securities Fund –
Class 2		  

Assets:

            
           

Investments at fair value

    $ 125,340,681       $ 786,168       $ 18,040,075       $ 5,148,464   
           
  

 

 

     

 

 

     

 

 

     

 

 

  

Total assets

    $ 125,340,681       $ 786,168       $ 18,040,075       $ 5,148,464   
           

Liabilities:

            

Payable to PHL Variable Insurance Company

    $ 1       $ -           $ -           $ -       
  

 

 

     

 

 

     

 

 

     

 

 

  

Total net assets

    $ 125,340,680       $ 786,168       $ 18,040,075       $ 5,148,464   
  

 

 

     

 

 

     

 

 

     

 

 

  

Net assets:

            

Accumulation units

    $ 125,335,456       $ 786,168       $ 18,039,229       $ 5,148,464   

Contracts in payout (annuitization) period

    $ 5,224       $ -           $ 846       $ -       
           
  

 

 

     

 

 

     

 

 

     

 

 

  

Total net assets

    $ 125,340,680       $ 786,168       $ 18,040,075       $ 5,148,464   
  

 

 

     

 

 

     

 

 

     

 

 

  
           

Units outstanding

      127,941,646         852,745         17,266,368         3,227,658   
  

 

 

     

 

 

     

 

 

     

 

 

  
           

Investment shares held

      9,162,330         70,321         1,232,247         546,546   

Investments at cost

    $ 115,864,342       $ 787,859       $ 15,879,957       $ 5,785,984   
           

Unit value (accumulation)

            

Asset Manager Option 1

    $ -           $ -           $ -           $ -       

Asset Manager Option 2

    $ -           $ -           $ -           $ -       

Freedom Edge®

    $ 0.97       $ 0.91       $ 1.03       $ 1.02   

Phoenix Dimensions® Option 1

    $ 0.98       $ 0.92       $ 1.05       $ 1.04   

Phoenix Dimensions® Option 2

    $ 0.97       $ -           $ 1.04       $ 1.03   

Phoenix Dimensions® Option 3

    $ 0.97       $ -           $ 1.04       $ 1.03   

Phoenix Dimensions® Option 4

    $ 0.96       $ -           $ 1.03       $ -       

Phoenix Income Choice®

    $ 0.98       $ -           $ 1.05       $ -       

Phoenix Investor’s Edge® Option 1

    $ 0.97       $ 0.91       $ 1.03       $ 1.02   

Phoenix Investor’s Edge® Option 2

    $ 0.96       $ 0.90       $ 1.02       $ 1.01   

Phoenix Investor’s Edge® Option 3

    $ 0.95       $ -           $ 1.02       $ -       

Phoenix Investor’s Edge® Option 4

    $ -           $ -           $ -           $ -       

Phoenix Premium Edge®

    $ 0.97       $ 0.91       $ 1.03       $ 4.12   

Phoenix Spectrum Edge® Option 1

    $ 0.99       $ 0.93       $ 1.06       $ 1.05   

Phoenix Spectrum Edge® Option 2

    $ 0.98       $ 0.92       $ 1.05       $ 1.04   

Phoenix Spectrum Edge® Option 3

    $ 0.98       $ -           $ 1.04       $ 1.03   

Phoenix Spectrum Edge® Option 4

    $ 0.98       $ -           $ -           $ 1.04   

Phoenix Spectrum Edge® + Option 1

    $ 0.99       $ 0.93       $ 1.05       $ 0.89   

Phoenix Spectrum Edge® + Option 2

    $ 0.98       $ 0.92       $ 1.04       $ 0.88   

Retirement Planner’s Edge

    $ 0.98       $ 0.92       $ 1.04       $ 3.58   

The Big Edge Choice®

    $ 0.98       $ 0.92       $ 1.04       $ 1.34   

The Phoenix Edge®—VA Option 1

    $ 1.00       $ 0.94       $ 1.07       $ 4.41   

The Phoenix Edge®—VA Option 2

    $ 0.98       $ 0.92       $ 1.05       $ 4.23   

The Phoenix Edge®—VA Option 3

    $ 0.98       $ 0.92       $ 1.04       $ 3.61   

 

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

 

SA - 11

Table of Contents

PHL VARIABLE ACCUMULATION ACCOUNT

STATEMENTS OF ASSETS AND LIABILITIES

December 31, 2011

(Continued)

 

     Templeton Foreign
Securities Fund –
Class 2		      Templeton Growth
Securities Fund –
Class 2		      Virtus Capital
Growth Series		      Virtus Growth &
Income Series		  

Assets:

            
           

Investments at fair value

    $ 11,930,351       $ 48,831,773       $ 34,104,341       $ 75,525,202   
           
  

 

 

     

 

 

     

 

 

     

 

 

  

Total assets

    $ 11,930,351       $ 48,831,773       $ 34,104,341       $ 75,525,202   
           

Liabilities:

            

Payable to PHL Variable Insurance Company

    $ 1       $ 1       $ -           $ 89   
  

 

 

     

 

 

     

 

 

     

 

 

  

Total net assets

    $ 11,930,350       $ 48,831,772       $ 34,104,341       $ 75,525,113   
  

 

 

     

 

 

     

 

 

     

 

 

  

Net assets:

            

Accumulation units

    $ 11,874,431       $ 48,813,083       $ 34,031,018       $ 64,410,004   

Contracts in payout (annuitization) period

    $ 55,919       $ 18,689       $ 73,323       $ 11,115,109   
           
  

 

 

     

 

 

     

 

 

     

 

 

  

Total net assets

    $ 11,930,350       $ 48,831,772       $ 34,104,341       $ 75,525,113   
  

 

 

     

 

 

     

 

 

     

 

 

  
           

Units outstanding

      5,713,521         45,187,062         29,450,886         43,299,709   
  

 

 

     

 

 

     

 

 

     

 

 

  
           

Investment shares held

      949,871         4,830,044         2,437,875         6,036,544   

Investments at cost

    $ 13,599,213       $ 63,776,398       $ 49,072,498       $ 68,771,535   
           

Unit value (accumulation)

            

Asset Manager Option 1

    $ -           $ -           $ -           $ -       

Asset Manager Option 2

    $ -           $ 2.76       $ -           $ 2.98   

Freedom Edge®

    $ 1.48       $ 1.21       $ -           $ 1.27   

Phoenix Dimensions® Option 1

    $ 1.14       $ 0.95       $ 0.94       $ 1.07   

Phoenix Dimensions® Option 2

    $ 1.13       $ 0.93       $ -           $ 1.05   

Phoenix Dimensions® Option 3

    $ 1.13       $ 0.93       $ -           $ 1.05   

Phoenix Dimensions® Option 4

    $ 1.11       $ 0.92       $ -           $ 1.04   

Phoenix Income Choice®

    $ 2.52       $ 2.23       $ 1.53       $ 2.14   

Phoenix Income Choice® with GPAF

             $ 1.04   

Phoenix Investor’s Edge® Option 1

    $ 2.69       $ 2.21       $ 1.71       $ 2.19   

Phoenix Investor’s Edge® Option 2

    $ 2.65       $ 2.18       $ 1.68       $ 2.16   

Phoenix Investor’s Edge® Option 3

    $ 2.61       $ 2.14       $ 1.65       $ 2.13   

Phoenix Investor’s Edge® Option 4

    $ 2.64       $ -           $ 1.67       $ 2.15   

Phoenix Premium Edge®

    $ 2.10       $ 2.13       $ 0.88       $ 1.82   

Phoenix Spectrum Edge® Option 1

    $ 2.85       $ 2.34       $ 1.80       $ 2.32   

Phoenix Spectrum Edge® Option 2

    $ 2.81       $ 2.30       $ 1.78       $ 2.29   

Phoenix Spectrum Edge® Option 3

    $ 2.76       $ 2.27       $ 1.75       $ 2.25   

Phoenix Spectrum Edge® Option 4

    $ 2.79       $ -           $ 1.77       $ 2.27   

Phoenix Spectrum Edge® + Option 1

    $ 0.79       $ 0.69       $ 0.82       $ 0.83   

Phoenix Spectrum Edge® + Option 2

    $ 0.79       $ 0.68       $ 0.81       $ 0.83   

Retirement Planner’s Edge

    $ 2.42       $ 2.55       $ 1.14       $ 2.00   

The Big Edge Choice®

    $ 1.53       $ 1.52       $ 1.07       $ 1.27   

The Phoenix Edge®—VA Option 1

    $ 2.53       $ 2.77       $ 1.17       $ 2.13   

The Phoenix Edge®—VA Option 2

    $ 2.49       $ 2.73       $ 1.12       $ 2.01   

The Phoenix Edge®—VA Option 3

    $ 2.29       $ 2.38       $ 1.10       $ 2.07   

 

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

 

SA - 12

Table of Contents

PHL VARIABLE ACCUMULATION ACCOUNT

STATEMENTS OF ASSETS AND LIABILITIES

December 31, 2011

(Continued)

 

     Virtus International
Series		      Virtus Multi-Sector
Fixed Income
Series		      Virtus Real Estate
Securities Series		      Virtus Small-Cap
Growth Series		  

Assets:

            
           

Investments at fair value

    $ 232,243,303       $ 126,187,780       $ 66,816,346       $ 26,176,213   
           
  

 

 

     

 

 

     

 

 

     

 

 

  

Total assets

    $ 232,243,303       $ 126,187,780       $ 66,816,346       $ 26,176,213   
           

Liabilities:

            

Payable to PHL Variable Insurance Company

    $ 9       $ 96       $ 64       $ -       
  

 

 

     

 

 

     

 

 

     

 

 

  

Total net assets

    $ 232,243,294       $ 126,187,684       $ 66,816,282       $ 26,176,213   
  

 

 

     

 

 

     

 

 

     

 

 

  

Net assets:

            

Accumulation units

    $ 232,089,185       $ 125,984,824       $ 66,726,572       $ 26,132,015   

Contracts in payout (annuitization) period

    $ 154,109       $ 202,860       $ 89,710       $ 44,198   
           
  

 

 

     

 

 

     

 

 

     

 

 

  

Total net assets

    $ 232,243,294       $ 126,187,684       $ 66,816,282       $ 26,176,213   
  

 

 

     

 

 

     

 

 

     

 

 

  
           

Units outstanding

      127,920,169         59,260,375         32,374,278         7,018,564   
  

 

 

     

 

 

     

 

 

     

 

 

  
           

Investment shares held

      15,202,149         13,746,842         2,551,849         1,865,344   

Investments at cost

    $ 238,878,413       $ 123,690,035       $ 59,589,239       $ 25,377,134   
           

Unit value (accumulation)

            

Asset Manager Option 1

    $ -           $ -           $ -           $ -       

Asset Manager Option 2

    $ -           $ 3.70       $ -           $ -       

Freedom Edge®

    $ 2.01       $ 1.52       $ 2.11       $ 1.47   

Phoenix Dimensions® Option 1

    $ 1.50       $ 1.41       $ 1.35       $ 1.33   

Phoenix Dimensions® Option 2

    $ 1.47       $ 1.38       $ 1.33       $ 1.31   

Phoenix Dimensions® Option 3

    $ 1.47       $ -           $ 1.33       $ -       

Phoenix Dimensions® Option 4

    $ 1.45       $ 1.36       $ 1.31       $ 1.29   

Phoenix Income Choice®

    $ 3.51       $ 3.71       $ 5.78       $ 4.02   

Phoenix Investor’s Edge® Option 1

    $ 3.77       $ 3.48       $ 5.51       $ 3.87   

Phoenix Investor’s Edge® Option 2

    $ 3.72       $ 3.42       $ 5.42       $ 3.81   

Phoenix Investor’s Edge® Option 3

    $ 3.66       $ 3.37       $ 5.34       $ 3.76   

Phoenix Investor’s Edge® Option 4

    $ 3.70       $ 3.40       $ 5.40       $ 3.79   

Phoenix Premium Edge®

    $ 2.35       $ 3.77       $ 6.48       $ 3.89   

Phoenix Spectrum Edge® Option 1

    $ 3.99       $ 3.68       $ 5.82       $ 4.08   

Phoenix Spectrum Edge® Option 2

    $ 3.93       $ 3.62       $ 5.74       $ 4.02   

Phoenix Spectrum Edge® Option 3

    $ 3.87       $ 3.57       $ 5.65       $ 3.96   

Phoenix Spectrum Edge® Option 4

    $ 3.91       $ 3.60       $ 5.71       $ 4.00   

Phoenix Spectrum Edge® + Option 1

    $ 0.93       $ 1.30       $ 0.95       $ 0.90   

Phoenix Spectrum Edge® + Option 2

    $ 0.92       $ 1.29       $ 0.94       $ 0.89   

Retirement Planner’s Edge

    $ 2.75       $ 4.00       $ 8.10       $ 3.96   

The Big Edge Choice®

    $ 2.48       $ 2.47       $ 5.01       $ 3.97   

The Phoenix Edge®—VA Option 1

    $ 2.95       $ 4.29       $ 8.54       $ 4.15   

The Phoenix Edge®—VA Option 2

    $ 2.76       $ 4.11       $ 8.11       $ 4.02   

The Phoenix Edge®—VA Option 3

    $ 2.59       $ 3.86       $ 7.65       $ 3.98   

 

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

 

SA - 13

Table of Contents

PHL VARIABLE ACCUMULATION ACCOUNT

STATEMENTS OF ASSETS AND LIABILITIES

December 31, 2011

(Continued)

 

     Virtus Small-Cap
Value Series		      Virtus Strategic
Allocation Series		      Wanger
International		      Wanger
International Select		  

Assets:

            
           

Investments at fair value

    $ 83,490,883       $ 26,148,734       $ 73,646,752       $ 7,013,627   
           
  

 

 

     

 

 

     

 

 

     

 

 

  

Total assets

    $ 83,490,883       $ 26,148,734       $ 73,646,752       $ 7,013,627   
           

Liabilities:

            

Payable to PHL Variable Insurance Company

    $ 1       $ 1       $ 59       $ -       
  

 

 

     

 

 

     

 

 

     

 

 

  

Total net assets

    $ 83,490,882       $ 26,148,733       $ 73,646,693       $ 7,013,627   
  

 

 

     

 

 

     

 

 

     

 

 

  

Net assets:

            

Accumulation units

    $ 83,474,607       $ 26,006,148       $ 73,547,200       $ 7,013,627   

Contracts in payout (annuitization) period

    $ 16,275       $ 142,585       $ 99,493       $ -       
           
  

 

 

     

 

 

     

 

 

     

 

 

  

Total net assets

    $ 83,490,882       $ 26,148,733       $ 73,646,693       $ 7,013,627   
  

 

 

     

 

 

     

 

 

     

 

 

  
           

Units outstanding

      51,382,650         10,930,799         31,350,302         2,465,098   
  

 

 

     

 

 

     

 

 

     

 

 

  
           

Investment shares held

      6,966,065         2,148,710         2,558,065         426,621   

Investments at cost

    $ 89,057,843       $ 30,480,745       $ 59,364,017       $ 6,679,002   
           

Unit value (accumulation)

            

Asset Manager Option 1

    $ -           $ -           $ -           $ -       

Asset Manager Option 2

    $ -           $ 3.15       $ -           $ -       

Freedom Edge®

    $ 1.50       $ 1.33       $ 2.39       $ 2.11   

Phoenix Dimensions® Option 1

    $ 1.05       $ 1.20       $ 1.51       $ 1.45   

Phoenix Dimensions® Option 2

    $ 1.03       $ 1.18       $ 1.48       $ 1.42   

Phoenix Dimensions® Option 3

    $ 1.03       $ -           $ 1.48       $ -       

Phoenix Dimensions® Option 4

    $ 1.01       $ -           $ 1.46       $ 1.40   

Phoenix Income Choice®

    $ 3.41       $ 2.63       $ 4.22       $ -       

Phoenix Investor’s Edge® Option 1

    $ 3.29       $ 2.54       $ 4.85       $ 4.08   

Phoenix Investor’s Edge® Option 2

    $ 3.24       $ 2.50       $ 4.78       $ 4.02   

Phoenix Investor’s Edge® Option 3

    $ 3.19       $ 2.47       $ 4.71       $ -       

Phoenix Investor’s Edge® Option 4

    $ 3.23       $ 2.49       $ 4.76       $ 4.00   

Phoenix Premium Edge®

    $ 3.45       $ 2.50       $ 2.75       $ 2.55   

Phoenix Spectrum Edge® Option 1

    $ 3.48       $ 2.69       $ 5.13       $ 4.32   

Phoenix Spectrum Edge® Option 2

    $ 3.43       $ 2.65       $ 5.06       $ 4.25   

Phoenix Spectrum Edge® Option 3

    $ 3.38       $ 2.61       $ 4.98       $ 4.19   

Phoenix Spectrum Edge® Option 4

    $ 3.41       $ 2.63       $ 5.03       $ 4.23   

Phoenix Spectrum Edge® + Option 1

    $ 0.77       $ 1.02       $ 0.86       $ 0.85   

Phoenix Spectrum Edge® + Option 2

    $ 0.77       $ 1.01       $ 0.85       $ 0.84   

Retirement Planner’s Edge

    $ 3.62       $ 2.70       $ 4.27       $ 4.37   

The Big Edge Choice®

    $ 3.90       $ 2.25       $ 4.78       $ 2.67   

The Phoenix Edge®—VA Option 1

    $ 4.14       $ 2.99       $ 4.55       $ 4.62   

The Phoenix Edge®—VA Option 2

    $ 3.69       $ 2.81       $ 4.26       $ 4.33   

The Phoenix Edge®—VA Option 3

    $ 3.88       $ 2.75       $ 4.20       $ 4.28   

 

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

 

SA - 14

Table of Contents

PHL VARIABLE ACCUMULATION ACCOUNT

STATEMENTS OF ASSETS AND LIABILITIES

December 31, 2011

(Continued)

 

     Wanger Select      Wanger USA  

Assets:

      
     

Investments at fair value

    $ 8,906,774       $ 38,475,101   
     
  

 

 

     

 

 

  

Total assets

    $ 8,906,774       $ 38,475,101   
     

Liabilities:

      

Payable to PHL Variable Insurance Company

    $ -           $ 1   
  

 

 

     

 

 

  

Total net assets

    $ 8,906,774       $ 38,475,100   
  

 

 

     

 

 

  

Net assets:

      

Accumulation units

    $ 8,906,655       $ 38,357,651   

Contracts in payout (annuitization) period

    $ 119       $ 117,449   
     
  

 

 

     

 

 

  

Total net assets

    $ 8,906,774       $ 38,475,100   
  

 

 

     

 

 

  
     

Units outstanding

      2,996,282         10,915,030   
  

 

 

     

 

 

  
     

Investment shares held

      381,447         1,291,111   

Investments at cost

    $ 6,140,144       $ 23,939,815   
     

Unit value (accumulation)

      

Asset Manager Option 1

    $ -           $ -       

Asset Manager Option 2

    $ -           $ -       

Freedom Edge®

    $ 1.42       $ 1.54   

Phoenix Dimensions® Option 1

    $ 1.21       $ 1.17   

Phoenix Dimensions® Option 2

    $ 1.19       $ 1.15   

Phoenix Dimensions® Option 3

    $ -           $ 1.15   

Phoenix Dimensions® Option 4

    $ -           $ -       

Phoenix Income Choice®

    $ 3.50       $ 3.24   

Phoenix Investor’s Edge® Option 1

    $ 3.28       $ 3.28   

Phoenix Investor’s Edge® Option 2

    $ 3.23       $ 3.23   

Phoenix Investor’s Edge® Option 3

    $ 3.18       $ 3.18   

Phoenix Investor’s Edge® Option 4

    $ 3.21       $ -       

Phoenix Premium Edge®

    $ 3.44       $ 3.67   

Phoenix Spectrum Edge® Option 1

    $ 3.47       $ 3.47   

Phoenix Spectrum Edge® Option 2

    $ 3.41       $ 3.42   

Phoenix Spectrum Edge® Option 3

    $ 3.36       $ 3.37   

Phoenix Spectrum Edge® Option 4

    $ 3.40       $ -       

Phoenix Spectrum Edge® + Option 1

    $ 0.79       $ 0.93   

Phoenix Spectrum Edge® + Option 2

    $ 0.79       $ 0.92   

Retirement Planner’s Edge

    $ 4.37       $ 3.66   

The Big Edge Choice®

    $ 2.54       $ 3.67   

The Phoenix Edge®—VA Option 1

    $ 4.52       $ 3.86   

The Phoenix Edge®—VA Option 2

    $ 4.25       $ 3.66   

The Phoenix Edge®—VA Option 3

    $ 4.11       $ 3.65   

 

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

 

SA - 15

Table of Contents

PHL VARIABLE ACCUMULATION ACCOUNT

STATEMENTS OF OPERATIONS

For the period ended December 31, 2011

 

     Alger Capital
Appreciation
Portfolio – Class I-2
Shares		     AllianceBernstein
VPS Balanced
Wealth Strategy
Portfolio – Class B		     Calvert VP S&P
MidCap 400 Index
Portfolio – Class I
Shares		     DWS Equity 500
Index VIP – Class A		  
        

Income:

         

Dividends

    $ 5,786      $ 106,636      $ 9,161      $ 825,305   

Expenses:

         

Mortality and expense fees

      62,372        60,359        14,480        557,288   

Administrative fees

      6,424        5,753        1,494        58,961   
  

 

 

    

 

 

    

 

 

    

 

 

  

Net investment income (loss)

      (63,010 )      40,524        (6,813 )      209,056   
  

 

 

    

 

 

    

 

 

    

 

 

  
        

Realized gains (losses) on investments

         

Realized gain (loss) on sale of fund shares

      896,153        17,478        (3,594 )      425,757   

Realized gain distributions

      -            -            -            -       
  

 

 

    

 

 

    

 

 

    

 

 

  

Realized gain (loss)

      896,153        17,478        (3,594 )      425,757   
  

 

 

    

 

 

    

 

 

    

 

 

  
        

Change in unrealized appreciation (depreciation)
during the year

      (867,404 )      (275,235 )      (86,498 )      (245,021 ) 
  

 

 

    

 

 

    

 

 

    

 

 

  

Net increase (decrease) in net assets from operations

    $ (34,261 )    $ (217,233 )    $ (96,905 )    $ 389,792   
  

 

 

    

 

 

    

 

 

    

 

 

  
     DWS Small Cap
Index VIP – Class A		     Federated Fund for
U.S. Government
Securities II		     Federated High
Income Bond Fund
II – Primary Shares		     Federated Prime
Money Fund II		  

Income:

         

Dividends

    $ 6,125      $ 5,716,905      $ 1,251,379      $ 1   

Expenses:

         

Mortality and expense fees

      6,027        1,532,727        169,547        739,141   

Administrative fees

      649        166,402        16,935        76,171   
  

 

 

    

 

 

    

 

 

    

 

 

  

Net investment income (loss)

      (551 )      4,017,776        1,064,897        (815,311 ) 
  

 

 

    

 

 

    

 

 

    

 

 

  
        

Realized gains (losses) on investments

         

Realized gain (loss) on sale of fund shares

      (4,359 )      361,796        (235,139 )      -       

Realized gain distributions

      -            -            -            -       
  

 

 

    

 

 

    

 

 

    

 

 

  

Realized gain (loss)

      (4,359 )      361,796        (235,139 )      -       
  

 

 

    

 

 

    

 

 

    

 

 

  
        

Change in unrealized appreciation (depreciation)
during the year

      (24,327 )      1,427,302        (321,062 )      -       
  

 

 

    

 

 

    

 

 

    

 

 

  

Net increase (decrease) in net assets from operations

    $ (29,237 )    $ 5,806,874      $ 508,696      $ (815,311 ) 
  

 

 

    

 

 

    

 

 

    

 

 

  

 

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

 

SA - 16

Table of Contents

PHL VARIABLE ACCUMULATION ACCOUNT

STATEMENTS OF OPERATIONS

For the period ended December 31, 2011

(Continued)

 

     Fidelity® VIP
Contrafund®
Portfolio – Service
Class		     Fidelity® VIP  Growth
Opportunities
Portfolio – Service
Class		     Fidelity® VIP  Growth
Portfolio – Service
Class		     Fidelity® VIP
Investment Grade
Bond Portfolio –
Service Class		  
        

Income:

         

Dividends

    $ 311,704      $ 63,610      $ 40,607      $ 1,793,040   

Expenses:

         

Mortality and expense fees

      474,959        1,416,094        200,151        685,567   

Administrative fees

      48,719        148,698        21,635        70,804   
  

 

 

    

 

 

    

 

 

    

 

 

  

Net investment income (loss)

      (211,974 )      (1,501,182 )      (181,179 )      1,036,669   
  

 

 

    

 

 

    

 

 

    

 

 

  
        

Realized gains (losses) on investments

         

Realized gain (loss) on sale of fund shares

      507,166        3,827,488        1,225,966        176,410   

Realized gain distributions

      -            -            60,979        1,502,743   
  

 

 

    

 

 

    

 

 

    

 

 

  

Realized gain (loss)

      507,166        3,827,488        1,286,945        1,679,153   
  

 

 

    

 

 

    

 

 

    

 

 

  
        

Change in unrealized appreciation (depreciation)
during the year

      (1,663,815 )      (677,390 )      (1,105,260 )      474,953   
  

 

 

    

 

 

    

 

 

    

 

 

  

Net increase (decrease) in net assets from operations

    $ (1,368,623 )    $ 1,648,916      $ 506      $ 3,190,775   
  

 

 

    

 

 

    

 

 

    

 

 

  
     Franklin Flex Cap
Growth Securities
Fund – Class 2		     Franklin Income
Securities Fund –
Class 2		     Ibbotson
Aggressive Growth
ETF Asset
Allocation Portfolio
– Class II		     Ibbotson Balanced
ETF Asset
Allocation Portfolio
– Class II		  

Income:

         

Dividends

    $ -          $ 2,957,352      $ 147,165      $ 274,619   

Expenses:

         

Mortality and expense fees

      4,378        659,393        185,253        360,768   

Administrative fees

      390        63,297        19,480        35,332   
  

 

 

    

 

 

    

 

 

    

 

 

  

Net investment income (loss)

      (4,768 )      2,234,662        (57,568 )      (121,481 ) 
  

 

 

    

 

 

    

 

 

    

 

 

  
        

Realized gains (losses) on investments

         

Realized gain (loss) on sale of fund shares

      8,215        (329,255 )      78,727        (31,665 ) 

Realized gain distributions

      -            -            -            432,083   
  

 

 

    

 

 

    

 

 

    

 

 

  

Realized gain (loss)

      8,215        (329,255 )      78,727        400,418   
  

 

 

    

 

 

    

 

 

    

 

 

  
        

Change in unrealized appreciation (depreciation)
during the year

      (19,385 )      (1,475,150 )      (970,550 )      (989,650 ) 
  

 

 

    

 

 

    

 

 

    

 

 

  

Net increase (decrease) in net assets from operations

    $ (15,938 )    $ 430,257      $ (949,391 )    $ (710,713 ) 
  

 

 

    

 

 

    

 

 

    

 

 

  

 

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

 

SA - 17

Table of Contents

PHL VARIABLE ACCUMULATION ACCOUNT

STATEMENTS OF OPERATIONS

For the period ended December 31, 2011

(Continued)

 

     Ibbotson Growth
ETF Asset
Allocation Portfolio
– Class II		     Ibbotson Income
and Growth ETF
Asset Allocation
Portfolio – Class II		     Invesco V.I. Capital
Appreciation Fund –
Series I Shares		     Invesco V.I. Core
Equity Fund –
Series I Shares		  
        

Income:

         

Dividends

    $ 245,937      $ 282,392      $ 51,679      $ 66,861   

Expenses:

         

Mortality and expense fees

      289,073        421,415        401,304        83,246   

Administrative fees

      27,271        40,830        43,814        8,967   
  

 

 

    

 

 

    

 

 

    

 

 

  

Net investment income (loss)

      (70,407 )      (179,853 )      (393,439 )      (25,352 ) 
  

 

 

    

 

 

    

 

 

    

 

 

  
        

Realized gains (losses) on investments

         

Realized gain (loss) on sale of fund shares

      159,308        78,604        (100,262 )      149,557   

Realized gain distributions

      246,553        529,313        -            -       
  

 

 

    

 

 

    

 

 

    

 

 

  

Realized gain (loss)

      405,861        607,917        (100,262 )      149,557   
  

 

 

    

 

 

    

 

 

    

 

 

  
        

Change in unrealized appreciation (depreciation)
during the year

      (1,387,576 )      (539,873 )      (2,485,307 )      (179,268 ) 
  

 

 

    

 

 

    

 

 

    

 

 

  

Net increase (decrease) in net assets from operations

    $ (1,052,122 )    $ (111,809 )    $ (2,979,008 )    $ (55,063 ) 
  

 

 

    

 

 

    

 

 

    

 

 

  
     Invesco V.I. Mid
Cap Core Equity
Fund – Series I
Shares		     Invesco Van
Kampen V.I. Equity
and Income Fund –
Class II		     Lazard Retirement
U.S. Small-Mid Cap
Equity Portfolio –
Service Shares		     Lord Abbett Series
Fund Bond
Debenture Portfolio
– Class VC Shares		  

Income:

         

Dividends

    $ 7,491      $ 15,585      $ -          $ 391,272   

Expenses:

         

Mortality and expense fees

      34,151        11,402        13,814        95,069   

Administrative fees

      3,383        1,093        1,434        9,345   
  

 

 

    

 

 

    

 

 

    

 

 

  

Net investment income (loss)

      (30,043 )      3,090        (15,248 )      286,858   
  

 

 

    

 

 

    

 

 

    

 

 

  
        

Realized gains (losses) on investments

         

Realized gain (loss) on sale of fund shares

      (49,235 )      14,019        (65,379 )      112,818   

Realized gain distributions

      -            -            75,700        48,812   
  

 

 

    

 

 

    

 

 

    

 

 

  

Realized gain (loss)

      (49,235 )      14,019        10,321        161,630   
  

 

 

    

 

 

    

 

 

    

 

 

  
        

Change in unrealized appreciation (depreciation)
during the year

      (71,372 )      (42,474 )      (109,828 )      (226,124 ) 
  

 

 

    

 

 

    

 

 

    

 

 

  

Net increase (decrease) in net assets from operations

    $ (150,650 )    $ (25,365 )    $ (114,755 )    $ 222,364   
  

 

 

    

 

 

    

 

 

    

 

 

  

 

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

 

SA - 18

Table of Contents

PHL VARIABLE ACCUMULATION ACCOUNT

STATEMENTS OF OPERATIONS

For the period ended December 31, 2011

(Continued)

 

     Lord Abbett Series
Fund Growth and
Income Portfolio –
Class VC Shares		     Lord Abbett Series
Fund Mid Cap Value
Portfolio – Class VC
Shares		     Mutual Shares
Securities Fund –
Class 2		     Neuberger Berman
AMT Guardian
Portfolio – S Class		  
        

Income:

         

Dividends

    $ 616,843      $ 11,602      $ 1,359,364      $ 219,271   

Expenses:

         

Mortality and expense fees

      1,024,404        75,511        753,870        760,507   

Administrative fees

      111,113        7,587        73,235        78,634   
  

 

 

    

 

 

    

 

 

    

 

 

  

Net investment income (loss)

      (518,674 )      (71,496 )      532,259        (619,870 ) 
  

 

 

    

 

 

    

 

 

    

 

 

  
        

Realized gains (losses) on investments

         

Realized gain (loss) on sale of fund shares

      (2,676,033 )      (177,504 )      (410,764 )      1,744,378   

Realized gain distributions

      -            -            -            -       
  

 

 

    

 

 

    

 

 

    

 

 

  

Realized gain (loss)

      (2,676,033 )      (177,504 )      (410,764 )      1,744,378   
  

 

 

    

 

 

    

 

 

    

 

 

  
        

Change in unrealized appreciation (depreciation)
during the year

      (3,129,598 )      (55,783 )      (1,550,266 )      (3,664,676 ) 
  

 

 

    

 

 

    

 

 

    

 

 

  

Net increase (decrease) in net assets from operations

    $ (6,324,305 )    $ (304,783 )    $ (1,428,771 )    $ (2,540,168 ) 
  

 

 

    

 

 

    

 

 

    

 

 

  
     Neuberger Berman
AMT Small Cap
Growth Portfolio –
S Class		     Oppenheimer
Capital
Appreciation
Fund/VA – Service
Shares		     Oppenheimer
Global Securities
Fund/VA – Service
Shares		     Oppenheimer Main
Street Small- & Mid-
Cap Fund®/VA –
Service Shares		  

Income:

         

Dividends

    $ -          $ 1,119      $ 25,411      $ 168,560   

Expenses:

         

Mortality and expense fees

      2,527        11,671        30,459        506,349   

Administrative fees

      246        1,197        2,918        52,382   
  

 

 

    

 

 

    

 

 

    

 

 

  

Net investment income (loss)

      (2,773 )      (11,749 )      (7,966 )      (390,171 ) 
  

 

 

    

 

 

    

 

 

    

 

 

  
        

Realized gains (losses) on investments

         

Realized gain (loss) on sale of fund shares

      11,668        94,178        8,583        1,343,996   

Realized gain distributions

      -            -            -            -       
  

 

 

    

 

 

    

 

 

    

 

 

  

Realized gain (loss)

      11,668        94,178        8,583        1,343,996   
  

 

 

    

 

 

    

 

 

    

 

 

  
        

Change in unrealized appreciation (depreciation)
during the year

      (11,157 )      (104,767 )      (212,799 )      (2,368,799 ) 
  

 

 

    

 

 

    

 

 

    

 

 

  

Net increase (decrease) in net assets from operations

    $ (2,262 )    $ (22,338 )    $ (212,182 )    $ (1,414,974 ) 
  

 

 

    

 

 

    

 

 

    

 

 

  

 

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

 

SA - 19

Table of Contents

PHL VARIABLE ACCUMULATION ACCOUNT

STATEMENTS OF OPERATIONS

For the period ended December 31, 2011

(Continued)

 

     PIMCO
CommodityReal
Return® Strategy
Portfolio – Advisor
Class		     PIMCO Real Return
Portfolio – Advisor
Class		     PIMCO Total Return
Portfolio – Advisor
Class		     Rydex VT Inverse
Government Long
Bond Strategy Fund		  
        

Income:

         

Dividends

    $ 5,418,859      $ 126,925      $ 371,680      $ -       

Expenses:

         

Mortality and expense fees

      476,585        87,506        180,536        12,726   

Administrative fees

      49,129        8,936        18,376        1,245   
  

 

 

    

 

 

    

 

 

    

 

 

  

Net investment income (loss)

      4,893,145        30,483        172,768        (13,971 ) 
  

 

 

    

 

 

    

 

 

    

 

 

  
        

Realized gains (losses) on investments

         

Realized gain (loss) on sale of fund shares

      192,443        72,464        65,744        (149,111 ) 

Realized gain distributions

      -            292,017        200,456        -       
  

 

 

    

 

 

    

 

 

    

 

 

  

Realized gain (loss)

      192,443        364,481        266,200        (149,111 ) 
  

 

 

    

 

 

    

 

 

    

 

 

  
        

Change in unrealized appreciation (depreciation)
during the year

      (8,114,529 )      250,821        (143,884 )      (179,473 ) 
  

 

 

    

 

 

    

 

 

    

 

 

  

Net increase (decrease) in net assets from operations

    $ (3,028,941 )    $ 645,785      $ 295,084      $ (342,555 ) 
  

 

 

    

 

 

    

 

 

    

 

 

  
     Rydex VT Nova
Fund		     Rydex|SGI VT U.S.
Long Short
Momentum Fund		     Sentinel Variable
Products Balanced
Fund		     Sentinel Variable
Products Bond
Fund		  

Income:

         

Dividends

    $ 370      $ -          $ 46,750      $ 1,305,676   

Expenses:

         

Mortality and expense fees

      11,816        14,347        41,931        485,812   

Administrative fees

      1,126        1,424        4,437        49,561   
  

 

 

    

 

 

    

 

 

    

 

 

  

Net investment income (loss)

      (12,572 )      (15,771 )      382        770,303   
  

 

 

    

 

 

    

 

 

    

 

 

  
        

Realized gains (losses) on investments

         

Realized gain (loss) on sale of fund shares

      12,376        49,094        96,666        86,872   

Realized gain distributions

      -            -            50,255        267,326   
  

 

 

    

 

 

    

 

 

    

 

 

  

Realized gain (loss)

      12,376        49,094        146,921        354,198   
  

 

 

    

 

 

    

 

 

    

 

 

  
        

Change in unrealized appreciation (depreciation)
during the year

      (19,743 )      (115,821 )      (126,382 )      1,038,688   
  

 

 

    

 

 

    

 

 

    

 

 

  

Net increase (decrease) in net assets from operations

    $ (19,939 )    $ (82,498 )    $ 20,921      $ 2,163,189   
  

 

 

    

 

 

    

 

 

    

 

 

  

 

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

 

SA - 20

Table of Contents

PHL VARIABLE ACCUMULATION ACCOUNT

STATEMENTS OF OPERATIONS

For the period ended December 31, 2011

(Continued)

 

     Sentinel Variable
Products Common
Stock Fund		     Sentinel Variable
Products Mid Cap
Fund		     Sentinel Variable
Products Small
Company Fund		     Templeton
Developing Markets
Securities Fund –
Class 2		  
        

Income:

         

Dividends

    $ 1,949,165      $ 70      $ -          $ 62,877   

Expenses:

         

Mortality and expense fees

      1,633,779        13,483        244,890        80,249   

Administrative fees

      166,374        1,448        24,957        8,249   
  

 

 

    

 

 

    

 

 

    

 

 

  

Net investment income (loss)

      149,012        (14,861 )      (269,847 )      (25,621 ) 
  

 

 

    

 

 

    

 

 

    

 

 

  
        

Realized gains (losses) on investments

         

Realized gain (loss) on sale of fund shares

      5,045,065        28,200        1,346,166        (14,108 ) 

Realized gain distributions

      -            -            446,914        -       
  

 

 

    

 

 

    

 

 

    

 

 

  

Realized gain (loss)

      5,045,065        28,200        1,793,080        (14,108 ) 
  

 

 

    

 

 

    

 

 

    

 

 

  
        

Change in unrealized appreciation (depreciation)
during the year

      (4,040,696 )      8,708        (1,156,765 )      (1,168,563 ) 
  

 

 

    

 

 

    

 

 

    

 

 

  

Net increase (decrease) in net assets from operations

    $ 1,153,381      $ 22,047      $ 366,468      $ (1,208,292 ) 
  

 

 

    

 

 

    

 

 

    

 

 

  
     Templeton Foreign
Securities Fund –
Class 2		     Templeton Growth
Securities Fund –
Class 2		     Virtus Capital
Growth Series		     Virtus Growth &
Income Series		  

Income:

         

Dividends

    $ 260,867      $ 730,895      $ 21,523      $ 606,290   

Expenses:

         

Mortality and expense fees

      177,267        708,835        468,797        1,173,132   

Administrative fees

      18,647        68,555        49,582        94,448   
  

 

 

    

 

 

    

 

 

    

 

 

  

Net investment income (loss)

      64,953        (46,495 )      (496,856 )      (661,290 ) 
  

 

 

    

 

 

    

 

 

    

 

 

  
        

Realized gains (losses) on investments

         

Realized gain (loss) on sale of fund shares

      89,904        (602,117 )      (2,709,615 )      1,384,292   

Realized gain distributions

      -            -            -            -       
  

 

 

    

 

 

    

 

 

    

 

 

  

Realized gain (loss)

      89,904        (602,117 )      (2,709,615 )      1,384,292   
  

 

 

    

 

 

    

 

 

    

 

 

  
        

Change in unrealized appreciation (depreciation)
during the year

      (1,819,417 )      (3,301,385 )      1,085,606        (2,807,881 ) 
  

 

 

    

 

 

    

 

 

    

 

 

  

Net increase (decrease) in net assets from operations

    $ (1,664,560 )    $ (3,949,997 )    $ (2,120,865 )    $ (2,084,879 ) 
  

 

 

    

 

 

    

 

 

    

 

 

  

 

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

 

SA - 21

Table of Contents

PHL VARIABLE ACCUMULATION ACCOUNT

STATEMENTS OF OPERATIONS

For the period ended December 31, 2011

(Continued)

 

     Virtus International
Series		     Virtus Multi-Sector
Fixed Income
Series		     Virtus Real Estate
Securities Series		     Virtus Small-Cap
Growth Series		  
        

Income:

         

Dividends

    $ 6,618,525      $ 9,104,198      $ 487,621      $ -       

Expenses:

         

Mortality and expense fees

      3,038,924        1,701,186        843,110        331,903   

Administrative fees

      322,939        173,916        87,972        35,154   
  

 

 

    

 

 

    

 

 

    

 

 

  

Net investment income (loss)

      3,256,662        7,229,096        (443,461 )      (367,057 ) 
  

 

 

    

 

 

    

 

 

    

 

 

  
        

Realized gains (losses) on investments

         

Realized gain (loss) on sale of fund shares

      2,253,206        (269,560 )      1,862,029        430,349   

Realized gain distributions

      -            -            3,728,007        2,705,021   
  

 

 

    

 

 

    

 

 

    

 

 

  

Realized gain (loss)

      2,253,206        (269,560 )      5,590,036        3,135,370   
  

 

 

    

 

 

    

 

 

    

 

 

  
        

Change in unrealized appreciation (depreciation)
during the year

      (19,901,382 )      (4,473,068 )      673,210        1,300,726   
  

 

 

    

 

 

    

 

 

    

 

 

  

Net increase (decrease) in net assets from operations

    $ (14,391,514 )    $ 2,486,468      $ 5,819,785      $ 4,069,039   
  

 

 

    

 

 

    

 

 

    

 

 

  
     Virtus Small-Cap
Value Series		     Virtus Strategic
Allocation Series		     Wanger
International		     Wanger
International Select		  

Income:

         

Dividends

    $ 719,229      $ 637,928      $ 4,279,375      $ 126,464   

Expenses:

         

Mortality and expense fees

      1,101,652        347,095        1,070,261        104,489   

Administrative fees

      115,459        36,214        112,843        10,854   
  

 

 

    

 

 

    

 

 

    

 

 

  

Net investment income (loss)

      (497,882 )      254,619        3,096,271        11,121   
  

 

 

    

 

 

    

 

 

    

 

 

  
        

Realized gains (losses) on investments

         

Realized gain (loss) on sale of fund shares

      482,988        (685,168 )      2,505,358        186,651   

Realized gain distributions

      6,031,249        -            2,197,834        -       
  

 

 

    

 

 

    

 

 

    

 

 

  

Realized gain (loss)

      6,514,237        (685,168 )      4,703,192        186,651   
  

 

 

    

 

 

    

 

 

    

 

 

  
        

Change in unrealized appreciation (depreciation)
during the year

      (2,689,336 )      708,812        (21,996,286 )      (1,152,224 ) 
  

 

 

    

 

 

    

 

 

    

 

 

  

Net increase (decrease) in net assets from operations

    $ 3,327,019      $ 278,263      $ (14,196,823 )    $ (954,452 ) 
  

 

 

    

 

 

    

 

 

    

 

 

  

 

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

 

SA - 22

Table of Contents

PHL VARIABLE ACCUMULATION ACCOUNT

STATEMENTS OF OPERATIONS

For the period ended December 31, 2011

(Continued)

 

     Wanger Select     Wanger USA           
         

Income:

          

Dividends

    $ 258,962      $ -            

Expenses:

          

Mortality and expense fees

      138,474        542,802        

Administrative fees

      14,695        56,987        
  

 

 

    

 

 

       

Net investment income (loss)

      105,793        (599,789 )      
  

 

 

    

 

 

       
         

Realized gains (losses) on investments

          

Realized gain (loss) on sale of fund shares

      1,393,457        2,159,639        

Realized gain distributions

      -            4,214,424        
  

 

 

    

 

 

       

Realized gain (loss)

      1,393,457        6,374,063        
  

 

 

