1

J.P. Morgan Conference on Risk Management & Fundamental Trends

in the Variable Annuity Market

June 3, 2009Zafar Rashid

Senior Vice President, Life and Annuity Financial

2

This presentation may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 which, by their nature, are subject to risks and uncertainties. We intend for these forward-looking statements to be covered by the safe harbor provisions of the federal securities laws relating to forward-looking statements. These include statements relating to trends in, or representing management’s beliefs about, our future transactions, strategies, operations and financial results, as well as other statements including words such as “anticipate,” “believe,” “plan,”“estimate,” “expect,” “intend,” “may,” “should” and other similar expressions. Forward-looking statements are made based upon our current expectations and beliefs concerning trends and future developments and their potential effects on the company. They are not guarantees of future performance. Our actual business, financial condition and results of operations may differ materially from those suggested by forward-looking statements as a result of risks and uncertainties, whichinclude, among others, those risks and uncertainties set forth herein or described in any of our filings with the SEC. We undertake no obligation to update or revise publicly any forward-looking statement, whether as a result of new information, future events or otherwise.

Important Disclosures

3

Financial HighlightsAs of March 31, 2009

• Total assets: $24.8 billion

• Total invested assets and cash (excluding CDOs): $13.4 billion

• Total stockholders’ equity: $865.4 million

• Gross life insurance in force: $166.3 billion

• Average life face amount sold in 1Q 2009: $1.0 million

• Annuity assets under management (includes private placements): $6.6 billion

• Private placement assets under management: $3.1 billion

• Variable annuities with living benefits account balance: $1.2 billion

Phoenix helps individuals and institutions solve often highly complex personal financial and business planning needs through a broad array of life insurance and annuities available through third-party financial professionals.

The Phoenix Companies Overview

Life Insurance>Universal life>Variable universal life>Term life>Private placement variable

universal life

Annuities>Variable annuities>Immediate annuities>Equity-Indexed Annuities>Private placement annuities

4

Phoenix Variable Annuity Business

> Innovative product development> Did not write GMWB and GMAB until hedging strategy was in place> Relatively good hedge performance

• Unhedged benefits have resulted in reserve hits> Reorienting strategy given ratings, distribution and capital constraints

5

Phoenix Annuity Product Evolution

> 1st company to offer second-to-die Lifetime GMWB> One of the 1st insurers to offer a full suite of living benefits - GMIB, GMAB, GMWB,

Lifetime GMWB> 1st insurer to offer variable annuity products with tactical asset allocation using

exchange-traded funds> Developed Guaranteed Income Edge > Introduced pricing by asset allocation model on living benefit riders> Early adopter of increased pricing on living benefit riders

6

Annuity Industry Evolution and Sales Trends

> Variable annuity total industry sales trending down• 1Q09 sales down 27% from 1Q08• 2008 sales down 15% from 2007

> Overall industry shift from variable annuity to fixed annuity sales

• 1Q09 fixed annuity sales up 94% from 1Q08• 2008 fixed annuity sales up 73% from 2007

> Increasing indexed annuity sales• 1Q09 sales up 22% from 1Q08• 2008 sales up 6% from 2007

Source: LIMRA, AnnuitySpecs, 2008 Annuity Fact Book, 7th edition, NAVA

> Return-of-premium death benefits have been available since 1980

> Enhanced death benefit versions introduced in late 1990s

> Income guarantees (GMIBs) introduced in 1996> Account balance guarantees (GMABs)

introduced in 2002> Withdrawal benefit guarantees (GMWBs)

introduced in 2002> Enhanced GMWBs and Lifetime GMWBs

introduced in 2004> Guarantees quickly gained popularity > By 2003 75% or more of VA sales had one or

