On February 27, Phoenix reported a net loss of $424.3 million, or $3.71 per share, for the fourth quarter of 2008. Phoenix preliminarily believes this loss was overstated by $46 million, or $0.40 per share as a result of an error in accounting for income taxes. As a result, Phoenix expects to report a net loss of $378.3 million or $3.31 per share, for the fourth quarter of 2008.
Similarly, Phoenix preliminarily believes that its net loss for the year ended December 31, 2008, reported as $772.0 million, or $6.75 per share, was overstated by $46 million, or $0.40 per share. As a result, Phoenix expects to report a full year 2008 net loss of $726.0 million or $6.35 per share.
The error reduces Phoenix’s other comprehensive income equally, and, as a result, Phoenix’s total stockholder’s equity and book value per share as reported on February 27, 2009 do not change.
In a separate development, State Farm Mutual Automobile Insurance Company has informed Phoenix that it intends to suspend the sale of Phoenix products pending a reevaluation of the relationship between the companies. While the strategic repositioning announced on Phoenix’s earnings call remains unchanged, the company is assessing the impact of this recent development on its business prospects, operations and strategy, and on the related disclosures in its Form 10-K.
Phoenix did not file its Form 10-K by the prescribed due date because it needs additional time to finalize its net losses and other comprehensive income after correcting the error in accounting for income taxes. Phoenix intends to file its Form 10-K with the SEC as promptly as practicable and is presently unaware of any circumstances that would prevent it from filing its Form 10-K on or before the fifteenth calendar day following the prescribed due date in compliance with Rule 12b-25 of the Securities Exchange Act of 1934.
Phoenix expects to report in its Form 10-K that it has a material weakness in its internal control over financial reporting designed to ensure proper accounting for income taxes that is related to the error in accounting for income taxes referred to above.