    

 

 

       
         

Change in unrealized appreciation (depreciation)
during the year

      (3,828,113 )      (7,579,473 )      
  

 

 

    

 

 

       

Net increase (decrease) in net assets from operations

    $ (2,328,863 )    $ (1,805,199 )      
  

 

 

    

 

 

       

 

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

 

SA - 23

Table of Contents

PHL VARIABLE ACCUMULATION ACCOUNT

STATEMENTS OF CHANGES IN NET ASSETS

For the periods ended December 31, 2011 and 2010

 

 

     Alger Capital Appreciation
Portfolio – Class I-2
Shares		     AllianceBernstein VPS
Balanced Wealth
Strategy
Portfolio – Class B		  
     2011     2010     2011     2010  
        

Increase (decrease) in net assets from operations:

         

Net investment income (loss)

    $ (63,010 )    $ (57,072 )    $ 40,524      $ 45,743   

Realized gains (losses)

      896,153        755,825        17,478        20,561   

Unrealized appreciation
(depreciation) during the year

      (867,404 )      (23,169 )      (275,235 )      310,701   
  

 

 

    

 

 

    

 

 

    

 

 

  

Net increase (decrease) in net assets from operations

      (34,261 )      675,584        (217,233 )      377,005   
  

 

 

    

 

 

    

 

 

    

 

 

  
        

Contract transactions:

         

Payments received from contract owners

      46,895        111,622        38,798        98,692   

Transfers between Investment Options
(including GIA/MVA), net

      (248,812 )      (327,888 )      438,229        1,036,769   

Transfers for contract benefits and terminations

      (1,488,933 )      (1,428,450 )      (326,037 )      (372,540 ) 

Contract maintenance charges

      (9,080 )      (12,721 )      (42,067 )      (47,083 ) 

Adjustments to net assets allocated to contracts in payout period

      (4,255 )      1,275        -            -       
  

 

 

    

 

 

    

 

 

    

 

 

  

Net increase (decrease) in net assets resulting from contract transactions

      (1,704,185 )      (1,656,162 )      108,923        715,838   
  

 

 

    

 

 

    

 

 

    

 

 

  

Total increase (decrease)
in net assets

      (1,738,446 )      (980,578 )      (108,310 )      1,092,843   
        

Net assets at beginning of period

      6,019,653        7,000,231        4,519,845        3,427,002   
  

 

 

    

 

 

    

 

 

    

 

 

  

Net assets at end of period

    $ 4,281,207      $ 6,019,653      $ 4,411,535      $ 4,519,845   
  

 

 

    

 

 

    

 

 

    

 

 

  

 

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

 

SA - 24

Table of Contents

PHL VARIABLE ACCUMULATION ACCOUNT

STATEMENTS OF CHANGES IN NET ASSETS

For the periods ended December 31, 2011 and 2010

(Continued)

 

     Calvert VP S&P MidCap 400 Index Portfolio –
Class I Shares		     DWS Equity 500 Index
VIP – Class A		  
     2011     2010     2011     2010  
        

Increase (decrease) in net assets from operations:

         

Net investment income (loss)

    $ (6,813 )    $ 624      $ 209,056      $ 319,321   

Realized gains (losses)

      (3,594 )      87,481        425,757        (798,130 ) 

Unrealized appreciation
(depreciation) during the year

      (86,498 )      (33,778 )      (245,021 )      6,697,678   
  

 

 

    

 

 

    

 

 

    

 

 

  

Net increase (decrease) in net assets from operations

      (96,905 )      54,327        389,792        6,218,869   
  

 

 

    

 

 

    

 

 

    

 

 

  
        

Contract transactions:

         

Payments received from contract owners

      2,864        15,177        196,263        244,020   

Transfers between Investment Options
(including GIA/MVA), net

      611,296        300,111        (1,964,187 )      (1,664,940 ) 

Transfers for contract benefits and terminations

      (105,023 )      (50,482 )      (6,185,932 )      (6,201,530 ) 

Contract maintenance charges

      (27,230 )      (1,074 )      (276,920 )      (315,936 ) 

Adjustments to net assets allocated to contracts in payout period

      -            -            (6,468 )      850   
  

 

 

    

 

 

    

 

 

    

 

 

  

Net increase (decrease) in net assets resulting from contract transactions

      481,907        263,732        (8,237,244 )      (7,937,536 ) 
  

 

 

    

 

 

    

 

 

    

 

 

  

Total increase (decrease)
in net assets

      385,002        318,059        (7,847,452 )      (1,718,667 ) 
        

Net assets at beginning of period

      886,549        568,490        51,826,143        53,544,810   
  

 

 

    

 

 

    

 

 

    

 

 

  

Net assets at end of period

    $ 1,271,551      $ 886,549      $ 43,978,691      $ 51,826,143   
  

 

 

    

 

 

    

 

 

    

 

 

  

 

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

 

SA - 25

Table of Contents

PHL VARIABLE ACCUMULATION ACCOUNT

STATEMENTS OF CHANGES IN NET ASSETS

For the periods ended December 31, 2011 and 2010

(Continued)

 

     DWS Small Cap Index VIP – Class A     Federated Fund for
U.S. Government
Securities II		  
     2011     2010     2011     2010  
        

Increase (decrease) in net assets from operations:

         

Net investment income (loss)

    $ (551 )    $ (308 )    $ 4,017,776      $ 4,970,297   

Realized gains (losses)

      (4,359 )      18,881        361,796        435,777   

Unrealized appreciation (depreciation) during the year

      (24,327 )      (2,084 )      1,427,302        440,787   
  

 

 

    

 

 

    

 

 

    

 

 

  

Net increase (decrease) in net assets from operations

      (29,237 )      16,489        5,806,874        5,846,861   
  

 

 

    

 

 

    

 

 

    

 

 

  
        

Contract transactions:

         

Payments received from contract owners

      495        6,507        425,909        628,653   

Transfers between Investment Options
(including GIA/MVA), net

      143,432        (178,548 )      (454,077 )      3,713,981   

Transfers for contract benefits and terminations

      (55,444 )      (23,416 )      (21,100,626 )      (21,076,808 ) 

Contract maintenance charges

      (851 )      (527 )      (752,932 )      (878,623 ) 

Adjustments to net assets allocated to contracts in payout period

      -            -            (2,192 )      (1,383 ) 
  

 

 

    

 

 

    

 

 

    

 

 

  

Net increase (decrease) in net assets resulting from contract transactions

      87,632        (195,984 )      (21,883,918 )      (17,614,180 ) 
  

 

 

    

 

 

    

 

 

    

 

 

  

Total increase (decrease) in net assets

      58,395        (179,495 )      (16,077,044 )      (11,767,319 ) 
        

Net assets at beginning of period

      272,214        451,709        141,530,096        153,297,415   
  

 

 

    

 

 

    

 

 

    

 

 

  

Net assets at end of period

    $ 330,609      $ 272,214      $ 125,453,052      $ 141,530,096   
  

 

 

    

 

 

    

 

 

    

 

 

  

 

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

 

SA - 26

Table of Contents

PHL VARIABLE ACCUMULATION ACCOUNT

STATEMENTS OF CHANGES IN NET ASSETS

For the periods ended December 31, 2011 and 2010

(Continued)

 

     Federated High Income Bond
Fund II –
Primary Shares		     Federated Prime Money Fund II  
     2011     2010     2011     2010  

Increase (decrease) in net assets from operations:

         
        

Net investment income (loss)

    $ 1,064,897      $ 856,849      $ (815,311 )    $ (913,934 ) 

Realized gains (losses)

      (235,139 )      439,722        -            -       

Unrealized appreciation
(depreciation) during the year

      (321,062 )      383,267        -            -       
  

 

 

    

 

 

    

 

 

    

 

 

  

Net increase (decrease) in net assets from operations

      508,696        1,679,838        (815,311 )      (913,934 ) 
  

 

 

    

 

 

    

 

 

    

 

 

  
        

Contract transactions:

         

Payments received from contract owners

      82,724        74,316        548,266        1,099,706   

Transfers between Investment Options
(including GIA/MVA), net

      759,060        1,765,904        22,498,385        98,477,874   

Transfers for contract benefits and terminations

      (3,605,592 )      (3,205,402 )      (32,386,070 )      (31,605,875 ) 

Contract maintenance charges

      (40,951 )      (37,381 )      (684,637 )      (641,209 ) 

Adjustments to net assets allocated to contracts in payout period

      327        517        (2,064 )      (7,657 ) 
  

 

 

    

 

 

    

 

 

    

 

 

  

Net increase (decrease) in net assets resulting from contract transactions

      (2,804,432 )      (1,402,046 )      (10,026,120 )      67,322,839   
  

 

 

    

 

 

    

 

 

    

 

 

  

Total increase (decrease) in net assets

      (2,295,736 )      277,792        (10,841,431 )      66,408,905   
        

Net assets at beginning of period

      14,739,270        14,461,478        66,408,905        -       
  

 

 

    

 

 

    

 

 

    

 

 

  

Net assets at end of period

    $ 12,443,534      $ 14,739,270      $ 55,567,474      $ 66,408,905   
  

 

 

    

 

 

    

 

 

    

 

 

  

 

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

 

SA - 27

Table of Contents

PHL VARIABLE ACCUMULATION ACCOUNT

STATEMENTS OF CHANGES IN NET ASSETS

For the periods ended December 31, 2011 and 2010

(Continued)

 

     Fidelity® VIP Contrafund®
Portfolio – Service
Class		     Fidelity® VIP Growth
Opportunities Portfolio –
Service Class		  
     2011     2010     2011     2010  

Increase (decrease) in net assets from operations:

         
        

Net investment income (loss)

    $ (211,974 )    $ (156,536 )    $ (1,501,182 )    $ (1,421,728 ) 

Realized gains (losses)

      507,166        (2,358,717 )      3,827,488        1,977,430   

Unrealized appreciation
(depreciation) during the year

      (1,663,815 )      8,626,976        (677,390 )      22,955,574   
  

 

 

    

 

 

    

 

 

    

 

 

  

Net increase (decrease) in net assets from operations

      (1,368,623 )      6,111,723        1,648,916        23,511,276   
  

 

 

    

 

 

    

 

 

    

 

 

  
        

Contract transactions:

         

Payments received from contract owners

      384,417        585,173        301,700        967,340   

Transfers between Investment Options (including GIA/MVA), net

      (2,359,727 )      (3,328,068 )      (7,959,164 )      (7,390,451 ) 

Transfers for contract benefits and terminations

      (8,888,203 )      (9,156,407 )      (10,436,958 )      (9,885,176 ) 

Contract maintenance charges

      (83,792 )      (111,029 )      (1,016,705 )      (1,069,056 ) 

Adjustments to net assets allocated to contracts in payout period

      (2,691 )      197        (665 )      33   
  

 

 

    

 

 

    

 

 

    

 

 

  

Net increase (decrease) in net assets resulting from contract transactions

      (10,949,996 )      (12,010,134 )      (19,111,792 )      (17,377,310 ) 
  

 

 

    

 

 

    

 

 

    

 

 

  

Total increase (decrease) in net assets

      (12,318,619 )      (5,898,411 )      (17,462,876 )      6,133,966   
        

Net assets at beginning of period

      44,209,617        50,108,028        124,417,305        118,283,339   
  

 

 

    

 

 

    

 

 

    

 

 

  

Net assets at end of period

    $ 31,890,998      $ 44,209,617      $ 106,954,429      $ 124,417,305   
  

 

 

    

 

 

    

 

 

    

 

 

  

 

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

 

SA - 28

Table of Contents

PHL VARIABLE ACCUMULATION ACCOUNT

STATEMENTS OF CHANGES IN NET ASSETS

For the periods ended December 31, 2011 and 2010

(Continued)

 

     Fidelity® VIP Growth Portfolio – Service
Class		     Fidelity® VIP Investment
Grade Bond
Portfolio – Service Class		  
     2011     2010     2011     2010  

Increase (decrease) in net assets from operations:

         
        

Net investment income (loss)

    $ (181,179 )    $ (207,594 )    $ 1,036,669      $ 1,189,021   

Realized gains (losses)

      1,286,945        407,374        1,679,153        904,800   

Unrealized appreciation
(depreciation) during the year

      (1,105,260 )      3,545,025        474,953        1,415,302   
  

 

 

    

 

 

    

 

 

    

 

 

  

Net increase (decrease) in net assets from operations

      506        3,744,805        3,190,775        3,509,123   
  

 

 

    

 

 

    

 

 

    

 

 

  
        

Contract transactions:

         

Payments received from contract owners

      66,617        93,241        176,111        575,931   

Transfers between Investment Options (including GIA/MVA), net

      (1,240,620 )      (891,964 )      2,987,697        3,215,305   

Transfers for contract benefits and terminations

      (3,574,705 )      (3,005,359 )      (5,540,750 )      (6,406,081 ) 

Contract maintenance charges

      (77,171 )      (86,248 )      (507,484 )      (569,973 ) 

Adjustments to net assets allocated to contracts in payout period

      24        19        (3 )      293   
  

 

 

    

 

 

    

 

 

    

 

 

  

Net increase (decrease) in net assets resulting from contract transactions

      (4,825,855 )      (3,890,311 )      (2,884,429 )      (3,184,525 ) 
  

 

 

    

 

 

    

 

 

    

 

 

  

Total increase (decrease) in net assets

      (4,825,349 )      (145,506 )      306,346        324,598   
        

Net assets at beginning of period

      19,431,600        19,577,106        56,224,519        55,899,921   
  

 

 

    

 

 

    

 

 

    

 

 

  

Net assets at end of period

    $ 14,606,251      $ 19,431,600      $ 56,530,865      $ 56,224,519   
  

 

 

    

 

 

    

 

 

    

 

 

  

 

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

 

SA - 29

Table of Contents

PHL VARIABLE ACCUMULATION ACCOUNT

STATEMENTS OF CHANGES IN NET ASSETS

For the periods ended December 31, 2011 and 2010

(Continued)

 

     Franklin Flex Cap Growth Securities Fund –
Class 2		     Franklin Income Securities Fund – Class 2  
     2011     2010     2011     2010  

Increase (decrease) in net assets from operations:

         
        

Net investment income (loss)

    $ (4,768 )    $ (5,199 )    $ 2,234,662      $ 2,718,059   

Realized gains (losses)

      8,215        14,501        (329,255 )      218,948   

Unrealized appreciation
(depreciation) during the year

      (19,385 )      28,630        (1,475,150 )      2,488,615   
  

 

 

    

 

 

    

 

 

    

 

 

  

Net increase (decrease) in net assets from operations

      (15,938 )      37,932        430,257        5,425,622   
  

 

 

    

 

 

    

 

 

    

 

 

  
        

Contract transactions:

         

Payments received from contract owners

      1,432        1,473        117,081        233,247   

Transfers between Investment Options (including GIA/MVA), net

      (1,369 )      (120,345 )      (2,424,066 )      (1,601,043 ) 

Transfers for contract benefits and terminations

      (25,068 )      (25,721 )      (6,230,033 )      (4,614,248 ) 

Contract maintenance charges

      (2,220 )      (2,025 )      (444,712 )      (486,948 ) 

Adjustments to net assets allocated to contracts in payout period

      -            -            103        109   
  

 

 

    

 

 

    

 

 

    

 

 

  

Net increase (decrease) in net assets resulting from contract transactions

      (27,225 )      (146,618 )      (8,981,627 )      (6,468,883 ) 
  

 

 

    

 

 

    

 

 

    

 

 

  

Total increase (decrease) in net assets

      (43,163 )      (108,686 )      (8,551,370 )      (1,043,261 ) 
        

Net assets at beginning of period

      333,569        442,255        54,025,208        55,068,469   
  

 

 

    

 

 

    

 

 

    

 

 

  

Net assets at end of period

    $ 290,406      $ 333,569      $ 45,473,838      $ 54,025,208   
  

 

 

    

 

 

    

 

 

    

 

 

  

 

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

 

SA - 30

Table of Contents

PHL VARIABLE ACCUMULATION ACCOUNT

STATEMENTS OF CHANGES IN NET ASSETS

For the periods ended December 31, 2011 and 2010

(Continued)

 

     Ibbotson Aggressive
Growth ETF Asset
Allocation Portfolio – Class II		     Ibbotson Balanced ETF Asset Allocation
Portfolio – Class II		  
     2011     2010     2011     2010  

Increase (decrease) in net assets from operations:

         
        

Net investment income (loss)

    $ (57,568 )    $ 20,402      $ (121,481 )    $ 122,020   

Realized gains (losses)

      78,727        2,599        400,418        (413 ) 

Unrealized appreciation
(depreciation) during the year

      (970,550 )      614,382        (989,650 )      445,641   
  

 

 

    

 

 

    

 

 

    

 

 

  

Net increase (decrease) in net assets from operations

      (949,391 )      637,383        (710,713 )      567,248   
  

 

 

    

 

 

    

 

 

    

 

 

  
        

Contract transactions:

         

Payments received from contract owners

      126,806        17,124        73,762        5,998   

Transfers between Investment Options (including GIA/MVA), net

      (416,413 )      16,173,547        7,127,796        24,950,661   

Transfers for contract benefits and terminations

      (1,247,444 )      (61,029 )      (4,755,929 )      (60,078 ) 

Contract maintenance charges

      (105,429 )      (10,954 )      (300,150 )      (13,785 ) 

Adjustments to net assets allocated to contracts in payout period

      -            -            -            -       
  

 

 

    

 

 

    

 

 

    

 

 

  

Net increase (decrease) in net assets resulting from contract transactions

      (1,642,480 )      16,118,688        2,145,479        24,882,796   
  

 

 

    

 

 

    

 

 

    

 

 

  

Total increase (decrease) in net assets

      (2,591,871 )      16,756,071        1,434,766        25,450,044   
        

Net assets at beginning of period

      16,756,071        -            25,450,044        -       
  

 

 

    

 

 

    

 

 

    

 

 

  

Net assets at end of period

    $ 14,164,200      $ 16,756,071      $ 26,884,810      $ 25,450,044   
  

 

 

    

 

 

    

 

 

    

 

 

  

 

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

 

SA - 31

Table of Contents

PHL VARIABLE ACCUMULATION ACCOUNT

STATEMENTS OF CHANGES IN NET ASSETS

For the periods ended December 31, 2011 and 2010

(Continued)

 

     Ibbotson Growth ETF Asset Allocation
Portfolio – Class II		     Ibbotson Income and Growth ETF Asset
Allocation Portfolio – Class II		  
     2011     2010     2011     2010  

Increase (decrease) in net assets from operations:

         
        

Net investment income (loss)

    $ (70,407 )    $ 118,938      $ (179,853 )    $ 101,698   

Realized gains (losses)

      405,861        4,165        607,917        250   

Unrealized appreciation
(depreciation) during the year

      (1,387,576 )      692,574        (539,873 )      303,994   
  

 

 

    

 

 

    

 

 

    

 

 

  

Net increase (decrease) in net assets from operations

      (1,052,122 )      815,677        (111,809 )      405,942   
  

 

 

    

 

 

    

 

 

    

 

 

  
        

Contract transactions:

         

Payments received from contract owners

      303,215        9,863        105,439        3,489   

Transfers between Investment Options (including GIA/MVA), net

      (413,644 )      24,462,179        6,665,435        32,282,505   

Transfers for contract benefits and terminations

      (2,761,579 )      (331,653 )      (5,589,825 )      (369,714 ) 

Contract maintenance charges

      (205,207 )      (27,357 )      (297,127 )      (32,195 ) 

Adjustments to net assets allocated to contracts in payout period

      (637 )      3,281        -            -       
  

 

 

    

 

 

    

 

 

    

 

 

  

Net increase (decrease) in net assets resulting from contract transactions

      (3,077,852 )      24,116,313        883,922        31,884,085   
  

 

 

    

 

 

    

 

 

    

 

 

  

Total increase (decrease) in net assets

      (4,129,974 )      24,931,990        772,113        32,290,027   
        

Net assets at beginning of period

      24,931,990        -            32,290,027        -       
  

 

 

    

 

 

    

 

 

    

 

 

  

Net assets at end of period

    $ 20,802,016      $ 24,931,990      $ 33,062,140      $ 32,290,027   
  

 

 

    

 

 

    

 

 

    

 

 

  

 

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

 

SA - 32

Table of Contents

PHL VARIABLE ACCUMULATION ACCOUNT

STATEMENTS OF CHANGES IN NET ASSETS

For the periods ended December 31, 2011 and 2010

(Continued)

 

     Invesco V.I. Capital
Appreciation Fund –
Series I Shares		     Invesco V.I. Core Equity
Fund – Series I
Shares		  
     2011     2010     2011     2010  

Increase (decrease) in net assets from operations:

         
        

Net investment income (loss)

    $ (393,439 )    $ (196,352 )    $ (25,352 )    $ (26,465 ) 

Realized gains (losses)

      (100,262 )      (579,226 )      149,557        (2,142 ) 

Unrealized appreciation
(depreciation) during the year

      (2,485,307 )      5,668,575        (179,268 )      622,275   
  

 

 

    

 

 

    

 

 

    

 

 

  

Net increase (decrease) in net assets from operations

      (2,979,008 )      4,892,997        (55,063 )      593,668   
  

 

 

    

 

 

    

 

 

    

 

 

  
        

Contract transactions:

         

Payments received from contract owners

      87,651        216,332        11,512        96,307   

Transfers between Investment Options
(including GIA/MVA), net

      (881,674 )      (824,908 )      (552,714 )      (162,046 ) 

Transfers for contract benefits and terminations

      (4,625,657 )      (4,182,317 )      (1,038,476 )      (1,138,522 ) 

Contract maintenance charges

      (215,415 )      (240,126 )      (39,708 )      (47,229 ) 

Adjustments to net assets allocated to contracts in payout period

      47        1,608        (11 )      74   
  

 

 

    

 

 

    

 

 

    

 

 

  

Net increase (decrease) in net assets resulting from contract transactions

      (5,635,048 )      (5,029,411 )      (1,619,397 )      (1,251,416 ) 
  

 

 

    

 

 

    

 

 

    

 

 

  

Total increase (decrease) in net assets

      (8,614,056 )      (136,414 )      (1,674,460 )      (657,748 ) 
        

Net assets at beginning of period

      38,679,863        38,816,277        7,843,817        8,501,565   
  

 

 

    

 

 

    

 

 

    

 

 

  

Net assets at end of period

    $ 30,065,807      $ 38,679,863      $ 6,169,357      $ 7,843,817   
  

 

 

    

 

 

    

 

 

    

 

 

  

 

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

 

SA - 33

Table of Contents

PHL VARIABLE ACCUMULATION ACCOUNT

STATEMENTS OF CHANGES IN NET ASSETS

For the periods ended December 31, 2011 and 2010

(Continued)

 

     Invesco V.I. Mid Cap Core
Equity Fund –
Series I Shares		     Invesco Van Kampen V.I.
Equity and Income
Fund – Class II		  
     2011     2010     2011     2010  

Increase (decrease) in net assets from operations:

         
        

Net investment income (loss)

    $ (30,043 )    $ (26,749 )    $ 3,090      $ 5,204   

Realized gains (losses)

      (49,235 )      (86,615 )      14,019        (44 ) 

Unrealized appreciation
(depreciation) during the year

      (71,372 )      519,499        (42,474 )      80,463   
  

 

 

    

 

 

    

 

 

    

 

 

  

Net increase (decrease) in net assets from operations

      (150,650 )      406,135        (25,365 )      85,623   
  

 

 

    

 

 

    

 

 

    

 

 

  
        

Contract transactions:

         

Payments received from contract owners

      18,606        72,791        583        2,411   

Transfers between Investment Options
(including GIA/MVA), net

      (328,414 )      (258,649 )      120,877        265,133   

Transfers for contract benefits and terminations

      (761,500 )      (512,664 )      (291,548 )      (85,709 ) 

Contract maintenance charges

      (6,964 )      (7,653 )      (4,020 )      (1,765 ) 

Adjustments to net assets allocated to contracts in payout period

      303        (215 )      -            -       
  

 

 

    

 

 

    

 

 

    

 

 

  

Net increase (decrease) in net assets resulting from contract transactions

      (1,077,969 )      (706,390 )      (174,108 )      180,070   
  

 

 

    

 

 

    

 

 

    

 

 

  

Total increase (decrease) in net assets

      (1,228,619 )      (300,255 )      (199,473 )      265,693   
        

Net assets at beginning of period

      3,460,651        3,760,906        958,194        692,501   
  

 

 

    

 

 

    

 

 

    

 

 

  

Net assets at end of period

    $ 2,232,032      $ 3,460,651      $ 758,721      $ 958,194   
  

 

 

    

 

 

    

 

 

    

 

 

  

 

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

 

SA - 34

Table of Contents

PHL VARIABLE ACCUMULATION ACCOUNT

STATEMENTS OF CHANGES IN NET ASSETS

For the periods ended December 31, 2011 and 2010

(Continued)

 

     Lazard Retirement U.S.
Small-Mid Cap Equity
Portfolio – Service Shares		     Lord Abbett Series Fund
Bond Debenture
Portfolio – Class VC Shares		  
     2011     2010     2011     2010  

Increase (decrease) in net assets from operations:

         
        

Net investment income (loss)

    $ (15,248 )    $ (13,598 )    $ 286,858      $ 356,349   

Realized gains (losses)

      10,321        (91,000 )      161,630        94,901   

Unrealized appreciation
(depreciation) during the year

      (109,828 )      349,508        (226,124 )      418,524   
  

 

 

    

 

 

    

 

 

    

 

 

  

Net increase (decrease) in net assets from operations

      (114,755 )      244,910        222,364        869,774   
  

 

 

    

 

 

    

 

 

    

 

 

  
        

Contract transactions:

         

Payments received from contract owners

      2,640        11,472        55,989        97,951   

Transfers between Investment Options
(including GIA/MVA), net

      (19,407 )      (104,337 )      530,291        231,769   

Transfers for contract benefits and terminations

      (198,070 )      (236,824 )      (2,184,353 )      (2,082,320 ) 

Contract maintenance charges

      (4,119 )      (5,247 )      (20,428 )      (22,421 ) 

Adjustments to net assets allocated to contracts in payout period

      -            (358 )      (54 )      3,269   
  

 

 

    

 

 

    

 

 

    

 

 

  

Net increase (decrease) in net assets resulting from contract transactions

      (218,956 )      (335,294 )      (1,618,555 )      (1,771,752 ) 
  

 

 

    

 

 

    

 

 

    

 

 

  

Total increase (decrease) in net assets

      (333,711 )      (90,384 )      (1,396,191 )      (901,978 ) 
        

Net assets at beginning of period

      1,287,187        1,377,571        8,121,234        9,023,212   
  

 

 

    

 

 

    

 

 

    

 

 

  

Net assets at end of period

    $ 953,476      $ 1,287,187      $ 6,725,043      $ 8,121,234   
  

 

 

    

 

 

    

 

 

    

 

 

  

 

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

 

SA - 35

Table of Contents

PHL VARIABLE ACCUMULATION ACCOUNT

STATEMENTS OF CHANGES IN NET ASSETS

For the periods ended December 31, 2011 and 2010

(Continued)

 

     Lord Abbett Series Fund Growth and Income
Portfolio – Class VC Shares		     Lord Abbett Series Fund
Mid Cap Value
Portfolio – Class VC Shares		  
     2011     2010     2011     2010  

Increase (decrease) in net assets from operations:

         
        

Net investment income (loss)

    $ (518,674 )    $ (694,859 )    $ (71,496 )    $ (62,636 ) 

Realized gains (losses)

      (2,676,033 )      (4,504,341 )      (177,504 )      (659,319 ) 

Unrealized appreciation
(depreciation) during the year

      (3,129,598 )      19,224,821        (55,783 )      2,026,703   
  

 

 

    

 

 

    

 

 

    

 

 

  

Net increase (decrease) in net assets from operations

      (6,324,305 )      14,025,621        (304,783 )      1,304,748   
  

 

 

    

 

 

    

 

 

    

 

 

  
        

Contract transactions:

         

Payments received from contract owners

      234,849        485,864        22,752        64,599   

Transfers between Investment Options (including GIA/MVA), net

      (985,473 )      (2,138,186 )      (67,256 )      (142,648 ) 

Transfers for contract benefits and terminations

      (11,215,097 )      (10,138,657 )      (1,088,304 )      (1,340,285 ) 

Contract maintenance charges

      (561,449 )      (638,945 )      (16,780 )      (20,470 ) 

Adjustments to net assets allocated to contracts in payout period

      71        449        (39 )      (39 ) 
  

 

 

    

 

 

    

 

 

    

 

 

  

Net increase (decrease) in net assets resulting from contract transactions

      (12,527,099 )      (12,429,475 )      (1,149,627 )      (1,438,843 ) 
  

 

 

    

 

 

    

 

 

    

 

 

  

Total increase (decrease) in net assets

      (18,851,404 )      1,596,146        (1,454,410 )      (134,095 ) 
        

Net assets at beginning of period

      97,888,534        96,292,388        6,660,349        6,794,444   
  

 

 

    

 

 

    

 

 

    

 

 

  

Net assets at end of period

    $ 79,037,130      $ 97,888,534      $ 5,205,939      $ 6,660,349   
  

 

 

    

 

 

    

 

 

    

 

 

  

 

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

 

SA - 36

Table of Contents

PHL VARIABLE ACCUMULATION ACCOUNT

STATEMENTS OF CHANGES IN NET ASSETS

For the periods ended December 31, 2011 and 2010

(Continued)

 

     Mutual Shares Securities Fund – Class 2     Neuberger Berman AMT Guardian
Portfolio –
S Class		  
     2011     2010     2011     2010  

Increase (decrease) in net assets from operations:

         
        

Net investment income (loss)

    $ 532,259      $ 85,459      $ (619,870 )    $ (626,663 ) 

Realized gains (losses)

      (410,764 )      (638,964 )      1,744,378        731,656   

Unrealized appreciation
(depreciation) during the year

      (1,550,266 )      6,235,677        (3,664,676 )      9,910,602   
  

 

 

    

 

 

    

 

 

    

 

 

  

Net increase (decrease) in net assets from operations

      (1,428,771 )      5,682,172        (2,540,168 )      10,015,595   
  

 

 

    

 

 

    

 

 

    

 

 

  
        

Contract transactions:

         

Payments received from contract owners

      208,277        348,360        170,862        629,205   

Transfers between Investment Options
(including GIA/MVA), net

      (683,554 )      (1,887,435 )      (629,459 )      (149,494 ) 

Transfers for contract benefits and terminations

      (7,553,800 )      (7,229,625 )      (5,018,788 )      (4,736,088 ) 

Contract maintenance charges

      (448,316 )      (501,691 )      (599,074 )      (625,009 ) 

Adjustments to net assets allocated to contracts in payout period

      (2,036 )      (767 )      (12 )      208   
  

 

 

    

 

 

    

 

 

    

 

 

  

Net increase (decrease) in net assets resulting from contract transactions

      (8,479,429 )      (9,271,158 )      (6,076,471 )      (4,881,178 ) 
  

 

 

    

 

 

    

 

 

    

 

 

  

Total increase (decrease) in net assets

      (9,908,200 )      (3,588,986 )      (8,616,639 )      5,134,417   
        

Net assets at beginning of period

      62,649,802        66,238,788        66,284,163        61,149,746   
  

 

 

    

 

 

    

 

 

    

 

 

  

Net assets at end of period

    $ 52,741,602      $ 62,649,802      $ 57,667,524      $ 66,284,163   
  

 

 

    

 

 

    

 

 

    

 

 

  

 

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

 

SA - 37

Table of Contents

PHL VARIABLE ACCUMULATION ACCOUNT

STATEMENTS OF CHANGES IN NET ASSETS

For the periods ended December 31, 2011 and 2010

(Continued)

 

     Neuberger Berman AMT Small Cap Growth
Portfolio – S Class		     Oppenheimer Capital Appreciation Fund/VA –
Service Shares		  
     2011     2010     2011     2010  

Increase (decrease) in net assets from operations:

         
        

Net investment income (loss)

    $ (2,773 )    $ (2,784 )    $ (11,749 )    $ (16,878 ) 

Realized gains (losses)

      11,668        12,926        94,178        134,687   

Unrealized appreciation
(depreciation) during the year

      (11,157 )      10,175        (104,767 )      (46,005 ) 
  

 

 

    

 

 

    

 

 

    

 

 

  

Net increase (decrease) in net assets from operations

      (2,262 )      20,317        (22,338 )      71,804   
  

 

 

    

 

 

    

 

 

    

 

 

  
        

Contract transactions:

         

Payments received from contract owners

      41        742        12,834        2,379   

Transfers between Investment Options
(including GIA/MVA), net

      (107,844 )      45,877        (192,081 )      273,786   

Transfers for contract benefits and terminations

      (34,956 )      (29,957 )      (240,109 )      (457,264 ) 

Contract maintenance charges

      (248 )      (881 )      (2,028 )      (2,410 ) 

Adjustments to net assets allocated to contracts in payout period

      -            -            -            -       
  

 

 

    

 

 

    

 

 

    

 

 

  

Net increase (decrease) in net assets resulting from
contract transactions

      (143,007 )      15,781        (421,384 )      (183,509 ) 
  

 

 

    

 

 

    

 

 

    

 

 

  

Total increase (decrease) in net assets

      (145,269 )      36,098        (443,722 )      (111,705 ) 
        

Net assets at beginning of period

      292,507        256,409        1,379,141        1,490,846   
  

 

 

    

 

 

    

 

 

    

 

 

  

Net assets at end of period

    $ 147,238      $ 292,507      $ 935,419      $ 1,379,141   
  

 

 

    

 

 

    

 

 

    

 

 

  

 

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

 

SA - 38

Table of Contents

PHL VARIABLE ACCUMULATION ACCOUNT

STATEMENTS OF CHANGES IN NET ASSETS

For the periods ended December 31, 2011 and 2010

(Continued)

 

     Oppenheimer Global Securities Fund/VA –
Service Shares		     Oppenheimer Main Street Small- & Mid-Cap
Fund®/VA – Service Shares		  
     2011     2010     2011     2010  

Increase (decrease) in net assets from operations:

         
        

Net investment income (loss)

    $ (7,966 )    $ (5,871 )    $ (390,171 )    $ (382,235 ) 

Realized gains (losses)

      8,583        16,263        1,343,996        1,774,207   

Unrealized appreciation
(depreciation) during the year

      (212,799 )      300,704        (2,368,799 )      6,887,226   
  

 

 

    

 

 

    

 

 

    

 

 

  

Net increase (decrease) in net assets from operations

      (212,182 )      311,096        (1,414,974 )      8,279,198   
  

 

 

    

 

 

    

 

 

    

 

 

  
        

Contract transactions:

         

Payments received from contract owners

      24,473        46,594        124,368        433,263   

Transfers between Investment Options
(including GIA/MVA), net

      (28,147 )      319,782        (916,117 )      (2,497,153 ) 

Transfers for contract benefits and terminations

      (443,054 )      (299,314 )      (3,444,913 )      (3,629,554 ) 

Contract maintenance charges

      (6,245 )      (4,727 )      (388,973 )      (414,359 ) 

Adjustments to net assets allocated to contracts in payout period

      -            -            (3 )      152   
  

 

 

    

 

 

    

 

 

    

 

 

  

Net increase (decrease) in net assets resulting from contract transactions

      (452,973 )      62,335        (4,625,638 )      (6,107,651 ) 
  

 

 

    

 

 

    

 

 

    

 

 

  

Total increase (decrease) in net assets

      (665,155 )      373,431        (6,040,612 )      2,171,547   
        

Net assets at beginning of period

      2,648,498        2,275,067        44,849,588        42,678,041   
  

 

 

    

 

 

    

 

 

    

 

 

  

Net assets at end of period

    $ 1,983,343      $ 2,648,498      $ 38,808,976      $ 44,849,588   
  

 

 

    

 

 

    

 

 

    

 

 

  

 

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

 

SA - 39

Table of Contents

PHL VARIABLE ACCUMULATION ACCOUNT

STATEMENTS OF CHANGES IN NET ASSETS

For the periods ended December 31, 2011 and 2010

(Continued)

 

     PIMCO CommodityRealReturn® Strategy
Portfolio – Advisor Class		     PIMCO Real Return Portfolio – Advisor Class  
     2011     2010     2011     2010  

Increase (decrease) in net assets from operations:

         
        

Net investment income (loss)

    $ 4,893,145      $ 5,047,018      $ 30,483      $ (4,373 ) 

Realized gains (losses)

      192,443        798,438        364,481        117,106   

Unrealized appreciation
(depreciation) during the year

      (8,114,529 )      2,102,116        250,821        254,738   
  

 

 

    

 

 

    

 

 

    

 

 

  

Net increase (decrease) in net assets from operations

      (3,028,941 )      7,947,572        645,785        367,471   
  

 

 

    

 

 

    

 

 

    

 

 

  
        

Contract transactions:

         

Payments received from contract owners

      159,399        398,646        7,718        22,183   

Transfers between Investment Options
(including GIA/MVA), net

      (2,458,296 )      (215,788 )      5,716,817        (438,929 ) 

Transfers for contract benefits and terminations

      (3,709,330 )      (3,281,003 )      (1,368,790 )      (1,707,872 ) 

Contract maintenance charges

      (352,416 )      (359,391 )      (19,204 )      (10,000 ) 

Adjustments to net assets allocated to contracts in payout period

      (25 )      146        -            -       
  

 

 

    

 

 

    

 

 

    

 

 

  

Net increase (decrease) in net assets resulting from contract transactions

      (6,360,668 )      (3,457,390 )      4,336,541        (2,134,618 ) 
  

 

 

    

 

 

    

 

 

    

 

 

  

Total increase (decrease) in net assets

      (9,389,609 )      4,490,182        4,982,326        (1,767,147 ) 
        

Net assets at beginning of period

      42,355,101        37,864,919        5,058,132        6,825,279   
  

 

 

    

 

 

    

 

 

    

 

 

  

Net assets at end of period

    $ 32,965,492      $ 42,355,101      $ 10,040,458      $ 5,058,132   
  

 

 

    

 

 

    

 

 

    

 

 

  

 

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

 

SA - 40

Table of Contents

PHL VARIABLE ACCUMULATION ACCOUNT

STATEMENTS OF CHANGES IN NET ASSETS

For the periods ended December 31, 2011 and 2010

(Continued)

 

     PIMCO Total Return Portfolio – Advisor Class     Rydex VT Inverse Government Long Bond
Strategy Fund		  
     2011     2010     2011     2010  

Increase (decrease) in net assets from operations:

         
        

Net investment income (loss)

    $ 172,768      $ 158,639      $ (13,971 )    $ (18,306 ) 

Realized gains (losses)

      266,200        706,847        (149,111 )      (91,059 ) 

Unrealized appreciation
(depreciation) during the year

      (143,884 )      210,180        (179,473 )      (91,598 ) 
  

 

 

    

 

 

    

 

 

    

 

 

  

Net increase (decrease) in net assets from operations

      295,084        1,075,666        (342,555 )      (200,963 ) 
  

 

 

    

 

 

    

 

 

    

 

 

  
        

Contract transactions:

         

Payments received from contract owners

      27,286        35,166        10        110   

Transfers between Investment Options (including GIA/MVA), net

      835,644        2,761,115        26,029        91,648   

Transfers for contract benefits and terminations

      (3,892,388 )      (5,052,057 )      (151,401 )      (172,612 ) 

Contract maintenance charges

      (28,337 )      (45,803 )      (3,287 )      (3,918 ) 

Adjustments to net assets allocated to contracts in payout period

      -            -            -            -       
  

 

 

    

 

 

    

 

 

    

 

 

  

Net increase (decrease) in net assets resulting from contract transactions

      (3,057,795 )      (2,301,579 )      (128,649 )      (84,772 ) 
  

 

 

    

 

 

    

 

 

    

 

 

  

Total increase (decrease) in net assets

      (2,762,711 )      (1,225,913 )      (471,204 )      (285,735 ) 
        

Net assets at beginning of period

      16,486,802        17,712,715        1,204,433        1,490,168   
  

 

 

    

 

 

    

 

 

    

 

 

  

Net assets at end of period

    $ 13,724,091      $ 16,486,802      $ 733,229      $ 1,204,433   
  

 

 

    

 

 

    

 

 

    

 

 

  

 

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

 

SA - 41

Table of Contents

PHL VARIABLE ACCUMULATION ACCOUNT

STATEMENTS OF CHANGES IN NET ASSETS

For the periods ended December 31, 2011 and 2010

(Continued)

 

     Rydex VT Nova Fund     Rydex|SGI VT U.S. Long Short
Momentum Fund		  
     2011     2010     2011     2010  

Increase (decrease) in net assets from operations:

         
        

Net investment income (loss)

    $ (12,572 )    $ (10,373 )    $ (15,771 )    $ (17,703 ) 

Realized gains (losses)

      12,376        (2,726 )      49,094        25,513   

Unrealized appreciation
(depreciation) during the year

      (19,743 )      162,741        (115,821 )      107,130   
  

 

 

    

 

 

    

 

 

    

 

 

  

Net increase (decrease) in net assets from operations

      (19,939 )      149,642        (82,498 )      114,940   
  

 

 

    

 

 

    

 

 

    

 

 

  
        

Contract transactions:

         

Payments received from contract owners

      685        1,569        5,063        14,566   

Transfers between Investment Options
(including GIA/MVA), net

      (29,639 )      (27,587 )      (84,341 )      (32,392 ) 

Transfers for contract benefits and terminations

      (202,119 )      (32,977 )      (177,771 )      (171,412 ) 

Contract maintenance charges

      (3,616 )      (3,318 )      (4,670 )      (5,199 ) 

Adjustments to net assets allocated to contracts in payout period

      -            -            -            -       
  

 

 

    

 

 

    

 

 

    

 

 

  

Net increase (decrease) in net assets resulting from contract transactions

      (234,689 )      (62,313 )      (261,719 )      (194,437 ) 
  

 

 

    

 

 

    

 

 

    

 

 

  

Total increase (decrease) in net assets

      (254,628 )      87,329        (344,217 )      (79,497 ) 
        

Net assets at beginning of period

      950,797        863,468        1,292,806        1,372,303   
  

 

 

    

 

 

    

 

 

    

 

 

  

Net assets at end of period

    $ 696,169      $ 950,797      $ 948,589      $ 1,292,806   
  

 

 

    

 

 

    

 

 

    

 

 

  

 

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

 

SA - 42

Table of Contents

PHL VARIABLE ACCUMULATION ACCOUNT

STATEMENTS OF CHANGES IN NET ASSETS

For the periods ended December 31, 2011 and 2010

(Continued)

 

     Sentinel Variable Products Balanced Fund     Sentinel Variable Products Bond Fund  
     2011     2010     2011     2010  

Increase (decrease) in net assets from operations:

         
        

Net investment income (loss)

    $ 382      $ 34,043      $ 770,303      $ 887,661   

Realized gains (losses)

      146,921        (678 )      354,198        2,096,510   

Unrealized appreciation (depreciation) during the year

      (126,382 )      282,218        1,038,688        (682,266 ) 
  

 

 

    

 

 

    

 

 

    

 

 

  

Net increase (decrease) in net assets from operations

      20,921        315,583        2,163,189        2,301,905   
  

 

 

    

 

 

    

 

 

    

 

 

  
        

Contract transactions:

         

Payments received from contract owners

      123        1,637        157,184        511,286   

Transfers between Investment Options
(including GIA/MVA), net

      (1,802,958 )      2,005,269        1,532,660        3,646,274   

Transfers for contract benefits and terminations

      (743,111 )      (415,691 )      (3,821,171 )      (4,675,117 ) 

Contract maintenance charges

      (12,623 )      (11,915 )      (385,632 )      (430,019 ) 

Adjustments to net assets allocated to contracts in payout period

      -            -            (2 )      3   
  

 

 

    

 

 

    

 

 

    

 

 

  

Net increase (decrease) in net assets resulting from contract transactions

      (2,558,569 )      1,579,300        (2,516,961 )      (947,573 ) 
  

