PHL Variable policyholders share hardship tales while ripping moratorium

Glenda and Lowell Thompson bought a PHL Variable Insurance Co. product nearly 12 years ago as a vehicle to fund their retirement.

That was long before the insurance company hit the financial bottom. PHL Variable is now in the hands of Connecticut regulators, who are trying to sort out its finances while a moratorium on benefits remains in place.

Insurance Commissioner Andrew Mais is asking a state Superior Court to loosen the moratorium on PHL Variable policies to allow for more flexible distributions for universal life and fixed index annuity owners.

A public comment period resulted in 26 letters that range from owners of multimillion-dollar policies being used to fund business transfers, to smaller policies held by blue-collar policyholders like the Thompsons.

The Moulton, Ala., couple, married for 65 years, does not list their policy type or the amount in their letter. But the anguish over the fate of their crucial retirement funds is clear in Glenda Thompson’s letter.

“I find myself being anxious and extremely worried for months, losing sleep over this money we invested. We have saved and saved to have money for our care when we are older.”

Glenda Thompson

“I find myself being anxious and extremely worried for months, losing sleep over this money we invested,” she writes. “We have saved and saved to have money for our care when we are older.”

Lowell Thompson, 88, was a farmer and factory worker forced to retire from Monsanto in 1982 due to a condition that would eventually leave him legally blind, his wife writes. He suffered a heart attack in 2023.

Glenda Thompson worked for “many years” as a hospital transcriptionist before earning a degree in sonography at age 51, she writes. She worked for the hospital into her 80s, battling breast cancer in 2010. Recently, Glenda Thompson suffered from her own heart condition.

“We both are old and do not have the time to wait for a long process of rehabilitation,” she writes.

Some policies will come up short

Some PHL Variable policyholders are “unlikely” to ever receive their full benefits, Mais said in a July memorandum.

Mais made the admission as part of a request to amend the moratorium in place since May 2024. The moratorium helped prevent “a run on the bank,” Mais wrote, while regulators created a rehabilitation plan.

That plan, due later this year, is dependent on the outcome of an effort to sell all or parts of the PHL Variable business, Mais explained.

In court documents, Mais explained how policyholders can access more of their benefits. Universal life policyholders have two options under the moratorium modification:

• Reduction in the face amount of death benefits with downward premium adjustment prospectively.
• Convert policy to a claim for a fixed amount (to be determined based on adjusted surrender value) with no ongoing premium obligation.

The modification is expected to offer fixed indexed annuity owners who have not activated their income rider or are currently receiving systematic withdrawals two alternatives:

• Activate the income rider (to the extent available under the contract).
• Receive a one-time surrender-charge free distribution of the “Free Withdrawal Amount” under the contract (typically this is approximately 10% of the contract’s account value).

High-dollar policy owners

A small subset of high-dollar PHL policies is in the hands of investors who use them as part of estate planning and/or the transfer of businesses or general wealth to heirs.

Obra Capital Management submitted a comment letter on behalf of clients who collectively own 61 life insurance policies issued by PHL Variable. Obra objects to the moratorium modification, claiming that Mais’s office has not shared comprehensive financial information to explain the impact on policyholders.

“Without comprehensive financial information available now, the Court, Obra, and other policyholders cannot meaningfully evaluate whether the proposed modifications serve the best interests of policyholders as a whole,” the Obra letter reads.

Larger policyholders argue that Mais’s decision to cap policyholder death benefits or policy maturity benefits at $300,000 divides the PHL policyholders into two camps: “under the cap” policyholders who will receive payment in full under their policies, and the “over the cap” policyholders, who “will receive less than what they bargained for when they purchased their PHL insurance policies,” as one policyholder claimed.

Judge Daniel J. Klau will hold an Oct. 21 public hearing on the moratorium request.

Janette K. Degen, of Elida, Ohio, used her letter to remind the court of the stakes for some policyholders. Degen, 73, is owed an annual benefit amount of nearly $45,000 from her PHL Variable annuity.

“This amount of money is needed to live in my retirement comfortably as I made many sacrifices in the 34 years that I worked for the United States Postal Service by placing bimonthly money into my deferred compensation program,” she wrote. “I should not have to be gravely ill with medical expenses or have my spouse pass away to receive my own money that I saved during my working career.”

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