more guarantees> Until 2008 guarantees continued to become

richer as insurers competed for market share

Emergence of VA Guarantees Industry Sales Trends

7

2008 – A Challenging Market

S&P 500

0

200

400

600

800

1,000

1,200

1,400

1,600

1,800

Dec-05

Mar-06

Jun-0

6Sep

-06Dec

-06Mar-

07Ju

n-07

Sep-07

Dec-07

Mar-08

Jun-0

8Sep

-08Dec

-08Mar-

09

Volatility Index

0

10

20

30

40

50

60

70

80

90

Dec-05

Mar-06

Jun-0

6Sep

-06Dec

-06Mar-

07Ju

n-07

Sep-07

Dec-07

Mar-08

Jun-0

8Sep

-08Dec

-08Mar-

09

Source: Bloomberg

10-Year Treasury

0

1

2

3

4

5

6

Dec-05

Mar-06

Jun-0

6Sep

-06Dec

-06Mar-

07Ju

n-07

Sep-07

Dec-07

Mar-08

Jun-0

8Sep

-08Dec

-08Mar-

09

8

Inventory of Risks

Hedged Risks> Equity market: Risk of a prolonged drop in equity markets> Interest rates: Risks associated with changes in the yield curve> Volatility changes: Risks associated with changes in implied volatility

Unhedgeable Risks> Basis risk: The performance of customer funds differs from the hedged indices> Policyholder behavior risk: Policy lapse and benefit utilization differ from pricing> Timing risk: Risk of a market shift between policy initiation and hedge initiation> Model risk: Risk of an error in the models used to price assets or liabilities> Counterparty risk: The ability of the derivative counterparty to meet future

obligations

9

Common Hedging Objectives & Choices

> No hedge (common for GMIB and GMDB)

> Delta hedging for equity market movements only

> Delta and rho hedging for equity and interest rate movements

> Dynamic hedging with first order greeks> Dynamic hedging for higher order and

cross greeks> Static hedging with structured derivatives

Hedging Choices

> Obtain the most cost-effective hedge that minimizes the economic risk to the company

> Mitigate GAAP earnings volatility> Minimize the level and volatility of

capital required> Not all risks are suitable for hedging

Hedging Objectives

10

Dynamic Hedging Strategy

Description: Dynamic approach designed to mitigate living benefit risks by hedging against key risk factors (known as “greeks”) via purchase and sale of equity and interest rate derivatives

Approach: Assemble a hedge portfolio whose financial profile matches that of the liabilities across a variety of risk dimensions including but not limited to> Delta hedging: protects the Company by matching changes in its liabilities

due to equity market movements> Vega hedging: protects the Company against an increase in the value of the

liabilities due to changes in volatility> Rho hedging: creates an asset portfolio with sensitivity to interest rate

changes roughly equivalent to the change in the value of the benefit> Higher order and cross greeks hedging

11

Hedging Example

Market Shocks with Hedge Overlay

$(70)$(50)$(30)$(10)$10$30$50$70

(30) (20) (10) 0 10 20 30

Volatility Shocks with Hedge Overlay

$(70)

$(50)

$(30)

$(10)

$10

$30

$50

$70

(10) (5) 0 5 10

Interest Shocks with Hedge Overlay

$(70)

$(50)

$(30)

$(10)

$10

$30

$50

$70

(3) (2) (1) 0 1 2 3

$ in millions

12

Unhedgeable Risks

MitigationMonitoring

> Sensitivity testing of all assumptions> Able to adjust prices on new issues > For some products, adjust prices when a step-up election is made

> Monitor experience and adjust hedge mix

> Gather industry experience as it evolves

Policyholder Behavior Risk

> Require minimum counterparty rating of AA-> Diversify derivative counterparty exposure among multiple highly

rated counterparties

Exposures reviewed monthly at Investment Policy Committee

Counterparty Risk

> Use industry standard tools> Engaged multiple actuarial consultants to assist in building models> Compare results from two different models for validation> Require regular review of all significant models

N/AModel Risk

> Shorten gap between premium flow and hedge initiation> Limit additional deposits to a short period on some new issues> Subsequent deposits are priced and hedged when received> Gain or loss from short timing gap tends to be random and small> Hedging operations frequently tested to assure execution