 

 

    

 

 

    

 

 

    

 

 

  

Total increase (decrease) in net assets

      (2,537,648 )      1,894,883        (353,772 )      1,354,332   
        

Net assets at beginning of period

      4,494,695        2,599,812        39,647,071        38,292,739   
  

 

 

    

 

 

    

 

 

    

 

 

  

Net assets at end of period

    $ 1,957,047      $ 4,494,695      $ 39,293,299      $ 39,647,071   
  

 

 

    

 

 

    

 

 

    

 

 

  

 

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

 

SA - 43

Table of Contents

PHL VARIABLE ACCUMULATION ACCOUNT

STATEMENTS OF CHANGES IN NET ASSETS

For the periods ended December 31, 2011 and 2010

(Continued)

 

     Sentinel Variable Products
Common Stock Fund		     Sentinel Variable
Products Mid Cap Fund		  
     2011     2010     2011     2010  

Increase (decrease) in net assets from operations:

         
        

Net investment income (loss)

    $ 149,012      $ (53,449 )    $ (14,861 )    $ (9,286 ) 

Realized gains (losses)

      5,045,065        2,699,417        28,200        1,775   

Unrealized appreciation
(depreciation) during the year

      (4,040,696 )      14,936,050        8,708        133,668   
  

 

 

    

 

 

    

 

 

    

 

 

  

Net increase (decrease) in net assets from operations

      1,153,381        17,582,018        22,047        126,157   
  

 

 

    

 

 

    

 

 

    

 

 

  
        

Contract transactions:

         

Payments received from contract owners

      440,964        1,635,317        4,806        2,054   

Transfers between Investment Options (including GIA/MVA), net

      (1,844,227 )      285,939        (23,239 )      446,888   

Transfers for contract benefits and terminations

      (11,179,776 )      (11,283,999 )      (274,155 )      (157,974 ) 

Contract maintenance charges

      (1,325,103 )      (1,414,167 )      (5,814 )      (2,757 ) 

Adjustments to net assets allocated to contracts in payout period

      (45 )      182        -            -       
  

 

 

    

 

 

    

 

 

    

 

 

  

Net increase (decrease) in net assets resulting from contract transactions

      (13,908,187 )      (10,776,728 )      (298,402 )      288,211   
  

 

 

    

 

 

    

 

 

    

 

 

  

Total increase (decrease) in net assets

      (12,754,806 )      6,805,290        (276,355 )      414,368   
        

Net assets at beginning of period

      138,095,486        131,290,196        1,062,523        648,155   
  

 

 

    

 

 

    

 

 

    

 

 

  

Net assets at end of period

    $ 125,340,680      $ 138,095,486      $ 786,168      $ 1,062,523   
  

 

 

    

 

 

    

 

 

    

 

 

  

 

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

 

SA - 44

Table of Contents

PHL VARIABLE ACCUMULATION ACCOUNT

STATEMENTS OF CHANGES IN NET ASSETS

For the periods ended December 31, 2011 and 2010

(Continued)

 

     Sentinel Variable Products Small
Company Fund		     Templeton Developing Markets
Securities
Fund – Class 2		  
     2011     2010     2011     2010  

Increase (decrease) in net assets from operations:

         
        

Net investment income (loss)

    $ (269,847 )    $ (248,759 )    $ (25,621 )    $ 16,926   

Realized gains (losses)

      1,793,080        700,864        (14,108 )      275,542   

Unrealized appreciation
(depreciation) during the year

      (1,156,765 )      3,423,404        (1,168,563 )      802,875   
  

 

 

    

 

 

    

 

 

    

 

 

  

Net increase (decrease) in net assets from operations

      366,468        3,875,509        (1,208,292 )      1,095,343   
  

 

 

    

 

 

    

 

 

    

 

 

  
        

Contract transactions:

         

Payments received from contract owners

      66,669        215,839        41,356        59,011   

Transfers between Investment Options (including GIA/MVA), net

      (1,076,825 )      (348,884 )      (1,349,748 )      667,710   

Transfers for contract benefits and terminations

      (1,841,306 )      (1,876,657 )      (965,369 )      (1,232,856 ) 

Contract maintenance charges

      (183,470 )      (187,896 )      (15,337 )      (17,179 ) 

Adjustments to net assets allocated to contracts in payout period

      (8 )      21        66        (3 ) 
  

 

 

    

 

 

    

 

 

    

 

 

  

Net increase (decrease) in net assets resulting from contract transactions

      (3,034,940 )      (2,197,577 )      (2,289,032 )      (523,317 ) 
  

 

 

    

 

 

    

 

 

    

 

 

  

Total increase (decrease) in net assets

      (2,668,472 )      1,677,932        (3,497,324 )      572,026   
        

Net assets at beginning of period

      20,708,547        19,030,615        8,645,788        8,073,762   
  

 

 

    

 

 

    

 

 

    

 

 

  

Net assets at end of period

    $ 18,040,075      $ 20,708,547      $ 5,148,464      $ 8,645,788   
  

 

 

    

 

 

    

 

 

    

 

 

  

 

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

 

SA - 45

Table of Contents

PHL VARIABLE ACCUMULATION ACCOUNT

STATEMENTS OF CHANGES IN NET ASSETS

For the periods ended December 31, 2011 and 2010

(Continued)

 

     Templeton Foreign Securities
Fund – Class 2		     Templeton Growth
Securities Fund – Class 2		  
     2011     2010     2011     2010  

Increase (decrease) in net assets from operations:

         
        

Net investment income (loss)

    $ 64,953      $ 98,267      $ (46,495 )    $ (14,655 ) 

Realized gains (losses)

      89,904        (121,366 )      (602,117 )      (633,486 ) 

Unrealized appreciation
(depreciation) during the year

      (1,819,417 )      987,431        (3,301,385 )      4,018,560   
  

 

 

    

 

 

    

 

 

    

 

 

  

Net increase (decrease) in net assets from operations

      (1,664,560 )      964,332        (3,949,997 )      3,370,419   
  

 

 

    

 

 

    

 

 

    

 

 

  
        

Contract transactions:

         

Payments received from contract owners

      520,516        219,806        199,782        438,538   

Transfers between Investment Options (including GIA/MVA), net

      (678,084 )      (675,947 )      520,713        (454,774 ) 

Transfers for contract benefits and terminations

      (2,982,168 )      (3,081,225 )      (7,253,833 )      (5,378,321 ) 

Contract maintenance charges

      (39,004 )      (55,859 )      (439,846 )      (493,803 ) 

Adjustments to net assets allocated to contracts in payout period

      (133 )      37        (1,302 )      (76 ) 
  

 

 

    

 

 

    

 

 

    

 

 

  

Net increase (decrease) in net assets resulting from contract transactions

      (3,178,873 )      (3,593,188 )      (6,974,486 )      (5,888,436 ) 
  

 

 

    

 

 

    

 

 

    

 

 

  

Total increase (decrease) in net assets

      (4,843,433 )      (2,628,856 )      (10,924,483 )      (2,518,017 ) 
        

Net assets at beginning of period

      16,773,783        19,402,639        59,756,255        62,274,272   
  

 

 

    

 

 

    

 

 

    

 

 

  

Net assets at end of period

    $ 11,930,350      $ 16,773,783      $ 48,831,772      $ 59,756,255   
  

 

 

    

 

 

    

 

 

    

 

 

  

 

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

 

SA - 46

Table of Contents

PHL VARIABLE ACCUMULATION ACCOUNT

STATEMENTS OF CHANGES IN NET ASSETS

For the periods ended December 31, 2011 and 2010

(Continued)

 

     Virtus Capital Growth Series     Virtus Growth & Income Series  
     2011     2010     2011     2010  

Increase (decrease) in net assets from operations:

         
        

Net investment income (loss)

    $ (496,856 )    $ (366,732 )    $ (661,290 )    $ (142,799 ) 

Realized gains (losses)

      (2,709,615 )      (3,276,709 )      1,384,292        (425,727 ) 

Unrealized appreciation

(depreciation) during the year

      1,085,606        8,787,848        (2,807,881 )      8,398,184   
  

 

 

    

 

 

    

 

 

    

 

 

  

Net increase (decrease) in net assets from operations

      (2,120,865 )      5,144,407        (2,084,879 )      7,829,658   
  

 

 

    

 

 

    

 

 

    

 

 

  
        

Contract transactions:

         

Payments received from contract owners

      638,463        531,876        1,145,329        508,259   

Transfers between Investment Options (including GIA/MVA), net

      (1,320,591 )      (1,224,595 )      (4,712,515 )      40,640,412   

Transfers for contract benefits and terminations

      (6,155,375 )      (5,053,904 )      (17,177,879 )      (8,296,228 ) 

Contract maintenance charges

      (98,938 )      (109,110 )      (304,003 )      (298,379 ) 

Adjustments to net assets allocated to contracts in payout period

      (51,534 )      3,563        (33,956 )      (122,118 ) 
  

 

 

    

 

 

    

 

 

    

 

 

  

Net increase (decrease) in net assets resulting from contract transactions

      (6,987,975 )      (5,852,170 )      (21,083,024 )      32,431,946   
  

 

 

    

 

 

    

 

 

    

 

 

  

Total increase (decrease) in net assets

      (9,108,840 )      (707,763 )      (23,167,903 )      40,261,604   
        

Net assets at beginning of period

      43,213,181        43,920,944        98,693,016        58,431,412   
  

 

 

    

 

 

    

 

 

    

 

 

  

Net assets at end of period

    $ 34,104,341      $ 43,213,181      $ 75,525,113      $ 98,693,016   
  

 

 

    

 

 

    

 

 

    

 

 

  

 

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

 

SA - 47

Table of Contents

PHL VARIABLE ACCUMULATION ACCOUNT

STATEMENTS OF CHANGES IN NET ASSETS

For the periods ended December 31, 2011 and 2010

(Continued)

 

     Virtus International Series     Virtus Multi-Sector Fixed Income Series  
     2011     2010     2011     2010  

Increase (decrease) in net assets from operations:

         
        

Net investment income (loss)

    $ 3,256,662      $ 2,958,859      $ 7,229,096      $ 8,025,992   

Realized gains (losses)

      2,253,206        (1,830,712 )      (269,560 )      1,061,549   

Unrealized appreciation
(depreciation) during the year

      (19,901,382 )      28,839,287        (4,473,068 )      6,518,264   
  

 

 

    

 

 

    

 

 

    

 

 

  

Net increase (decrease) in net assets from operations

      (14,391,514 )      29,967,434        2,486,468        15,605,805   
  

 

 

    

 

 

    

 

 

    

 

 

  
        

Contract transactions:

         

Payments received from contract owners

      752,457        1,846,389        746,417        1,120,876   

Transfers between Investment Options
(including GIA/MVA), net

      (3,947,434 )      (8,040,914 )      (2,605,150 )      17,541,377   

Transfers for contract benefits and terminations

      (28,180,970 )      (26,525,614 )      (21,654,392 )      (18,327,815 ) 

Contract maintenance charges

      (1,959,658 )      (2,127,447 )      (836,737 )      (902,742 ) 

Adjustments to net assets allocated to contracts in payout period

      (10,701 )      4,946        (7,023 )      2,795   
  

 

 

    

 

 

    

 

 

    

 

 

  

Net increase (decrease) in net assets resulting from contract transactions

      (33,346,306 )      (34,842,640 )      (24,356,885 )      (565,509 ) 
  

 

 

    

 

 

    

 

 

    

 

 

  

Total increase (decrease) in net assets

      (47,737,820 )      (4,875,206 )      (21,870,417 )      15,040,296   
        

Net assets at beginning of period

      279,981,114        284,856,320        148,058,101        133,017,805   
  

 

 

    

 

 

    

 

 

    

 

 

  

Net assets at end of period

    $ 232,243,294      $ 279,981,114      $ 126,187,684      $ 148,058,101   
  

 

 

    

 

 

    

 

 

    

 

 

  

 

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

 

SA - 48

Table of Contents

PHL VARIABLE ACCUMULATION ACCOUNT

STATEMENTS OF CHANGES IN NET ASSETS

For the periods ended December 31, 2011 and 2010

(Continued)

 

     Virtus Real Estate Securities Series     Virtus Small-Cap Growth Series  
     2011     2010     2011     2010  

Increase (decrease) in net assets from operations:

         
        

Net investment income (loss)

    $ (443,461 )    $ 416,197      $ (367,057 )    $ (201,744 ) 

Realized gains (losses)

      5,590,036        1,443,414        3,135,370        (1,067,796 ) 

Unrealized appreciation
(depreciation) during the year

      673,210        15,515,488        1,300,726        3,188,248   
  

 

 

    

 

 

    

 

 

    

 

 

  

Net increase (decrease) in net assets from operations

      5,819,785        17,375,099        4,069,039        1,918,708   
  

 

 

    

 

 

    

 

 

    

 

 

  
        

Contract transactions:

         

Payments received from contract owners

      404,763        627,719        205,164        127,386   

Transfers between Investment Options
(including GIA/MVA), net

      (4,170,644 )      (10,172,302 )      (1,977,257 )      15,133,330   

Transfers for contract benefits and terminations

      (8,714,616 )      (8,264,309 )      (4,932,257 )      (2,214,759 ) 

Contract maintenance charges

      (489,202 )      (536,178 )      (87,586 )      (59,502 ) 

Adjustments to net assets allocated to contracts in payout period

      (2,175 )      1,782        (1,430 )      1,208   
  

 

 

    

 

 

    

 

 

    

 

 

  

Net increase (decrease) in net assets resulting from contract transactions

      (12,971,874 )      (18,343,288 )      (6,793,366 )      12,987,663   
  

 

 

    

 

 

    

 

 

    

 

 

  

Total increase (decrease) in net assets

      (7,152,089 )      (968,189 )      (2,724,327 )      14,906,371   
        

Net assets at beginning of period

      73,968,371        74,936,560        28,900,540        13,994,169   
  

 

 

    

 

 

    

 

 

    

 

 

  

Net assets at end of period

    $ 66,816,282      $ 73,968,371      $ 26,176,213      $ 28,900,540   
  

 

 

    

 

 

    

 

 

    

 

 

  

 

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

 

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PHL VARIABLE ACCUMULATION ACCOUNT

STATEMENTS OF CHANGES IN NET ASSETS

For the periods ended December 31, 2011 and 2010

(Continued)

 

     Virtus Small-Cap Value Series     Virtus Strategic Allocation Series  
     2011     2010     2011     2010  

Increase (decrease) in net assets from operations:

         
        

Net investment income (loss)

    $ (497,882 )    $ (19,669 )    $ 254,619      $ 469,283   

Realized gains (losses)

      6,514,237        (1,054,717 )      (685,168 )      (1,439,716 ) 

Unrealized appreciation
(depreciation) during the year

      (2,689,336 )      6,456,566        708,812        4,413,162   
  

 

 

    

 

 

    

 

 

    

 

 

  

Net increase (decrease) in net assets from operations

      3,327,019        5,382,180        278,263        3,442,729   
  

 

 

    

 

 

    

 

 

    

 

 

  
        

Contract transactions:

         

Payments received from contract owners

      285,932        214,093        402,945        941,070   

Transfers between Investment Options
(including GIA/MVA), net

      (6,066,647 )      74,150,726        (1,011,790 )      (1,495,396 ) 

Transfers for contract benefits and terminations

      (10,840,408 )      (3,560,036 )      (4,758,285 )      (6,120,020 ) 

Contract maintenance charges

      (629,238 )      (190,213 )      (55,130 )      (48,342 ) 

Adjustments to net assets allocated to contracts in payout period

      (2,341 )      4,642        (15,966 )      72   
  

 

 

    

 

 

    

 

 

    

 

 

  

Net increase (decrease) in net assets resulting from contract transactions

      (17,252,702 )      70,619,212        (5,438,226 )      (6,722,616 ) 
  

 

 

    

 

 

    

 

 

    

 

 

  

Total increase (decrease) in net assets

      (13,925,683 )      76,001,392        (5,159,963 )      (3,279,887 ) 
        

Net assets at beginning of period

      97,416,565        21,415,173        31,308,696        34,588,583   
  

 

 

    

 

 

    

 

 

    

 

 

  

Net assets at end of period

    $ 83,490,882      $ 97,416,565      $ 26,148,733      $ 31,308,696   
  

 

 

    

 

 

    

 

 

    

 

 

  

 

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

 

SA - 50

Table of Contents

PHL VARIABLE ACCUMULATION ACCOUNT

STATEMENTS OF CHANGES IN NET ASSETS

For the periods ended December 31, 2011 and 2010

(Continued)

 

     Wanger International     Wanger International Select  
     2011     2010     2011     2010  

Increase (decrease) in net assets from operations:

         
        

Net investment income (loss)

    $ 3,096,271      $ 1,072,887      $ 11,121      $ (3,125 ) 

Realized gains (losses)

      4,703,192        1,195,704        186,651        (140,805 ) 

Unrealized appreciation
(depreciation) during the year

      (21,996,286 )      17,754,559        (1,152,224 )      1,875,009   
  

 

 

    

 

 

    

 

 

    

 

 

  

Net increase (decrease) in net assets from operations

      (14,196,823 )      20,023,150        (954,452 )      1,731,079   
  

 

 

    

 

 

    

 

 

    

 

 

  
        

Contract transactions:

         

Payments received from contract owners

      443,938        713,095        61,025        69,632   

Transfers between Investment Options
(including GIA/MVA), net

      (3,499,181 )      (7,066,162 )      (711,540 )      (695,688 ) 

Transfers for contract benefits and terminations

      (11,265,710 )      (10,539,827 )      (1,392,377 )      (1,369,856 ) 

Contract maintenance charges

      (456,403 )      (502,393 )      (25,587 )      (30,875 ) 

Adjustments to net assets allocated to contracts in payout period

      (14,838 )      5,716        -            -       
  

 

 

    

 

 

    

 

 

    

 

 

  

Net increase (decrease) in net assets resulting from contract transactions

      (14,792,194 )      (17,389,571 )      (2,068,479 )      (2,026,787 ) 
  

 

 

    

 

 

    

 

 

    

 

 

  

Total increase (decrease) in net assets

      (28,989,017 )      2,633,579        (3,022,931 )      (295,708 ) 
        

Net assets at beginning of period

      102,635,710        100,002,131        10,036,558        10,332,266   
  

 

 

    

 

 

    

 

 

    

 

 

  

Net assets at end of period

    $ 73,646,693      $ 102,635,710      $ 7,013,627      $ 10,036,558   
  

 

 

    

 

 

    

 

 

    

 

 

  

 

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

 

SA - 51

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PHL VARIABLE ACCUMULATION ACCOUNT

STATEMENTS OF CHANGES IN NET ASSETS

For the periods ended December 31, 2011 and 2010

(Continued)

 

     Wanger Select     Wanger USA  
     2011     2010     2011     2010  

Increase (decrease) in net assets from operations:

         
        

Net investment income (loss)

    $ 105,793      $ (102,271 )    $ (599,789 )    $ (612,470 ) 

Realized gains (losses)

      1,393,457        824,548        6,374,063        2,831,281   

Unrealized appreciation
(depreciation) during the year

      (3,828,113 )      2,365,295        (7,579,473 )      6,823,546   
  

 

 

    

 

 

    

 

 

    

 

 

  

Net increase (decrease) in net assets from operations

      (2,328,863 )      3,087,572        (1,805,199 )      9,042,357   
  

 

 

    

 

 

    

 

 

    

 

 

  
        

Contract transactions:

         

Payments received from contract owners

      144,196        211,232        471,564        556,866   

Transfers between Investment Options
(including GIA/MVA), net

      (1,249,005 )      (371,506 )      (2,780,260 )      (1,572,219 ) 

Transfers for contract benefits and terminations

      (2,612,064 )      (2,484,759 )      (7,008,960 )      (7,310,739 ) 

Contract maintenance charges

      (34,070 )      (36,151 )      (67,983 )      (84,326 ) 

Adjustments to net assets allocated to contracts in payout period

      (32 )      2,307        (16,136 )      6,340   
  

 

 

    

 

 

    

 

 

    

 

 

  

Net increase (decrease) in net assets resulting from contract transactions

      (3,750,975 )      (2,678,877 )      (9,401,775 )      (8,404,078 ) 
  

 

 

    

 

 

    

 

 

    

 

 

  

Total increase (decrease) in net assets

      (6,079,838 )      408,695        (11,206,974 )      638,279   
        

Net assets at beginning of period

      14,986,612        14,577,917        49,682,074        49,043,795   
  

 

 

    

 

 

    

 

 

    

 

 

  

Net assets at end of period

    $ 8,906,774      $ 14,986,612      $ 38,475,100      $ 49,682,074   
  

 

 

    

 

 

    

 

 

    

 

 

  

 

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

 

SA - 52

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PHL VARIABLE ACCUMULATION ACCOUNT

NOTES TO FINANCIAL STATEMENTS

 

Note 1—Organization

The PHL Variable Accumulation Account (the “Separate Account”), is a separate investment account of PHL Variable Insurance Company (“PHL Variable” or “the Sponsor”). PHL Variable is a Connecticut stock life insurance company and is an indirect wholly-owned subsidiary of Phoenix Life Insurance Company (“Phoenix”). Phoenix is a wholly-owned subsidiary of The Phoenix Companies, Inc. (“PNX”). The Separate Account is registered as a unit investment trust under the Investment Company Act of 1940, as amended, and was established December 7, 1994. The Separate Account currently consists of 58 investment options that invest in shares of underlying funds. The underlying funds include Virtus Variable Insurance Trust (formerly The Phoenix Edge Series Fund), Invesco Variable Insurance Funds, The Alger Portfolios, Alliance Bernstein® Variable Products Series (VPS) Fund, Inc., DWS Investments VIT Funds, Federated Insurance Series, Fidelity® Variable Insurance Products, Financial Investors Variable Insurance Trust, Franklin Templeton Variable Insurance Products Trust, Lazard Retirement Series, Inc., Lord Abbett Series Fund, Inc., Neuberger Berman Advisers Management Trust, Oppenheimer Variable Account Funds, PIMCO Variable Insurance Trust, The Rydex Variable Trust, Sentinel Variable Products Trust, Calvert Variable Products, Inc., and Wanger Advisors Trust (collectively, the “Funds”).

The Separate Account may invest in the following investment options:

 

Alger Capital Appreciation Portfolio – Class 1-2 Shares
AllianceBernstein VPS Balanced Wealth Strategy Portfolio – Class B
Calvert VP S&P MidCap 400 Index Portfolio – Class I Shares (formerly Summit S&P MidCap 400 Index Portfolio – Class I Shares)
DWS Equity 500 Index VIP – Class A
DWS Small Cap Index VIP – Class A
Federated Fund for U.S. Government Securities II
Federated High Income Bond Fund II – Primary Shares
Federated Prime Money Fund II
Fidelity® VIP Contrafund® Portfolio – Service Class
Fidelity® VIP Growth Opportunities Portfolio – Service Class
Fidelity® VIP Growth Portfolio – Service Class
Fidelity® VIP Investment Grade Bond Portfolio – Service Class
Franklin Flex Cap Growth Securities Fund – Class 2
Franklin Income Securities Fund – Class 2
Ibbotson Aggressive Growth ETF Asset Allocation Portfolio – Class II (merging series Phoenix Dynamic Asset Allocation Series: Aggressive Growth)
Ibbotson Balanced ETF Asset Allocation Portfolio – Class II (merging series Phoenix Dynamic Asset Allocation Series: Moderate Growth)
Ibbotson Growth ETF Asset Allocation Portfolio – Class II (merging series Phoenix Dynamic Asset Allocation Series: Growth)
Ibbotson Income and Growth ETF Asset Allocation Portfolio – Class II (merging series Phoenix Dynamic Asset Allocation Series: Moderate)
Invesco V.I. Capital Appreciation Fund – Series I Shares (formerly AIM V.I. Capital Appreciation Fund – Series I Shares)
Invesco V.I. Core Equity Fund – Series I Shares (formerly AIM V.I. Core Equity Fund – Series I Shares)
Invesco V.I. Mid Cap Core Equity Fund – Series I Shares (formerly AIM V.I. Mid Cap Core Equity Fund – Series I Shares)
Invesco Van Kampen V.I. Equity and Income Fund – Class II (formerly Van Kampen UIF Equity and Income Portfolio-Class II)
Lazard Retirement U.S. Small-Mid Cap Equity Portfolio – Service Shares
Lord Abbett Series Fund Bond Debenture Portfolio – Class VC Shares
Lord Abbett Series Fund Growth and Income Portfolio – Class VC Shares
Lord Abbett Series Fund Mid Cap Value Portfolio – Class VC Shares
Mutual Shares Securities Fund – Class 2 (included in Franklin Templeton Variable Insurance Products Trust)
Neuberger Berman AMT Guardian Portfolio – Class S
Neuberger Berman AMT Small Cap Growth Portfolio – S Class
Oppenheimer Capital Appreciation Fund/VA – Service Shares
Oppenheimer Global Securities Fund/VA – Service Shares

 

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PHL VARIABLE ACCUMULATION ACCOUNT

NOTES TO FINANCIAL STATEMENTS

 

Note 1—Organization (Continued)

 

Oppenheimer Main Street Small- & Mid-Cap Fund®/VA – Service Shares
PIMCO CommodityRealReturn® Strategy Portfolio – Advisor Class
PIMCO Real Return Portfolio – Advisor Class
PIMCO Total Return Portfolio – Advisor Class
Rydex VT Inverse Government Long Bond Strategy Fund
Rydex VT Nova Fund
Rydex|SGI VT U.S. Long Short Momentum Fund (formerly Rydex Variable Trust All-Cap Opportunity Fund)
Sentinel Variable Products Balanced Fund
Sentinel Variable Products Bond Fund
Sentinel Variable Products Common Stock Fund
Sentinel Variable Products Mid Cap Fund (formerly Sentinel Variable Products Mid Cap Growth Fund)
Sentinel Variable Products Small Company Fund
Templeton Developing Markets Securities Fund – Class 2
Templeton Foreign Securities Fund – Class 2
Templeton Growth Securities Fund – Class 2
Virtus Capital Growth Series (formerly Phoenix Capital Growth Series) (merging series Phoenix Comstock Series and Phoenix Equity 500 Series, surviving series Phoenix Capital Growth Series)
Virtus Growth & Income Series (formerly Phoenix Growth and Income Series)
Virtus International Series (formerly Phoenix-Aberdeen International Series)
Virtus Multi-Sector Fixed Income Series (formerly Phoenix Multi-Sector Fixed Income Series) (merging series Phoenix Multi-Sector Short Term Bond Series, surviving series Phoenix Multi-Sector Fixed Income Series)
Virtus Real Estate Securities Series (formerly Phoenix-Duff & Phelps Real Estate Securities Series)
Virtus Small-Cap Growth Series (formerly Phoenix Small-Cap Growth Series) (merging series Phoenix Mid-Cap Growth Series, surviving series Phoenix Small-Cap Growth Series)
Virtus Small-Cap Value Series (formerly Phoenix Small-Cap Value Series) (merging series Phoenix Mid-Cap Value Series, surviving series Phoenix Small-Cap Value Series)
Virtus Strategic Allocation Series (formerly Phoenix Strategic Allocation Series)
Wanger International
Wanger International Select
Wanger Select
Wanger USA

Additionally, policy owners may direct the allocation of their investments between the Separate Account, the Guaranteed Interest Account (“GIA”) and/or the Market Valuation Account (“MVA”).

Under applicable insurance law, the assets and liabilities of the Separate Account are clearly identified and distinguished from PHL Variable’s other asset and liabilities. The portion of the Separate Account’s assets applicable to the variable annuity contracts may not be used to pay liabilities arising out of any other business PHL Variable may conduct.

Note 2—Significant Accounting Policies

The following is a summary of significant accounting policies of the Separate Account, which are in accordance with accounting principles generally accepted in the United States of America in the investment company industry:

 

A. Valuation of investments: Investments are made exclusively in the Funds and are valued at the reported net asset values per share of the respective investment options, which in turn value their investment securities at fair value.

 

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PHL VARIABLE ACCUMULATION ACCOUNT

NOTES TO FINANCIAL STATEMENTS

 

Note 2—Significant Accounting Policies (Continued)

B. Investment transactions and related income: Investment transactions are recorded on the trade date. Realized gains and losses on the sales of shares of the Funds are computed on the basis of the identified cost of the share sold. Dividend income and realized gain distributions from investments are recorded on the ex-distribution date.

 

C. Income taxes: The Separate Account is not a separate entity from Phoenix, and under current federal income tax law, income arising from the Separate Account is not taxed since reserves are established equivalent to such income. Therefore, no provision for related federal taxes is required.

 

D. Use of estimates: The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, disclosure of contingent assets and liabilities, revenues and expenses. Actual results could differ from those estimates.

 

E. Distributions: Distributions from the Funds are recorded by each investment option on the ex-dividend date.

 

F. Security Valuation: The Separate Account measures the fair value of its investment in the investment options available on a recurring basis. U.S. GAAP establishes a hierarchy that prioritizes inputs to valuation methods. The three levels of inputs are:

 

  · 

Level 1 – Unadjusted quoted prices in active markets for identical assets or liabilities that the Separate Account has the ability to access.

 

  · 

Level 2 – Observable inputs other than quoted prices included in level 1 that are observable for the asset or liability, either directly or indirectly. These inputs may include quoted prices for the identical instrument on an inactive market, prices for similar instruments, interest rates, prepayment speeds, credit risk, yield curves, default rates, and similar data.

 

  · 

Level 3 – Unobservable inputs for the asset or liability, to the extent observable inputs are not available, representing the Separate Account’s own assumptions about the assumptions a market participant would use in valuing the assets or liability, and would be based on the best information available.

Investments in portfolio shares are valued using the net asset value of the respective portfolios at the end of each New York Stock Exchange business day, as determined by the respective fund manager. Investments held by the Separate Account are Level 1 of the hierarchy. There were no transfers between Level 1, Level 2 and Level 3 during the year.

 

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PHL VARIABLE ACCUMULATION ACCOUNT

NOTES TO FINANCIAL STATEMENTS

 

Note 3—Purchases and Proceeds from Sales of Investments

The cost of purchases and proceeds from sales of investments for the period ended December 31, 2011 were as follows:

 

Investment Option

     

Purchases

       

Sales

  

Alger Capital Appreciation Portfolio – Class I-2 Shares

      $ 137,382         $ 1,904,577   

AllianceBernstein VPS Balanced Wealth Strategy Portfolio – Class B

        1,122,342           972,894   

Calvert VP S&P MidCap 400 Index Portfolio – Class I Shares

        1,319,834           844,740   

DWS Equity 500 Index VIP – Class A

        2,361,182           10,389,363   

DWS Small Cap Index VIP – Class A

        534,774           447,693   

Federated Fund for U.S. Government Securities II

        15,096,053           32,962,215   

Federated High Income Bond Fund II – Primary Shares

        6,274,111           8,013,645   

Federated Prime Money Fund II

        38,211,673           49,053,100   

Fidelity® VIP Contrafund® Portfolio – Service Class

        4,033,171           15,195,142   

Fidelity® VIP Growth Opportunities Portfolio – Service Class

        1,540,133           22,153,107   

Fidelity® VIP Growth Portfolio – Service Class

        885,562           5,831,617   

Fidelity® VIP Investment Grade Bond Portfolio – Service Class

        8,695,034           9,040,051   

Franklin Flex Cap Growth Securities Fund – Class 2

        59,846           91,839   

Franklin Income Securities Fund – Class 2

        6,905,246           13,652,211   

Ibbotson Aggressive Growth ETF Asset Allocation Portfolio – Class II

        1,150,181           2,850,228   

Ibbotson Balanced ETF Asset Allocation Portfolio – Class II

        8,868,082           6,412,002   

Ibbotson Growth ETF Asset Allocation Portfolio – Class II

        1,823,368           4,725,073   

Ibbotson Income and Growth ETF Asset Allocation Portfolio – Class II

                11,498,674                   10,265,292   

Invesco V.I. Capital Appreciation Fund – Series I Shares

        813,646           6,842,134   

Invesco V.I. Core Equity Fund – Series I Shares

        138,795           1,783,543   

Invesco V.I. Mid Cap Core Equity Fund – Series I Shares

        69,131           1,177,143   

Invesco Van Kampen V.I. Equity and Income Fund – Class II

        197,042           368,059   

Lazard Retirement U.S. Small-Mid Cap Equity Portfolio – Service Shares

        111,655           270,158   

Lord Abbett Series Fund Bond Debenture Portfolio – Class VC Shares

        2,702,430           3,985,315   

Lord Abbett Series Fund Growth and Income Portfolio – Class VC Shares

        3,452,526           16,498,294   

Lord Abbett Series Fund Mid Cap Value Portfolio – Class VC Shares

        515,703           1,736,827   

Mutual Shares Securities Fund – Class 2

        4,562,333           12,509,503   

Neuberger Berman AMT Guardian Portfolio – S Class

        1,468,047           8,164,389   

Neuberger Berman AMT Small Cap Growth Portfolio – S Class

        108,340           254,120   

Oppenheimer Capital Appreciation Fund/VA – Service Shares

        223,722           656,855   

Oppenheimer Global Securities Fund/VA – Service Shares

        728,716           1,189,655   

Oppenheimer Main Street Small- & Mid-Cap Fund®/VA – Service Shares

        878,556           5,894,364   

PIMCO CommodityRealReturn® Strategy Portfolio – Advisor Class

        7,332,716           8,800,238   

PIMCO Real Return Portfolio – Advisor Class

        7,418,936           2,759,894   

PIMCO Total Return Portfolio – Advisor Class

        4,841,079           7,525,650   

Rydex VT Inverse Government Long Bond Strategy Fund

        122,209           264,829   

Rydex VT Nova Fund

        3,384           250,477   

Rydex|SGI VT U.S. Long Short Momentum Fund

        11,544           289,034   

Sentinel Variable Products Balanced Fund

        582,248           3,090,180   

Sentinel Variable Products Bond Fund

        5,168,524           6,647,856   

Sentinel Variable Products Common Stock Fund

        3,680,736           17,439,912   

Sentinel Variable Products Mid Cap Fund

        904,137           1,217,400   

Sentinel Variable Products Small Company Fund

        1,688,687           4,546,560   

Templeton Developing Markets Securities Fund – Class 2

        928,786           3,243,439   

Templeton Foreign Securities Fund – Class 2

        1,394,164           4,508,084   

Templeton Growth Securities Fund – Class 2

        6,746,140           13,767,120   

 

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PHL VARIABLE ACCUMULATION ACCOUNT

NOTES TO FINANCIAL STATEMENTS

 

Note 3—Purchases and Proceeds from Sales of Investments (Continued)

 

Investment Option

     

Purchases

       

Sales

  

Virtus Capital Growth Series

      $ 1,000,479         $ 8,485,310   

Virtus Growth & Income Series

        2,849,736           24,594,049   

Virtus International Series

        12,253,217           42,342,860   

Virtus Multi-Sector Fixed Income Series

        15,798,494           32,926,283   

Virtus Real Estate Securities Series

        5,743,543           15,430,870   

Virtus Small-Cap Growth Series

        4,769,692           9,225,094   

Virtus Small-Cap Value Series

        7,740,038           19,459,373   

Virtus Strategic Allocation Series

        1,603,994           6,787,601   

Wanger International

        9,671,957           19,170,045   

Wanger International Select

        599,125           2,656,483   

Wanger Select

        1,466,683           5,111,865   

Wanger USA

        6,747,199           12,534,338   
    

 

 

       

 

 

  
     $       237,554,737         $       529,209,992   
    

 

 

       

 

 

  

 

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PHL VARIABLE ACCUMULATION ACCOUNT

NOTES TO FINANCIAL STATEMENTS

 

Note 4—Changes in Units Outstanding

The changes in units outstanding were as follows:

 

    For the period ended December 31, 2011     For the period ended December 31, 2010  
Investment Option   Units
Issued		     Units
Redeemed		     Net Increase
(Decrease)		     Units
Issued		     Units
Redeemed		     Net Increase
(Decrease)		  
Alger Capital Appreciation Portfolio – Class I-2 Shares     45,259        (853,108 )      (807,849 )      157,299        (1,049,447 )      (892,148 ) 
AllianceBernstein VPS Balanced Wealth Strategy Portfolio – Class B     1,000,214        (901,718 )      98,496        1,831,162        (1,037,101 )      794,061   
Calvert VP S&P MidCap 400 Index Portfolio – Class I Shares     1,066,955        (700,344 )      366,611        777,701        (623,515 )      154,186   
DWS Equity 500 Index VIP – Class A     716,043        (4,549,325 )      (3,833,282 )      1,053,652        (5,109,435 )      (4,055,783 ) 
DWS Small Cap Index VIP – Class A     451,111        (382,156 )      68,955        289,369        (546,099 )      (256,730 ) 
Federated Fund for U.S. Government Securities II     3,773,162        (11,763,711 )      (7,990,549 )      6,884,675        (13,460,692 )      (6,576,017 ) 
Federated High Income Bond Fund II – Primary Shares     1,810,311        (2,556,786 )      (746,475 )      2,948,923        (2,928,225 )      20,698   
Federated Prime Money Fund II     38,972,747        (49,216,068 )      (10,243,321 )      115,667,683        (48,398,093 )      67,269,590   
Fidelity® VIP Contrafund® Portfolio – Service Class     1,578,209        (5,396,399 )      (3,818,190 )      2,086,322        (6,957,376 )      (4,871,054 ) 
Fidelity® VIP Growth Opportunities Portfolio – Service Class     958,892        (15,400,293 )      (14,441,401 )      1,501,718        (16,357,047 )      (14,855,329 ) 
Fidelity® VIP Growth Portfolio – Service Class     472,721        (2,973,710 )      (2,500,989 )      601,934        (3,239,708 )      (2,637,774 ) 
Fidelity® VIP Investment Grade Bond Portfolio – Service Class     4,432,597        (6,781,129 )      (2,348,532 )      5,724,712        (8,381,726 )      (2,657,014 ) 
Franklin Flex Cap Growth Securities Fund – Class 2     57,483        (79,538 )      (22,055 )      137,855        (296,794 )      (158,939 ) 
Franklin Income Securities Fund – Class 2     3,492,131        (11,720,435 )      (8,228,304 )      4,528,352        (11,108,427 )      (6,580,075 ) 
Ibbotson Aggressive Growth ETF Asset Allocation Portfolio – Class II     919,781        (2,489,249 )      (1,569,468 )      16,190,319        (183,963 )      16,006,356   
Ibbotson Balanced ETF Asset Allocation Portfolio – Class II     7,899,685        (5,891,600 )      2,008,085        25,008,384        (161,389 )      24,846,995   
Ibbotson Growth ETF Asset Allocation Portfolio – Class II     1,294,898        (4,216,008 )      (2,921,110 )      24,395,378        (414,336 )      23,981,042   
Ibbotson Income and Growth ETF Asset Allocation Portfolio – Class II     10,510,010        (9,646,037 )      863,973        32,431,722        (489,337 )      31,942,385   
Invesco V.I. Capital Appreciation Fund – Series I Shares     441,289        (3,406,930 )      (2,965,641 )      727,647        (3,690,396 )      (2,962,749 ) 
Invesco V.I. Core Equity Fund – Series I Shares     66,136        (1,519,581 )      (1,453,445 )      249,900        (1,484,607 )      (1,234,707 ) 
Invesco V.I. Mid Cap Core Equity Fund – Series I Shares     49,280        (840,173 )      (790,893 )      137,773        (730,627 )      (592,854 ) 
Invesco Van Kampen V.I. Equity and Income Fund – Class II     161,496        (329,605 )      (168,109 )      411,864        (231,728 )      180,136   
Lazard Retirement U.S. Small-Mid Cap Equity Portfolio – Service Shares     30,493        (201,659 )      (171,166 )      67,438        (366,703 )      (299,265 ) 
Lord Abbett Series Fund Bond Debenture Portfolio – Class VC Shares     1,625,766        (2,774,259 )      (1,148,493 )      1,747,561        (3,107,028 )      (1,359,467 ) 
Lord Abbett Series Fund Growth and Income Portfolio – Class VC Shares     2,891,809        (14,897,427 )      (12,005,618 )      3,633,448        (16,650,527 )      (13,017,079 ) 
Lord Abbett Series Fund Mid Cap Value Portfolio – Class VC Shares     459,426        (1,525,750 )      (1,066,324 )      981,806        (2,580,806 )      (1,599,000 ) 
Mutual Shares Securities Fund – Class 2     2,190,483        (7,962,239 )      (5,771,756 )      2,284,219        (8,817,264 )      (6,533,045 ) 
Neuberger Berman AMT Guardian Portfolio – S Class     1,318,041        (7,572,402 )      (6,254,361 )      2,686,147        (8,318,383 )      (5,632,236 ) 
Neuberger Berman AMT Small Cap Growth Portfolio – S Class     131,108        (305,770 )      (174,662 )      336,898        (348,839 )      (11,941 ) 
Oppenheimer Capital Appreciation Fund/VA – Service Shares     237,829        (691,658 )      (453,829 )      870,630        (1,099,378 )      (228,748 ) 
Oppenheimer Global Securities Fund/VA – Service Shares     704,263        (1,158,031 )      (453,768 )      1,217,359        (1,162,010 )      55,349   
Oppenheimer Main Street Small- & Mid-Cap Fund®/VA – Service Shares     801,686        (5,701,229 )      (4,899,543 )      1,943,368        (9,414,767 )      (7,471,399 ) 
PIMCO CommodityRealReturn® Strategy Portfolio – Advisor Class     1,713,358        (7,360,792 )      (5,647,434 )      2,632,296        (6,338,645 )      (3,706,349 ) 
PIMCO Real Return Portfolio – Advisor Class     5,234,266        (2,020,382 )      3,213,884        1,132,224        (2,903,727 )      (1,771,503 ) 
PIMCO Total Return Portfolio – Advisor Class     3,086,012        (5,321,764 )      (2,235,752 )      4,100,363        (5,869,653 )      (1,769,290 ) 
Rydex VT Inverse Government Long Bond Strategy Fund     243,085        (470,248 )      (227,163 )      209,960        (339,080 )      (129,120 ) 
Rydex VT Nova Fund     2,714        (200,273 )      (197,559 )      9,008        (69,285 )      (60,277 ) 
Rydex|SGI VT U.S. Long Short Momentum Fund     7,738        (182,283 )      (174,545 )      41,109        (181,848 )      (140,739 ) 
Sentinel Variable Products Balanced Fund     469,472        (3,028,517 )      (2,559,045 )      3,254,945        (1,657,191 )      1,597,754   
Sentinel Variable Products Bond Fund     2,915,920        (4,941,156 )      (2,025,236 )      5,407,004        (6,150,062 )      (743,058 ) 
Sentinel Variable Products Common Stock Fund     1,745,638        (15,804,748 )      (14,059,110 )      6,281,096        (18,514,536 )      (12,233,440 ) 
Sentinel Variable Products Mid Cap Fund     968,429        (1,292,778 )      (324,349 )      876,271        (576,236 )      300,035   
Sentinel Variable Products Small Company Fund     1,120,580        (3,998,949 )      (2,878,369 )      1,168,262        (3,622,992 )      (2,454,730 ) 

 

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PHL VARIABLE ACCUMULATION ACCOUNT

NOTES TO FINANCIAL STATEMENTS

 

Note 4—Changes in Units Outstanding (Continued)

 

