J.P.

Morgan Conference on Risk Management & Fundamental Trends in the Variable Annuity Market

June 3, 2009 Zafar Rashid Senior Vice President, Life and Annuity Financial

Important Disclosures
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 managements 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, which include, 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.

The Phoenix Companies Overview

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.
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

Financial Highlights
As 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 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

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

Annuity Industry Evolution and Sales Trends

Emergence of VA Guarantees
> 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
Source: LIMRA, AnnuitySpecs, 2008 Annuity Fact Book, 7th edition, NAVA 6

Industry 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

D
1,000 1,200 1,400 1,600 1,800 200 400 600 800 0

S&P 500

2008 A Challenging Market

Source: Bloomberg
ec M -05 a Ju r-06 Se n-0 p 6 D -06 ec M -06 a Ju r-07 Se n-0 p 7 D -07 ec M -07 a Ju r-08 Se n-0 p 8 D -08 ec M -08 ar -0 9
D

10

20

30

40

50

60

70

80

90

Volatility Index

ec M -05 a Ju r-06 Se n-0 p 6 D -06 ec M -06 a Ju r-07 Se n-0 p 7 D -07 ec M -07 a Ju r-08 Se n-0 p 8 D -08 ec M -08 ar -0 9

10-Year Treasury

ec M -0 5 a Ju r-06 Se n-0 p 6 D -0 6 ec M -0 6 a Ju r-07 Se n-0 p 7 D -0 7 ec M -0 7 a Ju r-08 n Se - 0 8 p D -0 8 ec M -0 8 ar -0 9

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

Common Hedging Objectives & Choices

Hedging Objectives > 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 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

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

10

Hedging Example
Market Shocks with Hedge Overlay

Volatility Shocks with Hedge Overlay

$70

(30)

(20)

$70 $50 $30 $10 $(10) (10) 0 $(30) $(50) $(70)

$50 $30 $10

10 20 30

(10)

(5)

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

10

Interest Shocks with Hedge Overlay

$70 $50 $30 $10 (3) (2) (1) $(10) $(30) $(50) $(70)
$ in millions 11

Unhedgeable Risks
Monitoring
Basis Risk Review of ongoing performance

Mitigation
> 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 > 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 > 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 > Require minimum counterparty rating of AA> Diversify derivative counterparty exposure among multiple highly rated counterparties > Sensitivity testing of all assumptions > Able to adjust prices on new issues > For some products, adjust prices when a step-up election is made

Timing Risk

Track timing gap on a daily basis

Model Risk

N/A

Counterparty Risk

Exposures reviewed monthly at Investment Policy Committee > Monitor experience and adjust hedge mix > Gather industry experience as it evolves

Policyholder Behavior Risk

12

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

13

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

14

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

15

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

16

Making Living Benefits Safer

Migration of Industry Product Offerings

GMWB Value Proposition

150

Rider Cost (bps)

100 Landscape 2Q08 Landscape 2Q09 50

0
Low Medium High

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

Source: Company Prospectuses and Proprietary Analysis 17

Reinsurance Alternatives
> Early GMDBs 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

18

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

19

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?

20

21