.bodytext {float: left; } .floatimg-left-hort { float:left; margin-top:10px; margin-right: 10px; width:300px; clear:left;} .floatimg-left-caption-hort { float:left; margin-bottom:10px; width:300px; margin-right:10px; clear:left;} .floatimg-left-vert { float:left; margin-top:10px; margin-right:15px; width:200px;} .floatimg-left-caption-vert { float:left; margin-right:10px; margin-bottom:10px; font-size: 10px; width:200px;} .floatimg-right-hort { float:right; margin-top:10px; margin-left:10px; margin-bottom:10px; width: 300px;} .floatimg-right-caption-hort { float:left; margin-right:10px; margin-bottom:10px; width: 300px; font-size: 10px; } .floatimg-right-vert { float:right; margin-top:10px; margin-left:10px; margin-bottom:10px; width: 200px;} .floatimg-right-caption-vert { float:left; margin-right:10px; margin-bottom:10px; width: 200px; font-size: 10px; } .floatimgright-sidebar { float:right; margin-top:10px; margin-left:10px; margin-bottom:10px; width: 200px; border-top-style: double; border-top-color: black; border-bottom-style: double; border-bottom-color: black;} .floatimgright-sidebar p { line-height: 115%; text-indent: 10px; } .floatimgright-sidebar h4 { font-variant:small-caps; } .pullquote { float:right; margin-top:10px; margin-left:10px; margin-bottom:10px; width: 150px; background: url(http://www.dmbusinessdaily.com/DAILY/editorial/extras/closequote.gif) no-repeat bottom right !important ; line-height: 150%; font-size: 125%; border-top: 1px solid; border-bottom: 1px solid;} .floatvidleft { float:left; margin-bottom:10px; width:325px; margin-right:10px; clear:left;} .floatvidright { float:right; margin-bottom:10px; width:325px; margin-right:10px; clear:left;} Dear Mr. Berko:

D.N., Everett, Wash.

Dear D. N:

The Phoenix Cos. Inc. (PNX-$13.72) doesn’t butter my toast, scramble my eggs or warm my coffee. For those readers who have not heard of this company, Phoenix is an unimpressive, uninspiring and unattractive insurance company. Phoenix peddles annuities, asset/portfolio management services and insurance products to affluent and high-net-worth households.

I wouldn’t give Phoenix Asset Management a plugged nickel of your IRA assets. Phoenix’s meathead portfolio people have (according to their three-year benchmarks) managed to smoothly and skillfully underperform the market. So perhaps your financial adviser may not have done his “due diligence” to protect your assets.

Phoenix needs an industrial-sized enema and quickly. After the company’s managers beseeched Morgan Stanley to take it public in June 2001 at $17.50, Phoenix shares rose to $20 and then slowly crumbled to $7 a share. Revenues were $2.5 billion that year, and this year, with some Herculean efforts, revenues may inch up to $2.55 billion. Earnings this year should rise nicely to $1.20 per share from $1.05 in 2006 and the dividend, which never has been raised, is expected to remain at 16 cents for the foreseeable future. But I think the earnings increase is an anomaly, and in my opinion, there is no compelling reason to own the stock.

Phoenix has lousy management, poor marketing, humdrum products, a weak sales force and a doddering board of directors. To make matters worse, Phoenix has been cursed with prolonged weak financial ratings by the various rating agencies. That’s embarrassing, so it’s no wonder that the stock trades at eight points below its $21.85 book value.

The Street also is disappointed with PNX’s terribly low 6 percent return on equity when well-managed insurers enjoy a 10 percent to 14 percent ROE. The Street’s disappointed that the company’s investment income per share continues to decline, as does its account for benefits and reserves. The Street is concerned by the poor operating results of PNX’s reinsurance business and potentially large claims. The Street is bothered by PNX’s ability to generate new business, as the company is finding it difficult to compete with the formidable array of private banks, better-performing money managers and financial planners. The Street is worried about a cash shortfall if assets allocated to the company’s closed book of business fail to produce sufficient cash flow.

The Street also is concerned that PNX’s profits may be dampened because of its literal mortality rates, which may differ substantially from the company’s pricing expectations. Finally, the Street recognizes that potential regulatory developments may increase PNX’s cost of doing business and require that Phoenix post higher capital levels.

Unless there is a merger/buyout or private equity deal waiting in the wings, I wouldn’t touch this stock with a harpoon. Fool me once, shame on you. Food me twice, shame on me.

So far, your adviser has two strikes, and I think it would be unwise to follow his advice.

Please address your financial questions to Malcolm Berko, P.O. Box 1416, Boca Raton, Fla. 33429 or e-mail him at malber@adelphia.net.© Copley News Service