    For the period ended December 31, 2011     For the period ended December 31, 2010  
Investment Option   Units
Issued		     Units
Redeemed		     Net Increase
(Decrease)		     Units
Issued		     Units
Redeemed		     Net Increase
(Decrease)		  
Templeton Developing Markets Securities Fund – Class 2     470,830        (1,699,868 )      (1,229,038 )      1,665,266        (2,073,961 )      (408,695 ) 
Templeton Foreign Securities Fund – Class 2     571,458        (1,821,889 )      (1,250,431 )      793,681        (2,280,341 )      (1,486,660 ) 
Templeton Growth Securities Fund – Class 2     5,433,863        (9,790,575 )      (4,356,712 )      5,180,033        (9,756,008 )      (4,575,975 ) 
Virtus Capital Growth Series     772,490        (6,522,427 )      (5,749,937 )      806,225        (6,217,325 )      (5,411,100 ) 
Virtus Growth & Income Series     1,390,734        (12,761,562 )      (11,370,828 )      43,359,429        (19,643,220 )      23,716,209   
Virtus International Series     3,495,131        (17,257,267 )      (13,762,136 )      3,795,186        (20,837,521 )      (17,042,335 ) 
Virtus Multi-Sector Fixed Income Series     2,679,752        (11,650,690 )      (8,970,938 )      9,375,518        (12,533,192 )      (3,157,674 ) 
Virtus Real Estate Securities Series     496,444        (5,821,784 )      (5,325,340 )      926,963        (11,545,537 )      (10,618,574 ) 
Virtus Small-Cap Growth Series     733,862        (2,476,666 )      (1,742,804 )      5,165,609        (1,128,545 )      4,037,064   
Virtus Small-Cap Value Series     374,955        (9,632,596 )      (9,257,641 )      55,862,183        (3,023,594 )      52,838,589   
Virtus Strategic Allocation Series     392,047        (2,574,843 )      (2,182,796 )      682,024        (3,678,090 )      (2,996,066 ) 
Wanger International     1,467,151        (5,526,661 )      (4,059,510 )      1,237,898        (7,573,102 )      (6,335,204 ) 
Wanger International Select     196,973        (807,643 )      (610,670 )      341,218        (960,941 )      (619,723 ) 
Wanger Select     406,595        (1,417,431 )      (1,010,836 )      722,458        (1,433,633 )      (711,175 ) 
Wanger USA     970,383        (3,417,368 )      (2,446,985 )      1,154,652        (3,765,627 )      (2,610,975 ) 

 

SA - 59

Table of Contents

PHL VARIABLE ACCUMULATION ACCOUNT

NOTES TO FINANCIAL STATEMENTS

 

Note 5—Financial Highlights

A summary of units outstanding, unit values, net assets, net investment income ratios, expense ratios (excluding expenses of the underlying fund) and total return ratios for each of the five years in the periods ended December 31, 2011, 2010, 2009, 2008 and 2007 follows:

 

     At December 31,           For the periods ended December 31,  
     Units
(000’s)		        Unit
Fair Value
(Lowest to Highest)		        Net
Assets
(000’s)		           Investment
Income
Ratio 1		        Expense
Ratio 2
(Lowest to Highest)		        Total
Return 3
(Lowest to Highest)		  

Alger Capital Appreciation Portfolio – Class I-2 Shares

  

2011

      2,138           1.77         to         3.04           4,281            0.11%           0.90%         to         1.95%           (2.24%)         to         (0.65%)   

2010

      2,946           1.80         to         3.08           6,020            0.41%           0.90%         to         1.95%           (0.26%)         to         13.00%   

2009

      3,838           1.60         to         2.73           7,000            -           0.90%         to         1.95%           48.16%         to         49.74%   

2008

      5,202           1.08         to         1.83           6,339            -           0.90%         to         1.95%           (46.21%)         to         (45.63%)   

2007

      7,444           1.99         to         3.37           16,676            -           0.90%         to         1.95%           30.92%         to         32.33%   

AllianceBernstein VPS Balanced Wealth Strategy Portfolio – Class B

  

2011

      4,641           0.94         to         0.97           4,412            2.31%           0.90%         to         1.80%           (4.80%)         to         (3.93%)   

2010

      4,542           0.98         to         1.01           4,520            2.51%           0.90%         to         1.80%           3.42%         to         9.31%   

2009

      3,748           0.91         to         0.92           3,427            0.79%           0.90%         to         1.80%           (2.91%)         to         27.97%   

20088

      2,910           0.75         to         0.75           2,170            2.77%           0.90%         to         1.80%           (29.46%)         to         (5.03%)   

2007

      -           -         to         -           -            -           -         to         -           -         to         -   

Calvert VP S&P MidCap 400 Index Portfolio – Class I Shares

  

2011

      1,128           1.11         to         1.14           1,272            0.77%           0.90%         to         1.80%           (4.82%)         to         (3.12%)   

2010

      762           1.15         to         1.18           887            1.60%           0.90%         to         1.75%           1.20%         to         26.35%   

2009

      608           0.93         to         0.95           568            0.97%           0.90%         to         1.75%           10.86%         to         49.30%   

200810

      131           0.70         to         0.70           91            0.84%           1.10%         to         1.60%           (43.72%)         to         (11.18%)   

2007

      -           -         to         -           -            -           -         to         -           -         to         -   

DWS Equity 500 Index VIP – Class A

  

2011

      19,409           0.85         to         2.53           43,979            1.72%           0.90%         to         2.25%           (0.45%)         to         5.04%   

2010

      23,243           0.84         to         2.51           51,826            1.94%           0.90%         to         2.25%           12.13%         to         13.67%   

2009

      27,298           0.75         to         2.20           53,545            2.85%           0.90%         to         2.25%           (13.55%)         to         25.19%   

2008

      30,057           0.60         to         1.76           47,286            2.47%           0.90%         to         2.25%           (38.57%)         to         (29.73%)   

2007

      32,498           0.97         to         2.83           82,484            1.52%           0.90%         to         2.25%           (0.14%)         to         4.34%   

DWS Small Cap Index VIP – Class A

  

2011

      307           1.06         to         1.09           331            1.19%           0.90%         to         1.80%           (14.27%)         to         4.41%   

2010

      238           1.13         to         1.16           272            1.12%           0.90%         to         1.65%           (5.02%)         to         25.26%   

2009

      495           0.91         to         0.92           452            2.42%           0.90%         to         1.65%           9.49%         to         40.55%   

200810

      158           0.73         to         0.73           116            -           1.10%         to         1.60%           (46.58%)         to         (3.63%)   

2007

      -           -         to         -           -            -           -         to         -           -         to         -   

Federated Fund for U.S. Government Securities II

  

2011

      45,698           1.20         to         3.44           125,453            4.28%           0.90%         to         1.95%           3.72%         to         4.83%   

2010

      53,689           1.15         to         3.28           141,530            4.59%           0.90%         to         1.95%           3.12%         to         4.22%   

2009

      60,265           1.11         to         3.15           153,297            5.24%           0.50%         to         1.95%           (0.75%)         to         4.26%   

2008

      74,790           1.07         to         3.02           184,073            5.02%           0.50%         to         1.95%           2.25%         to         3.76%   

2007

      92,674           1.04         to         2.92           220,849            4.38%           0.50%         to         1.95%           0.33%         to         5.75%   

Federated High Income Bond Fund II – Primary Shares

  

2011

      4,220           1.27         to         4.28           12,444            9.20%           0.75%         to         1.95%           3.12%         to         4.38%   

2010

      4,966           1.22         to         4.10           14,739            7.48%           0.75%         to         1.95%           6.63%         to         13.87%   

2009

      4,946           1.08         to         3.60           14,461            10.28%           0.75%         to         1.95%           1.15%         to         51.70%   

2008

      5,659           0.72         to         2.37           11,022            10.63%           0.75%         to         1.95%           (27.44%)         to         (15.62%)   

2007

      7,857           0.98         to         3.23           21,296            8.30%           0.75%         to         1.95%           (1.09%)         to         2.65%   

 

SA - 60

Table of Contents

PHL VARIABLE ACCUMULATION ACCOUNT

NOTES TO FINANCIAL STATEMENTS

 

Note 5—Financial Highlights (Continued)

 

     At December 31,           For the periods ended December 31,  
     Units
(000’s)		        Unit
Fair Value
(Lowest to Highest)		        Net
Assets
(000’s)		           Investment
Income
Ratio 1		        Expense
Ratio 2
(Lowest to Highest)		        Total
Return 3
(Lowest to Highest)		  

Federated Prime Money Fund II

  

                      

2011

      57,026           0.96         to         0.99           55,567            0.00%*           0.75%         to         1.95%           (1.94%)         to         (0.58%)   

201011

      67,270           0.98         to         0.99           66,409            0.00%*           0.75%         to         1.95%           (1.83%)         to         (0.71%)   

2009

      -           -         to         -           -            -           -         to         -           -         to         -   

2008

      -           -         to         -           -            -           -         to         -           -         to         -   

2007

      -           -         to         -           -            -           -         to         -           -         to         -   

Fidelity® VIP Contrafund® Portfolio – Service Class

  

                      

2011

      12,772           0.91         to         3.35           31,891            0.80%           0.90%         to         1.95%           (4.53%)         to         (2.72%)   

2010

      16,590           0.95         to         3.48           44,210            1.00%           0.90%         to         1.95%           0.37%         to         16.06%   

2009

      21,461           0.82         to         3.01           50,108            1.24%           0.90%         to         1.95%           26.17%         to         34.44%   

2008

      27,724           0.61         to         2.24           48,279            0.80%           0.90%         to         1.95%           (43.73%)         to         (36.87%)   

2007

      35,710           1.08         to         3.95           113,863            0.83%           0.90%         to         1.95%           (0.67%)         to         16.45%   

Fidelity® VIP Growth Opportunities Portfolio – Service Class

  

                      

2011

      84,269           0.86         to         2.30           106,954            0.05%           0.90%         to         1.95%           0.19%         to         1.26%   

2010

      98,711           0.85         to         2.28           124,417            0.09%           0.90%         to         1.95%           (1.03%)         to         22.54%   

2009

      113,566           0.70         to         1.86           118,283            0.39%           0.90%         to         1.95%           2.00%         to         44.41%   

2008

      97,266           0.49         to         1.29           75,492            0.48%           0.90%         to         1.95%           (55.94%)         to         (52.58%)   

2007

      43,891           1.10         to         2.91           101,935            -           0.90%         to         1.95%           10.35%         to         21.93%   

Fidelity® VIP Growth Portfolio – Service Class

  

                      

2011

      8,090           0.92         to         2.97           14,606            0.23%           0.75%         to         1.95%           (1.81%)         to         (0.61%)   

2010

      10,591           0.93         to         2.99           19,432            0.17%           0.75%         to         1.95%           21.64%         to         23.13%   

2009

      13,229           0.76         to         2.43           19,577            0.33%           0.50%         to         1.95%           5.18%         to         27.19%   

2008

      15,858           0.60         to         1.94           18,242            0.69%           0.50%         to         1.95%           (48.26%)         to         (6.52%)   

2007

      19,209           1.16         to         3.70           41,309            0.62%           0.50%         to         1.95%           (2.64%)         to         26.23%   

Fidelity® VIP Investment Grade Bond Portfolio – Service Class

  

                      

2011

      45,049           1.22         to         1.29           56,531            3.16%           0.90%         to         1.95%           5.13%         to         6.25%   

2010

      47,398           1.16         to         1.21           56,225            3.40%           0.90%         to         1.95%           5.58%         to         6.71%   

2009

      50,055           1.10         to         1.14           55,900            8.45%           0.90%         to         1.95%           0.26%         to         14.63%   

2008

      47,909           0.97         to         0.99           46,922            3.15%           0.90%         to         1.95%           (5.08%)         to         (3.33%)   

20074

      26,098           1.02         to         1.04           26,891            0.20%           0.90%         to         1.80%           0.71%         to         3.67%   

Franklin Flex Cap Growth Securities Fund – Class 2

  

                      

2011

      285           1.01         to         1.04           290            -           0.90%         to         1.65%           (12.86%)         to         5.54%   

2010

      307           1.08         to         1.10           334            -           1.10%         to         1.80%           5.06%         to         18.94%   

2009

      466           0.95         to         0.96           442            -           1.10%         to         1.80%           7.52%         to         31.51%   

20089

      231           0.73         to         0.73           168            0.07%           1.10%         to         1.65%           (32.37%)         to         10.65%   

2007

      -           -         to         -           -            -           -         to         -           -         to         -   

Franklin Income Securities Fund – Class 2

  

                      

2011

      41,775           1.00         to         1.22           45,474            5.83%           0.90%         to         1.95%           (7.54%)         to         1.47%   

2010

      50,003           0.99         to         1.20           54,025            6.60%           0.90%         to         1.95%           10.48%         to         11.66%   

2009

      56,584           0.89         to         1.07           55,068            8.18%           0.90%         to         1.95%           9.53%         to         37.94%   

2008

      60,032           0.66         to         0.80           44,070            5.55%           0.90%         to         1.95%           (31.03%)         to         (30.29%)   

2007

      44,645           0.96         to         1.14           49,235            2.99%           0.90%         to         1.95%           0.17%         to         2.82%   

 

SA - 61

Table of Contents

PHL VARIABLE ACCUMULATION ACCOUNT

NOTES TO FINANCIAL STATEMENTS

 

Note 5—Financial Highlights (Continued)

 

     At December 31,           For the periods ended December 31,  
     Units
(000’s)		        Unit
Fair Value
(Lowest to Highest)		        Net
Assets
(000’s)		           Investment
Income
Ratio 1		        Expense
Ratio 2
(Lowest to Highest)		        Total
Return 3
(Lowest to Highest)		  

Ibbotson Aggressive Growth ETF Asset Allocation Portfolio – Class II

  

                      

2011

      14,437           0.98         to         0.99           14,164            0.94%           0.90%         to         1.80%           (6.75%)         to         (5.89%)   

201012

      16,006           1.05         to         1.05           16,756            2.40%           0.90%         to         1.80%           3.88%         to         3.99%   

2009

      -           -         to         -           -            -           -         to         -           -         to         -   

2008

      -           -         to         -           -            -           -         to         -           -         to         -   

2007

      -           -         to         -           -            -           -         to         -           -         to         -   

Ibbotson Balanced ETF Asset Allocation Portfolio – Class II

  

2011

      26,855           1.00         to         1.01           26,885            0.97%           0.90%         to         1.80%           (2.66%)         to         (1.78%)   

201012

      24,847           1.02         to         1.03           25,450            5.67%           0.90%         to         1.80%           2.25%         to         2.36%   

2009

      -           -         to         -           -            -           -         to         -           -         to         -   

2008

      -           -         to         -           -            -           -         to         -           -         to         -   

2007

      -           -         to         -           -            -           -         to         -           -         to         -   

Ibbotson Growth ETF Asset Allocation Portfolio – Class II

  

2011

      21,060           0.98         to         0.99           20,802            1.06%           0.90%         to         1.95%           (5.55%)         to         (4.54%)   

201012

      23,981           1.04         to         1.04           24,932            5.60%           0.90%         to         1.95%           3.31%         to         3.44%   

2009

      -           -         to         -           -            -           -         to         -           -         to         -   

2008

      -           -         to         -           -            -           -         to         -           -         to         -   

2007

      -           -         to         -           -            -           -         to         -           -         to         -   

Ibbotson Income and Growth ETF Asset Allocation Portfolio – Class II

  

2011

      32,806           1.00         to         1.01           33,062            0.86%           0.90%         to         1.95%           (0.88%)         to         0.18%   

201012

      31,942           1.01         to         1.01           32,290            4.21%           0.90%         to         1.95%           1.21%         to         1.33%   

2009

      -           -         to         -           -            -           -         to         -           -         to         -   

2008

      -           -         to         -           -            -           -         to         -           -         to         -   

2007

      -           -         to         -           -            -           -         to         -           -         to         -   

Invesco V.I. Capital Appreciation Fund – Series I Shares

  

2011

      17,088           0.71         to         1.84           30,066            0.15%           0.90%         to         1.95%           (9.70%)         to         (8.74%)   

2010

      20,054           0.78         to         2.03           38,680            0.74%           0.90%         to         1.95%           13.24%         to         14.45%   

2009

      23,017           0.69         to         1.77           38,816            0.64%           0.90%         to         1.95%           18.72%         to         19.99%   

2008

      25,067           0.58         to         1.48           35,192            -           0.90%         to         1.95%           (43.62%)         to         (35.51%)   

2007

      26,874           1.01         to         2.60           66,230            -           0.90%         to         1.95%           (2.38%)         to         11.00%   

Invesco V.I. Core Equity Fund – Series I Shares

  

2011

      5,708           1.04         to         1.10           6,169            0.93%           0.90%         to         1.95%           (2.01%)         to         4.75%   

2010

      7,161           1.06         to         1.12           7,844            0.95%           0.90%         to         1.95%           7.42%         to         8.57%   

2009

      8,396           0.99         to         1.03           8,502            1.78%           0.90%         to         1.95%           14.52%         to         27.14%   

2008

      10,155           0.78         to         0.81           8,118            2.04%           0.90%         to         1.95%           (31.50%)         to         (30.77%)   

2007

      12,122           1.15         to         1.17           14,048            1.05%           0.90%         to         1.95%           6.00%         to         7.14%   

Invesco V.I. Mid Cap Core Equity Fund – Series I Shares

  

2011

      1,855           1.15         to         1.24           2,232            0.27%           0.90%         to         1.95%           (8.20%)         to         (7.22%)   

2010

      2,646           1.26         to         1.34           3,461            0.55%           0.90%         to         1.95%           11.89%         to         13.09%   

2009

      3,239           1.12         to         1.19           3,761            1.31%           0.50%         to         1.95%           7.53%         to         29.04%   

2008

      4,010           0.88         to         0.93           3,623            1.41%           0.50%         to         1.95%           (29.91%)         to         (5.16%)   

2007

      5,350           1.26         to         1.31           6,853            0.20%           0.50%         to         1.95%           7.40%         to         11.30%   

 

SA - 62

Table of Contents

PHL VARIABLE ACCUMULATION ACCOUNT

NOTES TO FINANCIAL STATEMENTS

 

Note 5—Financial Highlights (Continued)

 

     At December 31,           For the periods ended December 31,  
     Units
(000’s)		        Unit
Fair Value
(Lowest to Highest)		        Net
Assets
(000’s)		           Investment
Income
Ratio 1		        Expense
Ratio 2
(Lowest to Highest)		        Total
Return 3
(Lowest to Highest)		  

Invesco Van Kampen V.I. Equity and Income Fund – Class II

  

                      

2011

      708           0.95         to         1.11           759            1.78%           0.90%         to         1.80%           (6.58%)         to         (2.19%)   

2010

      877           0.98         to         1.14           958            2.03%           0.90%         to         1.80%           10.02%         to         11.02%   

2009

      696           0.88         to         1.02           693            2.44%           0.90%         to         1.80%           20.28%         to         21.39%   

2008

      857           0.73         to         0.84           694            2.48%           0.90%         to         1.80%           (24.07%)         to         (23.22%)   

2007

      521           0.96         to         1.10           560            1.49%           0.90%         to         1.80%           (3.28%)         to         2.43%   

Lazard Retirement U.S. Small-Mid Cap Equity Portfolio – Service Shares

  

2011

      804           1.14         to         1.22           953            -           0.90%         to         1.85%           (10.75%)         to         (9.89%)   

2010

      975           1.28         to         1.35           1,287            0.27%           0.90%         to         1.95%           5.21%         to         22.61%   

2009

      1,274           1.05         to         1.10           1,378            -           0.90%         to         1.95%           49.71%         to         51.31%   

2008

      1,817           0.70         to         0.73           1,303            -           0.90%         to         1.95%           (37.71%)         to         (10.10%)   

2007

      2,585           1.13         to         1.16           2,961            -           0.90%         to         1.95%           (9.02%)         to         (8.04%)   

Lord Abbett Series Fund Bond Debenture Portfolio – Class VC Shares

  

2011

      4,785           1.23         to         1.46           6,725            5.21%           0.90%         to         1.95%           2.35%         to         3.45%   

2010

      5,933           1.20         to         1.41           8,121            5.55%           0.90%         to         1.95%           10.13%         to         11.31%   

2009

      7,293           1.08         to         1.27           9,023            6.69%           0.90%         to         1.95%           0.62%         to         33.10%   

2008

      9,395           0.82         to         0.95           8,789            5.30%           0.90%         to         1.95%           (19.14%)         to         (11.57%)   

2007

      13,608           1.00         to         1.17           15,669            5.95%           0.90%         to         1.95%           (0.44%)         to         5.23%   

Lord Abbett Series Fund Growth and Income Portfolio – Class VC Shares

  

2011

      81,049           0.76         to         1.01           79,037            0.69%           0.90%         to         1.95%           (7.91%)         to         (6.92%)   

2010

      93,055           0.82         to         1.08           97,889            0.54%           0.90%         to         1.95%           15.13%         to         16.36%   

2009

      106,072           0.71         to         0.93           96,292            0.99%           0.90%         to         1.95%           16.58%         to         17.83%   

2008

      120,927           0.61         to         0.79           93,533            1.48%           0.90%         to         1.95%           (37.66%)         to         (13.11%)   

2007

      132,183           0.97         to         1.25           163,065            1.35%           0.90%         to         1.95%           1.13%         to         3.47%   

Lord Abbett Series Fund Mid Cap Value Portfolio – Class VC Shares

  

2011

      5,056           0.78         to         1.07           5,206            0.19%           0.90%         to         1.95%           (5.88%)         to         (4.87%)   

2010

      6,122           0.83         to         1.13           6,660            0.38%           0.90%         to         1.95%           0.08%         to         24.30%   

2009

      7,721           0.67         to         0.91           6,794            0.47%           0.90%         to         1.95%           24.15%         to         25.48%   

2008

      9,889           0.53         to         0.72           6,986            1.11%           0.90%         to         1.95%           (40.54%)         to         (27.12%)   

2007

      13,625           0.89         to         1.20           16,172            0.40%           0.90%         to         1.95%           (7.61%)         to         (0.33%)   

Mutual Shares Securities Fund – Class 2

  

2011

      41,035           0.78         to         3.20           52,742            2.32%           0.90%         to         1.95%           (2.97%)         to         (1.93%)   

2010

      46,807           0.80         to         3.27           62,650            1.55%           0.90%         to         1.95%           9.03%         to         10.20%   

2009

      53,340           0.73         to         2.96           66,239            1.94%           0.90%         to         1.95%           (10.16%)         to         24.91%   

2008

      53,629           0.59         to         2.37           58,111            3.17%           0.90%         to         1.95%           (38.34%)         to         (37.67%)   

2007

      36,007           0.94         to         3.81           83,298            1.35%           0.90%         to         1.95%           (1.65%)         to         2.54%   

Neuberger Berman AMT Guardian Portfolio – S Class

  

2011

      63,328           0.87         to         1.01           57,668            0.35%           0.90%         to         1.95%           (4.96%)         to         (3.95%)   

2010

      69,582           0.91         to         1.06           66,284            0.32%           0.90%         to         1.95%           16.62%         to         17.87%   

2009

      75,214           0.77         to         0.90           61,150            1.03%           0.90%         to         1.95%           3.02%         to         28.34%   

2008

      66,570           0.61         to         0.70           42,640            0.66%           0.90%         to         1.95%           (38.49%)         to         (25.99%)   

2007

      26,191           0.98         to         1.12           28,314            0.46%           0.90%         to         1.80%           0.12%         to         7.33%   

 

SA - 63

Table of Contents

PHL VARIABLE ACCUMULATION ACCOUNT

NOTES TO FINANCIAL STATEMENTS

 

Note 5—Financial Highlights (Continued)

 

     At December 31,           For the periods ended December 31,  
     Units
(000’s)		        Unit
Fair Value
(Lowest to Highest)		        Net
Assets
(000’s)		           Investment
Income
Ratio 1		        Expense
Ratio 2
(Lowest to Highest)		        Total
Return 3
(Lowest to Highest)		  

Neuberger Berman AMT Small Cap Growth Portfolio – S Class

  

                      

2011

      184           0.78         to         0.84           147            -           0.90%         to         1.80%           (10.97%)         to         12.07%   

2010

      358           0.80         to         0.86           293            -           0.90%         to         1.80%           (4.01%)         to         18.30%   

2009

      370           0.68         to         0.73           256            -           0.90%         to         1.80%           (5.76%)         to         41.52%   

2008

      102           0.56         to         0.60           58            -           0.90%         to         1.80%           (40.56%)         to         0.73%   

2007

      60           0.95         to         1.01           57            -           0.90%         to         1.80%           (7.36%)         to         (0.39%)   

Oppenheimer Capital Appreciation Fund/VA – Service Shares

  

2011

      1,035           0.83         to         0.93           935            0.11%           0.90%         to         1.80%           (3.14%)         to         (2.26%)   

2010

      1,489           0.86         to         0.96           1,379            -           0.90%         to         1.80%           (5.18%)         to         8.16%   

2009

      1,718           0.79         to         0.88           1,491            0.01%           0.90%         to         1.80%           (5.74%)         to         42.86%   

2008

      757           0.56         to         0.62           461            -           0.90%         to         1.80%           (46.64%)         to         (17.30%)   

2007

      768           1.13         to         1.16           877            0.01%           0.90%         to         1.80%           8.47%         to         12.83%   

Oppenheimer Global Securities Fund/VA – Service Shares

  

2011

      2,169           0.81         to         0.95           1,983            1.09%           0.90%         to         1.95%           (10.31%)         to         (9.35%)   

2010

      2,622           0.90         to         1.05           2,648            1.19%           0.90%         to         1.95%           2.88%         to         14.66%   

2009

      2,567           0.79         to         0.92           2,275            1.84%           0.90%         to         1.95%           36.64%         to         38.10%   

2008

      3,342           0.57         to         0.66           2,164            1.23%           0.90%         to         1.95%           (41.50%)         to         (11.77%)   

2007

      2,068           0.97         to         1.12           2,284            0.94%           0.90%         to         1.95%           (4.89%)         to         5.12%   

Oppenheimer Main Street Small- & Mid-Cap Fund®/VA – Service Shares

  

2011

      43,377           0.86         to         0.97           38,809            0.40%           0.90%         to         1.95%           (4.28%)         to         (3.26%)   

2010

      48,277           0.90         to         1.01           44,850            0.43%           0.90%         to         1.95%           20.66%         to         21.95%   

2009

      55,748           0.74         to         0.83           42,678            0.61%           0.90%         to         1.95%           5.45%         to         35.65%   

2008

      50,135           0.55         to         0.62           28,559            0.21%           0.90%         to         1.95%           (39.12%)         to         (28.17%)   

2007

      21,420           0.89         to         1.01           20,465            0.03%           0.90%         to         1.80%           (7.27%)         to         (2.28%)   

PIMCO CommodityRealReturn® Strategy Portfolio – Advisor Class

  

2011

      32,869           0.97         to         1.05           32,965            13.76%           0.90%         to         1.95%           (9.34%)         to         (8.37%)   

2010

      38,516           1.07         to         1.15           42,355            14.99%           0.90%         to         1.95%           21.83%         to         23.13%   

2009

      42,223           0.87         to         0.94           37,865            5.94%           0.90%         to         1.95%           (0.28%)         to         40.34%   

2008

      32,643           0.63         to         0.67           20,955            4.53%           0.90%         to         1.95%           (53.91%)         to         (44.36%)   

2007

      17,690           1.14         to         1.21           20,489            7.30%           0.90%         to         1.95%           8.44%         to         22.03%   

PIMCO Real Return Portfolio – Advisor Class

  

2011

      7,250           1.35         to         1.42           10,040            1.77%           0.90%         to         1.80%           9.56%         to         10.56%   

2010

      4,036           1.23         to         1.29           5,058            1.34%           0.90%         to         1.80%           1.32%         to         7.03%   

2009

      5,808           1.15         to         1.20           6,825            3.01%           0.90%         to         1.95%           (0.27%)         to         17.18%   

2008

      5,200           0.99         to         1.03           5,259            3.38%           0.90%         to         1.95%           (14.79%)         to         (6.07%)   

2007

      1,695           1.08         to         1.11           1,868            4.53%           0.90%         to         1.80%           (0.17%)         to         10.49%   

PIMCO Total Return Portfolio – Advisor Class

  

2011

      9,870           1.35         to         1.43           13,724            2.52%           0.90%         to         1.95%           1.49%         to         2.58%   

2010

      12,106           1.32         to         1.40           16,487            2.32%           0.90%         to         1.95%           3.91%         to         7.03%   

2009

      13,875           1.24         to         1.31           17,713            5.14%           0.90%         to         1.95%           2.60%         to         12.90%   

2008

      10,863           1.10         to         1.16           12,367            4.35%           0.90%         to         1.80%           (0.08%)         to         3.75%   

2007

      5,146           1.07         to         1.11           5,684            4.71%           0.90%         to         1.85%           (0.72%)         to         7.65%   

 

SA - 64

Table of Contents

PHL VARIABLE ACCUMULATION ACCOUNT

NOTES TO FINANCIAL STATEMENTS

 

Note 5—Financial Highlights (Continued)

 

     At December 31,           For the periods ended December 31,  
     Units
(000’s)		        Unit
Fair Value
(Lowest to Highest)		        Net
Assets
(000’s)		           Investment
Income
Ratio 1		        Expense
Ratio 2
(Lowest to Highest)		        Total
Return 3
(Lowest to Highest)		  

Rydex VT Inverse Government Long Bond Strategy Fund

  

                      

2011

      1,767           0.37         to         0.43           733            -           0.90%         to         1.95%           (31.79%)         to         (31.06%)   

2010

      1,994           0.53         to         0.63           1,204            -           0.90%         to         1.95%           (18.08%)         to         (13.59%)   

2009

      2,124           0.62         to         0.73           1,490            -           0.90%         to         1.95%           13.01%         to         18.34%   

2008

      2,475           0.53         to         0.61           1,474            0.41%           0.90%         to         1.95%           (31.57%)         to         (30.84%)   

2007

      3,315           0.77         to         0.89           2,870            3.77%           0.90%         to         1.95%           (6.38%)         to         3.57%   

Rydex VT Nova Fund

  

2011

      616           1.09         to         1.19           696            0.04%           0.90%         to         1.95%           (3.09%)         to         (2.05%)   

2010

      814           1.12         to         1.22           951            0.21%           0.90%         to         1.95%           17.63%         to         18.89%   

2009

      874           0.95         to         1.02           863            0.95%           0.90%         to         1.95%           21.50%         to         34.29%   

2008

      1,041           0.72         to         0.76           769            0.34%           0.90%         to         1.95%           (55.36%)         to         (31.34%)   

2007

      1,299           1.61         to         1.69           2,140            1.16%           0.90%         to         1.95%           (0.85%)         to         0.21%   

Rydex|SGI VT U.S. Long Short Momentum Fund

  

2011

      682           1.31         to         1.45           949            -           0.90%         to         1.95%           (8.38%)         to         (7.40%)   

2010

      856           1.43         to         1.57           1,293            -           0.90%         to         1.95%           9.04%         to         10.21%   

2009

      997           1.30         to         1.42           1,372            0.09%           0.90%         to         1.95%           24.82%         to         26.15%   

2008

      1,350           1.04         to         1.13           1,480            -           0.90%         to         1.95%           (47.83%)         to         (41.27%)   

2007

      2,339           1.78         to         1.92           4,392            -           0.90%         to         1.95%           4.16%         to         21.64%   

Sentinel Variable Products Balanced Fund

  

2011

      1,881           1.02         to         1.06           1,957            1.33%           0.90%         to         1.80%           2.34%         to         5.44%   

2010

      4,440           1.00         to         1.03           4,495            2.56%           0.90%         to         1.65%           (1.42%)         to         11.18%   

2009

      2,842           0.91         to         0.92           2,600            5.45%           0.90%         to         1.80%           (2.91%)         to         39.91%   

2008

      802           0.76         to         0.77           612            3.03%           0.90%         to         1.80%           (25.00%)         to         1.87%   

20077

      296           1.02         to         1.02           301            11.05%           1.10%         to         1.38%           (2.99%)         to         (1.98%)   

Sentinel Variable Products Bond Fund

  

2011

      30,821           1.24         to         1.30           39,293            3.29%           0.90%         to         1.95%           4.97%         to         6.08%   

2010

      32,846           1.18         to         1.23           39,647            3.54%           0.90%         to         1.95%           5.24%         to         6.36%   

2009

      33,589           1.12         to         1.15           38,293            4.95%           0.90%         to         1.95%           0.19%         to         10.08%   

2008

      31,015           1.03         to         1.05           32,264            5.70%           0.90%         to         1.95%           0.23%         to         2.47%   

20075

      4,498           1.02         to         1.02           4,587            28.15%           0.90%         to         1.80%           1.33%         to         3.07%   

Sentinel Variable Products Common Stock Fund

  

2011

      127,942           0.95         to         1.00           125,341            1.46%           0.90%         to         1.95%           0.11%         to         1.18%   

2010

      142,001           0.95         to         0.99           138,095            1.32%           0.90%         to         1.95%           13.55%         to         14.76%   

2009

      154,234           0.84         to         0.86           131,290            1.60%           0.90%         to         1.95%           2.87%         to         28.66%   

2008

      124,569           0.67         to         0.68           84,130            2.17%           0.90%         to         1.95%           (34.25%)         to         (26.73%)   

20075

      18,974           1.02         to         1.02           19,401            7.76%           0.90%         to         1.80%           (4.21%)         to         0.87%   

Sentinel Variable Products Mid Cap Fund

  

2011

      853           0.90         to         0.94           786            0.01%           0.90%         to         1.80%           1.76%         to         2.69%   

2010

      1,177           0.89         to         0.91           1,063            0.06%           0.90%         to         1.80%           (1.66%)         to         22.40%   

2009

      877           0.73         to         0.75           648            0.13%           0.90%         to         1.95%           9.94%         to         29.42%   

2008

      846           0.57         to         0.58           485            -           0.90%         to         1.95%           (47.03%)         to         (1.00%)   

20076

      443           1.08         to         1.08           477            -           0.90%         to         1.80%           (2.66%)         to         1.53%   

 

SA - 65

Table of Contents

PHL VARIABLE ACCUMULATION ACCOUNT

NOTES TO FINANCIAL STATEMENTS

 

Note 5—Financial Highlights (Continued)

 

     At December 31,           For the periods ended December 31,  
     Units
(000’s)		        Unit
Fair Value
(Lowest to Highest)		        Net
Assets
(000’s)		           Investment
Income
Ratio 1		        Expense
Ratio 2
(Lowest to Highest)		        Total
Return 3
(Lowest to Highest)		  

Sentinel Variable Products Small Company Fund

  

                      

2011

      17,266           1.02         to         1.07           18,040            -           0.90%         to         1.95%           1.01%         to         2.09%   

2010

      20,145           1.01         to         1.04           20,709            0.05%           0.90%         to         1.95%           21.34%         to         22.63%   

2009

      22,599           0.83         to         0.85           19,031            0.47%           0.90%         to         1.95%           2.59%         to         35.04%   

2008

      17,901           0.67         to         0.68           12,014            0.46%           0.90%         to         1.95%           (33.51%)         to         (25.00%)   

20075

      3,080           1.00         to         1.01           3,096            4.01%           0.90%         to         1.80%           (6.63%)         to         0.07%   

Templeton Developing Markets Securities Fund – Class 2

  

2011

      3,228           0.88         to         4.41           5,148            0.95%           0.90%         to         1.80%           (17.37%)         to         2.78%   

2010

      4,457           1.06         to         6.38           8,646            1.54%           0.90%         to         1.80%           (7.01%)         to         16.53%   

2009

      4,865           0.92         to         5.49           8,074            4.26%           0.90%         to         1.95%           (2.53%)         to         71.04%   

2008

      4,473           0.54         to         3.22           4,298            2.26%           0.90%         to         1.95%           (53.56%)         to         (0.76%)   

2007

      7,287           1.15         to         6.90           16,657            2.03%           0.90%         to         1.95%           (3.62%)         to         28.59%   

Templeton Foreign Securities Fund – Class 2

  

2011

      5,714           0.79         to         2.85           11,930            1.74%           0.90%         to         1.95%           (12.37%)         to         (6.06%)   

2010

      6,964           0.89         to         3.22           16,774            1.90%           0.90%         to         1.95%           1.10%         to         7.43%   

2009

      8,451           0.83         to         3.01           19,403            3.56%           0.50%         to         1.95%           9.67%         to         35.81%   

2008

      10,088           0.62         to         2.62           17,638            2.39%           0.50%         to         1.95%           (41.54%)         to         (12.12%)   

2007

      13,558           1.05         to         4.42           40,633            2.06%           0.50%         to         1.95%           1.02%         to         14.88%   

Templeton Growth Securities Fund – Class 2

  

2011

      45,187           0.68         to         2.77           48,832            1.33%           0.75%         to         1.95%           (8.78%)         to         (7.67%)   

2010

      49,544           0.74         to         3.01           59,756            1.40%           0.75%         to         1.95%           5.30%         to         6.59%   

2009

      54,120           0.70         to         2.83           62,274            3.17%           0.75%         to         1.95%           (12.90%)         to         30.12%   

2008

      55,486           0.54         to         2.18           52,858            1.79%           0.75%         to         1.95%           (43.45%)         to         (3.20%)   

2007

      33,792           0.95         to         3.81           74,605            1.25%           0.75%         to         1.95%           (0.78%)         to         1.80%   

Virtus Capital Growth Series

  

2011

      29,451           0.81         to         1.80           34,104            0.05%           0.90%         to         1.95%           (11.40%)         to         3.15%   

2010

      35,201           0.86         to         1.91           43,213            0.42%           0.90%         to         1.95%           12.64%         to         13.84%   

2009

      40,612           0.76         to         1.68           43,921            0.84%           0.90%         to         1.95%           27.40%         to         28.76%   

2008

      48,533           0.59         to         1.31           40,764            0.03%           0.90%         to         1.95%           (41.94%)         to         10.12%   

2007

      59,946           1.11         to         2.24           85,557            0.25%           0.90%         to         1.95%           8.58%         to         9.75%   

Virtus Growth & Income Series

  

2011

      43,300           0.83         to         2.98           75,525            0.68%           0.75%         to         2.25%           (3.87%)         to         5.13%   

2010

      54,671           0.85         to         3.05           98,693            1.18%           0.75%         to         2.25%           4.89%         to         11.99%   

2009

      30,954           0.76         to         2.73           58,431            1.59%           0.75%         to         1.95%           21.09%         to         33.94%   

2008

      35,718           0.63         to         2.23           54,789            1.30%           0.75%         to         1.95%           (36.20%)         to         (27.72%)   

2007

      43,261           0.98         to         3.45           102,198            0.94%           0.75%         to         1.95%           (2.83%)         to         5.85%   

Virtus International Series

  

2011

      127,920           0.92         to         3.99           232,243            2.56%           0.90%         to         1.95%           (6.43%)         to         (5.43%)   

2010

      141,682           0.98         to         4.23           279,981            2.42%           0.90%         to         1.95%           11.26%         to         12.45%   

2009

      158,725           0.87         to         3.77           284,856            3.24%           0.50%         to         1.95%           1.47%         to         38.61%   

2008

      150,692           0.63         to         3.16           217,411            2.09%           0.50%         to         1.95%           (40.36%)         to         (39.29%)   

2007

      92,535           1.05         to         5.21           316,871            1.68%           0.50%         to         1.95%           5.66%         to         14.37%   

 

SA - 66

Table of Contents

PHL VARIABLE ACCUMULATION ACCOUNT

NOTES TO FINANCIAL STATEMENTS

 

Note 5—Financial Highlights (Continued)

 

     At December 31,           For the periods ended December 31,  
     Units
(000’s)		        Unit
Fair Value
(Lowest to Highest)		        Net
Assets
(000’s)		           Investment
Income
Ratio 1		        Expense
Ratio 2
(Lowest to Highest)		        Total
Return 3
(Lowest to Highest)		  

Virtus Multi-Sector Fixed Income Series

  

                      

2011

      59,260           1.29         to         4.29           126,188            6.53%           0.75%         to         1.95%           0.99%         to         2.22%   

2010

      68,231           1.27         to         4.21           148,058            7.34%           0.75%         to         1.95%           12.13%         to         13.50%   

2009

      71,389           1.12         to         3.71           133,018            7.10%           0.50%         to         1.95%           0.59%         to         39.09%   

2008

      72,899           0.81         to         2.67           109,435            7.75%           0.50%         to         1.95%           (19.53%)         to         (18.34%)   

2007

      51,838           1.00         to         3.29           124,807            5.71%           0.50%         to         1.95%           1.68%         to         3.19%   

Virtus Real Estate Securities Series

  

2011

      32,374           0.94         to         8.54           66,816            0.69%           0.90%         to         1.95%           7.73%         to         8.88%   

2010

      37,700           0.87         to         7.84           73,968            1.89%           0.90%         to         1.95%           25.51%         to         26.85%   

2009

      48,318           0.69         to         6.18           74,937            3.69%           0.50%         to         1.95%           (12.95%)         to         27.95%   

2008

      38,420           0.54         to         4.83           56,526            1.56%           0.50%         to         1.95%           (43.55%)         to         (37.20%)   

2007

      19,614           0.87         to         7.73           82,754            1.27%           0.50%         to         1.95%           (17.36%)         to         (1.65%)   

Virtus Small-Cap Growth Series

  

2011

      7,019           0.89         to         4.15           26,176            -           0.90%         to         1.95%           14.32%         to         15.54%   

2010

      8,761           0.78         to         3.59           28,901            -           0.90%         to         1.95%           3.12%         to         12.51%   

2009

      4,724           0.69         to         3.19           13,994            -           0.90%         to         1.95%           20.00%         to         21.29%   

2008

      5,977           0.57         to         2.63           14,652            -           0.90%         to         1.95%           (46.00%)         to         (45.42%)   

2007

      7,195           1.06         to         4.83           33,407            -           0.75%         to         1.95%           (4.53%)         to         15.05%   

Virtus Small-Cap Value Series

  

2011

      51,383           0.77         to         4.14           83,491            0.78%           0.90%         to         1.95%           1.74%         to         3.60%   

2010

      60,640           0.74         to         4.00           97,417            1.25%           0.90%         to         1.95%           (0.27%)         to         16.35%   

2009

      7,802           0.64         to         3.43           21,415            0.46%           0.90%         to         1.95%           18.54%         to         19.81%   

2008

      9,182           0.54         to         2.87           21,404            0.08%           0.90%         to         1.95%           (39.12%)         to         (38.47%)   

2007

      10,590           0.88         to         4.66           41,422            -           0.90%         to         1.95%           (9.58%)         to         1.07%   

Virtus Strategic Allocation Series

  

2011

      10,931           1.01         to         3.15           26,149            2.19%           0.75%         to         1.95%           (0.07%)         to         3.77%   

2010

      13,114           1.01         to         3.11           31,309            2.79%           0.75%         to         1.95%           10.99%         to         12.35%   

2009

      16,110           0.90         to         2.77           34,589            3.58%           0.75%         to         1.95%           22.09%         to         23.58%   

2008

      19,732           0.73         to         2.24           34,613            2.88%           0.75%         to         1.95%           (26.90%)         to         (18.60%)   

2007

      26,152           1.00         to         3.03           63,031            2.53%           0.75%         to         1.95%           (1.25%)         to         5.19%   

Wanger International

  

2011

      31,350           0.85         to         5.13           73,647            4.73%           0.90%         to         1.95%           (16.28%)         to         0.73%   

2010

      35,410           1.01         to         6.08           102,636            2.43%           0.90%         to         1.95%           22.49%         to         23.80%   

2009

      41,745           0.82         to         4.92           100,002            3.76%           0.50%         to         1.95%           1.80%         to         48.44%   

2008

      41,941           0.55         to         3.74           75,698            0.97%           0.50%         to         1.95%           (46.66%)         to         (40.84%)   

2007

      30,013           1.03         to         6.91           145,767            0.87%           0.50%         to         1.95%           1.77%         to         15.73%   

Wanger International Select

  

2011

      2,465           0.84         to         4.62           7,014            1.45%           0.90%         to         1.85%           (11.77%)         to         2.80%   

2010

      3,076           0.95         to         5.19           10,037            1.30%           0.90%         to         1.85%           19.84%         to         20.99%   

2009

      3,695           0.79         to         4.29           10,332            3.10%           0.90%         to         1.95%           25.48%         to         31.72%   

2008

      4,584           0.60         to         3.26           10,006            0.44%           0.90%         to         1.95%           (45.43%)         to         (39.84%)   

2007

      6,225           1.09         to         5.90           26,318            0.70%           0.90%         to         1.95%           (4.28%)         to         20.68%   

 

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Table of Contents

PHL VARIABLE ACCUMULATION ACCOUNT

NOTES TO FINANCIAL STATEMENTS

 

Note 5—Financial Highlights (Continued)

 

     At December 31,           For the periods ended December 31,  
     Units
(000’s)		        Unit
Fair Value
(Lowest to Highest)		        Net
Assets
(000’s)		           Investment
Income
Ratio 1		        Expense
Ratio 2
(Lowest to Highest)		        Total
Return 3
(Lowest to Highest)		  

Wanger Select

  

2011

      2,996           0.79         to         4.52           8,907            2.20%           0.90%         to         1.95%           (19.28%)         to         0.36%   

2010

      4,007           0.97         to         5.54           14,987            0.57%           0.90%         to         1.95%           0.77%         to         25.43%   

2009

      4,718           0.78         to         4.42           14,578            -           0.90%         to         1.95%           62.95%         to         64.69%   

2008

      5,870           0.47         to         2.68           11,105            -           0.90%         to         1.95%           (50.06%)         to         (41.31%)   

2007

      7,203           0.94         to         5.31           29,092            -           0.90%         to         1.95%           (6.43%)         to         8.40%   

Wanger USA

  

2011

      10,915           0.92         to         3.86           38,475            -           0.90%         to         1.95%           (5.37%)         to         5.17%   

2010

      13,362           0.97         to         4.03           49,682            -           0.90%         to         1.95%           (0.62%)         to         22.24%   

2009

      15,973           0.80         to         3.30           49,044            -           0.50%         to         1.95%           9.21%         to         40.95%   

2008

      20,052           0.57         to         2.61           44,006            -           0.50%         to         1.95%           (40.86%)         to         (6.95%)   

2007

      24,932           0.95         to         4.35           92,825            -           0.50%         to         1.95%           (5.79%)         to         4.86%   

* Amount is less than 0.005%

1 The investment income ratios represent the annualized dividends, excluding distributions of capital gains, received by the Investment Option from the underlying mutual fund, net of management fees assessed by the fund manager, divided by average net assets. These ratios exclude those expenses, such as mortality and expense charges that are assessed against contract owner accounts either through reductions in the unit values or the redemption of units. The recognition of investment income by the Investment Option is affected by the timing of the declaration of dividends by the underlying fund in which the Investment Option invests.