Track timing gap on a daily basis

Timing Risk

Review of ongoing performance

> Mapping historical fund performance to various market indices> Historical relative performance is built into the pricing> Permit product only with balanced and asset allocation funds> Fluctuations beyond historical relative performance tend to be

random and average out over long term

Basis Risk

13

Managing Policyholder Behavior Risk

> While hedging is effective at neutralizing market risk, changes in policyholder behavior cannot be hedged

> Little history on actual long term patterns > Product design is first line of defense > Lapse and utilization patterns can be market sensitive

• Lower lapse and higher utilization rates decrease profitability in down markets• Lower lapses increase profitability in up markets• Mis-estimation of lapse and utilization can result in an over-hedged or under-hedged position

> Over-hedging is as much a risk as under-hedging

14

Hedge Effectiveness

> Dynamic hedging strategies generally performed reasonably well until 3Q2008> Unprecedented increase in hedge ineffectiveness in late 3Q2008 and 4Q2008> Causes:

• Performance of underlying funds differed materially from the hedged indices• Sharp increase in implied volatilities• Large daily market moves resulted in significant unhedged gamma and convexity exposure

• Significant increases in bid-asked spreads on derivatives• Numerous changes in the derivative dealers pricing models led to unpredicted value changes

• Faster convergence of market correlations> Hedge ineffectiveness has diminished considerably in 1Q2009> Basis risk is the largest component of ineffectiveness> Basis risk tends to produce random hedge gains/losses that average out in the long

term

15

Industry Responses

> Shift away from delta hedging towards a fuller dynamic hedge> Partial hedging of GMIB and GMDB exposures> Greater focus on statutory reserve and capital preservation> Accepting greater GAAP volatility> Increased sophistication of hedge models and scenario generators> Hedging with additional indices> Explored (with limited success) reinsurance alternatives

16

De-risking Living Benefits

> Reduce withdrawal limits> Reduce or eliminate step-up and roll-up features> Deferred benefits> Require asset allocation > Eliminate the more aggressive asset allocation choices> Increase prices> Forced reallocation of assets in down markets

17

Making Living Benefits Safer

GMWB Value Proposition

0

50

100

150

Richness of GMWBBased on W/D Limit, Roll-Up % and Max Equity Allocation

Rid

er C

ost (

bps)

Landscape 2Q08Landscape 2Q09

HighLow Medium

Source: Company Prospectuses and Proprietary Analysis

Migration of Industry Product Offerings

18

Reinsurance Alternatives

> Early GMDB’s were often reinsured at very low rates> Reinsurance market evaporated in 2001-2002> A spotty re-emergence of the reinsurers in 2007> Reinsurance costs are higher than hedge costs> Limited utilization by direct writers due to cost considerations

19

Capital Requirements for Living Benefits

Reserve requirements> Beginning in 2009 statutory reserves will be based on VACARVM> Reserves based on the higher of a stochastic tail test and a standard scenario (stress) test> Can count liquidation value of hedge instruments towards the stress test> Can take partial credit towards the stochastic test if modeling can demonstrate hedge effectiveness> Reserve requirements can increase sharply as the guarantees move into the money

Capital requirements> Capital requirements follow a similar approach but with more conservative parameters> Regulatory threshold for the stochastic asset required is CTE 90> Companies can grade into the current year total asset requirement over a two year period> Rating agencies are more likely to look for CTE 98> Total capital required also increases sharply as the guarantees move into the money

20

Implications for Variable Annuities

> Demographic trends favor continued growth in annuities and other retirement vehicles> The need to transfer longevity risk and asset performance risk from the individual to an

institution will not go away > Recent market turmoil has heightened consumer perception of the value of guarantees> The sharp increase in hedge costs has forced insurance companies to de-risk benefits

and adjust prices> Increased reserve and capital requirements will likely lead to

• A re-examination of hedging strategies• More capital friendly product design

> Reducing the volatility of capital requirements will increase GAAP income volatility> Companies may find more innovative ways to balance hedge objectives including the

use of captives and reinsurance > VA is no longer a simple fee business, it is becoming a retail derivatives business> Is a retail derivatives business model appropriate for the industry?

21