2 The expense ratios represent the annualized contract expenses of the Separate Account, consisting primarily of mortality and expense charges, for each period indicated. The ratios include only those expenses that result in a direct reduction of unit values. Charges made directly to contract owner accounts through the redemption of units and expenses of the underlying fund have been excluded.

3 The total returns are for the periods indicated, including changes in the value of the underlying fund, and the expenses assessed through the reduction of unit values. These ratios do not include any expenses assessed through the redemption of units. Investment options with a date notation indicate the effective date of that investment option in the variable account. The total return is calculated for each period indicated or from the effective date through the end of the reporting period. Total return is presented as the minimum and maximum return for the units invested in the Investment Option. While the Investment Option may be active in a given year, certain units may be initiated during the year. The corresponding return on those units, which is for the partial year, may cause the minimum and maximum total return for all the units in that Investment Option to deviate outside the range of the expense ratios presented.

 

4 From inception January 29, 2007 to December 31, 2007.    9 From inception April 8, 2008 to December 31, 2008.
5 From inception September 11, 2007 to December 31, 2007.    10 From inception April 30, 2008 to December 31, 2008.
6 From inception October 1, 2007 to December 31, 2007.    11 From inception January 22, 2010 to December 31, 2010.
7 From inception October 10, 2007 to December 31, 2007.    12 From inception November 19, 2010 to December 31, 2010.
8 From inception April 4, 2008 to December 31, 2008.   

 

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Table of Contents

PHL VARIABLE ACCUMULATION ACCOUNT

NOTES TO FINANCIAL STATEMENTS

 

Note 6—Policy Loans

If certain contractual requirements are met, loans may be made available under section 403(b) contracts. Refer to Product Prospectus for details.

Note 7—Fees and Related Party Transactions

Phoenix and its affiliate, 1851 Securities, Inc. (“1851 Securities”), provide services to the Separate Account. Phoenix is the insurer who provides the contract benefits as well as provides administrative and contract maintenance services to the Separate Account. 1851 Securities, a registered broker/dealer, is the principal underwriter and distributor for the Separate Account.

Saybrus Equity Services, Inc., a broker-dealer subsidiary of Saybrus, distributes the Sponsor’s products through non-affiliated advisors, broker-dealers and other financial intermediaries.

Certain fees are deducted from the Contracts. To understand all of the charges that are assessed, a policyholder may refer to their policy contract provided at issue or the most recent product prospectus provided annually. Those fees are described below:

 

A) Contract Maintenance Charges

The Separate Account is assessed periodic Contract Maintenance Charges which are designed to compensate PHL Variable for certain costs associated with maintenance. These expenses are included in a separate line item entitled “Contract Maintenance Charges” in the accompanying statements of changes in net assets. The total aggregate expense for the periods ended December 31, 2011 and 2010 were $ 15,051,326 and $16,286,856, respectively. The charges assessed the Separate Account for Contract Maintenance Charges are outlined as follows:

Administration Charge – Phoenix will make deductions to cover administrative expenses at a maximum annual rate of $35.

Policy Surrender Charge – In accordance with terms of the contracts, Phoenix makes deductions for surrender charges. Because a policy’s account value and policy duration may vary, the surrender charge may also vary.

Other Charges – Phoenix may deduct other costs depending on the policy terms.

All of the above expenses are taken out as a redemption of units.

 

B) Optional Rider and Benefit Charges

Phoenix may deduct other charges and fees based on the selection of Other Optional Policy Benefits and Riders. These expenses are included in a separate line item entitled “Transfers for contract benefits and terminations” in the accompanying statements of changes in net assets. This expense is taken out as a redemption of units.

 

C) Mortality and Expense Fee and Administration Fee Charges

Phoenix will make deductions at a maximum rate of 2.25% of the contract’s value for the mortality and expense risks and 0.125% for administration fees, which the company undertakes. These expenses are included in separate line items “Mortality and Expense Fees” and “Administration Fees” in the accompanying statements of operations. The total aggregate expense for the periods ended December 31, 2011 and 2010 were $29,412,983 and $30,730,727, respectively. This expense is taken out as a reduction of unit values.

Note 8—Distribution of Net Income

The Separate Account does not declare distributions to participants from accumulated net income. The accumulated net income is distributed to participants as part of withdrawals of amounts in the form of surrenders, death benefits, transfers or annuity payments in excess of net purchase payments.

Note 9—Diversification Requirements

Under the provisions of Section 817(h) of the Internal Revenue Code of 1986 (the “Code”) as amended, a variable contract, other than a contract issued in connection with certain types of employee benefit plans, will not be treated as a variable contract for federal tax purposes for any period for which the investments of the segregated asset account on which the contract is based are not adequately diversified.

 

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Table of Contents

PHL VARIABLE ACCUMULATION ACCOUNT

NOTES TO FINANCIAL STATEMENTS

 

Note 9—Diversification Requirements (Continued)

Each investment option is required to satisfy the requirements of Section 817(h). The Code provides that the “adequately diversified” requirement may be met if the underlying investments satisfy either the statutory safe harbor test or diversification requirements set forth in regulations issued by the Secretary of the Treasury.

PHL Variable intends that each of the investment options shall comply with the diversification requirements and, in the event of any failure to comply, will take immediate corrective action to assure compliance.

Note 10—Other

In light of downgrades to the financial strength ratings of the Sponsor of the Separate Accounts, Phoenix or its affiliated insurers, and the decline in sales through traditional distribution sources of the Sponsor’s variable products, the Sponsor’s parent company, PNX, initiated a business plan that shifts the focus of new business development to areas that are less capital intensive, less ratings sensitive and not dependent on particular distributors. This plan leverages existing strengths and includes a newly formed distribution subsidiary of PNX, Saybrus Partners, Inc. (“Saybrus”), repositioning some of the Sponsor’s core life and annuity products for the middle market and establishing new relationships with distributors within that market, and identifying market opportunities for the Sponsor’s alternative retirement solutions products.

Ratings

Rating agencies assign financial strength ratings to Phoenix and its subsidiaries based on their opinions of the Companies’ ability to meet their financial obligations. Ratings downgrades may result in lower sales, higher surrenders and increased or decreased interest costs with future borrowings.

On December 16, 2011, Moody’s Investor Services affirmed Phoenix’s financial strength rating of Ba2 and Phoenix’s senior debt rating of B3. They changed their outlook on all ratings from stable to positive.

On March 24, 2011, Standard & Poor’s affirmed Phoenix’s financial strength rating of BB- and Phoenix’s senior debt rating of CCC+. They changed their outlook on all ratings from negative to stable.

On February 8, 2011, A.M. Best Company, Inc. affirmed Phoenix’s financial strength rating of B+ and Phoenix’s senior debt rating of bb-. They changed their outlook on all ratings from negative to stable.

The financial strength ratings as of December 31, 2010 were as follows:

A.M. Best Company, Inc. affirmed Phoenix’s financial strength rating of B++. Their outlook on all ratings was negative. Moody’s Investor Services affirmed Phoenix’s financial strength rating of Ba2. Their outlook on all ratings was stable. Standard & Poor’s affirmed Phoenix’s financial strength rating of BB-. Their outlook on all ratings was negative.

On June 17, 2010, Moody’s Investor Services downgraded the Phoenix’s financial strength rating of Ba1 to Ba2. and changed its outlook from negative to stable.

On January 13, 2010, A.M. Best Company, Inc. downgraded Phoenix’s financial strength rating to B+ from B++.

Given these developments, it is possible that rating agencies will heighten the level of scrutiny that they apply to the Sponsor, will request additional information from the Sponsor, and may adjust upward the capital and other requirements employed in their models for maintenance of certain rating levels.

The Sponsor cannot predict what additional actions rating agencies may take, or what actions the Sponsor may take in response to the actions of rating agencies, which could adversely affect the Sponsor’s business. As with other companies in the financial services industry, the Sponsor’s ratings could be downgraded at any time and without any notice by any rating agency.

See Note 12 of these financial statements for the current ratings.

These ratings are not a recommendation to buy, hold or sell your insurance contract.

 

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Table of Contents

PHL VARIABLE ACCUMULATION ACCOUNT

NOTES TO FINANCIAL STATEMENTS

 

Note 11—Mergers and Liquidations

Effective June 2, 2011, SCM Advisors, LLC changed its name to NewFleet Asset Management, LLC.

Effective June 17, 2011, NewFleet Asset Management, LLC (formerly named SCM Advisors, LLC) became the subadviser to the Series.

Effective September 30, 2011, Kayne Anderson Rudnick Investment Management LLC became subadviser to the Series/Portfolio.

There were no mergers or liquidations in 2011.

On July 1, July 26, and August 25, 2010, the Board of Trustees (“Board”) for the Virtus Variable Insurance Trust (“VVIT”), formerly the Phoenix Edge Series Fund, considered and approved the following mergers:

 

Merging Series   Ibbotson Portfolio Series
Phoenix Dynamic Asset Allocation Series-Aggressive Growth   Ibbotson Aggressive Growth ETF Asset Allocation Portfolio – Class II
Phoenix Dynamic Asset Allocation Series-Growth   Ibbotson Growth ETF Asset Allocation
Portfolio – Class II
Phoenix Dynamic Asset Allocation Series-Moderate Growth   Ibbotson Balanced ETF Asset Allocation Portfolio – Class II
Phoenix Dynamic Asset Allocation Series-Moderate   Ibbotson Income and Growth ETF Asset Allocation Portfolio – Class II

The Ibbotson Portfolio Series are each a series of Financial Investors Variable Insurance Trust, 1290 Broadway, Suite 1100, Denver, CO 80203. The shareholders approved the mergers on November 12, 2010 and this transaction closed on November 19, 2010.

On July 26, 2010, the VVIT Board considered and approved a new advisor and subadvisors for several series, as well as the mergers of several series into other series. The Board approved Virtus Investment Advisers, Inc. (“VIA”) as advisor and an affiliate as distributor to eight series (“Virtus Series”) and also approved the merger of five other series into the Virtus Series (“Virtus Transaction”).

The shareholders approved the mergers and new advisor/subadvisors on October 29, 2010 as follows:

VIA became the investment advisor of the following series: Phoenix Capital Growth Series, Phoenix Growth and Income Series, Phoenix Multi-Sector Fixed Income Series, Phoenix Strategic Allocation Series, Phoenix Small-Cap Growth Series, Phoenix Small-Cap Value Series, Phoenix-Aberdeen International Series, Phoenix-Duff & Phelps Real Estate Securities Series. SCM Advisors, LLC, a VIA affiliate, became the subadvisor for Phoenix Capital Growth Series, Kayne Anderson Rudnick Investment Management, LLC, a VIA affiliate, became the subadvisor for Phoenix Small-Cap Growth Series and Phoenix Small-Cap Value Series.

The following mergers were approved by shareholders:

 

Merging Series   Surviving Virtus Series
Phoenix Comstock Series   Phoenix Growth and Income Series
Phoenix Equity 500 Index Series   Phoenix Growth and Income Series
Phoenix Mid-Cap Growth Series   Phoenix Small-Cap Growth Series
Phoenix Mid-Cap Value Series   Phoenix Small-Cap Value Series
Phoenix Multi-Sector Short Term Bond Series   Phoenix Multi-Sector Fixed Income Series

 

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Table of Contents

PHL VARIABLE ACCUMULATION ACCOUNT

NOTES TO FINANCIAL STATEMENTS

 

Note 11—Mergers and Liquidations (Continued)

The VVIT Board also approved the following name changes as of the date of the Virtus Transaction, which were not subject to shareholder approval:

 

Old Names   New Names
The Phoenix Edge Series Fund   Virtus Variable Insurance Trust
Phoenix Capital Growth Series   Virtus Capital Growth Series
Phoenix Growth and Income Series   Virtus Growth & Income Series
Phoenix Multi-Sector Fixed Income Series   Virtus Multi-Sector Fixed Income Series
Phoenix Small-Cap Growth Series   Virtus Small-Cap Growth Series
Phoenix Small-Cap Value Series   Virtus Small-Cap Value Series
Phoenix Strategic Allocation Series   Virtus Strategic Allocation Series
Phoenix-Aberdeen International Series   Virtus International Series
Phoenix-Duff & Phelps Real Estate Securities Series   Virtus Real Estate Securities Series

The Virtus Transaction closed on November 5, 2010.

A Special Meeting of Shareholders of the Phoenix Money Market Series was held on January 20, 2010, and the shareholders approved the liquidation of the assets of the Series and distributed the liquidation proceeds for the benefit of the previous Series’ shareholders to the Federated Prime Money Fund II, as well as other underlying mutual funds. The liquidation was completed on January 22, 2010.

Note 12—Subsequent Events

On April 2, 2012, the required shareholder votes were received and Invesco V.I. Capital Appreciation Fund will be merged into Invesco Van Kampen V.I. Capital Growth Fund. The anticipated merger date is on or about April 27, 2012, to be effective prior to the beginning of business on April 30, 2012.

Effective April 30, 2012 Invesco Van Kampen V.I. Capital Growth Fund will be renamed Invesco Van Kampen V.I. American Franchise Fund.

On January 13, 2012, A.M. Best Company, Inc. affirmed our financial strength rating of B+ and our senior debt rating of bb-. They changed their outlook on our ratings from stable to positive.

 

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Table of Contents

Report of Independent Registered Public Accounting Firm

To the Board of Directors of PHL Variable Insurance Company and

Participants of PHL Variable Accumulation Account:

In our opinion, the accompanying statements of assets and liabilities and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of the subaccounts of the PHL Variable Accumulation Account (as listed in the statements of assets and liabilities and statements of operations) at December 31, 2011, the results of each of their operations for the year then ended, the changes in each of their net assets for each of the two years in the period ended, and the financial highlights for each of the five years in the period ended, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as “financial statements”) are the responsibility of PHL Variable Insurance Company’s management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial 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, which included confirmation of securities at December 31, 2011 by correspondence with the mutual funds’ advisors, provide a reasonable basis for our opinion.

 

 

/s/ PricewaterhouseCoopers, LLP

Boston, MA

April 12, 2012

 

 

 

LOGO

Table of Contents

PHL VARIABLE ACCUMULATION ACCOUNT

PHL Variable Insurance Company

One American Row

Hartford, Connecticut 06103-2899

1851 Securities, Inc.

One American Row

Hartford, Connecticut 06102

Underwriter

Independent Registered Public Accounting Firm

PricewaterhouseCoopers LLP

125 High Street

Boston, Massachusetts 02110

Table of Contents



PHL Variable

Insurance Company

(a wholly-owned subsidiary of PM Holdings, Inc.)

Financial Statements

December 31, 2011 and 2010




F-1






Table of Contents


 

Page

 

 

Report of Independent Registered Public Accounting Firm

F-3

 

 

Balance Sheets as of December 31, 2011 and 2010

F-4

 

 

Statements of Income and Comprehensive Income for the years ended December 31, 2011, 2010 and 2009

F-5

 

 

Statements of Cash Flows for the years ended December 31, 2011, 2010 and 2009

F-6

 

 

Statements of Changes in Stockholder’s Equity the years ended December 31, 2011, 2010 and 2009

F-7

 

 

Notes to Financial Statements

F-8 – F-42






F-2










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, cash flows and changes in stockholders' equity present fairly, in all material respects, the financial position of PHL Variable Insurance Company (the “Company”) at December 31, 2011 and 2010, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2011 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 11 to the financial statements, the Company has significant transactions with its affiliates.  It is possible that the terms of these transactions are not the same as those that would result from transactions among wholly unrelated parties.


/s/ PricewaterhouseCoopers, LLP

Boston, Massachusetts

March 23, 2012




F-3






PHL VARIABLE INSURANCE COMPANY

Balance Sheets

($ in thousands, except share data)

December 31, 2011 and 2010



 

2011

 

2010

ASSETS:

 

 

 

 

 

Available-for-sale debt securities, at fair value (amortized cost of $2,496,830
  and $1,541,506)

$

2,546,392 

 

$

1,520,398 

Limited partnerships and other investments

 

4,965 

 

 

3,542 

Policy loans, at unpaid principal balances

 

62,502 

 

 

57,326 

Derivative investments

 

113,222 

 

 

90,441 

Fair value option investments

 

7,299 

 

 

11,731 

Total investments

 

2,734,380 

 

 

1,683,438 

Cash and cash equivalents

 

67,465 

 

 

51,059 

Accrued investment income

 

18,602 

 

 

12,019 

Receivables

 

382,383 

 

 

367,142 

Deferred policy acquisition costs

 

576,557 

 

 

594,126 

Receivable from related parties

 

4,830 

 

 

14,056 

Other assets

 

52,599 

 

 

54,320 

Separate account assets

 

2,547,007 

 

 

2,922,946 

Total assets

$

6,383,823 

 

$

5,699,106 

 

 

 

 

 

 

LIABILITIES:

 

 

 

 

 

Policy liabilities and accruals

$

1,343,909 

 

$

1,283,034 

Policyholder deposit funds

 

1,721,219 

 

 

793,142 

Deferred income taxes

 

6,762 

 

 

13,371 

Payable to related parties

 

30,024 

 

 

15,724 

Other liabilities

 

89,138 

 

 

60,734 

Separate account liabilities

 

2,547,007 

 

 

2,922,946 

Total liabilities

 

5,738,059 

 

 

5,088,951 

 

 

 

 

 

 

CONTINGENT LIABILITIES (Note 15)

 

 

 

 

 

 

 

 

 

 

 

STOCKHOLDER’S EQUITY:

 

 

 

 

 

Common stock, $5,000 par value: 1,000 shares authorized; 500 shares issued

 

2,500 

 

 

2,500 

Additional paid-in capital

 

802,152 

 

 

802,152 

Accumulated other comprehensive loss, net of tax

 

6,190 

 

 

(12,456)

Accumulated deficit

 

(165,078)

 

 

(182,041)

Total stockholder’s equity

 

645,764 

 

 

610,155 

Total liabilities and stockholder’s equity

$

6,383,823 

 

$

5,699,106 


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




F-4





PHL VARIABLE INSURANCE COMPANY

Statements of Income and Comprehensive Income

($ in thousands)

Years Ended December 31, 2011, 2010 and 2009



 

2011

 

2010

 

2009

REVENUES:

 

 

 

 

 

 

 

 

Premiums

$

2,311 

 

$

3,755 

 

$

11,420 

Insurance and investment product fees

 

394,816 

 

 

409,455 

 

 

413,531 

Net investment income

 

100,289 

 

 

73,727 

 

 

78,767 

Net realized investment gains (losses):

 

 

 

 

 

 

 

 

  Total other-than-temporary impairment (“OTTI”) losses

 

(9,311)

 

 

(19,793)

 

 

(49,698)

  Portion of OTTI losses recognized in other comprehensive income (“OCI”)

 

6,507 

 

 

8,994 

 

 

25,691 

    Net OTTI losses recognized in earnings

 

(2,804)

 

 

(10,799)

 

 

(24,007)

  Net realized investment gains (losses), excluding OTTI losses

 

(18,101)

 

 

(6,757)

 

 

14,829 

Net realized investment losses

 

(20,905)

 

 

(17,556)

 

 

(9,178)

Total revenues

 

476,511 

 

 

469,381 

 

 

494,540 

 

 

 

 

 

 

 

 

 

BENEFITS AND EXPENSES:

 

 

 

 

 

 

 

 

Policy benefits

 

245,619 

 

 

213,366 

 

 

249,457 

Policy acquisition cost amortization

 

133,164 

 

 

192,504 

 

 

139,243 

Other operating expenses

 

90,177 

 

 

99,094 

 

 

120,986 

Total benefits and expenses

 

468,960 

 

 

504,964 

 

 

509,686 

Income (loss) before income taxes

 

7,551 

 

 

(35,583)

 

 

(15,146)

Income tax expense (benefit)

 

(9,412)

 

 

(10,707)

 

 

6,007 

Net income (loss)

$

16,963 

 

$

(24,876)

 

$

(21,153)

 

 

 

 

 

 

 

 

 

FEES PAID TO RELATED PARTIES (NOTE 11)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

COMPREHENSIVE INCOME (LOSS):

 

 

 

 

 

 

 

 

Net income (loss)

$

16,963 

 

$

(24,876)

 

$

(21,153)

Net unrealized investment gains

 

22,876 

 

 

13,187 

 

 

49,762 

Portion of OTTI losses recognized in other comprehensive income

 

(4,230)

 

 

(5,846)

 

 

(16,699)

Other comprehensive income

 

18,646 

 

 

7,341 

 

 

33,063 

Comprehensive income (loss)

$

35,609 

 

$

(17,535)

 

$

11,910 


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




F-5





PHL VARIABLE INSURANCE COMPANY

Statements of Cash Flows

($ in thousands)

Years Ended December 31, 2011, 2010 and 2009



 

2011

 

2010

 

2009

OPERATING ACTIVITIES:

 

 

 

 

 

 

 

 

Net income (loss)

$

16,963 

 

$

(24,876)

 

$

(21,153)

  Net realized investment losses

 

20,905 

 

 

17,556 

 

 

9,178 

  Amortization of deferred policy acquisition costs

 

133,164 

 

 

192,504 

 

 

139,243 

  Policy acquisition costs deferred

 

(150,512)

 

 

(24,043)

 

 

(60,410)

Change in:

 

 

 

 

 

 

 

 

  Accrued investment income

 

(8,983)

 

 

(8,629)

 

 

(686)

  Deferred income taxes

 

(16,648)

 

 

431 

 

 

(22,733)

  Receivables

 

(23,227)

 

 

(44,476)

 

 

(24,150)

  Policy liabilities and accruals

 

34,365 

 

 

(75,711)

 

 

(16,823)

  Other assets and other liabilities change

 

42,732 

 

 

(9,254)

 

 

4,269 

Cash provided by operating activities

 

48,759 

 

 

23,502 

 

 

6,735 

 

 

 

 

 

 

 

 

 

INVESTING ACTIVITIES:

 

 

 

 

 

 

 

 

Purchases of:

 

 

 

 

 

 

 

 

  Available-for-sale debt securities

 

(1,516,499)

 

 

(760,235)

 

 

(716,109)

  Limited partnerships and other investments

 

(1,241)

 

 

(2,745)

 

 

(1,437)

  Derivative instruments

 

(30,583)

 

 

(73,553)

 

 

(65,447)

Sales, repayments and maturities of:

 

 

 

 

 

 

 

 

  Available-for-sale debt securities

 

562,896 

 

 

600,805 

 

 

838,892 

  Limited partnerships and other investments

 

59 

 

 

187 

 

 

-- 

  Derivative instruments

 

35,338 

 

 

35,792 

 

 

22,299 

  Fair value investment options

 

4,574 

 

 

29 

 

 

-- 

Policy loans, net

 

(5,177)

 

 

(7,651)

 

 

(14,758)

Cash provided by (used for) investing activities

 

(950,633)

 

 

(207,371)

 

 

63,440 

 

 

 

 

 

 

 

 

 

FINANCING ACTIVITIES:

 

 

 

 

 

 

 

 

Policyholder deposit fund deposits

 

1,246,541 

 

 

537,574 

 

 

100,455 

Policyholder deposit fund withdrawals

 

(328,261)

 

 

(400,164)

 

 

(304,297)

Capital contributions from parent

 

-- 

 

 

14,000 

 

 

65,000 

Cash provided by (used for) financing activities

 

918,280 

 

 

151,410 

 

 

(138,842)

Change in cash and cash equivalents

 

16,406 

 

 

(32,459)

 

 

(68,667)

Cash and cash equivalents, beginning of year

 

51,059 

 

 

83,518 

 

 

152,185 

Cash and cash equivalents, end of year

$

67,465 

 

$

51,059 

 

$

83,518 


Included in cash and cash equivalents above is cash held as collateral of $7,510 thousand and $6,870 thousand as of December 31, 2011 and 2010, respectively.


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




F-6





PHL VARIABLE INSURANCE COMPANY

Statements of Changes in Stockholder’s Equity

($ in thousands)

Years Ended December 31, 2011, 2010 and 2009



 

2011

 

2010

 

2009

COMMON STOCK:

 

 

 

 

 

 

 

 

Balance, beginning of year

$

2,500 

 

$

2,500 

 

$

2,500 

Balance, end of year

$

2,500 

 

$

2,500 

 

$

2,500 

 

 

 

 

 

 

 

 

 

ADDITIONAL PAID-IN CAPITAL:

 

 

 

 

 

 

 

 

Balance, beginning of year

$

802,152 

 

$

788,152 

 

$

723,152 

  Capital contributions from parent

 

-- 

 

 

14,000 

 

 

65,000 

Balance, end of year

 

802,152 

 

 

802,152 

 

 

788,152 

 

 

 

 

 

 

 

 

 

ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS):

 

 

 

 

 

 

 

 

Balance, beginning of year

$

(12,456)

 

$

(20,085)

 

$

(51,923)

  Adjustment for initial application of accounting changes

 

-- 

 

 

288 

 

 

(1,225)

  Other comprehensive income

 

18,646 

 

 

7,341 

 

 

33,063 

Balance, end of year

$

6,190 

 

$

(12,456)

 

$

(20,085)

 

 

 

 

 

 

 

 

 

RETAINED EARNINGS (ACCUMULATED DEFICIT):

 

 

 

 

 

 

 

 

Balance, beginning of year

$

(182,041)

 

$

(156,603)

 

$

(141,288)

  Adjustment for initial application of accounting changes

 

-- 

 

 

(562)

 

 

5,838 

Net income (loss)

 

16,963 

 

 

(24,876)

 

 

(21,153)

Balance, end of year

 

(165,078)

 

 

(182,041)

 

 

(156,603)

 

 

 

 

 

 

 

 

 

TOTAL STOCKHOLDER’S EQUITY:

 

 

 

 

 

 

 

 

Balance, beginning of year

$

610,155 

 

$

613,964 

 

$

532,441 

 Change in stockholder’s equity

 

35,609 

 

 

(3,809)

 

 

81,523 

Balance, end of year

$

645,764 

 

$

610,155 

 

$

613,964 


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




F-7





PHL VARIABLE INSURANCE COMPANY

Notes to Financial Statements

Years Ended December 31, 2011, 2010 and 2009




1.

Organization and Operations


PHL Variable Insurance Company (“PHL Variable” or the “Company”) is a life insurance company offering variable and fixed annuity and life insurance products. It is a wholly-owned subsidiary of PM Holdings, Inc. and PM Holdings, Inc. is a wholly-owned subsidiary of Phoenix Life Insurance Company (“Phoenix Life”), which is a wholly-owned subsidiary of The Phoenix Companies, Inc. (“PNX”), a New York Stock Exchange listed company.


Since 2009, our ultimate parent company, PNX, has focused on selling products and services that are less capital intensive and less ratings sensitive. In 2011, PNX product sales were primarily in annuities and 94% of those sales were fixed indexed annuities. In addition, PNX expanded sales of other insurance companies’ policies through its distribution subsidiary, Saybrus Partners, Inc. (“Saybrus”).



2.

Basis of Presentation and Significant Accounting Policies


We have prepared these financial statements in accordance with accounting principles generally accepted in the United States of America (“GAAP”) which differ materially from the accounting practices prescribed by various insurance regulatory authorities. Certain prior year amounts have been reclassified to conform to the current year presentation.


Adjustments Related to Prior Years


Net income of $16,963 thousand was recognized during the year ended December 31, 2011. This reflects approximately $1,300 thousand associated with the correction of errors related to various prior years, which increased income from continuing operations recognized in 2011. These out-of-period adjustments include expense of $3,605 thousand allocated to us related to Phoenix Life’s establishment of a liability for certain retirement benefits predating PNX’s 2001 demutualization that were identified as part of a comprehensive balance sheet review completed in the fourth quarter of 2011. This adjustment was offset by unrelated reserve and accrual corrections.


Use of estimates


In preparing these financial statements in conformity with GAAP, we 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 periods. Significant estimates and assumptions are made in the determination of estimated gross profits (“EGPs”) used in the valuation and amortization of assets and liabilities associated with universal life and annuity contracts; policyholder liabilities and accruals; valuation of investments in debt securities, limited partnerships and other investments; valuation of deferred tax assets; and accruals for contingent liabilities. We are also subject to estimates made by our ultimate parent company related to discount rates and other assumptions for our pension and other post-employment benefits expense. Actual results could differ from these estimates.


Adoption of new accounting standards


Amendment to Troubled Debt Restructuring Guidance


In April 2011, the Financial Accounting Standards Board (the “FASB”) issued amended guidance to ASC 310, Receivables, to clarify guidance on troubled debt restructurings related to a creditor’s determination of whether or not a restructuring constitutes a concession and if the debtor is experiencing financial difficulties. This guidance is effective for interim periods beginning after June 15, 2011, and should be applied retrospectively to the beginning of the annual period of adoption. Retrospective application to all prior periods presented on the date of application is also permitted, but not required. Our adoption in the second quarter of 2011 had no material effect on our financial statements.




F-8





2.

Basis of Presentation and Significant Accounting Policies (continued)


Disclosures for Financing Receivables and Allowances for Credit Losses


In July 2010, the FASB issued amended guidance within ASC 310, Receivables, that requires enhanced disclosures related to financing receivables and related allowances for credit losses. The disclosures as of the end of a reporting period are effective for interim and annual reporting periods ending on or after December 15, 2010. The disclosures about activity that occurs during a reporting period are effective for interim and annual reporting periods beginning after December 15, 2010. Our adoption of this amended guidance had no material effect on our financial statements.


Accounting standards not yet adopted


Disclosures about Offsetting Assets and Liabilities


In December 2011, the FASB issued amended guidance to ASC 210, Balance Sheet, with respect to disclosure of offsetting assets and liabilities as part of the effort to establish common requirements in accordance with GAAP and International Financial Reporting Standards (“IFRS”). This amended guidance requires the disclosure of both gross information and net information about both financial instruments and derivative instruments eligible for offset in our balance sheet and instruments and transactions subject to an agreement similar to a master netting arrangement. This guidance is effective for periods beginning on or after January 1, 2013, with respective disclosures required retrospectively for all comparative periods presented. The adoption of this guidance effective January 1, 2013 is not expected to have a material effect on our financial statements.


Amendments to the Presentation of Comprehensive Income


In June 2011, the FASB issued amended guidance to ASC 220, Comprehensive Income, with respect to the presentation of comprehensive income as part of the effort to establish common requirements in accordance with GAAP and IFRS. This amended guidance requires entities to present all non-owner changes in stockholder’s equity either in a single continuous statement of comprehensive income or in two separate but consecutive statements. This guidance is effective for periods beginning after December 15, 2011, on a retrospective basis. The adoption of this guidance effective January 1, 2012 is not expected to have a material effect on our financial statements.


Amendments to Fair Value Measurement and Disclosure Requirements


In May 2011, the FASB issued amended guidance to ASC 820, Fair Value Measurement, with respect to measuring fair value and related disclosures as part of the effort to establish common requirements in accordance with GAAP and IFRS. The amended guidance clarifies that the concept of highest and best use should only be used in the valuation of non-financial assets, specifies how to apply fair value measurements to instruments classified in stockholder’s equity and requires that premiums or discounts be applied consistent with what market participants would use absent Level 1 inputs. The amendment also explicitly requires additional disclosures related to the valuation of assets categorized as Level 3 within the fair value hierarchy. Additional disclosures include quantitative information about unobservable inputs, the sensitivity of fair value measurement to changes in unobservable outputs and information on the valuation process used. This guidance is effective for periods beginning after December 15, 2011, on a prospective basis. Other than additional disclosures, the adoption of this guidance effective January 1, 2012 is not expected to have a material effect on our financial statements.


Accounting for Costs Associated with Acquiring or Renewing Insurance Contracts


In October 2010, the FASB issued amended guidance to ASC 944, Financial Services – Insurance, to address the diversity in practice for accounting for costs associated with acquiring or renewing insurance contracts. The amendment clarifies the definition of acquisition costs (i.e., costs which qualify for deferral) to incremental direct costs that result directly from, and are essential to, a contract and would not have been incurred by the insurance entity had the contract transaction not occurred. Therefore, only costs related to successful efforts of acquiring a new, or renewal, contract should be deferred. This guidance is effective for periods beginning after December 15, 2011, on a prospective or retrospective basis.




F-9





2.

Basis of Presentation and Significant Accounting Policies (continued)


The Company intends to adopt this guidance retrospectively on January 1, 2012. Upon adoption, the Company estimates the cumulative effect of retrospective adoption will reduce deferred policy acquisition costs and beginning stockholder’s equity as of January 1, 2012 between $50,000 thousand and $100,000 thousand primarily related to lower deferrals associated with unsuccessful efforts.


Significant accounting policies


Investments


Debt Securities


Our debt securities classified as available-for-sale are reported on our balance sheet at fair value. Fair value is based on quoted market price, 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 (private placement debt securities), by quoted market prices of comparable instruments (untraded public debt securities) and by independent pricing sources or internally developed pricing models. We recognize unrealized gains and losses on investments in debt securities that we classify as available-for-sale. We report these unrealized investment gains and losses as a component of OCI, net of applicable deferred policy acquisition costs and applicable deferred income taxes. Realized investment gains and losses are recognized on a first in first out basis.


Limited Partnerships and Other Investments


Limited partnerships, infrastructure funds, hedge funds and joint venture interests in which we do not have voting control or power to direct activities are recorded using the equity method of accounting. These investments include private equity, mezzanine funds, infrastructure funds, hedge funds and direct equity interests. The equity method of accounting requires that the investment be initially recorded at cost and the carrying amount of the investment subsequently adjusted to recognize our share of the earnings or losses. We record our equity in the earnings in net investment income using the most recent financial information received from the partnerships. Recognition of net investment income is generally on a three-month delay due to the timing of the related financial statements.


Other investments include leveraged lease investments which represent the net amount of the estimated residual value of the lease assets, rental receivables and unearned and deferred income to be allocated over the lease term. We report mortgage loans at unpaid principal balances, net of valuation reserves on impaired loans.


Policy Loans


Policy loans are carried at their unpaid principal balances and are collateralized by the cash values of the related policies. The majority of cash values eligible for policy loans are at variable interest rates that are reset annually on the policy anniversary.


Derivative Instruments


We recognize derivative instruments on the balance sheet in derivative instruments at fair value. The derivative contracts are reported as assets in derivative instruments or liabilities in other liabilities on the balance sheet, excluding embedded derivatives. Embedded derivatives are recorded on the balance sheet with the associated host contract.


The Company designates derivatives as either a hedge of a forecasted transaction or of the variability of cash flows to be received or paid related to a recognized asset or liability (i.e., a “cash flow” hedge) or a derivative that does not qualify for hedge accounting. To qualify for hedge accounting, the changes in value of the derivative must be expected to substantially offset the changes in value of the hedged item. Hedges are monitored to ensure that there is a high correlation between the change in the value of the derivative instruments and the change in value of the hedged investment. Effectiveness of the hedge is formally assessed at inception and throughout the life of the hedging relationship.




F-10





2.

Basis of Presentation and Significant Accounting Policies (continued)


Changes in the fair value of a derivative that is designated and qualifies as a cash flow hedge are recorded in accumulated other comprehensive income (“AOCI”) and are reclassified into earnings when the variability of the cash flow of the hedged item impacts earnings. Any hedge ineffectiveness is recorded immediately in current period earnings as net realized investment gains (losses). If it is probable that a hedged forecasted transaction will no longer occur, the effective portions of the gains or losses on derivative instruments designated as cash flow hedges are reclassified into earnings immediately.


If a derivative does not qualify for hedge accounting, all changes in its fair value, including net receipts and payments, are included in net realized investment gains and losses without consideration of changes in the fair value of the economically associated assets or liabilities. Our derivatives generally do not qualify for hedge accounting, with the exception of cross currency swaps. We do not designate the purchased derivatives related to living benefits or index credits as hedges for accounting purposes.


Net investment income


For mortgage-backed and other asset-backed debt securities, we recognize income using a constant effective yield based on anticipated prepayments and the estimated economic lives of the securities. When actual prepayments differ significantly from anticipated prepayments, the effective yield is recalculated to reflect actual payments to date and any resulting adjustment is included in net investment income. For certain asset-backed securities, changes in estimated yield are recorded on a prospective basis and specific valuation methods are applied to these securities to determine if there has been an other-than-temporary decline in value. We record the net income from investments in partnerships and joint ventures in net investment income.


Other-than-temporary impairments on available-for-sale securities


We recognize realized investment losses when declines in fair value of debt securities are considered to be an other-than-temporary impairment (“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 our 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 OCI. 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 of and near term prospects of the issuer.


A debt security impairment 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.




F-11





2.

Basis of Presentation and Significant Accounting Policies (continued)


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.


On a quarterly basis, we review all 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 all 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 than 12 months.


We employ a comprehensive process to determine whether or not a security in an unrealized loss position is other-than-temporarily impaired. This assessment is done on a security-by-security basis and involves significant management 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 fixed maturity and equity securities for impairments includes an analysis of the total gross unrealized losses by severity and/or age of the gross unrealized loss. An extended and severe unrealized loss position on a fixed maturity 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 a decline in market value and the likelihood such market value decline will recover.


Specifically for structured securities, to determine whether a collateralized security is impaired, we obtain underlying data from the security’s trustee and 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 whether the security will pay in accordance with the contractual cash flows.


Cash and cash equivalents


Cash and cash equivalents include cash on hand, amounts due from banks, money market instruments and other debt instruments with original maturities of three months or less. As of December 31, 2011, $7,510 thousand of cash and cash equivalents was held as collateral by a third party related to our derivative transactions.


Deferred policy acquisition costs


The costs of acquiring new business, principally commissions, underwriting, distribution and policy issue expenses, all of which vary with and are primarily related to production of new business, are deferred.


We amortize deferred policy acquisition costs based on the related policy’s classification. For universal life, variable universal life and accumulation annuities, deferred policy acquisition costs are amortized in proportion to EGPs. Policies may be surrendered for value or exchanged for a different one of our products (internal replacement). The deferred policy acquisition costs balance associated with the replaced or surrendered policies is adjusted to reflect these surrenders. In addition, an offset to deferred policy acquisition costs and accumulated other comprehensive income (“AOCI”) is recorded each period for unrealized gains or losses on securities classified as available-for-sale as if they had been realized, an adjustment to deferred policy acquisition costs amortized using gross profits or gross margins would result.




F-12





2.

Basis of Presentation and Significant Accounting Policies (continued)


The projection of EGPs requires the extensive use of actuarial assumptions, estimates and judgments about the future. Future EGPs are generally projected on a policy-by-policy basis 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:


Significant Assumption

 

Product

 

Explanation and Derivation

 

 

 

 

 

Separate account investment return

 

Variable Annuities

(6.0% long-term return assumption)


Variable Universal Life

(6.9% 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, reduced by fund fees and mortality and expense charges. 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 Annuities

Universal 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.

 

Mortality / longevity

 

Universal Life

Variable Universal Life

Immediate Annuities

Indexed Annuities

 

 

Mortality assumptions are based on Company experience over a rolling five-year period plus supplemental data from industry sources and trends. These assumptions vary by issue age, gender, underwriting class and policy duration.
 

Policyholder behavior - surrenders

 

Universal Life

Variable Universal Life

Variable Annuities

Fixed and Indexed Annuities

 

 

Surrender assumptions vary by product and year and are updated with experience studies. Policyholders are generally assumed to behave rationally; hence rates are typically lower when surrender penalties are in effect or when policy benefits are more valuable.

 

Policyholder behavior – premium persistency

 

Universal Life

Variable Universal Life

 

Future premiums and related fees are projected based on contractual terms, product illustrations at the time of sale and expected policy lapses without value. Assumptions are updated based on actual experience studies and include anticipated future changes if the Company has a high degree of confidence that such changes will be implemented (e.g., change in cost of insurance charges).

 

Expenses

 

All products

 

Projected maintenance expenses to administer policies in force are based on annually updated studies of expenses incurred.

 

Reinsurance costs / recoveries

 

Universal Life

Variable Universal Life

Variable Annuities

 

Projected reinsurance costs are based on treaty terms currently in force. Recoveries are based on the Company’s assumed mortality and treaty terms. Treaty recaptures are based on contract provisions and management’s intentions.


To determine the reasonableness of the prior assumptions used and their impact on previously projected account values and the related EGPs, we evaluate, on a quarterly basis, our previously projected EGPs. Our process to assess the reasonableness of our EGPs involves the use of internally developed models, together with actual experience, analysis of market and industry trends, and other external events. Actual gross profits that vary from management’s initial estimates in a given reporting period result in increases or decreases in the rate of amortization recorded in the period.


In addition to our quarterly reviews, we conduct a comprehensive assumption review on an annual basis, or as circumstances warrant. We generally only update the assumptions and adjust the deferred policy acquisition cost balance in the quarterly period in which this comprehensive review is performed, unless a material change that we feel is indicative of a long-term trend is observed in an interim period.




F-13





2.

Basis of Presentation and Significant Accounting Policies (continued)


Upon completion of these reviews, we revise our assumptions to reflect our current best estimate, thereby changing our estimate of EGPs in the deferred policy acquisition cost and unearned revenue amortization models, as well as projections within the death benefit and other insurance benefit reserving models. The deferred policy acquisition cost asset, the unearned revenue reserves and death benefit and other insurance benefit reserves are then adjusted with an offsetting benefit or charge to income to reflect such changes in the period of the revision, a process known as “unlocking.” Finally, an analysis is performed periodically to assess whether there are sufficient gross margins or gross profits to amortize the remaining deferred policy acquisition costs balances. If the estimates of 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 assumptions are changed, resulting in a charge to income.


Separate account assets and liabilities


Separate account assets and liabilities related to policyholder funds are carried at fair value. Deposits, net investment income and realized investment gains and losses for these accounts are excluded from revenues, and the related liability increases are excluded from benefits and expenses. Fees assessed to the contract owners for management services are included in revenues when services are rendered.


Policy liabilities and accruals


Policy liabilities and accruals include future benefit liabilities for certain life and annuity products. We establish liabilities in amounts adequate to meet the estimated future obligations of policies in force. Future benefit liabilities for traditional life insurance are computed using the net level premium method on the basis of actuarial assumptions as to contractual guaranteed rates of interest, mortality rates guaranteed in calculating the cash surrender values described in such contracts and morbidity. Future benefit liabilities for term and annuities in the payout phase that have significant mortality risk are computed using the net premium method on the basis of actuarial assumptions at the issue date of these contracts for rates of interest, contract administrative expenses, mortality and surrenders. The liability for universal life-type contracts is equal to the balance that accrues to the benefit of the policyholders as of the financial statement date, including interest credited, amounts that have been assessed to compensate us for services to be performed over future periods, and any amounts previously assessed against the policyholder that is refundable. Although mortality and morbidity and interest rate assumptions are “locked-in” upon the issuance of new insurance or annuity business with fixed and guaranteed terms, significant changes in experience or assumptions may require the Company to provide for expected future losses on a product by establishing premium deficiency reserves.


Policy liabilities and accruals also include liabilities for outstanding claims, losses and loss adjustment expenses based on individual case estimates for reported losses and estimates of unreported losses based on past experience. The Company does not establish claim liabilities until a loss has occurred. However, unreported losses and loss adjustment expenses includes estimates of claims that the Company believes have been incurred but have not yet been reported as of the balance sheet date.


Certain contracts may also include additional death or other insurance benefit features. For example, guaranteed minimum death or income benefits offered with variable annuity contracts, guaranteed minimum withdrawal benefits offered with fixed indexed annuity contracts or no-lapse guarantees offered with universal life insurance contracts. An additional liability is established for these benefits by estimating the expected present value of the excess benefits and recognizing the excess ratably over the accumulation period based on total expected assessments with changes in fair value recorded in policy benefits, excluding dividends, in the consolidated statement of net income.


Embedded derivatives

Certain contract guarantees contain derivative instruments embedded in the contracts. These guarantees are assessed to determine if they do not qualify as being clearly and closely related to the economic characteristics of the host contract and if a separate instrument with the same terms would qualify as a derivative. Contract guarantees that meet these criteria are reported separately from the host contract and reported at fair value.




F-14





2.

Basis of Presentation and Significant Accounting Policies (continued)


The guaranteed minimum withdrawal benefit (“GMWB”), guaranteed minimum accumulation benefit (“GMAB”), guaranteed pay-out annuity floor (“GPAF”) and combination rider (“COMBO”) represent embedded derivative liabilities in the variable annuity contracts. These investments are accounted for at fair value within policyholder deposit funds on the consolidated balance sheet with changes in fair value recorded in realized investment gains on the consolidated statement of income. The fair value of the GMWB, GMAB, GPAF and COMBO obligation is calculated based on actuarial and capital market assumptions related to the projected cash flows, including benefits and related contract charges, over the lives of the contracts, incorporating expectations concerning policyholder behavior. As markets change, contracts mature and actual policyholder behavior emerges, we continually evaluate and may from time to time adjust these assumptions.


Fixed indexed annuities also offer a variety of index options: policy credits that are calculated based on the performance of an outside equity market or other index over a specified term. The index options represent embedded derivative liabilities accounted for at fair value within policyholder deposit funds on the balance sheet with changes in fair value recorded in policy benefits in the statement of income. The fair value of these index options is calculated 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.


See Note 7 to these financial statements for additional information regarding embedded derivatives.


Policyholder deposit funds


Amounts received as payment for certain deferred annuities and other contracts without life contingencies are reported as deposits to policyholder deposit funds. The liability for deferred annuities and other contracts without life contingencies is equal to the balance that accrues to the benefit of the contract owner as of the financial statement date which includes the accumulation of deposits plus interest credited, less withdrawals and amounts assessed through the financial statement date.


Contingent liabilities


Amounts related to contingent liabilities are accrued if it is probable that a liability has been incurred and an amount is reasonably estimable.


Revenue recognition


We recognize premiums for long-duration life insurance products as revenue when due from policyholders. We match benefits, losses and related expenses with premiums over the related contract periods.


Amounts received as payment for interest sensitive life contracts, deferred annuities and contracts without life contingencies are considered deposits and are not included in revenue. Revenues from these products consist primarily of fees assessed during the period against the policyholders’ account balances for mortality charges, policy administration charges and surrender charges. Fees assessed that represent compensation for services to be provided in the future are deferred and amortized into revenue over the life of the related contracts. Related policy benefit expenses include universal life benefit claims in excess of fund values, interest credited to policyholders’ account balances and amortization of deferred policy acquisition costs.


Certain variable annuity contracts and fixed index annuity contract riders provide the holder a guarantee that the benefit received upon death or annuitization will be no less than a minimum prescribed amount. These benefits are accounted for as insurance contracts. Certain variable annuity contracts with living benefits and fixed index annuity index options are considered embedded derivatives. These contracts are discussed in further detail in Note 7 to these financial statements.


Reinsurance


Premiums, policy benefits and other operating expenses related to our traditional life and term insurance policies are stated net of reinsurance ceded to other companies, except for amounts associated with certain modified coinsurance contracts which are reflected in the Company’s financial statements based on the application of the deposit method of accounting. Estimated reinsurance recoverables and the net cost of reinsurance are recognized over the life of the reinsured treaty using assumptions consistent with those used to account for the underlying policies.




F-15





2.

Basis of Presentation and Significant Accounting Policies (continued)


For universal life and variable universal life contracts, reinsurance premiums and ceded benefits are reflected net within policy benefits. Reinsurance recoveries are recognized in the same period as the related reinsured claim. The net cost of reinsurance (the present value of all expected ceded premium payments and expected future benefit payments) is recognized over the life of the reinsurance treaty based upon the ratio of net cost to estimated gross profits or fees and cost of insurance.


Income taxes


Income tax expense or benefit is recognized based upon amounts reported in the financial statements and the provisions of currently enacted tax laws. We allocate income taxes to income, OCI and additional paid-in capital in the manner required by ASC 740, Accounting for Income Taxes.


We recognize current income tax assets and liabilities for estimated income taxes refundable or payable based on the current year’s income tax returns. We recognize deferred income tax assets and liabilities for the estimated future income tax effects of temporary differences and income tax carryforwards. Temporary differences are the differences between the financial statement carrying amounts of assets and liabilities and their tax bases. If necessary, we establish valuation allowances to reduce the carrying amount of deferred income tax assets to amounts that are more likely than not to be realized. We periodically review the adequacy of these valuation allowances and record any increase or reduction in allowances in accordance with intraperiod allocation rules. We assess all significant tax positions to determine if a liability for uncertain tax position is necessary, and, if so, the impact on the current or deferred income tax balances. Also, if indicated, we recognize interest and/or penalties related to income taxes as a component of the income tax provision.


We are included in the consolidated federal income tax return filed by PNX and are party to a tax sharing agreement by and among PNX 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.


Within the consolidated tax return, we are required by regulations of the Internal Revenue Service (“IRS”) to segregate the entities into two groups: life insurance companies and non-life insurance companies. We are limited as to the amount of any operating losses from the non-life group that can be offset against taxable income of the life group. These limitations may affect the amount of any operating loss carryovers that we have now or in the future.



3.

Reinsurance


We use reinsurance agreements to limit potential losses, reduce exposure to larger risks and provide additional capacity for 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 us. Since we bear the risk of nonpayment, we evaluate the financial condition of our reinsurers and monitor concentrations of credit risk. As of December 31, 2011, we had ceded reserves of $50,273 thousand and a reinsurance receivable balance of $1,660 thousand with Scottish Re. Based on our review of its financial statements, reputation in the reinsurance marketplace and other relevant information, we believe that we have no material exposure to uncollectible life reinsurance. As such, no allowance has been established.




F-16





3.

Reinsurance (continued)


The following table lists our top five reinsurance relationships as defined by reinsurance recoverable balance and ceded statutory reserves and the A.M. Best rating of each reinsurer.


 

December 31, 2011

Principal Life Reinsurers:

 

 

Reinsurer’s

($ in thousands)

Recoverable

 

A.M. Best

 

Balances

 

Rating

 

 

 

 

RGA Reinsurance Company

$

156,673

 

 

A+

Swiss Reinsurance Group(1)

$

152,155

 

 

A+

AEGON USA(2)

$

121,227

 

 

A+

Scottish Re (US) Inc(3)

$

50,273

 

 

NR

Munich American Reassurance Co

$

45,200

 

 

A+

———————

(1)

Swiss Reinsurance Group includes Swiss Re Life & Health America and Reassure America Life Insurance Co.

(2)

Transamerica Life Insurance Co is a subsidiary of AEGON.

(3)

Due to the financial distress of Scottish Re and the withdrawal of its ratings in June, 2009, we are continuing to monitor its financial situation and assess the recoverability of the reinsurance recoverable on a quarterly basis.


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.


Direct Business and Reinsurance:

Years Ended December 31,

($ in thousands)

2011

 

2010

 

2009

 

 

 

 

 

 

 

 

 

Direct premiums

$

77,138 

 

$

82,799 

 

$

95,823 

Premiums ceded to reinsurers(1)

 

(74,827)

 

 

(79,044)

 

 

(84,403)

Premiums

$

2,311 

 

$

3,755 

 

$

11,420 

 

 

 

 

 

 

 

 

 

Direct policy benefits incurred

$

159,619 

 

$

217,429 

 

$

197,776 

Policy benefits assumed from reinsureds

 

3,810 

 

 

3,815 

 

 

3,590 

Policy benefits ceded to reinsurers

 

(90,131)

 

 

(148,275)

 

 

(78,977)

Premiums paid to reinsurers(2)

 

78,812 

 

 

63,248 

 

 

68,753 

Policy benefits(3)

$

152,110 

 

$

136,217 

 

$

191,142 

 

 

 

 

 

 

 

 

 

Direct life insurance in-force

$

68,205,090 

 

$

73,616,813 

 

$

81,106,817 

Life insurance in-force assumed from reinsureds

 

66,060 

 

 

71,594 

 

 

80,402 

Life insurance in-force ceded to reinsurers

 

(52,320,762)

 

 

(56,248,915)

 

 

(61,854,539)

Life insurance in-force

$

15,950,388 

 

$

17,439,492 

 

$

19,332,680 

Percentage of amount assumed to net insurance in-force

 

0.4%

 

 

0.4%

 

 

0.4%

———————

(1)

Amount above represents premiums ceded to reinsurers related to traditional life and term insurance policies.

(2)

For universal life and variable universal life contracts, premiums paid to reinsurers are reflected within policy benefits.

(3)

The policy benefit amounts above exclude changes in reserves, interest credited to policyholders and withdrawals, which total $93,509 thousand, $77,149 thousand and $58,315 thousand, net of reinsurance, for the years ended December 31, 2011, 2010 and 2009, respectively.


Our reinsurance program cedes various types of risks to other reinsurers primarily under yearly renewable term and coinsurance agreements. Yearly renewable term and coinsurance arrangements result in passing all or a portion of the risk to the reinsurer. Under coinsurance agreements on our traditional and term insurance policies, the reinsurer receives a proportionate amount of the premiums less an allowance for commissions and expenses and is liable for a corresponding proportionate amount of all benefit payments. Under our yearly renewable term agreements, the ceded premium represents a charge for the death benefit coverage.




F-17





3.

Reinsurance (continued)


We cede the majority of mortality risk on most new issues of term insurance. Effective October 1, 2009, we coinsured all the benefit risks, net of existing reinsurance, on the previously unreinsured portion of our term life business in force.


Irrevocable letters of credit aggregating $27,973 thousand at December 31, 2011 have been arranged with commercial banks in our favor to collateralize the ceded reserves.



4.

Deferred Policy Acquisition Costs


Deferred Policy Acquisition Costs:

Years Ended December 31,

($ in thousands)

2011

 

2010

 

2009

 

 

 

 

 

 

 

 

 

Policy acquisition costs deferred

$

150,512 

 

$

24,043 

 

$

60,410 

Costs amortized to expenses:

 

 

 

 

 

 

 

 

  Recurring costs

 

(133,073)

 

 

(194,573)

 

 

(139,828)

  Realized investment gains (losses)

 

(91)

 

 

2,069 

 

 

585 

Offset for ceded reserve and expense allowance

 

 

 

 

-- 

 

 

-- 

Offsets to net unrealized investment gains or losses included in AOCI(1)

 

(41,865)

 

 

(98,432)

 

 

(149,998)

Cumulative effect of adoption of new guidance

 

-- 

 

 

(119)

 

 

2,634 

Other

 

6,948 

 

 

23,571 

 

 

(1,364)

Change in deferred policy acquisition costs

 

(17,569)

 

 

(243,441)

 

 

(227,561)

Deferred policy acquisition costs, beginning of year

 

594,126 

 

 

837,567 

 

 

1,065,128 

Deferred policy acquisition costs, end of year

$

576,557 

 

$

594,126 

 

$

837,567 

———————

(1)

An offset to deferred policy acquisition costs and AOCI is recorded each period to the extent that, had unrealized holding gains or losses from securities classified as available-for-sale actually been realized, an adjustment to deferred policy acquisition costs amortized using gross profits or gross margins would result.


We amortize deferred policy acquisition costs based on the related policy’s classification. For universal life, variable universal life and accumulation annuities, deferred policy acquisition costs are amortized in proportion to EGPs. Policies may be surrendered for value or exchanged for a different one of our products (internal replacement). The deferred policy acquisition cost balance associated with the replaced or surrendered policies is adjusted to reflect these surrenders. In addition, an offset to deferred policy acquisition costs and AOCI is recorded each period for unrealized gains or losses on securities classified as available-for-sale as if they had been realized, an adjustment to deferred policy acquisition costs amortized using gross profits or gross margins would result.


The projection of EGPs requires the extensive use of actuarial assumptions, estimates and judgments about the future. Future EGPs are generally projected on a policy-by-policy basis 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. See “Significant accounting policies” in Note 2 to these financial statements for more information on significant assumptions.


In addition to our quarterly reviews, we conduct a comprehensive assumption review on an annual basis, or as circumstances warrant. During the third quarter, we conducted our annual comprehensive assumption review. We revised our assumptions to reflect our current best estimates, thereby changing our estimate of EGPs in the deferred policy acquisition cost amortization models. The deferred policy acquisition cost asset was adjusted, a process known as “unlocking,” with an offsetting benefit or charge to income.


Upon completion of a study during the third quarter of 2011, we updated our best estimate assumptions used to project EGPs in the deferred policy acquisition cost amortization schedules. Major projection assumptions included policy maintenance expenses, investment income, fees, reinsurance recapture, lapses and premium persistency. In our review, to develop the best estimate for these assumptions, we examined our own experience, industry studies and market conditions. Assumption changes resulted in an overall increase in deferred policy acquisition cost amortization of $1,904 thousand, which included a decrease of $32,677 thousand for universal life policies from higher expected fees. It also included an increase of $30,067 thousand for universal life policies from lower persistency. Overall, the amortization increased by $693 thousand, $174 thousand and $1,038 thousand, respectively, for universal life, variable universal life and annuities.




F-18





4.

Deferred Policy Acquisition Costs (continued)


Upon completion of a study during the third quarter of 2010, we updated our best estimate assumptions used to project EGPs and margins in the deferred policy acquisition cost amortization schedules. Major projection assumptions updated included surrenders, lapse experience, net investment income, and premium funding. In our review to develop the best estimate for these assumptions, we examined our own experience and market conditions. The greatest impact of the unlocking was on the universal life line of business, where the effects of these adjustments resulted in an overall increase in deferred policy acquisition cost amortization of $23,486 thousand. This unlocking was primarily driven by increased lapses in portions of our universal life business and the impact of the low interest rate environment. Annuities and variable universal life lines of business had increases in amortization of $8,267 thousand and $200 thousand, respectively.


Upon completion of a study during the fourth quarter of 2009, we updated our best estimate assumptions used to project EGPs and margins in the deferred policy acquisition cost amortization schedules. Major projection assumptions updated include mortality, cost of insurance charges, policy maintenance expenses, lapse experience, expense, net investment income. In our review to develop the best estimate for these assumptions, we examined our own experience and market conditions. We updated our maintenance expenses and reallocated them among various lines of business. Additionally, we updated the lapse rate assumptions for annuities, decreasing the rates for variable annuities while increasing them for fixed annuities. We reflected a change in the cost of insurance rates for certain single life universal life policies, effective April 1, 2010, resulting in an increase in overall projected gross profits or margins. We also reflected the lower interest earned in investments, consistent with recent experience. These changes resulted in an increase in overall deferred policy acquisition cost amortization of $21,723 thousand.



5.

Policy Liabilities and Accruals


Policyholder liabilities are primarily for universal life policies and include deposits received from customers and investment earnings on their fund balances which range from 3.00% to 4.75% as of December 31, 2011, less administrative and mortality charges.



6.

Investing Activities


Debt securities


We invest in a variety of debt securities. We classify these investments into various sectors using industry conventions; however, our classifications may differ from similarly titled classifications of other companies.


Fair Value and Cost of Securities:

December 31, 2011

($ in millions)

 

 

Gross

 

Gross

 

 

 

OTTI

 

Amortized

 

Unrealized

 

Unrealized

 

Fair

 

Recognized

 

Cost

 

Gains(1)

 

Losses(1)

 

Value

 

in AOCI(2)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. government and agency

$

163,132 

 

$

12,653 

 

$

(457)

 

$

175,328 

 

$

-- 

State and political subdivision

 

77,323 

 

 

5,518 

 

 

(444)

 

 

82,397 

 

 

-- 

Foreign government

 

30,473 

 

 

1,825 

 

 

(421)

 

 

31,877 

 

 

-- 

Corporate

 

1,169,209 

 

 

83,310 

 

 

(44,142)

 

 

1,208,377 

 

 

(1,505)

Commercial mortgage-backed (“CMBS”)

 

281,616 

 

 

12,283 

 

 

(3,944)

 

 

289,955 

 

 

(5,131)

Residential mortgage-backed (“RMBS”)

 

562,186 

 

 

14,106 

 

 

(22,773)

 

 

553,519 

 

 

(20,396)

CDO/CLO

 

77,456 

 

 

1,240 

 

 

(10,680)

 

 

68,016 

 

 

(6,220)

Other asset-backed

 

135,435 

 

 

2,333 

 

 

(845)

 

 

136,923 

 

 

-- 

Available-for-sale debt securities

$

2,496,830 

 

$

133,268 

 

$

(83,706)

 

$

2,546,392 

 

$

(33,252)

———————

(1)

Net unrealized investment gains and losses on securities classified as available-for-sale and certain other assets are included in our balance sheet as a component of AOCI. The table above 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).

(2)

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




F-19





6.

Investing Activities (continued)


Fair Value and Cost of Securities:

December 31, 2010

($ in millions)

 

 

Gross

 

Gross

 

 

 

OTTI

 

Amortized

 

Unrealized

 

Unrealized

 

Fair

 

Recognized

 

Cost

 

Gains(1)

 

Losses(1)

 

Value

 

in AOCI(2)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. government and agency

$

96,137 

 

$

2,483 

 

$

(337)

 

$

98,283 

 

$

-- 

State and political subdivision

 

33,092 

 

 

216 

 

 

(799)

 

 

32,509 

 

 

-- 

Foreign government

 

14,683 

 

 

1,463 

 

 

(60)

 

 

16,086 

 

 

-- 

Corporate

 

692,780 

 

 

39,804 

 

 

(38,807)

 

 

693,777 

 

 

(1,512)

CMBS

 

172,850 

 

 

5,673 

 

 

(4,568)

 

 

173,955 

 

 

(4,519)

RMBS

 

350,729 

 

 

4,429 

 

 

(21,553)

 

 

333,605 

 

 

(15,263)

CDO/CLO

 

72,603 

 

 

1,940 

 

 

(11,359)

 

 

63,184 

 

 

(6,279)

Other asset-backed

 

108,632 

 

 

1,320 

 

 

(953)

 

 

108,999 

 

 

-- 

Available-for-sale debt securities

$

1,541,506 

 

$

57,328 

 

$

(78,436)

 

$

1,520,398 

 

$

(27,573)

———————

(1)

Net unrealized investment gains and losses on securities classified as available-for-sale and certain other assets are included in our balance sheet as a component of AOCI. The table above 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).

(2)

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


Aging of Temporarily Impaired

As of December 31, 2011

Debt Securities:

Less than 12 months

 

Greater than 12 months

 

Total

($ in thousands)

Fair

 

Unrealized

 

Fair

 

Unrealized

 

Fair

 

Unrealized

 

Value

 

Losses

 

Value

 

Losses

 

Value

 

Losses

Debt Securities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. government and agency

$

-- 

 

$

-- 

 

$

3,485 

 

$

(457)

 

$

3,485 

 

$

(457)

State and political subdivision

 

15,419 

 

 

(28)

 

 

913 

 

 

(416)

 

 

16,332 

 

 

(444)

Foreign government

 

7,231 

 

 

(421)

 

 

-- 

 

 

-- 

 

 

7,231 

 

 

(421)

Corporate

 

113,623 

 

 

(3,707)

 

 

74,192 

 

 

(40,435)

 

 

187,815 

 

 

(44,142)

CMBS

 

59,478 

 

 

(1,240)

 

 

6,924 

 

 

(2,704)

 

 

66,402 

 

 

(3,944)

RMBS

 

74,575 

 

 

(2,809)

 

 

106,890 

 

 

(19,964)

 

 

181,465 

 

 

(22,773)

CDO/CLO

 

3,735 

 

 

(110)

 

 

40,638 

 

 

(10,570)

 

 

44,373 

 

 

(10,680)

Other asset-backed

 

22,944 

 

 

(190)

 

 

15,194 

 

 

(655)

 

 

38,138 

 

 

(845)

Total temporarily impaired securities

$

297,005 

 

$

(8,505)

 

$

248,236 

 

$

(75,201)

 

$

545,241 

 

$

(83,706)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Below investment grade

$

26,187 

 

$

(1,515)

 

$

76,237 

 

$

(49,711)

 

$

102,424 

 

$

(51,226)

Below investment grade after offsets
  for deferred policy acquisition cost
  adjustment and taxes

 

 

 

$

(595)

 

 

 

 

$

(4,714)

 

 

 

 

$

(5,309)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Number of securities

 

 

 

 

193 

 

 

 

 

 

180 

 

 

 

 

 

373 


Unrealized losses on below-investment-grade debt securities with a fair value of less than 80% of amortized cost totaled $44,536 thousand at December 31, 2011, of which $40,125 thousand was below 80% of amortized cost for more than 12 months.


These securities were considered to be temporarily impaired at December 31, 2011 because each of these securities had performed, and are expected to perform, in accordance with original contractual terms. In addition, management does not have the intention to sell nor does it expect to be required to sell these securities prior to their recovery.




F-20





6.

Investing Activities (continued)


Aging of Temporarily Impaired

As of December 31, 2010

Debt Securities:

Less than 12 months

 

Greater than 12 months

 

Total

($ in thousands)

Fair

 

Unrealized

 

Fair

 

Unrealized

 

Fair

 

Unrealized

 

Value

 

Losses

 

Value

 

Losses

 

Value

 

Losses

Debt Securities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. government and agency

$

592 

 

$

(8)

 

$

3,613 

 

$

(329)

 

$

4,205 

 

$

(337)

State and political subdivision

 

20,184 

 

 

(381)

 

 

910 

 

 

(418)

 

 

21,094 

 

 

(799)

Foreign government

 

968 

 

 

(60)

 

 

-- 

 

 

-- 

 

 

968 

 

 

(60)

Corporate

 

38,680 

 

 

(1,833)

 

 

89,756 

 

 

(36,974)

 

 

128,436 

 

 

(38,807)

CMBS

 

22,577 

 

 

(401)

 

 

12,851 

 

 

(4,167)

 

 

35,428 

 

 

(4,568)

RMBS

 

61,907 

 

 

(2,296)

 

 

96,254 

 

 

(19,257)

 

 

158,161 

 

 

(21,553)

CDO/CLO

 

88 

 

 

-- 

 

 

43,920 

 

 

(11,359)

 

 

44,008 

 

 

(11,359)

Other asset-backed

 

35,346 

 

 

(355)

 

 

7,456 

 

 

(598)

 

 

42,802 

 

 

(953)

Total temporarily impaired securities

$

180,342 

 

$

(5,334)

 

$

254,760 

 

$

(73,102)

 

$

435,102 

 

$

(78,436)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Below investment grade

$

3,946 

 

$

(276)

 

$

88,564 

 

$

(43,094)

 

$

92,510 

 

$

(43,370)

Below investment grade after offsets
  for deferred policy acquisition cost
  adjustment and taxes

 

 

 

$

(35)

 

 

 

 

$

(3,310)

 

 

 

 

$

(3,345)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Number of securities

 

 

 

 

142 

 

 

 

 

 

174 

 

 

 

 

 

316 


Unrealized losses on below-investment-grade debt securities with a fair value of less than 80% of amortized cost totaled $37,304 thousand at December 31, 2010, of which $36,499 thousand was below 80% of amortized cost for more than 12 months.


These securities were considered to be temporarily impaired at December 31, 2010 because each of these securities had performed, and are expected to perform, in accordance with original contractual terms. In addition, management does not have the intention to sell nor does it expect to be required to sell these securities prior to their recovery.


Maturities of Debt Securities:

December 31, 2011

 

December 31, 2010

($ in thousands)

Amortized

 

Fair

 

Amortized

 

Fair

 

Cost

 

Value

 

Cost

 

Value

 

 

 

 

 

 

 

 

 

 

 

 

Due in one year or less

$

111,027 

 

$

111,279 

 

$

89,543 

 

$

89,992 

Due after one year through five years

 

268,596 

 

 

284,081 

 

 

216,902 

 

 

228,887 

Due after five years through ten years

 

572,731 

 

 

604,800 

 

 

261,559 

 

 

280,563 

Due after ten years

 

487,783 

 

 

497,819 

 

 

268,688 

 

 

241,213 

CMBS/RMBS/ABS/CDO/CLO

 

1,056,693 

 

 

1,048,413 

 

 

704,814 

 

 

679,743 

Total

$

2,496,830 

 

$

2,546,392 

 

$

1,541,506 

 

$

1,520,398 


The maturities of debt securities, as of December 31, 2011, are summarized in the table above by contractual maturity. Actual maturities will differ from contractual maturities as certain borrowers have the right to call or prepay obligations with or without call or prepayment penalties, and we have the right to put or sell certain obligations back to the issuers.


Other-than-temporary impairments


Management exercised significant judgment with respect to certain securities in determining whether impairments are temporary or other than temporary. In reaching its conclusions, management 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, 2011, management does not have the intention to sell nor does it expect to be required to sell these securities prior to their recovery.




F-21





6.

Investing Activities (continued)


Fixed income OTTIs recorded in 2011 were primarily concentrated in structured securities and corporate bonds. These impairments were driven primarily by increased collateral default rates and rating downgrades. In our judgment, these credit events or other adverse conditions of the issuers 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 related to such credit-related circumstances were $2,804 thousand in 2011, $10,799 thousand in 2010 and $22,914 thousand in 2009. There were no limited partnership and other investment OTTIs in 2011 and 2010, respectively, and $1,093 thousand in 2009 were recognized.


In addition to 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 $6,507 thousand in 2011, $8,994 thousand in 2010 and $25,691 thousand in 2009.


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


Credit Losses Recognized in Earnings on Debt Securities for

As of December 31,

which a Portion of the OTTI Loss was Recognized in OCI:

2011

 

2010

($ in thousands)

 

 

 

 

 

Balance, beginning of year

$

(17,335)

 

$

(12,442)

  Add: Credit losses on securities not previously impaired(1)

 

(961)

 

 

(2,193)

  Add: Credit losses on securities previously impaired(1)

 

(1,526)

 

 

(7,344)

  Less: Credit losses on securities impaired due to intent to sell

 

-- 

 

 

-- 

  Less: Credit losses on securities sold

 

1,208 

 

 

2,475 

  Less: Credit losses upon adoption of ASC 815

 

-- 

 

 

2,169 

  Less: Increases in cash flows expected on previously impaired securities

 

-- 

 

 

-- 

Balance, end of year

$

(18,614)

 

$

(17,335)

———————

(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.


Limited partnerships and other investments


Limited partnerships and other investments are made up of private equity investments of $4,620 thousand in 2011 and $3,226 thousand in 2010 and common stock of $345 thousand in 2011 and $316 thousand in 2010.


Net investment income


Sources of Net Investment Income:

Years Ended December 31,

($ in thousands)

2011

 

2010

 

2009

 

 

 

 

 

 

 

 

 

Debt securities

$

96,816 

 

$

69,219 

 

$

74,237 

Policy loans

 

3,114 

 

 

3,012 

 

 

2,587 

Limited partnerships and other investments

 

323 

 

 

1,633 

 

 

2,051 

Fair value option investments

 

178 

 

 

1,028 

 

 

176 

Other income

 

1,263 

 

 

157 

 

 

112 

Cash and cash equivalents

 

5 

 

 

34 

 

 

21 

Total investment income

 

101,699 

 

 

75,083 

 

 

79,184 

Less: Investment expenses

 

1,410 

 

 

1,356 

 

 

417 

Net investment income

$

100,289 

 

$

73,727 

 

$

78,767 


Statutory deposits


Pursuant to certain statutory requirements, as of December 31, 2011 and 2010, we had on deposit securities with a fair value of $7,636 thousand and $7,131 thousand, respectively, in insurance department special deposit accounts. We are not permitted to remove the securities from these accounts without approval of the regulatory authority.




F-22





6.

Investing Activities (continued)


Net realized investment gains (losses)


Sources and Types of Net Realized Investment Gains (Losses):

Years Ended December 31,

($ in thousands)

2011

 

2010

 

2009

 

 

 

 

 

 

 

 

 

Total other-than-temporary debt impairments

$

(9,311)

 

$

(19,793)

 

$

(48,605)

Portion of loss recognized in OCI

 

6,507 

 

 

8,994 

 

 

25,691 

Net debt impairments recognized in earnings

$

(2,804)

 

$

(10,799)

 

$

(22,914)

 

 

 

 

 

 

 

 

 

Debt security impairments:

 

 

 

 

 

 

 

 

  U.S. government and agency

$

-- 

 

$

-- 

 

$

-- 

  State and political subdivision

 

-- 

 

 

-- 

 

 

-- 

  Foreign government

 

-- 

 

 

-- 

 

 

-- 

  Corporate

 

(413)

 

 

(756)

 

 

(7,059)

  CMBS

 

(398)

 

 

(1,560)

 

 

(637)

  RMBS

 

(1,628)

 

 

(4,713)

 

 

(9,560)

  CDO/CLO

 

(306)

 

 

(3,648)

 

 

(4,600)

  Other asset-backed

 

(59)

 

 

(122)

 

 

(1,058)

Net debt security impairments

 

(2,804)

 

 

(10,799)

 

 

(22,914)

Limited partnerships and other investment impairments

 

-- 

 

 

-- 

 

 

(1,093)

Impairment losses

 

(2,804)

 

 

(10,799)

 

 

(24,007)

Debt security transaction gains(1)

 

2,411 

 

 

3,334 

 

 

9,043 

Debt security transaction losses(1)

 

(766)

 

 

(4,120)

 

 

(13,247)

Limited partnerships and other investment gains

 

-- 

 

 

265 

 

 

-- 

Limited partnerships and other investment losses

 

-- 

 

 

-- 

 

 

(1,128)

Net transaction gains (losses)

 

1,645 

 

 

(521)

 

 

(5,332)

Derivative instruments

 

12,576 

 

 

(23,426)

 

 

(70,446)

Embedded derivatives(2)

 

(32,322)

 

 

17,190 

 

 

90,607 

Net realized investment gains (losses), excluding impairment losses

 

(18,101)

 

 

(6,757)

 

 

14,829 

Net realized investment losses, including impairment losses

$

(20,905)

 

$

(17,556)

 

$

(9,178)

———————

(1)

Proceeds from the sale of available-for-sale debt securities were $325,796 thousand, $359,084 thousand and $417,265 thousand for the years ended December 31, 2011, 2010 and 2009, respectively.

(2)

Includes the change in fair value of embedded derivatives associated with variable annuity GMWB, GMAB, GPAF and COMBO riders. See Note 7 to these financial statements for additional disclosures.


Unrealized investment gains (losses)


Sources of Changes in Net Unrealized Investment Gains (Losses):

Years Ended December 31,

($ in thousands)

2011

 

2010

 

2009

 

 

 

 

 

 

 

 

 

Debt securities

$

70,670 

 

$

92,080 

 

$

198,748 

Other investments

 

(120)

 

 

(201)

 

 

2,116 

Net unrealized investment gains

$

70,550 

 

$

91,879 

 

$

200,864 

 

 

 

 

 

 

 

 

 

Net unrealized investment gains

$

70,550 

 

$

91,879 

 

$

200,864 

Applicable deferred policy acquisition cost

 

41,865 

 

 

98,432 

 

 

149,998 

Applicable deferred income tax

 

10,039 

 

 

(13,894)

 

 

17,803 

Offsets to net unrealized investment gains (losses)

 

51,904 

 

 

84,538 

 

 

167,801 

Net unrealized investment gains included in OCI

$

18,646 

 

$

7,341 

 

$

33,063 




F-23





6.

Investing Activities (continued)


Non-consolidated variable interest entities


Entities which do not have sufficient equity at risk to allow the entity to finance its activities without additional financial support or in which the equity investors, as a group, do not have the characteristic of a controlling financial interest are referred to as VIEs. We perform ongoing assessments of our investments in VIEs to determine whether we have a controlling financial interest in the VIE and therefore would be considered to be the primary beneficiary. An entity would be considered a primary beneficiary and be required to consolidate a VIE when the entity has both the power to direct the activities of a VIE that most significantly impact the entity’s economic performance and the obligation to absorb losses, or right to receive benefits, that could potentially be significant to the VIE. We reassess our VIE determination with respect to an entity on an ongoing basis.


We are involved with various entities that are deemed to be VIEs primarily as a passive investor in private equity limited partnerships and through direct investments, in which we are not related to the general partner. These investments are accounted for under the equity method of accounting and are included in limited partnerships and other investments on our balance sheet. The carrying value of assets and liabilities, as well as the maximum exposure to loss, relating to significant VIEs for which we are not the primary beneficiary was $4,620 thousand and $3,226 thousand as of December 31, 2011 and 2010, respectively. The asset value of our investments in VIEs for which we are not the primary beneficiary is based upon sponsor values and financial statements of the individual entities. Our maximum exposure to loss related to these non-consolidated VIEs is limited to the amount of our investment.


Issuer and counterparty credit exposure


Credit exposure related to issuers and derivatives counterparties is inherent in investments and derivative contracts with positive fair value or asset balances. We manage credit risk through the analysis of the underlying obligors, issuers and transaction structures. We review our debt security portfolio regularly to monitor the performance of obligors and assess the stability of their credit ratings. We also manage credit risk through industry and issuer diversification and asset allocation. Maximum exposure to an issuer or derivative counterparty is defined by quality ratings, with higher quality issuers having larger exposure limits. As of December 31, 2011, we were not exposed to any credit concentration risk of a single issuer greater than 10% of stockholders’ equity other than U.S. government and government agencies backed by the faith and credit of the U.S. government. We have an overall limit on below-investment-grade rated issuer exposure. To further mitigate the risk of loss on derivatives, we only enter into contracts in which the counterparty is a financial institution with a rating of A or higher.


As of December 31, 2011, we held derivative assets, net of liabilities, with a fair value of $90,765 thousand. Derivative credit exposure was diversified with eight different counterparties. We also had debt securities of these issuers with a fair value of $17,806 thousand. Our maximum amount of loss due to credit risk with these issuers was $108,571 thousand. See Note 8 to these financial statements for more information regarding derivatives.



7.

Separate Accounts, Death Benefits and Other Insurance Benefit Features


Separate account products are those for which a separate investment and liability account is maintained on behalf of the policyholder. Investment objectives for these separate accounts vary by fund account type, as outlined in the applicable fund prospectus or separate account plan of operations. Our separate account products include variable annuities, fixed indexed annuities and variable life insurance contracts. The assets supporting these contracts are carried at fair value. Assets supporting variable annuity and variable life contracts are reported as separate account assets with an equivalent amount reported as separate account liabilities. The assets supporting fixed indexed annuity contracts are reported within the respective investment line items on the balance sheet. Amounts assessed against the policyholder for mortality, administration, and other services are included within revenue in insurance and investment product fees. In 2011 and 2010, there were no gains or losses on transfers of assets from the general account to a separate account.




F-24





7.

Separate Accounts, Death Benefits and Other Insurance Benefit Features (continued)


Separate Account Investments of Account Balances of Variable Annuity Contracts with Guarantees:

December 31,

($ in thousands)

2011

 

2010

 

 

 

 

 

 

Debt securities

$

395,540 

 

$

441,842 

Equity funds

 

1,537,736 

 

 

1,850,010 

Other

 

58,300 

 

 

68,677 

Total

$

1,991,576 

 

$

2,360,529 


Investments of Account Balances of Fixed Indexed Annuity Contracts with Guarantees:

December 31,

($ in thousands)

2011

 

2010

 

 

 

 

 

 

Debt securities

$

972,354 

 

$

225,986 

Equity funds

 

-- 

 

 

-- 

Other

 

-- 

 

 

-- 

Total

$

972,354 

 

$

225,986 


Variable annuity guaranteed benefits


Many of our variable annuity contracts offer various guaranteed minimum death, accumulation, withdrawal and income benefits. Many of our fixed indexed annuities offer guaranteed minimum withdrawal and death benefits.



We establish policy benefit liabilities for minimum death and income benefit guarantees relating to certain annuity policies as follows:


·

Liabilities associated with the GMDB are determined by estimating the expected value of death benefits in excess of the projected account balance and recognizing the excess ratably over the accumulation period based on total expected assessments. The assumptions used for calculating the liabilities are consistent with those used for amortizing deferred policy acquisition costs.

·

Liabilities associated with the guaranteed minimum income benefit (“GMIB”) are determined by estimating the expected value of the income benefits in excess of the projected account balance at the date of annuitization and recognizing the excess ratably over the accumulation period based on total expected assessments. The assumptions used for calculating such guaranteed income benefit liabilities are consistent with those used for amortizing deferred policy acquisition costs.


For variable annuities with GMDB and GMIB, reserves are calculated based on 200 stochastically generated scenarios. The GMDB and GMIB guarantees are recorded in policy liabilities and accruals on our balance sheet. Changes in the liability are recorded in policy benefits, excluding policyholder dividends, on our statements of income. We regularly evaluate estimates used and adjust the additional liability balances, with a related charge or credit to benefit expense if actual experience or other evidence suggests that earlier assumptions should be revised.


Changes in Guaranteed Liability Balances:

Year Ended

($ in thousands)

December 31, 2011

 

Annuity

 

Annuity

 

GMDB

 

GMIB

 

 

 

 

 

 

Liability balance as of January 1, 2011

$

4,570 

 

$

17,457 

Incurred

 

(1,608)

 

 

(257)

Paid

 

1,930 

 

 

-- 

Liability balance as of December 31, 2011

$

4,892 

 

$

17,200 




F-25





7.

Separate Accounts, Death Benefits and Other Insurance Benefit Features (continued)


Changes in Guaranteed Liability Balances:

Year Ended

($ in thousands)

December 31, 2010

 

Annuity

 

Annuity

 

GMDB

 

GMIB

 

 

 

 

 

 

Liability balance as of January 1, 2010

$

5,063 

 

$

15,811 

Incurred

 

3,330 

 

 

1,646 

Paid

 

(3,823)

 

 

— 

Liability balance as of December 31, 2010

$

4,570 

 

$

17,457 


Changes in Guaranteed Liability Balances:

Year Ended

($ in thousands)

December 31, 2009

 

Annuity

 

Annuity

 

GMDB

 

GMIB

 

 

 

 

 

 

Liability balance as of January 1, 2009

$

9,581 

 

$

21,365 

Incurred

 

3,403 

 

 

(5,554)

Paid

 

(7,921)

 

 

-- 

Liability balance as of December 31, 2009

$

5,063 

 

$

15,811 


For those guarantees of benefits that are payable in the event of death, the net amount at risk is generally defined as the benefit payable in excess of the current account balance at the balance sheet date. We have entered into reinsurance agreements to reduce the net amount of risk on certain death benefits. Following are the major types of death benefits currently in-force:


GMDB Benefits by Type:

 

 

Net Amount

 

Average

($ in thousands)

Account

 

at Risk after

 

Attained Age

 

Value

 

Reinsurance

 

of Annuitant

 

 

 

 

 

 

 

 

 

GMDB return of premium

$

825,573 

 

$

21,576 

 

 

62

GMDB step up

 

1,307,870 

 

 

110,666 

 

 

62

GMDB earnings enhancement benefit (“EEB”)

 

39,715 

 

 

400 

 

 

62

GMDB greater of annual step up and roll up

 

27,106 

 

 

8,759 

 

 

66

Total GMDB at December 31, 2011

$

2,200,264 

 

$

141,401 

 

 

 

 

 

 

 

 

 

 

 

 

GMDB return of premium

$

981,787 

 

$

17,685 

 

 

61

GMDB step up

 

1,507,216 

 

 

82,613 

 

 

62

GMDB earnings enhancement benefit (“EEB”)

 

47,123 

 

 

291 

 

 

61

GMDB greater of annual step up and roll up

 

32,083 

 

 

7,680 

 

 

65

Total GMDB at December 31, 2010

$

2,568,209 

 

$

108,269 

 

 

 


Return of Premium: The death benefit is the greater of current account value or premiums paid (less any adjusted partial withdrawals).


Step Up: The death benefit is the greater of current account value, premiums paid (less any adjusted partial withdrawals) or the annual step up amount prior to the oldest original owner attaining a certain age. On and after the oldest original owner attains that age, the death benefit is the greater of current account value or the death benefit at the end of the contract year prior to the oldest original owner’s attaining that age plus premium payments (less any adjusted partial withdrawals) made since that date.


Earnings Enhancement Benefit: The death benefit is the greater of the premiums paid (less any adjusted partial withdrawals) or the current account value plus the EEB. The EEB is an additional amount designed to reduce the impact of taxes associated with distributing contract gains upon death.


Greater of Annual Step Up and Annual Roll Up: The death benefit is the greatest of premium payments (less any adjusted partial withdrawals), the annual step up amount, the annual roll up amount or the current account value prior to the eldest original owner attaining age 81. On and after the eldest original owner attained age 81, the death benefit is the greater of current account value or the death benefit at the end of the contract year prior to the eldest original owner’s attained age of 81 plus premium payments (less any adjusted partial withdrawals) made since that date.



F-26





7.

Separate Accounts, Death Benefits and Other Insurance Benefit Features (continued)


We also offer certain separate account variable products with a GMWB, GMAB, GPAF and COMBO rider.


Additional Insurance Benefits:

 

 

Average

($ in thousands)

Account

 

Attained Age

 

Value

 

of Annuitant

 

 

 

 

 

 

GMWB

$

529,027 

 

 

62

GMIB

 

428,058 

 

 

63

GMAB

 

374,423 

 

 

57

GPAF

 

18,446 

 

 

77

COMBO

 

9,756 

 

 

60

Total at December 31, 2011

$

1,359,710 

 

 

 

 

 

 

 

 

 

GMWB

$

587,053 

 

 

61

GMIB

 

511,971 

 

 

62

GMAB

 

427,315 

 

 

56

GPAF

 

13,251 

 

 

76

COMBO

 

10,837 

 

 

59

Total at December 31, 2010

$

1,550,427 

 

 

 


The GMWB rider guarantees the contract owner a minimum amount of withdrawals and benefit payments over time, regardless of the investment performance of the contract, subject to an annual limit. Optional resets are available. In addition, these contracts have a feature that allows the contract owner to receive the guaranteed annual withdrawal amount for as long as they are alive.


The GMAB rider provides the contract owner with a minimum accumulation of the contract owner’s purchase payments deposited within a specific time period, adjusted for withdrawals, after a specified amount of time determined at the time of issuance of the variable annuity contract.


The GPAF rider provides the contract owner with a minimum payment amount if the variable annuity payment falls below this amount on the payment calculation date.


The COMBO rider includes the GMAB and GMWB riders as well as the GMDB rider at the contract owner’s option.


We have entered into a contract with Phoenix Life whereby we reinsure 100% of any claims related to GMWB liabilities on variable annuity policies issued after April 30, 2008 and 100% of any claims related to GMAB liabilities on variable annuity policies issued after December 31, 2008. Because this contract does not transfer sufficient risk to be accounted for as reinsurance, we account for ceded liabilities as a receivable from affiliate.


The GMWB, GMAB, GPAF and COMBO represent embedded derivative liabilities in the variable annuity contracts that are required to be reported separately from the host variable annuity contract. These investments are accounted for at fair value within policyholder deposit funds on the consolidated balance sheet with changes in fair value recorded in realized investment gains on the statement of income. The fair value of the GMWB, GMAB, GPAF and COMBO obligation is calculated based on actuarial and capital market assumptions related to the projected cash flows, including benefits and related contract charges, over the lives of the contracts, incorporating expectations concerning policyholder behavior. As markets change, contracts mature and actual policyholder behavior emerges, we continually evaluate and may from time to time adjust these assumptions.


Embedded derivative liabilities for GMWB, GMAB, GPAF and COMBO are shown in the table below. There were no benefit payments made for the GMWB and GMAB during 2011 and 2010. There were benefit payments made of $181 thousand and $351 thousand for GPAF during 2011 and 2010. In order to manage the risk associated with these variable annuity embedded derivative liabilities, we have established a risk management strategy under which we hedge our GMAB, GMWB and COMBO exposure using equity index options, equity index futures, equity index variance swaps, interest rate swaps and swaptions.




F-27





7.

Separate Accounts, Death Benefits and Other Insurance Benefit Features (continued)


Variable Annuity Embedded Derivative Liabilities:

As of December 31,

($ in thousands)

2011

 

2010

 

 

 

 

 

 

GMWB

$

16,313 

 

$

(1,664)

GMAB

 

24,665 

 

 

13,098 

GPAF

 

1,865 

 

 

2,286 

COMBO

 

(312)

 

 

(695)

Total variable annuity embedded derivative liabilities

$

42,531 

 

$

13,025 


Fixed indexed annuity guaranteed benefits


Liabilities associated with the GMWB for the fixed indexed annuities differ from those offered on variable annuities in that there is less exposure to capital market risk due to the fixed nature of the underlying contract. These liabilities are determined by estimating the expected value of the withdrawal benefits in excess of the projected account balance at the date of election and recognizing the excess ratably over the accumulation period based on total expected assessments. The assumptions used for calculating such guaranteed withdrawal benefit liabilities are consistent with those used for amortizing deferred policy acquisition costs. Some of these riders also offer a GMDB in addition to the withdrawal benefits.


The GMWB and GMDB guarantees are recorded in policy liabilities and accruals on our balance sheet. Changes in the liability are recorded in policy benefits, excluding policyholder dividends, on our statements of income. We regularly evaluate estimates used and adjust the additional liability balances, with a related charge or credit to benefit expense if actual experience or other evidence suggests that earlier assumptions should be revised.


Changes in Guaranteed Liability Balances:

Fixed Indexed Annuity

($ in thousands)

GMWB & GMDB

 

Year Ended

 

December 31,

 

2011

 

2010

 

 

 

 

 

 

Liability balance, beginning of period

$

204 

 

$

-- 

Incurred

 

5,410 

 

 

204 

Paid

 

-- 

 

 

-- 

Liability balance, end of period

$

5,614 

 

$

204 


Fixed indexed annuities also offer a variety of index options: policy credits that are calculated based on the performance of an outside equity market or other index over a specified term. The index options represent embedded derivative liabilities that are required to be reported separately from the host contract. These investments are accounted for at fair value within policyholder deposits within the consolidated balance sheet with changes in fair value recorded in policy benefits, excluding dividends, in the consolidated statement of net income. The fair value of these index options is calculated 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.


Fixed indexed annuity embedded derivatives were $78,331 thousand and $13,460 thousand as of December 31, 2011 and 2010, respectively. In order to manage the risk associated with these fixed indexed annuity options we hedge using equity index options


Universal life


Liabilities for universal life are generally determined by estimating the expected value of losses when death benefits exceed revenues and recognizing those benefits ratably 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. A single set of best estimate assumptions is used since these insurance benefits do not vary significantly with capital market conditions. At December 31, 2011 and 2010, we held additional universal life benefit reserves in accordance with death benefit and other insurance benefit reserves of $134,015 thousand and $95,742 thousand, respectively.





F-28





8.

Derivative Instruments


Derivative instruments


We use derivative financial instruments, including options, futures and swaps as a means of hedging exposure to interest rate, equity price change, equity volatility and foreign currency risk. This includes our surplus hedge which utilizes futures and options to hedge against declines in equity markets and the resulting statutory capital and surplus impact. We also use derivative instruments to economically hedge our exposure on living benefits offered on certain of our variable products as well as index credits on our fixed indexed annuity products.


The Company seeks to enter into over-the-counter (“OTC”) derivative transactions pursuant to master agreements that provide for a netting of payments and receipts by counterparty. As of December 31, 2011 and 2010, $7,510 thousand and $6,870 thousand, respectively, of cash and cash equivalents were held as collateral by a third party related to our derivative transactions.


Our derivatives generally do not qualify for hedge accounting, with the exception of cross currency swaps. We do not designate the purchased derivatives related to variable annuity living benefits or fixed indexed annuity index credits as hedges for accounting purposes.


Derivative Instruments:

 

 

Fair Value as of December 31,

($ in millions)

 

 

2011

 

2010

 

 

 

Notional

 

 

 

 

 

Notional

 

 

 

 

 

Maturity

 

Amount

 

Assets

 

Liabilities

 

Amount

 

Assets

 

Liabilities

Non-hedging derivative instruments

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  Interest rate swaps

2017-2026

 

$

101,000 

 

$

10,792 

 

$

3,472 

 

$

77,000 

 

$

3,593 

 

$

1,469 

  Variance swaps

2015-2017

 

 

935 

 

 

3,202 

 

 

-- 

 

 

935 

 

 

-- 

 

 

577 

  Swaptions

2024

 

 

25,000 

 

 

254 

 

 

-- 

 

 

14,000 

 

 

2,097 

 

 

-- 

  Put options

2015-2021

 

 

200,000 

 

 

54,833 

 

 

-- 

 

 

235,000 

 

 

45,019 

 

 

-- 

  Call options

2012-2016

 

 

354,933 

 

 

27,956 

 

 

18,985 

 

 

34,837 

 

 

11,231 

 

 

5,980 

  Equity futures

2012

 

 

66,347 

 

 

16,185 

 

 

-- 

 

 

52,887 

 

 

28,501 

 

 

-- 

Total non-hedging
  derivative instruments

 

 

$

748,215 

 

$

113,222 

 

$

22,457 

 

$

414,659 

 

$

90,441 

 

$

8,026 


Derivative Instrument Gains (Losses) Recognized in Earnings:(1)

Years Ended

($ in thousands)

December 31,

 

2011

 

2010

Derivative instruments by type

 

 

 

 

 

  Interest rate swaps

$

11,089 

 

$

491 

  Variance swaps

 

3,779 

 

 

(577)

  Swaptions

 

(752)

 

 

935 

  Put options

 

15,885 

 

 

2,078 

  Call options

 

(12,397)

 

 

8,311 

  Equity futures

 

(5,028)

 

 

(34,664)

  Cross currency swaps

 

-- 

 

 

-- 

Total derivative instrument gains (losses) recognized in earnings

$

12,576 

 

$

(23,426)

———————

(1)

Excludes realized losses of $32,322 thousand and realized gains of $17,190 thousand on embedded derivatives for the years ended December 31, 2011 and 2010.


Interest Rate Swaps


We maintain an overall interest rate risk-management strategy that primarily incorporates the use of interest rate swaps as hedges of our exposure to changes in interest rates. Our exposure to changes in interest rates primarily results from our commitments to fund interest-sensitive insurance liabilities, as well as from our significant holdings of fixed rate financial instruments. We use interest rate swaps that effectively convert variable rate cash flows to fixed cash flows in order to hedge the interest rate risks associated with guaranteed minimum living benefit (GMAB/GMWB) rider liabilities.




F-29





8.

Derivative Instruments (continued)


Interest Rate Options


We use interest rate options, such as swaptions, to hedge against market risks to assets or liabilities from substantial changes in interest rates. An interest rate swaption gives us the right but not the obligation to enter into an underlying swap. Swaptions are options on interest rate swaps. All of our swaption contracts are receiver swaptions, which give us the right to enter into a swap where we will receive the agreed-upon fixed rate and pay the floating rate. If the market conditions are favorable and the swap is needed to continue hedging our inforce liability business, we will exercise the swaption and enter into a fixed rate swap. If a swaption contract is not exercised by its option maturity date, it expires with no value.


Exchange Traded Future Contracts


We use equity index futures to hedge the market risks from changes in the value of equity indices, such as S&P 500, associated with guaranteed minimum living benefit (GMAB/GMWB) rider liabilities. Positions are short-dated, exchange-traded futures with maturities of three months.


Equity Index Options


We use equity indexed options to hedge against market risks from changes in equity markets, volatility and interest rates.


An equity index option affords us the right to make or receive payments based on a specified future level of an equity market index. We may use exchange-trade or OTC options.


Generally, we have used a combination of equity index futures, interest rate swaps, variance swaps and long-dated put options to hedge its GMAB and GMWB liabilities and equity index call options to hedge its indexed annuity option liabilities.


Contingent features


Derivative counterparty agreements may contain certain provisions that require our insurance companies’ financial strength rating to be above a certain threshold. If our financial strength ratings were to fall below a specified rating threshold, certain derivative counterparties could request immediate payment or 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 below the specified threshold levels. However, the Company held no derivative instruments as of December 31, 2011 in a net liability position payable to any counterparty (i.e., such derivative instruments have fair values in a net asset position payable to the Company if such holdings were liquidated).



9.

Fair Value of Financial Instruments


ASC 820-10 defines fair value, establishes a framework for measuring fair value, establishes a fair value hierarchy based on the quality of inputs used to measure fair value and enhances disclosure requirements for fair value measurements. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.




F-30





9.

Fair Value of Financial Instruments (continued)


ASC 820-10 establishes a three-level valuation hierarchy for disclosure of fair value measurements. The valuation hierarchy is based upon the transparency of inputs to the valuation of an asset or liability as of the measurement date. The three levels, from highest to lowest, are defined as follows:


·

Level 1 – inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets. Level 1 securities include highly liquid government bonds and exchange-traded equities.

·

Level 2 – inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument. Examples of such instruments include government-backed mortgage products, certain collateralized mortgage and debt obligations and certain high-yield debt securities.

·

Level 3 – inputs to the valuation methodology are unobservable and significant to the fair value measurement. Securities classified within Level 3 include broker quoted investments, certain residual interests in securitizations and other less liquid securities. Most valuations that are based on brokers’ prices are classified as Level 3 due to a lack of transparency in the process they use to develop prices.


A financial instrument’s categorization within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement.


The following tables present the financial instruments carried at fair value by ASC 820-10 valuation hierarchy (as described above).


Fair Values of Financial Instruments by Level:

As of December 31, 2011

($ in thousands)

Level 1

 

Level 2

 

Level 3

 

Total

Assets

 

 

 

 

 

 

 

 

 

 

 

Available-for-sale debt securities

 

 

 

 

 

 

 

 

 

 

 

  U.S. government and agency

$

138,947 

 

$

36,381 

 

$

-- 

 

$

175,328 

  State and political subdivision

 

-- 

 

 

82,397 

 

 

-- 

 

 

82,397 

  Foreign government

 

-- 

 

 

31,877 

 

 

-- 

 

 

31,877 

  Corporate

 

-- 

 

 

1,179,889 

 

 

28,488 

 

 

1,208,377 

  CMBS

 

-- 

 

 

269,514 

 

 

20,441 

 

 

289,955 

  RMBS

 

-- 

 

 

546,975 

 

 

6,544 

 

 

553,519 

  CDO/CLO

 

-- 

 

 

1,044 

 

 

66,972 

 

 

68,016 

  Other asset-backed

 

-- 

 

 

128,861 

 

 

8,062 

 

 

136,923 

Derivative assets

 

-- 

 

 

113,222 

 

 

-- 

 

 

113,222 

Separate account assets(1)

 

2,419,655 

 

 

78,325 

 

 

-- 

 

 

2,497,980 

Fair value option investments(2)

 

-- 

 

 

-- 

 

 

7,299 

 

 

7,299 

Total assets

$

2,558,602 

 

$

2,468,485 

 

$

137,806 

 

$

5,164,893 

Liabilities

 

 

 

 

 

 

 

 

 

 

 

Derivative liabilities

$

-- 

 

$

22,457 

 

$

-- 

 

$

22,457 

Embedded derivatives

 

-- 

 

 

-- 

 

 

120,862 

 

 

120,862 

Total liabilities

$

-- 

 

$

22,457 

 

$

120,862 

 

$

143,319 

———————

(1)

Excludes $40,086 thousand in limited partnerships and real estate investments accounted for on the equity method as well as $8,941 thousand in cash and cash equivalents and money market funds.

(2)

Fair value option investments at December 31, 2011 include $7,299 thousand of available-for-sale debt securities in which the fair value option has been elected. Changes in the fair value of these assets are recorded through net investment income.


There were no transfers of assets between Level 1 and Level 2 during the year ended December 31, 2011.




F-31





9.

Fair Value of Financial Instruments (continued)


Fair Values of Financial Instruments by Level:

As of December 31, 2010

($ in thousands)

Level 1

 

Level 2

 

Level 3

 

Total

Assets

 

 

 

 

 

 

 

 

 

 

 

Available-for-sale debt securities

 

 

 

 

 

 

 

 

 

 

 

  U.S. government and agency

$

68,724 

 

$

29,559 

 

$

-- 

 

$

98,283 

  State and political subdivision

 

-- 

 

 

32,509 

 

 

-- 

 

 

32,509 

  Foreign government

 

-- 

 

 

16,086 

 

 

-- 

 

 

16,086 

  Corporate

 

-- 

 

 

663,717 

 

 

30,060 

 

 

693,777 

  CMBS

 

-- 

 

 

163,647 

 

 

10,308 

 

 

173,955 

  RMBS

 

-- 

 

 

326,168 

 

 

7,437 

 

 

333,605 

  CDO/CLO

 

-- 

 

 

-- 

 

 

63,184 

 

 

63,184 

  Other asset-backed

 

-- 

 

 

89,328 

 

 

19,671 

 

 

108,999 

Derivative assets

 

-- 

 

 

90,441 

 

 

-- 

 

 

90,441 

Separate account assets(1)

 

2,800,500 

 

 

77,195 

 

 

-- 

 

 

2,877,695 

Fair value option investments(2)

 

-- 

 

 

4,442 

 

 

7,289 

 

 

11,731 

Total assets

$

2,869,224 

 

$

1,493,092 

 

$

137,949 

 

$

4,500,265 

Liabilities

 

 

 

 

 

 

 

 

 

 

 

Derivative liabilities

$

-- 

 

$

8,026 

 

$

-- 

 

$

8,026 

Embedded derivatives

 

-- 

 

 

-- 

 

 

26,485 

 

 

26,485 

Total liabilities

$

-- 

 

$

8,026 

 

$

26,485 

 

$

34,511 

———————

(1)

Excludes $37,949 thousand in limited partnerships and real estate investments accounted for on the equity method as well as $7,302 thousand in cash and cash equivalents and money market funds.

(2)

Fair value option investments at December 31, 2010 include $11,731 thousand of available-for-sale debt securities in which the fair value option has been elected. Changes in the fair value of these assets are recorded through net investment income.


There were no transfers of assets between Level 1 and Level 2 assets during the year ended December 31, 2010.


Level 3 financial assets and liabilities


The following tables set forth a summary of changes in the fair value of our Level 3 financial assets and liabilities. Financial assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement. For example, a hypothetical derivative contract with Level 1, Level 2 and significant Level 3 inputs would be classified as a Level 3 financial instrument in its entirety. Subsequently, even if only Level 1 and Level 2 inputs are adjusted, the resulting gain or loss is classified as Level 3. Further, Level 3 instruments are frequently hedged with instruments that are classified as Level 1 or Level 2 and, accordingly, gains or losses reported as Level 3 in the table below may be offset by gains or losses attributable to instruments classified in Level 1 or 2 of the fair value hierarchy.


Level 3 Financial Assets:

As of December 31, 2011

($ in thousands)

Asset-

 

 

 

Corp &

 

 

 

 

 

Fair Value

 

Total

 

Backed

 

CDO/CLO

 

Other

 

CMBS

 

RMBS

 

Options

 

Assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance, beginning of period

$

19,671 

 

$

63,184 

 

$

30,060 

 

$

10,308 

 

$

7,437 

 

$

7,289 

 

$

137,949 

Purchases

 

-- 

 

 

12,601 

 

 

2,100 

 

 

11,295 

 

 

-- 

 

 

-- 

 

 

25,996 

Sales

 

(2,891)

 

 

(7,541)

 

 

(866)

 

 

(1,624)

 

 

(648)

 

 

(37)

 

 

(13,607)

Transfers into Level 3(1)

 

-- 

 

 

-- 

 

 

1,780 

 

 

-- 

 

 

-- 

 

 

-- 

 

 

1,780 

Transfers out of Level 3(2)

 

(9,012)

 

 

(1,044)

 

 

(3,170)

 

 

-- 

 

 

(517)

 

 

-- 

 

 

(13,743)

Realized gains (losses)
  included in earnings

 

41 

 

 

(504)

 

 

12 

 

 

(104)

 

 

(1)

 

 

-- 

 

 

(556)

Unrealized gains (losses)
  included in other comprehensive
  income (loss)

 

224 

 

 

(21)

 

 

(1,517)

 

 

539 

 

 

114 

 

 

-- 

 

 

(661)

Amortization/accretion

 

29 

 

 

297 

 

 

89 

 

 

27 

 

 

159 

 

 

47 

 

 

648 

Balance, end of period

$

8,062 

 

$

66,972 

 

$

28,488 

 

$

20,441 

 

$

6,544 

 

$

7,299 

 

$

137,806 

——————

(1)

Transfers into Level 3 for the year ended December 31, 2011 primarily represent private securities for which Level 2 input assumptions for valuation pricing were no longer applicable.

(2)

Transfers out of Level 3 for the year ended December 31, 2011 primarily represent private securities for which reliable Level 2 input assumptions for valuation pricing became obtainable.



F-32





9.

Fair Value of Financial Instruments (continued)


Level 3 Financial Assets:

As of December 31, 2010

($ in thousands)

Asset-

 

 

 

Corp &

 

 

 

 

 

Fair Value

 

Total

 

Backed

 

CDO/CLO

 

Other

 

CMBS

 

RMBS

 

Options

 

Assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance, beginning of period

$

18,854 

 

$

64,999 

 

$

41,257 

 

$

11,784 

 

$

15,637 

 

$

-- 

 

$

152,531 

Purchases

 

20,939 

 

 

19,314 

 

 

45,151 

 

 

2,556 

 

 

3,383 

 

 

-- 

 

 

91,343 

Sales

 

(16,867)

 

 

(20,950)

 

 

(57,254)

 

 

(6,172)

 

 

(8,339)

 

 

-- 

 

 

(109,582)

Adjustment for initial application
  of accounting changes(1)

 

-- 

 

 

(7,289)

 

 

-- 

 

 

-- 

 

 

-- 

 

 

7,289 

 

 

-- 

Transfers into Level 3(2)

 

-- 

 

 

-- 

 

 

2,020 

 

 

-- 

 

 

3 

 

 

-- 

 

 

2,023 

Transfers out of Level 3(3)

 

(5,667)

 

 

-- 

 

 

(7,143)

 

 

-- 

 

 

(2,955)

 

 

-- 

 

 

(15,765)

Realized gains (losses)
  included in earnings

 

(51)

 

 

(4,130)

 

 

25 

 

 

(1,793)

 

 

(144)

 

 

-- 

 

 

(6,093)

Unrealized gains (losses)
  included in other comprehensive
  income (loss)

 

2,230 

 

 

11,135 

 

 

6,014 

 

 

3,930 

 

 

(402)

 

 

-- 

 

 

22,907 

Amortization/accretion

 

233 

 

 

105 

 

 

(10)

 

 

3 

 

 

254 

 

 

-- 

 

 

585 

Balance, end of period

$

19,671 

 

$

63,184 

 

$

30,060 

 

$

10,308 

 

$

7,437 

 

$

7,289 

 

$

137,949 

——————

(1)

Adjustment from available-for-sale debt securities to fair value option investments upon adoption of ASC 815, Derivatives and Hedging, as of July 1, 2010.

(2)

Transfers into Level 3 for the year ended December 31, 2010 primarily represent private securities for which Level 2 input assumptions for valuation pricing were no longer applicable.

(3)

Transfers out of Level 3 for the year ended December 31, 2010 primarily represent private securities for which reliable Level 2 input assumptions for valuation pricing became obtainable.


Level 3 Financial Liabilities:

Embedded Derivatives

($ in thousands)

Years Ended December 31,

 

2011

 

2010

 

 

 

 

 

 

Balance, beginning of year

$

26,485 

 

$

28,678 

Net purchases/(sales)

 

62,360 

 

 

9,270 

Transfers into Level 3

 

-- 

 

 

-- 

Transfers out of Level 3

 

-- 

 

 

-- 

Realized (gains) losses

 

29,506 

 

 

(11,463)

Unrealized (gains) losses included in other comprehensive loss

 

-- 

 

 

-- 

Deposits less benefits

 

-- 

 

 

-- 

Change in fair value(1)

 

2,511 

 

 

-- 

Amortization/accretion

 

-- 

 

 

-- 

Balance, end of year

$

120,862 

 

$

26,485 

———————

(1)

Represents change in fair value related to fixed index credits recognized in policy benefits on the statement of income.


We have an established process for determining fair values. 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. The majority of the valuations of Level 3 assets were internally calculated or obtained from independent third-party broker quotes.




F-33





9.

Fair Value of Financial Instruments (continued)


We determine fair value as the price received in an orderly transaction. Thus, we evaluate broker pricing indications, if available, to determine whether the weight of evidence indicates that markets are inactive, or transactions are disorderly. In order to determine whether the volume and level of activity for an asset or liability has significantly decreased, we compare current activity with normal market activity for the asset or liability. We may observe a notable decrease in the number of recent transactions, and the significant decline or absence of a market for new issuances for the security or a similar security. If we do receive a broker pricing indication, we look for substantiation, such as a significant increase in implied liquidity risk premiums, yields, or performance indications when compared to the expected cash flow analysis. We look to see if the pricing indications have varied substantially in a short amount of time where no fundamental event or occurrence has prompted the large variation, or if there is a significant increase in the bid-ask spread. We review published indexes that may have been historically highly correlated with the fair values that no longer are representative of an active market. For corporate positions, we utilize TRACE, for which published trade activity is made available, to assess trading activity levels. For other positions, we rely on many factors such as the observable flows through Bloomberg, trading levels and activity as reported by market participants, and industry publications that speak to trading volume and current market conditions. Using professional judgment and experience, we evaluate and weigh the relevance and significance of all applicable factors to determine if there has been a significant decrease in the volume and level of activity for an asset, or group of similar assets.


Similarly, in order to identify transactions that are not orderly, we take into consideration the activity in the market as stated above, because that can influence the determination and occurrence of an orderly transaction. In addition, we assess the period of the exposure to the market before the measurement date to determine adequacy for customary marketing activities. Also, we look to see if it was marketed to a single or limited number of participants. We assess the financial condition of the seller, if available, to determine whether observed transactions may have been forced. If the trading price is an outlier when compared to similar recent transactions, we consider whether this is an indicator of a disorderly trade. Using professional judgment and experience, we evaluate and weigh the relevance and significance of all applicable factors to determine if the evidence suggests that a transaction or group of similar transactions is not orderly.


Following is a description of our valuation methodologies for assets and liabilities measured at fair value. Such valuation methodologies were applied to all of the assets and liabilities carried at fair value.


Structured securities


For structured securities, we consider the best estimate of cash flows until maturity to determine our ability to collect principal and interest and compare this to the anticipated cash flows when the security was purchased. In addition, management judgment is used to assess the probability of collecting all amounts contractually due to us. After consideration is given to the available information relevant to assessing the collectibility, including historical events, current conditions and reasonable forecasts, an estimate of future cash flows is determined. This includes evaluating the remaining payment terms, prepayment speeds, the underlying collateral, expected defaults using current default data and the financial condition of the issuer. Other factors considered are composite credit ratings, industry forecast, analyst reports and other relevant market data are also considered, similar to those the Company believes market participants would use. For securities for which observable market data is available and substantiated, valuations reflect the quoted fair value.


To determine fair values for certain structured, collateralized loan obligations (“CLO”) and collateralized debt obligation (“CDO”) assets for which current pricing indications either do not exist, or are based on inactive markets or sparse transactions, we utilize model pricing using a third-party forecasting application that leverages historical trustee information for each modeled security. Principal and interest cash flows are modeled under various default scenarios for a given tranche of a security in accordance with its contractual cash flow priority of claim and subordination with respect to credit losses. The key assumptions include the level of annual default rates, loss-given-default or recovery rate, collateral prepayment rate and reinvestment spread.


Fair value is then determined based on discounted projected cash flows. We use a discount rate based upon a combination of the current U.S. Treasury rate plus the most recent gross CDO/CLO spreads (including the corresponding swap spread) by original tranche rating, which is representative of the inherent credit risk exposure in a deal’s capital structure.




F-34





9.

Fair Value of Financial Instruments (continued)


Derivatives


Exchange-traded derivatives valued using quoted prices are classified within Level 1 of the valuation hierarchy. However, few classes of derivative contracts are listed on an exchange. Therefore, the majority of our derivative positions are valued using internally developed models that use as their basis readily observable market parameters. These positions are classified within Level 2 of the valuation hierarchy. Such derivatives include basic interest rate swaps, options and credit default swaps.


Fair values for OTC derivative financial instruments, principally forwards, options and swaps, represent the present value of amounts estimated to be received from or paid to a marketplace participant in settlement of these instruments (i.e., the amount we would expect to receive in a derivative asset assignment or would expect to pay to have a derivative liability assumed). These derivatives are valued using pricing models based on the net present value of estimated future cash flows and directly observed prices from exchange-traded derivatives or other OTC trades, while taking into account the counterparty’s credit ratings, or our own credit ratings, as appropriate. Determining the fair value for OTC derivative contracts can require a significant level of estimation and management judgment.


New and/or complex instruments may have immature or limited markets. As a result, the pricing models used for valuation often incorporate significant estimates and assumptions that market participants would use in pricing the instrument, which may impact the results of operations reported in the financial statements. For long-dated and illiquid contracts, extrapolation methods are applied to observed market data in order to estimate inputs and assumptions that are not directly observable. This enables us to mark to market all positions consistently when only a subset of prices is directly observable. Values for OTC derivatives are verified using observed information about the costs of hedging the risk and other trades in the market. As the markets for these products develop, we continually refine our pricing models to correlate more closely to the market risk of these instruments.


Retained interest in securitization


Retained interests in securitizations do not trade in an active, open market with readily observable prices. Accordingly, we estimate the fair value of certain retained interests in securitizations using discounted cash flow (“DCF”) models.


For certain other retained interests in securitizations, a single interest rate path DCF model is used and generally includes assumptions based upon projected finance charges related to the securitized assets, estimated net credit losses, prepayment assumptions and contractual interest paid to third-party investors. Changes in the assumptions used may have a significant impact on our valuation of retained interests and such interests are, therefore, typically classified within Level 3 of the valuation hierarchy.


We compare the fair value estimates and assumptions to observable market data where available and to actual portfolio experience.


Private equity investments


The valuation of non-public private equity investments requires significant management judgment due to the absence of quoted market prices, an inherent lack of liquidity and the long-term nature of such assets. Private equity investments are valued initially based upon transaction price. The carrying values of private equity investments are adjusted either upwards or downwards from the transaction price to reflect expected exit values as evidenced by financing and sale transactions with third parties, or when determination of a valuation adjustment is confirmed through ongoing reviews by senior investment managers. A variety of factors are reviewed and monitored to assess positive and negative changes in valuation including, but not limited to, current operating performance and future expectations of the particular investment, industry valuations of comparable public companies, changes in market outlook and the third-party financing environment over time. In determining valuation adjustments resulting from the investment review process, emphasis is placed on current company performance and market conditions. Private equity investments are included in Level 3 of the valuation hierarchy.


Private equity investments may also include publicly held equity securities, generally obtained through the initial public offering of privately held equity investments. Such securities are marked-to-market at the quoted public value less adjustments for regulatory or contractual sales restrictions. Discounts for restrictions are quantified by analyzing the length of the restriction period and the volatility of the equity security.




F-35





9.

Fair Value of Financial Instruments (continued)


Valuation of embedded derivatives


We make guarantees on certain variable annuity contracts, including GMAB and GMWB 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 and GMWB 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 information derived from the asset derivatives market, including the volatility surface 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 policy benefits. The initial value under the budget method is established based on the fair value of the options used to hedge the liabilities. The budget amount for future years 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 variable annuity GMAB and GMWB 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”). In analyzing various alternatives to the CSA calculation, we determined that we could not use credit default swap spreads as there are no such observable instruments on PNX’s life insurance subsidiaries, including us, nor could we consistently obtain an observable price on the surplus notes issued by Phoenix Life, as the surplus notes are not actively traded. Therefore, when discounting the rider cash flows for calculation of the fair value of the liability, we calculated the CSA that reflects the credit spread (based on a Standard & Poor’s BB- credit rating) for financial services companies similar to the Company’s life insurance subsidiaries. This average credit spread is recalculated every quarter therefore the fair value will change with the passage of time even in the absence of any other changes that would affect the valuation. The impact of the CSA, net of the reinsurance impact from a contract with Phoenix Life, at December 31, 2011 and 2010 was a reduction of $34,679 thousand and $19,231 thousand in the reserves associated with these riders, respectively.


Fair value of financial instruments


The Company is required by U.S. GAAP to disclose the fair value of certain financial instruments including those that are not carried at fair value. The following table discloses the Company’s financial instruments where the carrying amounts and fair values differ:


Carrying Amounts and Fair Values

As of December 31,

of Financial Instruments:

2011

 

2010

($ in thousands)

Carrying

 

Fair

 

Carrying

 

Fair

 

Value

 

Value

 

Value

 

Value

Financial liabilities

 

 

 

 

 

 

 

 

 

 

 

Investment contracts

$

1,721,219 

 

$

1,728,887 

 

$

793,142 

 

$

804,107 


Fair value of investment contracts


We determine the fair value of guaranteed interest contracts by using a discount rate equal to the appropriate U.S. Treasury rate plus 100 basis points to calculate the present value of projected contractual liability payments through final maturity. We determine the fair value of deferred annuities and supplementary contracts without life contingencies with an interest guarantee of one year or less at the amount of the policy reserve. In determining the fair value of deferred annuities and supplementary contracts without life contingencies with interest guarantees greater than one year, we use a discount rate equal to the appropriate U.S. Treasury rate plus 100 basis points to calculate the present value of the projected account value of the policy at the end of the current guarantee period.


Deposit type funds, including pension deposit administration contracts, dividend accumulations, and other funds left on deposit not involving life contingencies, have interest guarantees of less than one year for which interest credited is closely tied to rates earned on owned assets. For these liabilities, we assume fair value to be equal to the stated liability balances.




F-36





10.

Income Taxes


Allocation of Income Taxes:

Years Ended December 31,

($ in thousands)

2011

 

2010

 

2009

 

 

 

 

 

 

 

 

 

Income tax expense (benefit) attributable to:

 

 

 

 

 

 

 

 

  Current

$

7,236 

 

$

(11,138)

 

$

28,445 

  Deferred

 

(16,648)

 

 

431 

 

 

(22,438)

Income tax expense (benefit)

$

(9,412)

 

$

(10,707)

 

$

6,007 

Income taxes paid (recovered)

$

(2,478)

 

$

1,264 

 

$

11,489 


Effective Income Tax Rate:

Years Ended December 31,

($ in thousands)

2011

 

2010

 

2009

 

 

 

 

 

 

 

 

 

Income (loss) before income taxes

$

7,550 

 

$

(35,583)

 

$

(15,146)

Income taxes at statutory rate of 35.0%

 

2,643 

 

 

(12,454)

 

 

(5,301)

Dividend received deduction

 

(2,000)

 

 

(591)

 

 

(1,376)

ASC 740 increase (decrease)

 

-- 

 

 

(52)

 

 

(667)

Valuation allowance increase (decrease)

 

(10,800)

 

 

(400)

 

 

9,500 

IRS audit settlements/adjustments

 

768 

 

 

2,488 

 

 

3,843 

Other, net

 

(23)

 

 

302 

 

 

8 

Applicable income taxes (benefit)

$

(9,412)

 

$

(10,707)

 

$

6,007 

Effective income tax rates

 

(124.7%)

 

 

30.1%

 

 

(39.7%)


Deferred Income Tax Balances Attributable to Temporary Differences:

As of December 31,

($ in thousands)

2011

 

2010

 

 

 

 

 

 

Deferred income tax assets:

 

 

 

 

 

Future policyholder benefits

$

96,416 

 

$

61,608 

Unearned premiums / deferred revenues

 

17,853 

 

 

21,450 

Investments

 

14,507 

 

 

36,678 

Net operating and capital loss carryover benefits

 

25,770 

 

 

44,454 

Alternative minimum tax credits

 

4,466 

 

 

-- 

Valuation allowance

 

-- 

 

 

(10,800)

Gross deferred income tax assets

 

159,012 

 

 

153,390 

 

 

 

 

 

 

Deferred income tax liabilities:

 

 

 

 

 

Deferred policy acquisition costs

 

163,633 

 

 

156,406 

Other

 

2,141 

 

 

10,355 

Gross deferred income tax liabilities

 

165,774 

 

 

166,761 

Deferred income tax liabilities

$

6,762 

 

$

13,371 


As of December 31, 2011, we performed our assessment of the realization of deferred tax assets. Significant management judgment is required in determining the provision for income taxes and, in particular, any valuation allowance recorded against our deferred tax assets. Our methodology for determining the realizability of deferred tax assets involves estimates of future taxable income and consideration of available tax planning strategies and actions that could be implemented, if necessary. These estimates are projected through the life of the related deferred tax assets based on assumptions that we believe to be reasonable and consistent with current operating results. Changes in future operating results not currently forecasted may have a significant impact on the realization of deferred tax assets. Based on the scheduling of gross deferred tax liabilities, a valuation allowance is not required at December 31, 2011, as we believe it is more likely than not that the deferred tax assets will be recognized.


For the year ended December 31, 2011, we recognized a decrease in the valuation allowance of $10,800 thousand. Accounting guidance requires that this movement be allocated to the various financial statement components of income or loss. The entire decrease to the valuation allowance corresponds to a decrease of $10,800 thousand in income statement related deferred tax balances. An income tax benefit of $9,412 thousand recognized through the income statement primarily reflects the decrease of the valuation allowance.




F-37





10.

Income Taxes (continued)


As of December 31, 2011, $25,770 thousand of net operating and capital loss carryover benefits were included in the deferred tax asset. Of this amount, $16,761 thousand related to $47,888 thousand of federal net operating losses scheduled to expire in 2024. An additional $9,010 thousand related to $25,742 thousand of federal capital losses scheduled to expire in 2014 and 2016.


As of December 31, 2011, we had deferred tax assets of $4,466 thousand related to alternative minimum tax credit carryovers which do not expire.


As of December 31, 2011, in accordance with the tax sharing agreement, we had an intercompany current tax payable of $15,514 thousand.


The Company is no longer subject to U.S. federal income tax examinations by tax authorities for years before 2010. During 2011, the Company resolved examination issues for 2009. No material unanticipated assessments were incurred and no increases were necessary to our liability for uncertain tax positions.


The Company does not anticipate that any event will result in a significant change in the existing balance of unrecognized tax benefits within 12 months. Management believes that adequate provisions have been made in the financial statements for any potential assessments that may result from tax examinations and other tax related matters for all open tax years.


A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:


Reconciliation of the Beginning and Ending Amount of Unrecognized Tax Benefits:

2011

 

2010

($ in thousands)

 

 

 

Balance, beginning of year

$

-- 

 

$

52 

Reductions for tax positions of prior years

 

-- 

 

 

(52)

Settlements with taxing authorities

 

-- 

 

 

-- 

Balance, end of year

$

-- 

 

$

-- 


Based upon the timing and status of our current examinations by taxing authorities, we do not believe that it is reasonably possible that any changes to the balance of unrecognized tax benefits occurring within the next 12 months will result in a significant change to the results of operations, financial condition or liquidity. In addition, we do not anticipate that there will be additional payments made or refunds received within the next 12 months with respect to the years under audit. We do not anticipate any increases to the existing unrecognized tax benefits that would have a significant impact on the financial position of the Company.



11.

Related Party Transactions


Capital Contributions


During the year ended December 31, 2011, we received no capital contributions from PM Holdings, Inc.


Related Party Transactions


The amounts included in the following discussion are gross expenses, before deferrals for policy acquisition costs.


Phoenix Life provides services and facilities to us and is reimbursed through a cost allocation process. The expenses allocated to us were $64,276 thousand, $69,670 thousand and $130,633 thousand for the years ended December 31, 2011, 2010 and 2009, respectively. Amounts payable to Phoenix Life were $2,234 thousand and $5,893 thousand as of December 31, 2011 and 2010, respectively.


We have a contract with Phoenix Life whereby we cede to Phoenix Life certain of the liabilities related to guarantees on our annuity products. This contract qualifies as a freestanding derivative. This derivative asset is reported within receivable from related parties. The derivative asset was $3,522 thousand and $407 thousand at December 31, 2011 and 2010, respectively.




F-38





11.

Related Party Transactions (continued)


Prior to November 18, 2011, Goodwin Capital Advisers, Inc. (“Goodwin”), an indirect wholly-owned subsidiary of PNX, provided investment advisory services to us for a fee. On November 18, 2011, PNX closed on a transaction to sell Goodwin to Conning Holdings Corp. (“Conning Holdings”). Included in the terms of this transaction was a multi-year investment management agreement under which Conning will manage the Company’s publicly-traded fixed income assets. Private placement bond and limited partnership investments previously managed under Goodwin will continue to be managed by Phoenix under its subsidiary, Phoenix Life. Investment advisory fees incurred by us for Goodwin’s management of general account assets were $1,240 thousand, $1,362 thousand and $381 thousand for the years ended December 31, 2011, 2010 and 2009, respectively. Amounts payable to Goodwin were $0 and $339 thousand, as of December 31, 2011 and 2010, respectively.


Effective September 20, 2010, 1851 Securities, Inc., a wholly-owned subsidiary of PM Holdings, Inc., became the principal underwriter of the Company’s variable life insurance policies and variable annuity contracts. Phoenix Life reimburses 1851 for commissions incurred on our behalf and we in turn reimburse Phoenix Life through a cost allocation process. Commissions incurred were $6,920 thousand and 15,736 thousand for the years ended December 31, 2011 and 2010, respectively. There were no amounts payable to Phoenix Life related to commissions as of December 31, 2011 and 2010, respectively.


Prior to September 20, 2010, Phoenix Equity Planning Corporation (“PEPCO”), an indirect wholly-owned subsidiary of PNX, was the principal underwriter. Phoenix Life reimbursed PEPCO for commissions incurred on our behalf and we in turn reimbursed Phoenix Life through a cost allocation process. Commissions incurred were $0, $9,029 thousand and $16,271 thousand for the years ended December 31, 2011, 2010 and 2009, respectively. There were no amounts payable to Phoenix Life related to commissions as of December31, 2011 and 2010, respectively.


Phoenix Life pays commissions to producers who sell our non-registered life and annuity products. Commissions paid by Phoenix Life on our behalf were $96,946 thousand, $8,265 thousand (less commission reversals of $10,764 thousand due to policy rescissions) and $39,876 thousand for the years ended December 31, 2011, 2010 and 2009, respectively. Amounts payable to Phoenix Life were $4,754 thousand and $1,022 thousand as of December 31, 2011 and 2010, respectively.


Effective in 2010, Saybrus, a majority-owned subsidiary of PNX, provides wholesaling services to various third-party distributors and affiliates of variable life insurance and variable annuities. Commissions paid by Saybrus on our behalf were $11,224 thousand and $2,671 thousand as of December 31, 2011 and 2010, respectively. Commission amounts payable to Saybrus were $1,004 thousand and $409 thousand as of December 31, 2011 and 2010, respectively.


Effective in 2010, Saybrus Equity Services, Inc. (“Saybrus Equity), a wholly owned subsidiary of Saybrus Partners, Inc., provides wholesaling services to various third party distributors and affiliates of variable life insurance and variable annuities. Commissions paid by Saybrus Equity on our behalf were $7 thousand and $4 thousand as of December 31, 2011 and 2010, respectively. Commission amounts payable to Saybrus Equity were $1 thousand and $4 thousand as of December 31, 2011 and 2010, respectively.


Premium processing services


We provide payment processing services for Phoenix Life, wherein we receive deposits on Phoenix Life annuity contracts and forward those payments to Phoenix Life. During 2006, we began including life insurance premiums in this service. In connection with this service, we had amounts due to Phoenix Life of $4,226 thousand and $2,793 thousand as of December 31, 2011 and 2010, respectively. We do not charge any fees for this service.


State Farm Mutual Automobile Insurance Company (“State Farm”) is currently the owner of record of more than 5% of our ultimate parent company’s (PNX) outstanding common stock. In 2011, 2010 and 2009, we incurred $2,052 thousand, $3,077 thousand and $25,272 thousand, respectively, as compensation costs for the sale of our insurance and annuity products by entities that were either subsidiaries of State Farm or owned by State Farm agents.




F-39





11.

Related Party Transactions (continued)


We also provide payment processing services for Phoenix Life and Annuity Company (“Phoenix Life and Annuity”), a wholly-owned indirect subsidiary of Phoenix Life, wherein we receive deposits on certain Phoenix Life and Annuity annuity contracts and forward those payments to Phoenix Life and Annuity. During 2006, we began including life insurance premiums in this service. In connection with this service, we had amounts due from Phoenix Life and Annuity of $29 thousand as of December 31, 2011 and amounts due to Phoenix Life and Annuity of $47 thousand as of December 31, 2010. We do not charge any fees for this service.



12.

Other Comprehensive Income


Sources of

Years Ended December 31,

Other Comprehensive Income:

2011


2010


2009

($ in thousands)

Gross

 

Net

 

Gross

 

Net

 

Gross

 

Net

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Unrealized gains on investments

$

69,391 

 

$

17,896 

 

$

79,757 

 

$

390 

 

$

173,746 

 

$

16,560 

Adjustments for net realized investment losses
  on available-for-sale securities included
  in net income

 

1,159 

 

 

750 

 

 

12,122 

 

 

6,951 

 

 

27,118 

 

 

16,503 

Net unrealized investment gains

 

70,550 

 

 

18,646 

 

 

91,879 

 

 

7,341 

 

 

200,864 

 

 

33,063 

Net unrealized gains on derivative instruments

 

-- 

 

 

-- 

 

 

-- 

 

 

-- 

 

 

-- 

 

 

-- 

Other comprehensive income

 

70,550 

 

$

18,646 

 

 

91,879 

 

$

7,341 

 

 

200,864 

 

$

33,063 

Applicable deferred policy acquisition
  cost amortization

 

41,865 

 

 

 

 

 

98,432 

 

 

 

 

 

149,998 

 

 

 

Applicable deferred income tax expense (benefit)

 

10,039 

 

 

 

 

 

(13,894)

 

 

 

 

 

17,803 

 

 

 

Offsets to other comprehensive income

 

51,904 

 

 

 

 

 

84,538 

 

 

 

 

 

167,801 

 

 

 

Other comprehensive income

$

18,646 

 

 

 

 

$

7,341 

 

 

 

 

$

33,063 

 

 

 


Components of Accumulated

As of December 31,

Other Comprehensive Income:

2011

 

2010

($ in thousands)

Gross

 

Net

 

Gross

 

Net

 

 

 

 

 

 

 

 

 

 

 

 

Unrealized gains (losses) on investments

$

49,800 

 

$

6,190 

 

$

(20,750)

 

$

(12,456)

Unrealized gains on derivative instruments

 

-- 

 

 

-- 

 

 

-- 

 

 

-- 

Accumulated other comprehensive income (loss)

 

49,800 

 

$

6,190 

 

 

(20,750)

 

$

(12,456)

Applicable deferred policy acquisition costs

 

53,202 

 

 

 

 

 

11,337 

 

 

 

Applicable deferred income tax benefit

 

(9,592)

 

 

 

 

 

(19,631)

 

 

 

Offsets to other comprehensive income (loss)

 

43,610 

 

 

 

 

 

(8,294)

 

 

 

Accumulated other comprehensive income (loss)

$

6,190 

 

 

 

 

$

(12,456)

 

 

 



13.

Employee Benefit Plans and Employment Agreements


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.


The employee pension plan, covering substantially all employees, provides benefits up to the amount allowed under the Internal Revenue Code. The two supplemental plans provide benefits in excess of the primary plan. Retirement benefits under all plans are a function of years of service and compensation. The employee pension plan is funded with assets held in a trust while the supplemental plans are unfunded. Effective March 31, 2010, all benefit accruals under our funded and unfunded defined benefit plans were frozen.


Our ultimate parent company has historically provided employees with other post-employment benefits that include health care and life insurance. In December 2009, PNX announced the decision to eliminate retiree medical coverage for current employees whose age plus years of service did not equal at least 65 as of March 31, 2010. Employees who remain eligible must still meet all other plan requirements to receive benefits. In addition, the cap on the Company’s contribution to pre-65 retiree medical costs per participant was reduced beginning with the 2011 plan year.




F-40





13.

Employee Benefit Plans and Employment Agreements (continued)


The funding requirements of our ultimate parent company’s pension plan are dependent on interest rates and market performance. Significant assumptions made by our ultimate parent company related to these plans include the discount rate and the long-term rate of return on plan assets. The discount rate assumption is developed using upon a yield curve approach comprised of bonds rated Aa or higher by Moody’s Investor Services or rated AA or higher by Standard & Poor’s with maturities between one and fifteen or more years. The long-term rate of return of plan assets is determined through modeling long-term returns and asset return volatilities.


Applicable information regarding the actuarial present value of vested and non-vested accumulated plan benefits, and the net assets of the plans available for benefits, is omitted as the information is not separately calculated for our participation in the plans. PNX, the plan sponsor, established an accrued liability and amounts attributable to us have been allocated.


Employee benefit expense allocated to us for these benefits totaled $2,870 thousand, $5,614 thousand and $12,817 thousand for 2011, 2010 and 2009, respectively. Over the next 12 months, Phoenix Life expects to make contributions to the pension plans of which approximately $4,979 thousand will be allocated to us.



14.

Statutory Financial Information and Regulatory Matters


We are required to file annual statements with state regulatory authorities prepared on an accounting basis prescribed or permitted by such authorities. The State of Connecticut Insurance Department (the “Department”) has adopted the National Association of Insurance Commissioners’ (the “NAIC’s”) Accounting Practices and Procedures manual effective January 1, 2001 (“NAIC SAP”) as a component of its prescribed or permitted statutory accounting practices. As of December 31, 2011, 2010 and 2009, the Department has not prescribed or permitted us to use any accounting practices that would materially deviate from NAIC SAP. Statutory surplus differs from equity reported in accordance with GAAP primarily because policy acquisition costs are expensed when incurred, investment reserves are based on different assumptions, life insurance reserves are based on different assumptions and deferred tax assets are limited to amounts reversing in a specified period with an additional limitation based upon 10% or 15% of statutory surplus, dependent on meeting certain risk-based capital (“RBC”) thresholds.


Connecticut Insurance Law requires that Connecticut life insurers report their RBC. RBC is based on a formula calculated by applying factors to various assets, 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. Connecticut Insurance Law gives the Connecticut Commissioner of Insurance explicit regulatory authority to require various actions by, or take various actions against, insurers whose total adjusted capital does not exceed certain RBC levels. Our RBC was in excess of 200% of Company Action Level (the level where a life insurance enterprise must submit a comprehensive plan to state insurance regulators) as of December 31, 2011 and 2010.


Statutory Financial Data:

As of or For the Years Ended December 31,

($ in thousands)

2011

 

2010

 

2009

 

 

 

 

 

 

 

 

Statutory capital and surplus

$

312,837 

 

$

275,698 

 

$

235,696 

Asset valuation reserve

 

7,270 

 

 

3,124 

 

 

2,494 

Statutory capital, surplus and asset valuation reserve

$

320,107 

 

$

278,822 

 

$

238,190 

Statutory gain (loss) from operations

$

56,432 

 

$

77,571 

 

$

(31,030)

Statutory net income (loss)

$

61,428 

 

$

47,033 

 

$

(87,546)


The Connecticut Insurance Holding Company Act limits the maximum amount of annual dividends and other distributions in any 12-month period to stockholders of Connecticut domiciled insurance companies without prior approval of the Insurance Commissioner. Under current law, we cannot make any dividend distribution during 2012 without prior approval.





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15.

Contingent Liabilities


Litigation and Arbitration


We are regularly involved in litigation and arbitration, both as a defendant and as a plaintiff. The litigation and arbitration naming us as a defendant ordinarily involves our activities as an insurer, investor or investment advisor.


It is not feasible to predict or determine the ultimate outcome of all legal or arbitration proceedings or to provide reasonable ranges of potential losses. Based on current information, we believe that the outcomes of our litigation and arbitration matters are not likely, either individually or in the aggregate, to have a material adverse effect on our financial condition. However, given the large or indeterminate amounts sought in certain of these matters and the inherent unpredictability of litigation and arbitration, 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.


Regulatory Matters


State regulatory bodies, the Securities and Exchange Commission (“SEC”), the Financial Industry Regulatory Authority (“FINRA”), the IRS and other regulatory bodies regularly make inquiries of us and, from time to time, conduct examinations or investigations concerning our compliance with laws and regulations related to, among other things, our insurance and broker-dealer subsidiaries, securities offerings and registered products. We endeavor to respond to such inquiries in an appropriate way and to take corrective action if warranted.


Regulatory actions may be difficult to assess or quantify. The nature and magnitude of their outcomes may remain unknown for substantial periods of time. It is not feasible to predict or determine the ultimate outcome of all pending inquiries, investigations, legal proceedings and other regulatory actions, or to provide reasonable ranges of potential losses. Based on current information, we believe that the outcomes of our 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.



Unclaimed Property Inquiry


On July 5, 2011, the State of New York Insurance Department issued a letter (“308 Letter”) requiring life insurers doing business in New York to use data available on the U.S. Social Security Administration’s Death Master File or a similar database to identify instances where death benefits under life insurance policies, annuities, and retained asset accounts are payable, to locate and pay beneficiaries under such contracts, and to report the results of the use of the data. Additionally, the insurers are required to report on their success in finding and making payments to beneficiaries or escheatment of funds deemed abandoned under state laws. We have completed our investigation and analysis and estimate the amount of claim and interest payments to beneficiaries or state(s) to be $546 thousand ($190 thousand after deferred policy acquisition cost offsets).



16.

Subsequent Events


On January 13, 2012, A.M. Best Company, Inc. affirmed our financial strength rating of B+. They changed their outlook on our ratings from stable to positive.



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Table of Contents

PART C

OTHER INFORMATION

 

Item 24. Financial Statements and Exhibits.

 

(a)

    Financial Statements
   (1)    The financial statements of the Registrant and the Report of Independent Registered Public Accounting Firm thereto are contained in the Registrant’s Annual Report and are included in the Statement of Additional Information. The financial statements of the Registrant include: Statement of Assets and Liabilities as of December 31, 2011; Statement of Operations for the year ended December 31, 2011; Statement of Changes in Net Assets for the years ended December 31, 2011 and 2010; and Notes to Financial Statements are filed herewith.
   (2)    The financial statements of PHL Variable Insurance Company and the report of Independent Registered Public Accounting Firm thereto are contained in the Statement of Additional Information. The financial statements of PHL Variable Insurance Company include: Balance Sheets as of December 31, 2011 and 2010; Statements of Income and Comprehensive Income, Statements of Stockholder’s Equity and Statements of Cash Flows for the years ended December 31, 2011, 2010 and 2009; and Notes to the Financial Statements are filed herewith.
(b)    Exhibits
   (1)    Resolution of the Board of Directors of PHL Variable Insurance Company establishing the PHL Variable Accumulation Account is incorporated by reference to Initial Registration Statement on Form N-4 (File No. 333-68164), filed via EDGAR on August 22, 2001.
   (2)    Not Applicable.
   (3)    Distribution of Contracts
      (a)    Master Service and Distribution Compliance Agreement between Depositor and Phoenix Equity Planning Corporation dated November 1, 2000 is incorporated by reference to Post-Effective Amendment No. 17 on Form N-4 (File No. 033-87376), filed via EDGAR on April 30, 2002.
      (b)    Form of Broker Dealer Supervisory and Service Agreement among Phoenix Equity Planning Corporation and Independent Brokers with respect to the sale of contracts is incorporated by reference to Registrant’s Initial Registration Statement on Form N-4 (File No. 333-123040), filed via EDGAR on February 28, 2005.
      (c)    Principal Underwriting and Distribution Agreement between PHL Variable Insurance Company and Phoenix Equity Planning Corporation, dated February 5, 2009, is incorporated by reference to Post-Effective Amendment No. 4 on Form N-6 (File No. 333-143656), filed via EDGAR on April 29, 2010.
      (d)    Amended and Restated Principal Underwriting and Distribution Agreement between PHL Variable Insurance Company and 1851 Securities, Inc., dated January 1, 2012, is incorporated by reference to Post-Effective Amendment No. 6 on Form N-6 (File No. 333-143656), filed via EDGAR on April 26, 2012.
   (4)    (a)    Form of Variable Annuity Contract Form No. D617 (Phoenix Dimensions®) is incorporated by reference to Registrant’s Initial Registration Statement on Form N-4 (File No. 333-123040), filed via EDGAR on June 20, 2005.
      (b)    Guaranteed Minimum Income Benefit Rider, Form No. DR87 is incorporated by reference to Registrant’s Initial Registration Statement on Form N-4 (File No. 333-123040), filed via EDGAR on June 20, 2005.
      (c)    Guaranteed Minimum Accumulation Benefit Rider, Form No. DR83 is incorporated by reference to Registrant’s Initial Registration Statement on Form N-4 (File No. 333-123040), filed via EDGAR on June 20, 2005.
      (d)    Guaranteed Minimum Withdrawal Benefit Rider, Form No. DR93.1 is incorporated by reference to Registrant’s Post-Effective Amendment No. 2 on Form N-4 (File No. 333-123040), filed via EDGAR on November 9, 2005.
      (e)    Guaranteed Minimum Withdrawal Benefit Rider, Form No. 06GMWB is incorporated by reference to Registrant’s Post-Effective Amendment No. 4 on Form N-4 (File No. 333-123040), filed via EDGAR on October 10, 2006.
      (f)    Guaranteed Minimum Withdrawal Benefit Rider, Form No. 08GMWB, is incorporated by reference to Post-Effective Amendment No. 20 on Form N-4 (File No. 333-68164), filed via EDGAR on May 28, 2008.
      (g)    Guaranteed Minimum Withdrawal Benefit Rider with Extended Care Enhancement, Form No. 08GMWBCE, is incorporated by reference to Post-Effective Amendment No. 20 on Form N-4 (File No. 333-68164), filed via EDGAR on May 28, 2008.
      (h)    Flexible Combination Benefit Rider, Form No. 08PRP, is incorporated by reference to Post-Effective Amendment No. 20 on Form N-4 (File No. 333-68164), filed via EDGAR on May 28, 2008.

 

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  (5)    Form of Application (Form No. OL4157.1) is incorporated by reference to Registrant’s Post-Effective Amendment No. 2 on Form N-4 (File No. 333-123040), filed via EDGAR on November 9, 2005.
  (6)    (a)    Amended and Restated Certificate of Incorporation of PHL Variable Insurance Company is incorporated by reference to Initial Registration Statement on Form N-4 (File No. 333-68164), filed via EDGAR on August 22, 2001.
     (b)    Bylaws of PHL Variable Insurance Company, as amended and restated effective May 16, 2002 are incorporated by reference to Post-Effective Amendment No. 21 on Form N-4 (File No. 033-87376), filed via EDGAR on April 30, 2004.
  (7)    Not Applicable.
  (8)    (a)    Participation Agreements.
     (1)    (a) Amended and Restated Participation Agreement dated April 4, 2008 among PHL Variable Insurance Company, Wanger Advisors Trust, Columbia Wanger Asset Management, LLP and Columbia Management Distributors, Inc., is incorporated by reference to Registrant’s Post-Effective Amendment No. 8 on Form N-4 (File No. 333-123040), filed via EDGAR on April 30, 2008.
        (b) Consent to Assignment of Participation Agreement dated March 29, 2010 between Columbia Management Distributors, Inc. (“CMDI”) and PHL Variable Insurance Company to Riversource Fund Distributors, Inc. (“RSFD”) is incorporated by reference to Post-Effective Amendment No. 4 on Form N-6 (File No. 333-143656), filed via EDGAR on April 29, 2010.
     (2)    (a)    Participation Agreement as of May 1, 2000 among Franklin Templeton Variable Insurance Products Trust, Franklin Templeton Distributors, Inc., Phoenix Home Life Mutual Insurance Company, and PHL Variable Insurance Company (“PHLVIC”), is incorporated by reference to Post-Effective Amendment No. 5 on Form N-6 (File No. 333-81458), filed via EDGAR on April 30, 2004.
        (b)    Amendment to Participation Agreement as of May 1, 2000 among Franklin Templeton Variable Insurance Products Trust, Franklin Templeton Distributors, Inc., Phoenix Home Life Mutual Insurance Company and (“PHLVIC”), is incorporated by reference to Post-Effective Amendment No. 5 on Form N-6 (File No. 333-81458), filed via EDGAR on April 30, 2004.
        (c)    Amendment to Participation Agreement as of May 3, 2004 by and among Franklin Templeton Variable Insurance Products Trust, Franklin/Templeton Distributors, Inc., Phoenix Life Insurance Company and PHLVIC, is incorporated by reference to Post-Effective Amendment No. 9 on Form N-6 (File No. 333-76778), filed via EDGAR on April 27, 2006.
        (d)    Amendment No. 3 to Participation Agreement as of May 1, 2006 by and among Franklin Templeton Variable Insurance Products Trust, Franklin/Templeton Distributors, Inc., Phoenix Life Insurance Company and PHLVIC, is incorporated by reference to Post-Effective Amendment No. 9 on Form N-6 (File No. 333-119916), filed via EDGAR on August 14, 2006.
        (e)    Amendment No. 4 to Participation Agreement as of May 1, 2007, by and among Franklin Templeton Variable Insurance Products Trust, Franklin/Templeton Distributors, Inc., PHL Variable Insurance Company, Phoenix Life Insurance Company, and Phoenix Equity Planning Corporation, is incorporated by reference to Pre-Effective Amendment No. 1 to Initial Registration Statement on Form N-6 (File No. 333-146301), filed via EDGAR on December 21, 2007.
        (f)    Amendment No. 5 dated March 1, 2008 to the Participation Agreement dated May 1, 2000 among Franklin Templeton Variable Insurance Products Trust, Franklin/Templeton Distributors, Inc., Phoenix Home Mutual Life Insurance Company, and PHL Variable Insurance Company, is incorporated by reference to Pre-Effective Amendment No. 1 to Initial Registration Statement on Form N-4 (File No. 333-147565), filed via EDGAR on April 4, 2008.
        (g)    Amendment No. 6 to Participation Agreement as of September 20, 2010 by and among Franklin Templeton Variable Insurance Products Trust, Franklin/Templeton Distributors, Inc., PHL Variable Insurance Company (“PHLVIC”), Phoenix Life Insurance Company (“PLIC”), Phoenix Life and Annuity Company (“PLAC”), and Phoenix Equity Planning Corporation (“PEPCO”) is incorporated by reference to Post-Effective Amendment No. 5 on Form N-6 (File No. 333-146301), filed via EDGAR on April 29, 2011.
     (3)    (a)    Fund Participation Agreement dated July 15, 1999, among PHL Variable Insurance Company, Insurance Series, and Federated Securities Corp., is incorporated by reference to Post-Effective Amendment No. 2 on Form S-6 (File No. 333-65823), filed via EDGAR on April 30, 2002.

 

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        (b)    Amendment to Fund Participation Agreement dated December 22, 2009 among Federated Securities Corp., Federated Insurance Series, and PHL Variable Insurance Company is incorporated by reference to Post-Effective Amendment No. 4 on Form N-6 (File No. 333-143656), filed via EDGAR on April 29, 2010.
        (c)    First Addendum to Fund Participation Agreement dated January 19, 2010 by and between PHL Variable Insurance Company (“Insurer”) and Federated Securities Corp. (“FSC”) is incorporated by reference to Post-Effective Amendment No. 4 on Form N-6 (File No. 333-143656), filed via EDGAR on April 29, 2010.
     (4)    (a)    Fund Participation Agreement dated July 19, 1999 among BT Insurance Funds Trust, Bankers Trust Company, and PHL Variable Insurance Company (“PHLVIC”), is incorporated by reference to Post-Effective Amendment No. 2 on Form S-6 (File No. 333-65823), filed via EDGAR on April 30, 2002.
        (b)    Amendment No. 1 to the Fund Participation Agreement dated April 20, 2001 among Deutsche Asset Management VIT Funds (formerly, BT Insurance Funds Trust), Bankers Trust Company and PHLVIC, is incorporated by reference to Post-Effective Amendment No. 2 on Form S-6 (File No. 333-65823), filed via EDGAR on April 30, 2002.
        (c)    Amendment No. 2 to the Fund Participation Agreement dated October 29, 2001 among Deutsche Asset Management VIT Funds, Deutsche Asset Management, Inc. and PHLVIC, is incorporated by reference to Post-Effective Amendment No. 2 on Form S-6 (File No. 333-65823), filed via EDGAR on April 30, 2002.
        (d)    Amendment No. 3 dated February 1, 2008 to the Fund Participation Agreement dated July 19, 1999 among PHL Variable Insurance Company, DWS Investments VIT Funds (formerly, Deutsche Asset Management VIT Funds and BT Insurance Funds Trust) and Deutsche Investment Management Americas Inc. (successor by merger to Deutsche Asset Management, Inc.), is incorporated by reference to Registrant’s Post-Effective Amendment No. 8 on Form N-4 (File No. 333-123040), filed via EDGAR on April 30, 2008.
     (5)    Participation Agreement dated May 1, 2006 among PHL Variable Insurance Company, The Universal Institutional Funds, Inc., Morgan Stanley Distribution, Inc. and Morgan Stanley Investment Management, Inc., is incorporated by reference to Post-Effective Amendment No. 9 on Form N-6 (File No. 333-119916), filed via EDGAR on August 14, 2006.
     (6)    Participation Agreement dated June 1, 2000 among PHL Variable Insurance Company, The Alger American Fund and Fred Alger & Company, Incorporated, is incorporated by reference to Post-Effective Amendment No. 2 on Form S-6 (File No. 333-65823), filed via EDGAR on April 30, 2002.
     (7)    (a)    Amended and Restated Participation Agreement dated April 1, 2008 by and among PHL Variable Insurance Company, Fidelity Distributors Corporation, and each of Variable Insurance Products Fund, Variable Insurance Products Fund II, Variable Insurance Products Fund III, and Variable Insurance Products Fund IV and Variable Insurance Products Fund V, is incorporated by reference to Pre-Effective Amendment No. 1 to Initial Registration Statement on Form N-4 (File No. 333-147565), filed via EDGAR on April 4, 2008.
        (b)    Amendment No. 1, dated August 1, 2009, to the Amended and Restated Participation Agreement among PHL Variable Insurance Company, Variable Insurance Products Fund, Variable Insurance Products Fund II, Variable Insurance Products Fund III, Variable Insurance Products Fund IV, Variable Insurance Products Fund V, and Fidelity Distributors Corporation dated April 1, 2008 is incorporated by reference to Post-Effective Amendment No. 4 on Form N-6 (File No. 333-143656), filed via EDGAR on April 29, 2010.
     (8)    (a)    Participation Agreement dated March 29, 2001 among PHL Variable Insurance Company, AIM Variable Insurance Funds, Phoenix Equity Planning Corporation and AIM Distributors, Inc., is incorporated by reference to Post-Effective Amendment No. 2 on Form S-6 (File No. 333-65823), filed via EDGAR on April 30, 2002.
        (b)    Amendment No. 1 to Participation Agreement dated February 1, 2008 by and among AIM Variable Insurance Funds, AIM Distributors, Inc., PHL Variable Insurance Company and Phoenix Equity Planning Corporation, is incorporated by reference to Pre-Effective Amendment No. 1 to Initial Registration Statement on Form N-4 (File No. 333-147565), filed via EDGAR on April 4, 2008.
        (c)    Amendment No. 2, effective April 30, 2010, to Participation Agreement dated as of March 29, 2001, by and among AIM Variable Insurance Funds (“AVIF”), AIM Distributors, Inc., PHL Variable Insurance Company (“Phoenix”) and Phoenix Equity Planning Corporation (“PEPCO”) is incorporated by reference to Post-Effective Amendment No. 5 on Form N-6 (File No. 333-143656), filed via EDGAR on April 29, 2011.

 

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        (d)    Amendment No. 3, effective September 20, 2010, to Participation Agreement dated March 29, 2001, by and among AIM Variable Insurance Funds (Invesco Variable Insurance Funds, Invesco Distributors, Inc. PHL Variable Insurance Company (“Phoenix”) and Phoenix Equity Planning Corporation (“PEPCO”) is incorporated by reference to Post-Effective Amendment No. 5 on Form N-6 (File No. 333-143656), filed via EDGAR on April 29, 2011.
     (9)    (a)    Participation Agreement dated May 30, 2003 among PHL Variable Insurance Company, Rydex Variable Trust and Rydex Distributors, Inc., is incorporated by reference to Post-Effective Amendment No. 5 on Form N-6 (File No. 333-81458), filed via EDGAR on April 30, 2004.
        (b)    Amendment to Fund Participation Agreement dated February 1, 2008 among Rydex Variable Trust, Rydex Distributors, Inc. and PHL Variable Insurance Company, is incorporated by reference to Pre-Effective Amendment No. 1 on Form N-4 (File No. 333-147565), filed via EDGAR on April 4, 2008.
        (c)    Consent to Assignment of Participation Agreement dated February 1, 2008 among Rydex Variable Trust, Rydex Distributors, Inc. and PHL Variable Insurance Company is incorporated by reference to Pre-Effective Amendment No. 1 on Form N-4 (File No. 333-147565), filed via EDGAR on April 4, 2008.
     (10)    (a)    Participation Agreement dated April 25, 2005 among PHL Variable Insurance Company, Lazard Asset Management Securities LLC and Lazard Retirement Series, Inc., is incorporated by reference to Post-Effective Amendment No. 9 on Form N-6 (File No. 333-76778), filed via EDGAR on April 26, 2006.
        (b)    Amendment No. 1 to Participation Agreement dated February 1, 2008 by and among Lazard Asset Management Securities LLC, Lazard Retirement Series, Inc. and PHL Variable Insurance Company is incorporated by reference to Pre-Effective Amendment No. 1 on Form N-4 (File No. 333-147565), filed via EDGAR on April 4, 2008.
     (11)    Fund Participation Agreement dated April 14, 2005 among PHL Variable Insurance Company, Lord Abbett Series Fund, Inc., and Lord Abbett Distributor LLC, is incorporated by reference to Registrant’s Post-Effective Amendment No. 3 on Form N-4 (File No. 333-123040), filed via EDGAR on April 27, 2006.
     (12)    (a)    Participation Agreement dated May 1, 2006 among PHL Variable Insurance Company, Oppenheimer Variable Account Funds and Oppenheimer Funds, Inc. is incorporated by reference to Post-Effective Amendment No. 9 on Form N-6 (File No. 333-119916), filed via EDGAR on August 14, 2006.
        (b)    Amendment No. 1 to Participation Agreement dated February 1, 2008 among Oppenheimer Variable Accounts Funds, Oppenheimer Funds, Inc. and PHL Variable Insurance Company, is incorporated by reference to Pre-Effective Amendment No. 1 to Initial Registration Statement on Form N-4 (File No. 333-147565), filed via EDGAR on April 4, 2008.
     (13)    (a)    Participation Agreement dated May 1, 2006 among PHL Variable Insurance Company, Phoenix Life and Annuity Company, PIMCO Variable Insurance Trust and Allianz Global Investors Distributors LLC, is incorporated by reference to Post-Effective Amendment No. 9 on Form N-6 (File No. 333-119916), filed via EDGAR on August 14, 2006.
        (b)    Amendment No. 1 to Participation Agreement dated February 1, 2008 by and among PHL Variable Insurance Company, Phoenix Life and Annuity Company, PIMCO Variable Insurance Trust, and Allianz Global Investors Distributors LLC, is incorporated by reference to Pre-Effective Amendment No. 1 to Initial Registration Statement on Form N-4 (File No. 333-147565), filed via EDGAR on April 4, 2008.
        (c)    Novation of and Amendment to Participation Agreement made August 24, 2011 by and among Allianz Global Investors Distributors LLC, PIMCO Investors LLC, PIMCO Variable Insurance Trust, PHL Variable Insurance Company; and Phoenix Life and Annuity Company, is incorporated by reference to Post-Effective Amendment No. 6 on Form N-6 (File No. 333-143656), filed via EDGAR on April 26, 2012.
     (14)    Participation Agreement dated May 1, 2006 among PHL Variable Insurance Company, Phoenix Life and Annuity Company, Neuberger Berman Advisers Management Trust and Neuberger Berman Management, Inc., is incorporated by reference to Post-Effective Amendment No. 9 on Form N-6 (File No. 333-119916), filed via EDGAR on August 14, 2006.
     (15)    Participation Agreement as of November 5, 2010 among Virtus Variable Insurance Trust, VP Distributors, Inc., Phoenix Life Insurance Company, PHL Variable Insurance Company, Phoenix Life and Annuity Company and 1851 Securities, Inc. is incorporated by reference to Post-Effective Amendment No. 5 on Form N-6 (File No. 333-146301), filed via EDGAR on April 29, 2011.

 

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   (16)    Participation Agreement dated September 7, 2007, among PHL Variable Insurance Company, Sentinel Variable Products Trust and Sentinel Financial Services Company, is incorporated by reference to Post-Effective Amendment No. 5 on Form N-4 (File No. 333-123035), filed via EDGAR on September 7, 2007.
   (17)    (a) Participation Agreement dated April 1, 2008, among PHL Variable Insurance Company, Phoenix Equity Planning Corporation, AllianceBernstein LP and AllianceBernstein Investments, Inc., is incorporated by reference to Registrant’s Post-Effective Amendment No. 8 on Form N-4 (File No. 333-123040), filed via EDGAR on April 30, 2008.
     

(b) Amendment No. 1, effective September 20, 2010, to Participation Agreement dated April 1, 2008, by and among PHL Variable Insurance Company, Phoenix Equity Planning Corporation, AllianceBernstein L.P., and AllianceBernstein Investments, Inc. is incorporated by reference to Registrant’s Post-Effective Amendment No. 14 on Form N-4 (File No. 333-123040), filed via EDGAR on April 29, 2011.

   (18)    (a)    Participation Agreement dated February 1, 2008, among PHL Variable Insurance Company, Phoenix Equity Planning Corporation, Summit Mutual Funds, Inc., and Ameritas Investment Corporation, is incorporated by reference to Registrant’s Post-Effective Amendment No. 8 on Form N-4 (File No. 333-123040), filed via EDGAR on April 30, 2008.
      (b)    Consent to Assignment of Participation Agreement effective February 1, 2008 among Summit Mutual Funds, Inc., Ameritas Investment Corp., PHL Variable Insurance Company, and Phoenix Equity Planning Corporation is incorporated by reference to Post-Effective Amendment No. 3 to Registration Statement on Form N-6 (File No. 333-143656), filed via EDGAR on April 22, 2009.
      (c)    Amendment of September 20, 2010 to Participation Agreement dated February 1, 2008, by and among Summit Mutual Funds, Inc., Ameritas Investment Corp., PHL Variable Insurance Company and Phoenix Equity Planning Corporation as amended by a consent to assignment dated December 12, 2008 from Ameritas Investment Corp. to Calvert Distributors, Inc. is incorporated by reference to Post-Effective Amendment No. 5 to Registration Statement on Form N-6 (File No. 333-143656), filed via EDGAR on April 29, 2011.
   (19)       Amended and Restated Participation Agreement of November 19, 2010 by and among Phoenix Life Insurance Company (“PLIC”), PHL Variable Insurance Company (“PHLVIC”), Phoenix Life and Annuity Company (“PLAC”), (together “Phoenix”), Financial Investors Variable Insurance Trust, ALPS Advisors, Inc. and ALPS Distributors, Inc. is incorporated by reference to Post-Effective Amendment No. 5 on Form N-6 (File No. 333-146301), filed via EDGAR on April 29, 2011.
(b)    Other Material Contracts:
      (1)    (a) Amended and Restated Administration and Accounting Services Agreement dated March 1, 2003 by and between PHL Variable Insurance Company and PFPC, INC., is incorporated by reference to Registrant’s Post-Effective Amendment No. 7 on Form N-4 (File No. 333-123040), filed via EDGAR on September 7, 2007.
         (b) Amendment dated January 1, 2005 to Amended and Restated Administration and Accounting Services Agreement between PHL Variable Insurance Company and PFPC, INC., is incorporated by reference to Registrant’s Post-Effective Amendment No. 7 on Form N-4 (File No. 333-123040), filed via EDGAR on September 7, 2007.
         (c) Amendment dated January 1, 2008 to Amended and Restated Administration and Accounting Services Agreement between PHL Variable Insurance Company and PNC Global Investing Servicing (U.S.) Inc., is incorporated by reference to Registrant’s Post-Effective Amendment No. 6 on Form N-6 (File No. 333-143656), filed via EDGAR on April 26, 2012.

 

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      (2)    Information Sharing Agreements pursuant to Rule 22c-2 for the following funds: AIM Variable Insurance Funds, The Alger American Fund, AllianceBernstein LP, DWS Funds, Federated Insurance Series, Franklin Templeton Variable Insurance Products Trust, Lazard Retirement Series, Lord Abbett Series Fund, Inc., Neuberger Berman Advisers Management Trust, Oppenheimer Variable Account Funds, The Rydex Trust, Wanger Advisors Trust; and, The Universal Institutional Funds are incorporated by reference to Post-Effective Amendment No. 29 on Form N-4 (File No. 033-87376), filed via EDGAR on May 1, 2007.
      (3)    Information Sharing Agreement dated as of September 7, 2007, pursuant to Rule 22c-2 between Phoenix Life Insurance Company, PHL Variable Insurance Company, and Phoenix Life and Annuity Company and the Sentinel Variable Products Trust, is incorporated by reference to Post-effective Amendment No. 6 on Form N-4 (File No. 333-123035), filed via EDGAR on September 28, 2007.
      (4)    Information Sharing Agreement dated February 1, 2008 by and between PHL Variable Insurance Company, Phoenix Life and Annuity Company, Phoenix Life Insurance Company and Summit Mutual Funds, Inc., is incorporated by reference to Registrant’s Post-Effective Amendment No. 8 on Form N-4 (File No. 333-123040), filed via EDGAR on April 30, 2008.
      (5)    Consent to Assignment of Rule 22c-2 Shareholder Information Agreement dated March 29, 2010 between Columbia Management Services, Inc., Phoenix Life Insurance Company, PHL Variable Insurance Company and Phoenix Life and Annuity Company, is incorporated by reference to Post-Effective Amendment No. 4 on Form N-6 (File No. 333-143656), filed via EDGAR on April 29, 2010.
      (6)    Rule 22c-2 Shareholder Information Agreement as of November 5, 2010 by and among VP Distributors, Inc. (“Fund Agent”), Phoenix Life Insurance Company, PHL Variable Insurance Company, and Phoenix Life and Annuity Company (together “Insurance Company”), and 1851 Securities, Inc. (“1851”), is incorporated by reference to Post-Effective Amendment No. 5 on Form N-6 (File No. 333-146301), filed via EDGAR on April 29, 2011.
      (7)    Distribution and Administrative Services Agreement as of November 5, 2010 among Virtus Investment Advisers, Inc. (“Virtus”), VP Distributors, Inc. (“VPD”), Phoenix Life Insurance Company, PHL Variable Insurance Company, and Phoenix Life and Annuity Company (each a “Company” and collectively, the “Company”) and 1851 Securities, Inc. (“1851”), is incorporated by reference to Post-Effective Amendment No. 5 on Form N-6 (File No. 333-146301), filed via EDGAR on April 29, 2011.
      (8)    Investment Performance Calculation Agreement as of November 5, 2010 by and among The Phoenix Life Insurance Company, PHL Variable Insurance Company, and Phoenix Life and Annuity Company, (collectively, “Phoenix”) and Virtus Partners, Inc. (“Virtus”), is incorporated by reference to Post-Effective Amendment No. 5 on Form N-6 (File No. 333-146301), filed via EDGAR on April 29, 2011.
   (9)    Written Opinion and Consent of Counsel, filed herewith.
   (10)    (a)    Consent of Independent Registered Public Accounting Firm, filed herewith.
      (b)    Powers of Attorney are incorporated by reference to Post-Effective Amendment No. 2 to Registration Statement on Form S-3 (File No. 333-168357), filed via EDGAR on April 11, 2012.
   (11)    Not Applicable.
   (12)    Not Applicable.

 

Item 25. Directors and Executive Officers of the Depositor.

 

Name

   

Position

John H. Beers

    Vice President and Secretary

Edward W. Cassidy

    Director

Peter A. Hofmann

    Senior Executive Vice President and Chief Financial Officer and Treasurer

David R. Pellerin

    Senior Vice President and Chief Accounting Officer

Philip K. Polkinghorn

    Director, Senior Executive Vice President

James D. Wehr

    President

Christopher M. Wilkos

    Director, Executive Vice President and Chief Investment Officer

 

The business address of these individuals is One American Row, Hartford, CT 06102-5056.

 

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Item 26. Persons Controlled by or Under Common Control with the Depositor or Registrant.

The Phoenix Companies, Inc. (100%) Delaware

Phoenix Distribution Holding Company (100%) Connecticut

Phoenix Investment Management Company (100%) Connecticut

Phoenix National Trust Holding Company (100%) Connecticut

PML International Insurance Limited (100%) Bermuda

Saybrus Partners, Inc. (85.456%) Delaware

Saybrus Holdings, Inc. (100%) Delaware

Saybrus Equity Services, Inc. (100%) Delaware

Phoenix Life Insurance Company (100%) New York

Holland Re Holdings, LLC (100%)

Holland Re, Inc. (100%)

Next Generation Ventures LLC (50%) Connecticut

Phoenix Life Separate Account B (100%) New York

Phoenix Life Separate Account C (100%) New York

Phoenix Life Separate Account D (100%) New York

Phoenix Life Variable Accumulation Account (100%) New York

Phoenix Life Variable Universal Life Account (100%) New York

PM Holdings, Inc. (100%) Connecticut

1851 Securities, Inc. (100%) Delaware

American Phoenix Life and Reassurance Company (100%) Connecticut

PHL Variable Insurance Company (100%) Connecticut

PHL Variable Accumulation Account (100%) Connecticut

PHL Variable Accumulation Account II (100%) Connecticut

PHL Variable Accumulation Account III (100%) Connecticut

PHL Variable Separate Account MVA1 (100%) Connecticut

PHLVIC Variable Universal Life Account (100%) Connecticut

PHL Variable VA Account 1 (100%) Connecticut

Phoenix Founders, Inc. (100%) Connecticut

Phoenix Life and Annuity Company (100%) Connecticut

Phoenix Life and Annuity Variable Universal Life Account (100%) Connecticut

Phoenix New England Trust Holding Company (100%) Connecticut

Phoenix Variable Advisors, Inc. (100%) Delaware

The only companies that file consolidated financial statements with the Securities and Exchange Commission (“SEC”) are The Phoenix Companies Inc. and Phoenix Life Insurance Company. In addition, PHL Variable Insurance Company and Phoenix Life and Annuity Company file individual financial statements with the SEC. For the remainder, except the separate accounts (defined as Phoenix Life Separate Account B, Phoenix Life Separate Account C, Phoenix Life Separate Account D, Phoenix Life Variable Accumulation Account, Phoenix Life Variable Universal Life Account, PHL Variable Accumulation Account, PHL Variable Accumulation Account II, PHL Variable Accumulation Account III, PHL Variable Separate Account MVA1, PHLVIC Variable Universal Life Account, PHL Variable VA Account 1and Phoenix Life and Annuity Variable Universal Life Account) all other entities are included in the consolidated financial statement for The Phoenix Companies, Inc., but none file individual financial statements with the SEC.

 

Item 27. Number of Contract Owners.

As of February 29, 2012, there were 853 qualified and 436 nonqualified contract owners.

 

Item 28. Indemnification.

Section 33-776 of the Connecticut General Statutes states that: “a corporation may provide indemnification of, or advance expenses to, a director, officer, employee or agent only as permitted by sections 33-770 to 33-779, inclusive.”

Article VI. Section 6.01. of the Bylaws of the Depositor (as amended and restated effective May 16, 2002) provides that: “Each director, officer or employee of the company, and his heirs, executors, or administrators, shall be indemnified or reimbursed by the company for all expenses necessarily incurred by him in connection with the defense or reasonable settlement of any action, suit or proceeding in which he is made a party by reason of his being or having been a director, officer or employee of the company, or of any other company which he was serving as a director or officer at the request of the company, except in relation to matters as to which such director, officer or employee is finally adjudged in such action, suit or proceeding to be liable for negligence or misconduct in the performance of his duties as such director, officer or employee. The foregoing right of indemnification or reimbursement shall not be exclusive of any other rights to which he may be entitled under any statute, bylaw, agreement, vote of shareholders or otherwise.”

 

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Insofar as indemnification for liability arising under the Securities Act of 1933 (the “Act”) may be permitted to directors, officers and controlling persons of the Registrant pursuant to the foregoing provisions, or otherwise, the Registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the Registrant of expenses incurred or paid by a director, officer or controlling person of the Registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the Registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue.

 

Item 29. Principal Underwriter.

1851 Securities, Inc. (“1851 Securities”).

(a) 1851 Securities serves as the principal underwriter for the following entities: Phoenix Life Variable Accumulation Account, Phoenix Life Variable Universal Life Account, Phoenix Life Separate Account B, Phoenix Life Separate Account C, Phoenix Life Separate Account D, Phoenix Life and Annuity Variable Universal Life Account, PHL Variable Accumulation Account, PHL Variable Accumulation Account II, PHL Variable VA Account 1, PHLVIC Variable Universal Life Account and PHL Variable Separate Account MVA1.

(b) Directors and Executive Officers of 1851 Securities.

 

Name

   

Position

John H. Beers

    Vice President and Secretary

Susan L. Guazzelli

    Second Vice President and Treasurer

Philip K. Polkinghorn

    Chairman, President and Chief Executive Officer

Katherine E. Storch

    Assistant Vice President and Chief Compliance Officer

Gary C. Tebbetts

    Chief Financial Officer

The business address of these individuals is One American Row, Hartford, CT 06102-5056.

(c) 1851 Securities received no compensation from the Registrant during the last fiscal year for sales of the contract:

 

(1)

Name of Principal Underwriter

    (2)
Net Underwriting
Discounts and
Commissions		      (3)
Compensation On
Redemption		      (4)
Brokerage
Commissions		      (5)
Compensation		  

1851 Securities

    $ 0       $ 0       $ 0       $ 0   

 

Item 30. Location of Accounts and Records.

The accounts, books and other documents required to be maintained by Section 31(a) of the Investment Company Act of 1940 and the Rules under it are maintained at the administrative offices of PHL Variable Insurance Company located at One American Row, Hartford, CT 06102-5056.

 

Item 31. Management Services.

Under a contract with Phoenix Life Insurance Company (“PLIC”), Ibbotson Associates provides certain asset allocation services, including a risk tolerance questionnaire to assist the Contract owner, for use in conjunction with the Contract. For these services, PLIC pays Ibbotson an annual flat fee. The fees paid for the last three fiscal years follow:

 

Year Ended December 31,

    Fee paid  

2011

      0   

2010

      0   

2009

    $ 125,000   
  

 

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Item 32. Undertakings.

 

  (a) Registrant hereby undertakes to file a post-effective amendment to this registration statement as frequently as is necessary to ensure that the audited financial statements contained therein are never more than 16 months old for so long as payments under the Contracts may be accepted;

 

  (b) Registrant hereby undertakes to include as part of any application to purchase a Contract offered by the prospectus, a space that an applicant can check to request a Statement of Additional Information;

 

  (c) Registrant hereby undertakes to deliver any Statement of Additional Information and any financial statements required to be made available under this form promptly upon written or oral request; and

 

  (d) Representation Required by Section 26 (f) (2) (A) of the Investment Company Act of 1940.

PHL Variable Insurance Company represents that the fees and charges deducted under the Contract are reasonable in relation to the services rendered, the expenses expected to be incurred and the risks assumed by PHL Variable Insurance Company.

 

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SIGNATURES

Pursuant to the requirements of the Securities Act of 1933 and the Investment Company Act of 1940, as amended, the Registrant, PHL Variable Accumulation Account, certifies that it meets all of the requirements for effectiveness of this Post-Effective Amendment No. 15 pursuant to Rule 485(b) under the Securities Act of 1933. The Registrant causes this Post-Effective Amendment No. 15 to Registration Statement No. 333-123040 to be signed on its behalf by the undersigned thereunto duly authorized, all in the City of Hartford and the State of Connecticut, on this 26th day of April, 2012.

 

PHL VARIABLE ACCUMULATION ACCOUNT (Registrant)
By:    
  James D. Wehr*
  President

 

PHL VARIABLE INSURANCE COMPANY
By:    
  James D. Wehr*
  President

 

By:   /s/    KATHLEEN A. MCGAH        
  *Kathleen A. McGah

 

* As Attorney-in-Fact pursuant to power of attorney

As required by the Securities Act of 1933, the following persons in the capacities stated have signed this Post-Effective Amendment No. 15 to Registration Statement No. 333-123040 on April 26, 2012.

 

Signature

   

Title

 

Edward W. Cassidy*

   

Director

 

Peter A. Hofmann*

   

Chief Financial Officer

 

David R. Pellerin*

   

Chief Accounting Officer

 

Philip K. Polkinghorn*

   

Director

 

James D. Wehr*

   

President

 

Christopher M. Wilkos*

   

Director

 

By:   /s/    KATHLEEN A. MCGAH        
  * Kathleen A. McGah

 

* As Attorney-in-Fact pursuant to Powers of Attorney

Table of Contents

Exhibit Index

 

Exhibit 24 (b) (9)   Opinion and Consent of Counsel
Exhibit 24 (b) (10) (a)   Consent of Independent Registered Public Accounting Firm